##### 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 June 30, 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
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification Number)
 1111
Third Avenue, Suite 2100
Seattle, Washington 98101
 (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  June 30, 2007 and December 31, 2006.Unaudited Consolidated Statements of Income  For the three months and six months
ended June 30, 2007 and 2006.Unaudited Consolidated Statements of Stockholders Equity  For the six months ended
June 30, 2007 and 2006.Unaudited Consolidated Statements of Comprehensive Income  For the three months and
six months ended June 30, 2007.Unaudited Consolidated Statements of Cash Flows  For the six months ended June 30,
2007 and 2006.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
  - 2 -




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  
 
 June 30,
    
    
    December 31,2007
    
    
    2006AssetsCash and due from banks
    
    $
    6,604
    
    
    $
    9,160Federal funds sold
    
    
    414
    
    
    
    1,983Interest-bearing deposits in financial institutions
    
    
    6,963
    
    
    
    760Total cash and cash equivalents
    
    
    13,981
    
    
    
    11,903Securities available-for-sale
    
    
    27,643
    
    
    
    29,531Loans
    
    
    333,925
    
    
    
    292,449Allowance for loan losses
    
    
    (3,251
    )
    
    
    (2,784
    )Net loans
    
    
    330,674
    
    
    
    289,665Premises and equipment
    
    
    3,247
    
    
    
    3,078Cash surrender value of bank owned life insurance
    
    
    5,430
    
    
    
    5,316Accrued interest and other assets
    
    
    5,647
    
    
    
    4,027Total assets
    
    $
    386,622
    
    
    $
    343,520LiabilitiesDepositsNoninterest-bearing
    
    $
    52,372
    
    
    $
    55,373Interest-bearing
    
    
    247,862
    
    
    
    201,062Total deposits
    
    
    300,234
    
    
    
    256,435Federal Home Loan Bank advances
    
    
    39,361
    
    
    
    46,805Junior subordinated debt
    
    
    17,372
    
    
    
    12,217Accrued expenses and other liabilities
    
    
    4,720
    
    
    
    4,244Total liabilities
    
    
    361,687
    
    
    
    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; 2,358,334 shares issued at June 30, 2007; 2,353,262
shares issued at December 31, 2006
    
    
    21,240
    
    
    
    21,129Retained earnings
    
    
    4,527
    
    
    
    3,453Accumulated other comprehensive loss
    
    
    (832
    )
    
    
    (763
    )Total stockholders equity
    
    
    24,935
    
    
    
    23,819Total liabilities and stockholders equity
    
    $
    386,622
    
    
    $
    343,520
 See accompanying notes to unaudited consolidated financial statements.
 - 3 -




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##### Table of Contents



Three months ended June 30,
    
    
    Six months ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Interest incomeLoans, including fees
    
    $
    6,861
    
    
    $
    4,479
    
    
    $
    13,256
    
    
    $
    8,400Taxable securities
    
    
    284
    
    
    
    291
    
    
    
    572
    
    
    
    566Tax exempt securities
    
    
    31
    
    
    
    34
    
    
    
    63
    
    
    
    69Federal funds sold and other
    
    
    71
    
    
    
    30
    
    
    
    107
    
    
    
    53Total interest income
    
    
    7,247
    
    
    
    4,834
    
    
    
    13,998
    
    
    
    9,088Interest expenseDeposits
    
    
    2,595
    
    
    
    1,294
    
    
    
    4,766
    
    
    
    2,221Federal funds purchased
    
    
    28
    
    
    
    15
    
    
    
    64
    
    
    
    36Federal Home Loan Bank advances
    
    
    447
    
    
    
    437
    
    
    
    1,118
    
    
    
    842Junior subordinated debt
    
    
    314
    
    
    
    107
    
    
    
    548
    
    
    
    208Total interest expense
    
    
    3,384
    
    
    
    1,853
    
    
    
    6,496
    
    
    
    3,307Net interest income
    
    
    3,863
    
    
    
    2,981
    
    
    
    7,502
    
    
    
    5,781Provision for loan losses
    
    
    233
    
    
    
    180
    
    
    
    496
    
    
    
