##### Table of Contents



UNITED STATES 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, 2007
 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 
Incorporation or Organization)
    
    (I.R.S. Employer
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 StatementsUnaudited Consolidated Balance Sheets  March 31, 2007 and December 31, 2006Unaudited Consolidated Statements of Income  For the three months ended March 31,
2007 and 2006Unaudited Consolidated Statements of Stockholders Equity  For the three months
ended March 31, 2007 and 2006Unaudited Consolidated Statements of Comprehensive Income  For the three months
ended March 31, 2007 and 2006Unaudited Consolidated Statements of Cash Flows  For the three months ended March
31, 2007 and 2006Notes to Unaudited Consolidated Financial InformationItem 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3.
    
    Quantitative and Qualitative Disclosures About Market RiskItem 4.
    
    Controls and ProceduresPART IIOTHER INFORMATIONItem 1.
    
    Legal ProceedingsItem 1A.
    
    Risk FactorsItem 2.
    
    Unregistered Sales of Equity Securities and Use of ProceedsItem 3.
    
    Defaults Upon Senior SecuritiesItem 4.
    
    Submission of Matters to a Vote of Security HoldersItem 5.
    
    Other InformationItem 6.
    
    ExhibitsEXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  - 2 -




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  
  
 March 31,
    
    
    December 31,2007
    
    
    2006AssetsCash and due from banks
    
    $
    7,024
    
    
    $
    9,160Federal funds sold
    
    
    3,090
    
    
    
    1,983Interest-bearing deposits in financial institutions
    
    
    2,540
    
    
    
    760Total cash and cash equivalents
    
    
    12,654
    
    
    
    11,903Securities available-for-sale
    
    
    29,097
    
    
    
    29,531Loans
    
    
    311,403
    
    
    
    292,449Allowance for loan losses
    
    
    (2,983
    )
    
    
    (2,784
    )Net loans
    
    
    308,420
    
    
    
    289,665Premises and equipment
    
    
    3,031
    
    
    
    3,078Cash surrender value of bank owned life insurance
    
    
    5,372
    
    
    
    5,316Accrued interest and other assets
    
    
    5,736
    
    
    
    4,027Total assets
    
    $
    364,310
    
    
    $
    343,520LiabilitiesDepositsNoninterest-bearing
    
    
    59,296
    
    
    
    55,373Interest-bearing
    
    
    234,519
    
    
    
    201,062Total deposits
    
    
    293,815
    
    
    
    256,435Federal Home Loan Bank advances
    
    
    29,557
    
    
    
    46,805Junior subordinated debt
    
    
    12,217
    
    
    
    12,217Accrued expenses and other liabilities
    
    
    4,338
    
    
    
    4,244Total liabilities
    
    
    339,927
    
    
    
    319,701Stockholders equityPreferred stock; no par value; 100,000 shares authorized; none
issued
    
    
    
    
    
    
    Common stock and surplus; no par value; 15,000,000 shares
authorized; 2,353,262 shares issued at March 31, 2007 and
December 31, 2006
    
    
    21,154
    
    
    
    21,129Retained earnings
    
    
    3,944
    
    
    
    3,453Accumulated other comprehensive loss
    
    
    (715
    )
    
    
    (763
    )Total stockholders equity
    
    
    24,383
    
    
    
    23,819Total liabilities and stockholders equity
    
    $
    364,310
    
    
    $
    343,520
 See accompanying notes to unaudited consolidated financial statements.
 - 3 -




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##### Table of Contents



March 31,
    
    
    March 31,2007
    
    
    2006Interest incomeLoans, including fees
    
    $
    6,395
    
    
    $
    3,921Taxable securities
    
    
    288
    
    
    
    275Tax exempt securities
    
    
    32
    
    
    
    34Federal funds sold and other
    
    
    36
    
    
    
    23Total interest income
    
    
    6,751
    
    
    
    4,253Interest expenseDeposits
    
    
    2,171
    
    
    
    926Federal funds purchased
    
    
    36
    
    
    
