SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 20, 2004
EverTrust Financial Group, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Washington 0-26993 91-1613658
- ---------------------------- ---------- ----------------
State or other jurisdiction Commission (I.R.S. Employer
of incorporation File Number Identification No.)
2707 Colby Avenue, Suite 600, Everett, Washington 98201
- ------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (including area code) (425) 258-3645
Not Applicable
- ------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
- ---------------------------------------------------------------------------
(c) Exhibits
--------
99.1 Press Release dated April 20, 2004.
Item 12. Results of Operations and Financial Condition
- -------------------------------------------------------
On April 20, 2004, EverTrust Financial Group, Inc. issued its earnings
release for the quarter and year ended March 31, 2004. A copy of the
earnings release is attached hereto as Exhibit 99.1, which is incorporated
herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
EVERTRUST FINANCIAL GROUP, INC.
/s/Jeffrey R. Mitchell
DATE: April 30, 2004 By: -----------------------------------
Jeffrey R. Mitchell
Vice President and Chief Financial
Officer
Exhibit 99.1
Press Release of EverTrust Financial Group, Inc. on April 20, 2004
EverTrust Financial Group Reports Fourth
Quarter and Year-End Results
EVERETT, Wash.--April 20, 2004--EverTrust Financial Group, Inc. (Nasdaq:EVRT -
News) today reported net income of $2.2 million, or $0.30 per diluted share,
for the quarter ended March 31, 2004. (Financial information contained in this
release reflects the January 16, 2004 three-for-two stock split.) This
compares to net income of $2.0 million, or $0.26 per diluted share, for the
year-earlier quarter.
For the year-ended March 31, 2004, EverTrust Financial reported net income of
$7.0 million, or $0.95 per diluted share, which includes an additional income
tax charge as a result of a valuation allowance increase against a deferred
tax asset, as well as the gain on sale of a former EverTrust Bank branch
building. Without this charge and gain, diluted earnings per share for the
year would have been $7.2 million or $0.97 per diluted share, reflecting the
unusual earnings shortfall in the second and third quarters. This compares to
net income of $6.8 million or $0.90 per diluted share for the fiscal year
ended March 31, 2003, which included a write-down on a limited partnership
investment that reduced earnings per share by $0.05. Excluding the write-down,
earnings for fiscal 2003 were $7.3 million, or $0.95 per share on a diluted
basis.
"While we are not performing at nearly our potential, we believe that
operating fundamentals have certainly improved on several levels," said
Michael B. Hansen, EverTrust Financial Group chief executive officer. "We
believe that the loan payoffs during the past two quarters resulting from the
prolonged and dramatic decline in interest rates are clearly behind us and in
no way indicate a true reflection of EverTrust's performance or any trend."
"We have trimmed noninterest expenses to more closely align with actual
revenues," continued Mr. Hansen. "Opportunities also remain to enhance our
commercial mortgage banking operations in the coming year now that the loan
portfolio has returned to a stable level, and we have added personnel to grow
this part of our business. We are not a single-family lender of any volume as
we were ten years ago. We expect that our commercial mortgage banking
operations will continue to contribute to the bottom line to a much greater
degree than in previous years. In this pursuit we will seek to grow revenues
beyond simply growing loans outstanding as part of our long-term business
strategy to rely less on margin revenue and more on noninterest income."
Page 1
At March 31, 2004, EverTrust Financial Group's total assets grew to $770.1
million as compared to $706.2 million at March 31, 2003. Total equity at March
31, 2004 was $90.6 million (book value of $13.15 per share) compared to $91.7
million a year earlier (book value of $12.64 per share).
During the quarter EverTrust Financial repurchased 145,760 shares of its
common stock at an average cost of $19.84 per share. For fiscal 2004 EverTrust
repurchased 457,349 shares at an average cost of $19.90 per share with 140,965
shares remaining available for repurchase under the Company's previously
approved stock repurchase plan. At March 31, 2004, the Company had 6,890,160
shares outstanding, compared to 7,252,168 one-year earlier. "Recent changes in
SEC guidelines for stock repurchases have impacted institutions with smaller
market capitalizations such as EverTrust and will continue to adversely limit
future repurchase activity," said Mr. Hansen.