    348Net interest income after provision for loan losses
    
    
    3,630
    
    
    
    2,801
    
    
    
    7,006
    
    
    
    5,433Noninterest incomeService charges on deposit accounts
    
    
    363
    
    
    
    300
    
    
    
    698
    
    
    
    555Merchant credit card processing
    
    
    48
    
    
    
    37
    
    
    
    92
    
    
    
    71Other commissions and fees
    
    
    17
    
    
    
    62
    
    
    
    31
    
    
    
    95Net earnings on bank owned life insurance
    
    
    59
    
    
    
    56
    
    
    
    115
    
    
    
    112Other noninterest income
    
    
    34
    
    
    
    35
    
    
    
    60
    
    
    
    67Total noninterest income
    
    
    521
    
    
    
    490
    
    
    
    996
    
    
    
    900Noninterest expenseSalaries and employee benefits
    
    
    1,396
    
    
    
    1,302
    
    
    
    2,853
    
    
    
    2,612Occupancy and equipment
    
    
    484
    
    
    
    445
    
    
    
    963
    
    
    
    881Data processing
    
    
    272
    
    
    
    208
    
    
    
    478
    
    
    
    411Professional fees
    
    
    96
    
    
    
    92
    
    
    
    192
    
    
    
    143Marketing
    
    
    165
    
    
    
    115
    
    
    
    226
    
    
    
    190State revenue and sales tax expense
    
    
    139
    
    
    
    79
    
    
    
    246
    
    
    
    155Other noninterest expense
    
    
    488
    
    
    
    506
    
    
    
    977
    
    
    
    949Total noninterest expense
    
    
    3,040
    
    
    
    2,747
    
    
    
    5,935
    
    
    
    5,341Income before income taxes
    
    
    1,111
    
    
    
    544
    
    
    
    2,067
    
    
    
    992Income tax expense
    
    
    364
    
    
    
    153
    
    
    
    664
    
    
    
    283Net income
    
    $
    747
    
    
    $
    391
    
    
    $
    1,403
    
    
    $
    709Basic earnings per share
    
    $
    0.32
    
    
    $
    0.20
    
    
    $
    0.60
    
    
    $
    0.35Diluted earnings per share
    
    $
    0.31
    
    
    $
    0.19
    
    
    $
    0.59
    
    
    $
    0.35
 See accompanying notes to unaudited consolidated financial statements.
 - 4 -




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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
    
    
    $
    2,136
    
    
    $
    (456
    )
    
    $
    17,685Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    709
    
    
    
    
    
    
    
    709Change in net unrealized gain
(loss) on securities
available-for- sale, net of
reclassification and tax
effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99
    )
    
    
    (99
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    610Cash dividends ($.12 per share)
    
    
    
    
    
    
    
    
    
    
    (240
    )
    
    
    
    
    
    
    (240
    )Exercise of stock options
    
    
    10,535
    
    
    
    118
    
    
    
    
    
    
    
    
    
    
    
    118Stock options earned
    
    
    
    
    
    
    73
    
    
    
    
    
    
    
    
    
    
    
    73Balance at June 30, 2006
    
    
    2,011,002
    
    
    $
    16,196
    
    
    $
    2,605
    
    
    $
    (555
    )
    
    $
    18,246
 AccumulatedCommon
    
    
    
    
    
    
    otherCommon
    
    
    stock
    
    
    
    
    
    
    comprehen-
    
    
    Total stock-stock
    
    
    and
    
    
    Retained
    
    
    sive
    
    
    holdersshares
    
    
    surplus
    
    
    earnings
    
    
    income (loss)
    
    
    equityBalance at January 1, 2007
    
    
    2,353,262
    
    
    $
    21,129
    
    
    $
    3,453
    
    
    $
    (763
    )
    
    $
    23,819Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    1,403
    
    
    
    
    
    
    
    1,403Change in net unrealized gain
(loss) on securities
available-for- sale, net of
reclassification and tax
effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (69
    )
    
    
    (69
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,334Cash dividends ($.14 per share)
    
    
    
    
    
    
    
    
    
    
    (329
    )
    
    
    
    
    
    
    (329
    )Exercise of stock options
    
    
    5,072
    
    
    