    21Federal Home Loan Bank advances
    
    
    671
    
    
    
    405Junior subordinated debt
    
    
    234
    
    
    
    100Total interest expense
    
    
    3,112
    
    
    
    1,452Net interest income
    
    
    3,639
    
    
    
    2,801Provision for loan losses
    
    
    263
    
    
    
    168Net interest income after provision for loan losses
    
    
    3,376
    
    
    
    2,633Noninterest incomeService charges on deposit accounts
    
    
    335
    
    
    
    255Merchant credit card processing
    
    
    44
    
    
    
    33Other commissions and fees
    
    
    14
    
    
    
    34Net earnings on bank owned life insurance
    
    
    56
    
    
    
    56Other noninterest income
    
    
    26
    
    
    
    32Total noninterest income
    
    
    475
    
    
    
    410Noninterest expenseSalaries and employee benefits
    
    
    1,457
    
    
    
    1,344Occupancy and equipment
    
    
    479
    
    
    
    435Data processing
    
    
    206
    
    
    
    203Professional fees
    
    
    96
    
    
    
    51Marketing
    
    
    61
    
    
    
    75State revenue and sales tax expense
    
    
    107
    
    
    
    77Other noninterest expense
    
    
    489
    
    
    
    410Total noninterest expense
    
    
    2,895
    
    
    
    2,595Income before income taxes
    
    
    956
    
    
    
    448Income tax expense
    
    
    300
    
    
    
    130Net income
    
    $
    656
    
    
    $
    318Basic earnings per share
    
    $
    0.28
    
    
    $
    0.16Diluted earnings per share
    
    $
    0.27
    
    
    $
    0.16
 See accompanying notes to unaudited consolidated financial statements.
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Common
    
    
    
    
    
    
    AccumulatedCommon
    
    
    stock
    
    
    
    
    
    
    otherstock
    
    
    and
    
    
    Retained
    
    
    comprehensive
    
    
    Totalshares
    
    
    surplus
    
    
    earnings
    
    
    income/(loss)
    
    
    stockholders equityBalance at January 1, 2006
    
    
    2,000,467
    
    
    $
    16,005
    
    
    $
    2,136
    
    
    $
    (456
    )
    
    $
    17,685Comprehensive 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
    
    
    $
    2,334
    
    
    $
    (496
    )
    
    $
    17,877
 Common
    
    
    
    
    
    
    AccumulatedCommon
    
    
    stock
    
    
    
    
    
    
    otherstock
    
    
    and
    
    
    Retained
    
    
    comprehensive
    
    
    Totalshares
    
    
    surplus
    
    
    earnings
    
    
    income/(loss)
    
    
    stockholders equityBalance at January 1, 2007
    
    
    2,353,262
    
    
    $
    21,129
    
    
    $
    3,453
    
    
    $
    (763
    )
    
    $
    23,819Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    656
    
    
    
    
    
    
    
    656Change in net unrealized gain
(loss) on securities available for
sale, net of reclassification and
tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    48Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    704Cash dividends ($.070 per share)
    
    
    
    
    
    
    
    
    
    
    (165
    )
    
    
    
    
    
    
    (165
    )Stock options earned
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    25Balance at March 31, 2007
    
    
    2,353,262
    
    
    $
    21,154
    
    
    $
    3,944
    
    
    $
    (715
    )
    
    $
    24,383
 See accompanying notes to unaudited consolidated financial statements.
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##### Table of Contents



March 31,
    
    
    March 31,2007
    
    
    2006Net income
    
    $
    656
    
    
    $
    318Other comprehensive income:Change in unrealized gain (loss) on securities
available-for-sale
    
    
    73
    
    
    
    (61
    )Reclassification adjustment for gains included
in net income
    
    
    
    
    
    
    Net unrealized gains (losses)
    
    
    73
    
    
    
    (61
    )Tax effect
    
    
    (25
    )
    
    
    21Total other comprehensive income (loss)
    
    
    48
    
    
    