Net interest income was $7.1 million for the quarter ended March 31, 2004 as
compared to $6.8 million for the year-earlier quarter. For the year ended
March 31, 2004, net interest income totaled $26.3 million as compared to $26.7
million for the year earlier. Net loans receivable increased to $661.8 million
at March 31, 2004, as compared to $600.2 million at March 31, 2003. Loan
originations for the current quarter, primarily commercial real estate loans,
totaled $105.4 million. For the year ended March 31, 2004, the Company
originated $498.9 million in loans as compared to $435.6 million in the
previous year.
"Commercial real estate loan production year-over-year continues to be
exceptional," said Mr. Hansen, "and the unprecedented level of loan payoffs
essentially required an increase in our production of commercial real estate
loans to offset these loan payoffs during the prior two quarters. We
anticipate that the amount of loan production necessary in the coming fiscal
year to meet our portfolio loan growth target will be well below the fiscal
2004 level. In executing our ongoing business plan, all of the loans generated
in excess of that portfolio growth amount may be regularly participated or
sold to other lenders which will help augment loan fee revenue." Loans held
for sale were $886,000 at March 31, 2004 as compared to $4.8 million a year
earlier.
The net interest margin for the quarter ended March 31, 2004 was 3.82% as
compared to 3.99% for the year-earlier quarter, and 3.66% for the year ended
March 31, 2004, which compares to 3.97% for the previous year. "Fee
recognition contributed 45 basis points to the margin for the quarter,
compared to 33 basis points in the prior quarter," noted Jeffrey R. Mitchell,
EverTrust's chief financial officer. "Given the impact of deferred fee
recognition on the margin, some fluctuations are expected to occur as
repayments and the ongoing flow of loan participations vary from
period-to-period. The other primary factor
Page 2
impacting the margin is the competitive rate environment for loans and
deposits, which, as our business plan has anticipated, portend steadily
declining margins for both EverTrust and the industry as a whole."
For the quarter ended March 31, 2004, the provision for loan loss expense was
$100,000 compared to no provision for loan loss expense in the year earlier
quarter. For the year ended March 31, 2004, the provision expense was $525,000
as compared to $390,000 for the year earlier. Total nonperforming assets at
March 31, 2004 were $4.4 million, or 0.56% of total assets, compared to
$233,000, or 0.03% of total assets at March 31, 2003. Nonperforming assets at
March 31, 2004 consisted primarily of a $3.4 million single family lot
development loan which management believes to be well-secured. As a percent of
gross loans receivable, the allowance for loan losses was 1.35% at March 31,
2004, compared to 1.40% at December 31, 2003 and 1.46% at March 31, 2003. Net
loan charge-offs were 0.08% for the year ending March 31, 2004 and 0.03% in
the prior fiscal year.
"The Washington state economy is beginning to show some improvement in certain
sectors, although this region is expected to lag the U.S. national recovery
according to the official state economic forecast," said Mr. Mitchell. "We
continue to closely monitor our loan portfolio quality, and although
nonperforming loans and internal classifications are up somewhat from the
unsustainably low levels experienced over the past few years, they are
currently at a very manageable level."
Total deposits at March 31, 2004 were $546.4 million compared to $508.3
million at March 31, 2003. At March 31, 2004 the deposit mix included 47%
fixed-rate certificates of deposit, 29% money market accounts and 22%
transaction accounts, with the remainder from noninterest bearing accounts,
savings accounts and demand deposit accounts. "Deposit growth was modest and
slightly below our expectations as a result of some end-of-year fluctuations,"
said Mr. Mitchell, "but we were pleased with the progress made this last year
to improve the deposit mix toward lower-cost transaction accounts, which grew
from 16% of total deposits at March 31, 2003 to 22% at March 31, 2004."
In the past year, the private and business bankers generated $22.0 million in
net deposit growth, all of which was in transaction and money market
categories. EverTrust Asset Management grew its assets under management to
$185.0 million at March 31, 2004, up from $111.9 million at March 31, 2003.