    62
    
    
    
    
    
    
    
    
    
    
    
    62Stock options earned
    
    
    
    
    
    
    49
    
    
    
    
    
    
    
    
    
    
    
    49Balance at June 30, 2007
    
    
    2,358,334
    
    
    $
    21,240
    
    
    $
    4,527
    
    
    $
    (832
    )
    
    $
    24,935
 See accompanying notes to unaudited consolidated financial statements.
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Three months ended June 30,
    
    
    Six months ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net income
    
    $
    747
    
    
    $
    391
    
    
    $
    1,403
    
    
    $
    709Other comprehensive income (loss):Change in unrealized gain (loss) on
securities available-for-sale
    
    
    (177
    )
    
    
    (89
    )
    
    
    (105
    )
    
    
    (150
    )Reclassification adjustment for gains
included in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net unrealized gains (losses)
    
    
    (177
    )
    
    
    (89
    )
    
    
    (105
    )
    
    
    (150
    )Tax effect
    
    
    60
    
    
    
    30
    
    
    
    36
    
    
    
    51Total other comprehensive income (loss)
    
    
    (117
    )
    
    
    (59
    )
    
    $
    (69
    )
    
    $
    (99
    )Total comprehensive income (loss)
    
    $
    630
    
    
    $
    332
    
    
    $
    1,334
    
    
    $
    610
 See accompanying notes to unaudited consolidated financial statements
 - 6 -




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June 30,
    
    
    June 30,2007
    
    
    2006Cash flows from operating activitiesNet income
    
    $
    1,403
    
    
    $
    709Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation
    
    
    467
    
    
    
    432Provision for loan losses
    
    
    496
    
    
    
    348Amortization of premiums and discounts on securities
    
    
    17
    
    
    
    20Net earnings on bank owned life insurance
    
    
    (115
    )
    
    
    (112
    )Stock option compensation expense
    
    
    49
    
    
    
    73Other changes, net
    
    
    (1,107
    )
    
    
    (212
    )Net cash provided by operating activities
    
    
    1,210
    
    
    
    1,258Cash flows from investing activitiesProceeds from maturities and principal payments on
securities available-for- sale
    
    
    1,766
    
    
    
    361Net increase in loans
    
    
    (41,505
    )
    
    
    (44,895
    )Purchases of securities available-for-sale
    
    
    
    
    
    
    (133
    )Purchases of premises and equipment
    
    
    (636
    )
    
    
    (42
    )Net cash provided by (used in) investing activities
    
    
    (40,375
    )
    
    
    (44,709
    )Cash flows from financing activitiesNet increase in deposits
    
    
    43,799
    
    
    
    26,776Proceeds from Federal Home Loan Bank advances
    
    
    141,235
    
    
    
    12,900Repayments of Federal Home Loan Bank advances
    
    
    (148,679
    )
    
    
    (3,112
    )Proceeds from the issuance of trust preferred securities
    
    
    5,155
    
    
    
    Proceeds from the exercise of stock options
    
    
    62
    
    
    
    118Dividends paid
    
    
    (329
    )
    
    
    (240
    )Net cash provided by financing activities
    
    
    41,243
    
    
    
    36,442Net increase (decrease) in cash and cash equivalents
    
    
    2,078
    
    
    
    (7,009
    )Cash and cash equivalents at beginning of year
    
    
    11,903
    
    
    
    17,302Cash and cash equivalents at end of period
    
    $
    13,981
    
    
    $
    10,293
 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
 Accounting for
Servicing
 - 9 -




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




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Six months
    
    Six monthsended June 30,
    
    ended June 30,2007
    
    2006Risk-free interest rate
    
    
    4.47
    %
    
    
    4.96
    %Expected option life
    
    6.5 years
    
    
    7.5 yearsExpected stock price volatility
    
    
    20
    %
    
    
    24
    %Dividend yield
    
    
    1.8
    %
    
    
    1.7
    %
  Weighted-
    
    
    Weighted Average
    
    
    AggregateAverage
    
    
    Remaining
    
    
    IntrinsicShares
    
    
    Exercise Price
    
    
    Contractual Term
    
    
    ValueOutstanding at the
beginning of the
year
    
    
    207,434
    
    
    $
    10.37Granted
    
    
    6,000
    
    
    