    (40
    )Total comprehensive income
    
    $
    704
    
    
    $
    278
 See accompanying notes to unaudited consolidated financial statements
 - 6 -




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March 31,
    
    
    March 31,2007
    
    
    2006Cash flows from operating activitiesNet income
    
    $
    656
    
    
    $
    318Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation
    
    
    230
    
    
    
    219Provision for loan losses
    
    
    263
    
    
    
    168Amortization of premiums and discounts on securities
    
    
    7
    
    
    
    11Net earnings on bank owned life insurance
    
    
    (56
    )
    
    
    (56
    )Stock option compensation expense
    
    
    25
    
    
    
    34Other changes, net
    
    
    (1,640
    )
    
    
    47Net cash provided by operating activities
    
    
    (515
    )
    
    
    741Cash flows from investing activitiesProceeds from sales, maturities and principal payments on securities
available-for-sale
    
    
    500
    
    
    
    179Net loan originations
    
    
    (19,018
    )
    
    
    (16,806
    )Purchases of loans
    
    
    
    
    
    
    (5,753
    )Purchases of securities available-for-sale
    
    
    
    
    
    
    (133
    )Purchases of premises and equipment
    
    
    (183
    )
    
    
    (33
    )Net cash provided by investing activities
    
    
    (18,701
    )
    
    
    (22,546
    )Cash flows from financing activitiesNet increase in deposits
    
    
    37,380
    
    
    
    9,640Proceeds from Federal Home Loan Bank advances
    
    
    86,310
    
    
    
    60,820Repayments of Federal Home Loan Bank advances
    
    
    (103,558
    )
    
    
    (51,036
    )Dividends paid
    
    
    (165
    )
    
    
    (120
    )Net cash provided by financing activities
    
    
    19,967
    
    
    
    19,304Net increase in cash and cash equivalents
    
    
    751
    
    
    
    (2,501
    )Cash and cash equivalents at beginning of period
    
    
    11,903
    
    
    
    17,302Cash and cash equivalents at end of period
    
    $
    12,654
    
    
    $
    14,801
 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.
 Newly issued accounting pronouncements. Fair Value Measurements
 - 8 -




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The Fair Value Option for Financial Assets and
Financial Liabilities
   Accounting for Certain
Hybrid Financial Instruments-an amendment to FASB Statements No. 133 and 140
 Accounting for
Servicing of Financial Assets-an amendment of FASB Statement No. 140
 - 9 -




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Accounting for Uncertainty
in Income Taxes
  Note 2: Stock options
 Stock option and equity compensation plan.
    - 10 -




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2007Risk-free interest rate
    
    
    4.47
    %Expected option life
    
    6.5 yearsExpected stock price volatility
    
    
    20
    %Dividend yield
    
    
    1.8
    %
  Weighted-
    
    
    Weighted-AverageAverage
    
    
    Remaining
    
    
    AggregateShares
    
    
    Exercise Price
    
    
    Contractual Term
    
    
    Intrinsic ValueOutstanding at the beginning
of the year
    
    
    207,434
    
    
    $
    10.37Granted
    
    
    6,000
    
    
    
    15.25Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (364
    )
    
    
    8.89Outstanding at the end of
the period
    
    
    213,070
    
    
    $
    10.51
    
    
    5.81 years
    
    $
    1,095,180Exercisable at the end of
the period
    
    
    122,502
    
    
    $
    8.69
    
    
    4.68 years
    
    $
    852,614
  Note 3: Securities
   - 11 -




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March 31, 2007(in thousands)
    
    Less than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossUS agencies
    
    $
    
    
    
    $
    
    
    
    $
    2,488
    
    
    $
    (8
    )
    
    $
    2,488
    
    
    $
    (8
    )State and political subdivisions
    
    
    
    
    
    
    
    
    
    
    3,464
    
    
    
    (43
    )
    
    
    3,464
    
    
    
    (43
    )Mortgage-backed securities
    
    
    313
    
    
    
    (1
    )
    
    
    3,474
    
    
    
    (93
    )
    
    
    3,787
    
    
    