Noninterest income for the current quarter was $1.4 million as compared to
$1.5 million for the quarter one year earlier. For the year, noninterest
income increased to $6.3 million, as compared to $5.7 million for the previous
year, with the increase primarily attributable to an increase in fees
generated from EverTrust
Page 3
Asset Management. "Growth in noninterest income will continue to be a key
focal point of our operating plan in fiscal 2005," said Mr. Mitchell, "And one
primary component of noninterest income growth for EverTrust is commercial and
multifamily mortgage loan broker fees. However, these fees tend to fluctuate
widely both in individual transaction amount and timing from quarter to
quarter in line with business flow. In the end, the year-over-year trend line
should be notable if we are successful in executing this plan."
Noninterest expense for the current quarter decreased to $4.9 million as
compared to $5.6 million for the year-earlier quarter, primarily as a result
of lower staffing expenses and the final funding in December 2003 of the
Company's employee stock ownership program. For the year ended March 31, 2004,
noninterest expense was $20.5 million compared to $22.5 million for the
previous year, which included a write-down of a limited partnership
investment. "In an ongoing effort to improve our efficiency ratio we remain
focused on limiting year-over-year operating expense," said Mr. Mitchell, "and
when combined with revenue growth, we have begun to see initial results of
this strategy." In the quarter ended March 31, 2004 the efficiency ratio
improved to 58% as compared to 66% in the December quarter and 67% in the
year-earlier quarter, levels that were created by revenue shortfalls, not an
increase in expenses. For the current year, the efficiency ratio was 63%, a
level the Company expects to improve upon in future quarters, as compared to
69% in 2003.
The Company's key measurement goals of earnings per share, return on equity
and noninterest income as a percentage of net revenue (net interest income
plus noninterest income) for the current quarter were each above levels
reported in the prior quarter and one-year ago quarter when viewed net of the
income statement events noted in the first portion of this release. "However,"
noted Mr. Hansen, "these results do not place EverTrust into a group of top-
performing companies. We intend to improve the quality of our earnings through
retaining and rewarding our top producers while striving to improve the
performance of each business unit."
EverTrust Financial Group is a diversified financial services holding company
(regulated by the Federal Reserve) that serves the Puget Sound region of
Washington state through its EverTrust Bank of Washington branches in Seattle,
Bellevue, and Snohomish County; Commercial Mortgage Banking Group office in
Tacoma, EverTrust Asset Management office in Seattle, and a commercial
mortgage loan production office in Portland, Oregon.
For additional information, visit EverTrust Financial Group at
www.EVRTonline.com.
Page 4
Forward-looking Statements. Certain matters discussed in this press release
may constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward looking statements
relate to, among other things, expectations of the business environment in
which the Company operates, projections of future performance, perceived
opportunities in the market, and statements regarding the Company's mission
and vision. These forward-looking statements are based upon current management
expectations, and may therefore involve risks and uncertainties. The Company's
actual results, performance, or achievements may differ materially from these
suggested, expressed, or implied by forward looking statements due to a wide
range of factors including, but not limited to, interest rate fluctuations,
changes in residential mortgage patterns, changes in loan demand, economic
conditions both nationally and in the Company's local market areas, success of
new products, non-bank financial services providers, regulatory changes, and
other risks detailed in the Company's reports, particularly the Form 10-K for
the year ended March 31, 2003 filed with the Securities and Exchange
Commission.