    15.25Exercised
    
    
    (5,072
    )
    
    
    11.16Forfeited
    
    
    (364
    )
    
    
    8.89Outstanding at the
end of the period
    
    
    207,998
    
    
    $
    10.49
    
    
    5.60 years
    
    
    $
    1,052,470Exercisable at the
end of the period
    
    
    131,106
    
    
    $
    8.59
    
    
    4.70 years
    
    
    $
    879,721
  Note 3: Securities
   - 11 -




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June 30, 2007
 Less than 12 Months
    
    
    12 Months or More
    
    
    Total(in thousands)
    
    
    
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Fair Value
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossUS agencies
    
    $
    1,985
    
    
    $
    (15
    )
    
    $
    1,496
    
    
    $
    (5
    )
    
    $
    3,481
    
    
    $
    (20
    )State and political subdivisions
    
    
    338
    
    
    
    (5
    )
    
    
    3,446
    
    
    
    (61
    )
    
    
    3,784
    
    
    
    (66
    )Mortgage-backed securities
    
    
    296
    
    
    
    (1
    )
    
    
    3,528
    
    
    
    (158
    )
    
    
    3,824
    
    
    
    (159
    )AMF Ultra Short Mortgage Fund
    
    
    
    
    
    
    
    
    
    
    14,732
    
    
    
    (475
    )
    
    
    14,732
    
    
    
    (475
    )Total temporarily impaired
    
    $
    2,619
    
    
    $
    (21
    )
    
    $
    23,202
    
    
    $
    (699
    )
    
    $
    25,821
    
    
    $
    (720
    )
 December 31, 2006
 Less than 12 Months
    
    
    12 Months or More
    
    
    Total(in thousands)
    
    
    
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Fair 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
    )
   Note 4: Earnings per share
   - 12 -




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Three months ended June 30,2007
    
    
    2006Income (numerator):Net income
    
    $
    747
    
    
    $
    391Income (denominator):Weighted average number of common stock shares outstanding  basic
    
    
    2,357,308
    
    
    
    2,005,981Dilutive effect of outstanding employee and director stock options
    
    
    38,519
    
    
    
    25,279Weighted average number of common stock shares outstanding and
assumed conversion  diluted
    
    
    2,395,827
    
    
    
    2,031,260Basic earnings per share
    
    $
    0.32
    
    
    $
    0.20Diluted earnings per share
    
    $
    0.31
    
    
    $
    0.19
 Six months ended June 30,2007
    
    
    2006Income (numerator):Net income
    
    $
    1,403
    
    
    $
    709Income (denominator):Weighted average number of common stock shares outstanding  basic
    
    
    2,355,108
    
    
    
    2,007,153Dilutive effect of outstanding employee and director stock options
    
    
    40,760
    
    
    
    21,994Weighted average number of common stock shares outstanding and
assumed conversion  diluted
    
    
    2,395,868
    
    
    
    2,029,147Basic earnings per share of common stock
    
    $
    0.60
    
    
    $
    0.35Diluted earnings per share of common stock
    
    $
    0.59
    
    
    $
    0.35
 Note 5: Retirement Benefits
   - 13 -




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Components of net periodic benefit cost
 Three months
    
    
    Six monthsended June 30,
    
    
    ended June 30,(in thousands)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Service cost
    
    $
    33
    
    
    $
    41
    
    
    $
    66
    
    
    $
    82Interest cost
    
    
    25
    
    
    
    28
    
    
    
    50
    
    
    
    56Amortization of transition obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    (5
    )
    
    
    (1
    )
    
    
    (10
    )
    
    
    (2
    )Recognized net actuarial (gain) loss
    
    
    3
    
    
    
    8
    
    
    
    6
    
    
    
    16Net periodic benefit cost
    
    $
    56
    
    
    $
    76
    
    
    $
    112
    
    
    $
    152
 Note 6: Junior Subordinated Debt
  Note 7: Subsequent Events  Junior Subordinated Debt
  
 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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Net Income
 Three months and six months ended June 30, 2007 and 2006
       Net Interest Income and Net Interest Margin
    - 16 -