    (94
    )AMF Ultra Short Mortgage Fund
    
    
    
    
    
    
    
    
    
    
    14,808
    
    
    
    (398
    )
    
    
    14,808
    
    
    
    (398
    )Total temporarily impaired
    
    $
    313
    
    
    $
    (1
    )
    
    $
    24,234
    
    
    $
    (542
    )
    
    $
    24,547
    
    
    $
    (543
    )
 December 31, 2006
    
    Less than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossUS agencies
    
    $
    
    
    
    $
    
    
    
    $
    3,477
    
    
    $
    (27
    )
    
    $
    3,477
    
    
    $
    (27
    )State and political subdivisions
    
    
    135
    
    
    
    (1
    )
    
    
    3,663
    
    
    
    (44
    )
    
    
    3,798
    
    
    
    (45
    )Mortgage-backed securities
    
    
    315
    
    
    
    (1
    )
    
    
    4,021
    
    
    
    (133
    )
    
    
    4,336
    
    
    
    (134
    )AMF Ultra Short Mortgage Fund
    
    
    
    
    
    
    
    
    
    
    14,793
    
    
    
    (413
    )
    
    
    14,793
    
    
    
    413
    )Total temporarily impaired
    
    $
    450
    
    
    $
    (2
    )
    
    $
    25,954
    
    
    $
    (617
    )
    
    $
    26,404
    
    
    $
    (619
    )
   - 12 -




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Fair ValueMarch 31,
    
    
    December 31,2007
    
    
    2006Due in one year or less
    
    $
    2,825
    
    
    $
    2,779Due after one year through five years
    
    
    4,687
    
    
    
    5,050Due after five years through ten years
    
    
    791
    
    
    
    791Total
    
    
    8,303
    
    
    
    8,620AMF Ultra Short Mortgage Fund
    
    
    14,808
    
    
    
    14,793Mortgage-backed securities and collateralized mortgage
obligations
    
    
    4,435
    
    
    
    4,567Federal Home Loan Bank stock
    
    
    1,551
    
    
    
    1,551Total
    
    $
    29,097
    
    
    $
    29,531
 Note 4: Earnings per share
   Three months ended March 31,2007
    
    
    2006Income (numerator):Net income
    
    $
    656
    
    
    $
    318Income (denominator):Weighted average number of common
stock shares outstanding  basic
    
    
    2,353,262
    
    
    
    2,000,467Dilutive effect of outstanding employee
and director stock options
    
    
    38,290
    
    
    
    32,139Weighted average number of common
stock shares outstanding and
assumed conversion  diluted
    
    
    2,391,552
    
    
    
    2,032,606Basic earnings per share of common stock
    
    $
    0.28
    
    
    $
    0.16Diluted earnings per share of common stock
    
    $
    0.27
    
    
    $
    0.16
 Note 5: Retirement Benefits
   - 13 -




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Components of net periodic benefit cost
 Three Months EndedMarch 31,(in thousands)
    
    2007
    
    
    2006Service cost
    
    $
    33
    
    
    $
    41Interest cost
    
    
    25
    
    
    
    28Expected return on plan assets
    
    
    
    
    
    
    Amortization of transition obligation
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    (5
    )
    
    
    (1
    )Recognized net actuarial (gain) loss
    
    
    3
    
    
    
    8Net periodic benefit cost
    
    $
    56
    
    
    $
    76
   Note 6: Subsequent Event  Junior Subordinated Debt Offering
  
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    - 14 -




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Forward-Looking Statements
  RESULTS OF OPERATIONS
 Overview
     - 15 -




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##### Table of Contents



Net Income
 Three months ended March 31, 2007 and 2006
     Net Interest Income and Net Interest Margin
    - 16 -




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March 31,(in thousands, except ratio data)
    
    2007
    
    
    2006Net Interest MarginInterest income (GAAP)
    
    $
    6,751
    
    
    $
    4,253Taxable-equivalent adjustment:Loans
    
    
    3
    
    
    
    3Investments
    
    
    16
    
    
    
    18Interest income  FTE
    
    
    6,770
    
    
    
    4,274Interest expense (GAAP)
    
    
    3,112
    
    
    
    1,452Net interest income  FTE
    
    $
    3,658
    
    
    $
    2,822Net interest income  (GAAP)
    
    $
    3,639
    
    
    $
    2,801Average interest-earning assets
    
    $
    336,921
    
    
    $
    233,610Net interest margin (GAAP)
    
    
    4.38
    %
    
    
    4.86
    %Net interest margin  FTE
    
    
    4.40
    %
    
    
    4.90
    %
 Noninterest Income/Expense
  - 17 -




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##### Table of Contents



Income tax expense
  Provision and Allowance for Loan Losses
     FINANCIAL CONDITION
 Loans
   - 18 -




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##### Table of Contents



Types of Loans
 March 31,
    
    
    December 31,(in thousands)
    
    2007
    
    
    2006Commercial
    
    $
    83,519
    
    
    $
    85,067Real estate:Commercial
    
    
    126,650
    
    
    
    118,070Construction
    
    
    45,774
    
    
    
    34,813Residential 1-4 family
    
    
    36,806
    
    
    
    36,875Consumer and other
    
    
    18,654
    
    
    
    17,624Total
    
    $
    311,403
    
    
    $
    292,449
 Allocation of the Allowance for Loan Losses
  % of Loans in
    
    
    December 31,
    
    
    % of Loans inMarch 31, 2007
    
    
    Each Category
    
    
    2006
    
    
    Each Category(in thousands)
    
    Amount
    
    
    to Total Loans
    
    
    Amount
    
    
    to Total LoansCommercial
    
    $
    941
    
    
    
    27
    
    
    $
    919
    
    
    
    29Real estate:Commercial
    
    
    1,239
    
    
    
    41
    
    
    
    1,120
    
    
    
    40Construction
    
    
    500
    
    
    
    15
    
    
    
    440
    
    
    
    12Residential 1-4 family
    
    
    35
    
    
    
    12
    
    
    
    36
    
    
    
    13Consumer and other
    
    
    268
    
    
    
    5
    
    
    
    269
    
    
    
    6Total
    
    $
    2,983
    
    
    
    100
    
    
    $
    2,784
    
    
    
    100% of Loan portfolio
    
    
    0.96
    %
    
    
    
    
    
    
    0.95
    %
  - 19 -




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Analysis of Allowance for Loan Losses
  Three Months Ended
    
    
    Three Months Ended(in thousands)
    
    March 31, 2007
    
    
    March 31, 2006Beginning Balance
    
    $
    2,784
    
    
    $
    2,056Chargeoffs:Commercial
    
    
    (44)
    
    
    
    Real estate:Commercial
    
    
    
    
    
    
    Construction
    
    
    
    
    
    
    Residential 1-4 family
    
    
    
    
    
    
    Consumer and other
    
    
    (29)
    
    
    
    Total chargeoffs
    
    
    (73)
    
    
    
    Recoveries:Commercial
    
    
    7
    
    
    
    2Real estate:Commercial
    
    
    
    
    
    
    Construction
    
    
    
    
    
    
    Residential 1-4 family
    
    
    
    
    
    
    Consumer and other
    
    
    2
    
    
    
    3Total Recoveries
    
    
    9
    
    
    
    5Net (chargeoffs) recoveries
    
    
    (64
    )
    
    
    5Provision
    
    
    263
    
    
    
    168Ending balance
    
    $
    2,983
    
    
    $
    2,229
  Investments
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##### Table of Contents



Deposits
  Borrowings and Junior Subordinated Debt
    Stockholders Equity and Capital Resources
  Managements Discussion and Analysis of Financial
Condition and Results of Operations
  - 21 -




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##### Table of Contents



Minimum to BeWell CapitalizedMinimum for
    
    
    Under the PromptCapital Adequacy
    
    
    Corrective ActionActual
    
    
    
    
    
    
    Purposes

    
    