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(in thousands, except ratio data)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Net Interest MarginInterest income (GAAP)
    
    $
    7,247
    
    
    $
    4,834
    
    
    $
    13,998
    
    
    $
    9,088Taxable-equivalent adjustment:Loans
    
    
    3
    
    
    
    3
    
    
    
    6
    
    
    
    6Investments
    
    
    16
    
    
    
    17
    
    
    
    33
    
    
    
    35Interest income  FTE
    
    
    7,266
    
    
    
    4,854
    
    
    
    14,037
    
    
    
    9,129Interest expense (GAAP)
    
    
    3,384
    
    
    
    1,853
    
    
    
    6,496
    
    
    
    3,307Net interest income  FTE
    
    $
    3,882
    
    
    $
    3,001
    
    
    $
    7,541
    
    
    $
    5,822Net interest income  (GAAP)
    
    $
    3,863
    
    
    $
    2,981
    
    
    $
    7,502
    
    
    $
    5,781Average interest earning assets
    
    $
    353,774
    
    
    $
    258,915
    
    
    $
    345,404
    
    
    $
    246,339Net interest margin (GAAP)
    
    
    4.38
    %
    
    
    4.62
    %
    
    
    4.38
    %
    
    
    4.73
    %Net interest margin  FTE
    
    
    4.40
    %
    
    
    4.65
    %
    
    
    4.40
    %
    
    
    4.77
    %
 Noninterest Income/Expense
    - 18 -




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Income tax expense
  Provision and Allowance for Loan Losses
    - 19 -




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FINANCIAL CONDITION
 Loans
    Types of Loans
 June 30,
    
    
    December 31,(in thousands)
    
    2007
    
    
    2006Commercial
    
    $
    88,173
    
    
    $
    85,067Real estate:Commercial
    
    
    134,557
    
    
    
    118,070Construction
    
    
    55,337
    
    
    
    34,813Residential 1-4 family
    
    
    34,739
    
    
    
    36,875Consumer and other
    
    
    21,119
    
    
    
    17,624Total
    
    $
    333,925
    
    
    $
    292,449
 Allocation of the Allowance for Loan Losses
  - 20 -




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June 30,
    
    
    % of loans in
    
    
    December 31,
    
    
    % of loans in2007
    
    
    each category
    
    
    2006
    
    
    each category(in thousands)
    
    Amount
    
    
    to Total Loans
    
    
    Amount
    
    
    to Total LoansCommercial
    
    $
    990
    
    
    
    27
    %
    
    $
    919
    
    
    
    29
    %Real estate:Commercial
    
    
    1,367
    
    
    
    40
    
    
    
    1,120
    
    
    
    40Construction
    
    
    519
    
    
    
    17
    
    
    
    440
    
    
    
    12Residential 1-4 family
    
    
    35
    
    
    
    10
    
    
    
    36
    
    
    
    13Consumer and other
    
    
    340
    
    
    
    6
    
    
    
    269
    
    
    
    6Total
    
    $
    3,251
    
    
    
    100
    %
    
    $
    2,784
    
    
    
    100
    %% of Loan portfolio
    
    
    0.97
    %
    
    
    
    
    
    
    0.95
    %
  Analysis of Allowance for Loan Losses
  Six months
    
    
    Six monthsended
    
    
    ended(in thousands)
    
    June 30, 2007
    
    
    June 30, 2006Beginning Balance
    
    $
    2,784
    
    
    $
    2,056ChargeoffsCommercial
    
    
    60
    
    
    
    Real estate:Commercial
    
    
    
    
    
    
    Construction
    
    
    
    
    
    
    Residential 1-4 family
    
    
    
    
    
    
    Consumer and other
    
    
    34
    
    
    
    5Total charge-offs
    
    
    94
    
    
    
    5RecoveriesCommercial
    
    
    61
    
    
    
    5Real estate:Commercial
    
    
    
    
    
    
    Construction
    
    
    
    
    
    
    Residential 1-4 family
    
    
    
    
    
    
    Consumer and other
    
    
    4
    
    
    
    6Total Recoveries
    
    
    65
    
    
    
    11Net chargeoffs/(recoveries)
    
    
    29
    
    
    
    (6
    )Provision
    
    
    496
    
    
    
    348Ending balance
    
    $
    3,251
    
    
    $
    2,410
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Investments
   Deposits
   Borrowings and Junior Subordinated Debt
    Stockholders Equity and Capital Resources
  Managements Discussion and Analysis of Financial
Condition and Results of Operations
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Minimum to BeWell CapitalizedMinimum for
    
    Under the PromptCapital Adequacy
    
    Corrective ActionActual
    
    Purposes
    
    Provisions(in thousands, except ratio data)
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioJune 30, 2007Total capital (to risk-weighted assets)Consolidated
    
    $
    46,076
    
    
    
    13.44
    %
    
    $
    27,437
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    40,416
    
    
    
    12.07
    
    
    
    26,791
    
    
    
    8.00
    
    
    $
    33,489
    
    
    
    10.00
    %Tier 1 capital (to risk-weighted assets)Consolidated
    
    
    33,937
    
    
    
    9.90
    
    
    
    13,718
    
    
    
    4.00
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    37,165
    
    
    
    11.10
    
    
    
    13,396
    
    
    
    4.00
    
    
    
    20,094
    
    
    
    6.00Tier 1 capital (to average assets) (1)Consolidated
    
    
    33,937
    
    
    
    9.02
    
    
    
    15,049
    
    
    
    4.00
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    37,165
    
    
    
    10.07
    
    
    
    14,770
    
    
    
    4.00
    
    
    
    18,463
    
    
    
    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
     - 23 -




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Within
    
    
    
    
    
    
    
    
    
    
    After(in thousands)
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 Years
    
    
    TotalFederal Home Loan Bank advances
    
    $
    14,636
    
    
    $
    9,675
    
    
    $
    7,050
    
    
    $
    8,000
    
    
    $
    39,361Junior subordinated debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,372
    
    
    
    17,372Time Deposits
    
    
    140,369
    
    
    
    19,259
    
    
    
    2,131
    
    
    
    259
    
    
    
    162,018Operating leases
    
    
    723
    
    
    
    1,303
    
    
    
    1,031
    
    
    
    711
    
    
    
    3,768Total
    
    $
    155,728
    
    
    $
    30,237
    
    
    $
    10,212
    
    
    $
    26,342
    
    
    $
    222,519
 Liquidity
    
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Net interest income analysis as of June 30, 2007:
  ANNUALIZED DOLLAR CHANGEIMMEDIATE RATE CHANGE
    
    IN NET INTEREST INCOME
    
    PERCENT CHANGE+200bp
    
    
    882
    
    
    
    5.79+100bp
    
    
    449
    
    
    
    2.95+ 50bp
    
    
    225
    
    
    
    1.40- 50bp
    
    
    (244
    )
    
    
    (1.60
    )-100bp
    
    
    (452
    )
    
    
    (2.97
    )-200bp
    
    
    (882
    )
    
    
    (5.79
    )
   - 24 -




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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
 rd
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Proposal No. 1:
 Election of directors to three yearterms, expiring 2010
    
    For
    
    Against
    
    WithheldCarole J. Grisham
    
    
    1,590,541
    
    
    
    
    
    
    
    3,951Russel E. Olson
    
    
    1,588,027
    
    
    
    
    
    
    
    6,465Joseph M. Phillips
    
    
    1,592,041
    
    
    
    
    
    
    
    2,451
 Election of directors to one yearterms, expiring 2008
    
    For
    
    
    
    
    
    WithheldCraig O. Dawson
    
    
    1,581,344
    
    
    
    
    
    
    
    13,148
 Proposal No. 2:
 For
    
    Against
    
    Abstain
    
    Non-Votes1,583,060
    
    1,480
    
    9,952
    
    
 
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 (a) Exhibits
 Exhibit 31.1 
 Exhibit 31.2 
 Exhibit 32.1 
 Exhibit 32.2 
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EVERGREENBANCORP, INC./s/ Gordon D. BrowningGordon D. BrowningExecutive Vice President and Chief Financial Officer
(Authorized Officer and Principal Financial Officer) - 27 -