    Provisions(in thousands, except ratio data)
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioMarch 31, 2007Total capital (to risk-weighted assets)Consolidated
    
    $
    40,035
    
    
    
    12.26
    %
    
    $
    26,130
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    39,457
    
    
    
    12.37
    
    
    
    25,524
    
    
    
    8.00
    
    
    $
    31,906
    
    
    
    10.00
    %Tier 1 capital (to risk-weighted assets)Consolidated
    
    
    33,113
    
    
    
    10.14
    
    
    
    13,065
    
    
    
    4.00
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    36,474
    
    
    
    11.43
    
    
    
    12,762
    
    
    
    4.00
    
    
    
    19,143
    
    
    
    6.00Tier 1 capital (to average assets)(1)
Consolidated
    
    
    33,113
    
    
    
    9.25
    
    
    
    14,324
    
    
    
    4.00
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    36,474
    
    
    
    10.31
    
    
    
    14,158
    
    
    
    4.00
    
    
    
    17,697
    
    
    
    5.00December 31, 2006Total capital (to risk-weighted assets)
Consolidated
    
    $
    39,310
    
    
    
    13.20
    %
    
    $
    23,819
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    38,504
    
    
    
    12.94
    
    
    
    23,795
    
    
    
    8.00
    
    
    $
    29,744
    
    
    
    10.00
    %Tier 1 capital (to risk-weighted assets)
Consolidated
    
    
    32,412
    
    
    
    10.89
    
    
    
    11,910
    
    
    
    4.00
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    35,720
    
    
    
    12.01
    
    
    
    11,898
    
    
    
    4.00
    
    
    
    17,847
    
    
    
    6.00Tier 1 capital (to average assets)(1)
Consolidated
    
    
    32,412
    
    
    
    9.92
    
    
    
    13,074
    
    
    
    4.00
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    35,720
    
    
    
    11.15
    
    
    
    12,817
    
    
    
    4.00
    
    
    
    16,022
    
    
    
    5.00
 
 (1)
    
    Also referred to as the leverage ratio Contractual Obligations and Commitments
    - 22 -




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##### Table of Contents



Within
    
    
    
    
    
    
    
    
    
    
    After(in thousands)
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 Years
    
    
    TotalFederal Home Loan
Bank advances
    
    $
    5,371
    
    
    $
    10,186
    
    
    $
    5,000
    
    
    $
    9,000
    
    
    $
    29,557Junior subordinated debt *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,372
    
    
    
    17,372Time deposits
    
    
    124,370
    
    
    
    18,008
    
    
    
    4,696
    
    
    
    259
    
    
    
    147,333Operating leases
    
    
    717
    
    
    
    1,336
    
    
    
    1,122
    
    
    
    771
    
    
    
    3,946Total
    
    $
    130,458
    
    
    $
    29,530
    
    
    $
    10,818
    
    
    $
    27,402
    
    
    $
    198,208
 
 *
 Liquidity
    
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Net interest income analysis as of March 31, 2007:
  ANNUALIZED DOLLAR CHANGEIMMEDIATE RATE CHANGE
    
    IN NET INTEREST INCOME
    
    
    PERCENT CHANGE+200bp
    
    $
    937
    
    
    
    6.45
    %+100bp
    
    
    449
    
    
    
    3.09+ 50bp
    
    
    225
    
    
    
    1.55- 50bp
    
    
    (239
    )
    
    
    (1.65
    )-100bp
    
    
    (478
    )
    
    
    (3.29
    )-200bp
    
    
    (919
    )
    
    
    (6.33
    )
  - 23 -




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
   
 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
  - 24 -




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##### Table of Contents



ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 (a) Exhibits
 Exhibit 31.1 
 Exhibit 31.2 
 Exhibit 32.1 
 Exhibit 32.2 
 - 25 -




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##### Table of Contents



/s/ Gordon D. Browning

Gordon D. BrowningExecutive Vice President and Chief Financial Officer(Authorized Officer and Principal Financial Officer)
 - 26 -