-financial tables follow-
Page 5
EVERTRUST FINANCIAL GROUP, INC. - Key Financial Ratios
Three Months Twelve Months
Ended March 31, Ended March 31,
2004 2003 2004 2003
-------- -------- -------- --------
KEY FINANCIAL RATIOS:
(Unaudited)
Performance Ratios:
Return on average assets (1) 1.16% 1.11% 0.96% 1.00%
Return on average equity (2) 9.83% 8.27% 7.63% 7.37%
Equity-to-assets ratio (3) 11.79% 13.47% 12.59% 13.53%
Interest rate spread (4) 3.48% 3.55% 3.26% 3.48%
Net interest margin (5) 3.82% 3.99% 3.66% 3.97%
Average interest-earning assets
to average interest-bearing
liabilities 115.99% 116.78% 117.19% 117.08%
Other operating expenses as a
percent of average total
assets 2.59% 3.21% 2.80% 3.27%
Efficiency ratio (6) 57.89% 67.14% 62.79% 69.12%
Non interest income as a percent
of net revenue 16.09% 18.38% 19.24% 17.74%
Asset Quality Ratios:
Nonaccrual and 90 days or more
past due loans as a percent of
total loans, net 0.60% 0.04%
Nonperforming assets as a percent
of total assets 0.56% 0.03%
Allowance for losses as a percent
of gross loans receivable 1.35% 1.46%
Allowance for loan losses as a
percent of nonperforming loans 227.53% 3955.30%
Net charge-offs (recoveries) to
average outstanding loans 0.00% 0.01% 0.08% 0.03%
- ---------------
(1) Net earnings divided by average total assets.
(2) Net earnings divided by average equity.
(3) Average equity divided by average total assets.
(4) Difference between weighted average yield on interest-earning
assets and weighted average rate on interest-bearing liabilities.
(5) Net interest income as a percentage of average interest-earning
assets.
(6) Total other operating expenses divided by total net interest
income (on a tax-equivalent basis) before provision for loan
losses plus total other operating income.
Allowance for Loan Losses:
Quarter Ended
03/31/04 12/31/03 09/30/03 06/30/03 03/31/03
--------- --------- --------- --------- ---------
Allowance at
beginning of period $8,973 $8,747 $9,086 $8,979 $9,036
Provision for loan
losses 100 250 0 175 0
Charge-offs (34) (69) (353) (73) (57)
Recoveries 7 45 14 5 -
--------- --------- --------- --------- ---------
Balances at end
of period $9,046 $8,973 $8,747 $9,086 $8,979
========= ========= ========= ========= =========
Page 6
EverTrust Financial Group, Inc.
Consolidated Statements of Financial Condition
March 31, 2004 and 2003
(Dollar amounts in thousands, except per share amounts)
March 31, March 31,
2004 2003
------------- ------------
ASSETS (Unaudited)
- ------
Cash and cash equivalents, including
interest bearing deposits of $1,000
and $27,415 $14,995 $37,259
Securities available for sale, amortized
cost of $66,914 and $33,807 67,567 34,167
Securities held to maturity, fair value of
$2,419 and $3,999 2,311 3,800
Federal Home Loan Bank stock, at cost 6,650 6,334
Loans receivable, net of allowances of
$9,046 and $8,979 661,756 600,200
Loans held for sale, fair value of $907 and
$4,813 886 4,755
Accrued interest receivable 3,301 3,280
Premises and equipment, net 7,206 9,074
Other real estate owned 375 -
Prepaid expenses and other assets 5,025 7,294
------------- ------------
Total Assets $770,072 $706,163
============= ============
LIABILITIES AND EQUITY
- ----------------------
LIABILITIES:
Deposit accounts $546,388 $508,269
Federal Home Loan Bank advances and other
borrowings 128,531 100,984
Accounts payable and other liabilities 4,574 5,215
------------- ------------
Total Liabilities 679,493 614,468
COMMITMENTS AND CONTINGENCIES
EQUITY:
Common stock - no par value, 73,500,000
shares authorized, 6,890,160 shares
and 7,252,168 shares outstanding at
March 31, 2004 and 2003, respectively 23,819 30,613
Employee Stock Ownership Plan (ESOP) debt - (396)
Retained earnings 66,738 62,542
Shares held in trust for stock-related
compensation plans (409) (1,301)
Accumulated other comprehensive income 431 237
------------- ------------
Total Equity 90,579 91,695
------------- ------------
Total Liabilities and Equity $770,072 $706,163
============= ============
Book value per common share $13.15 $12.64
Page 7
EverTrust Financial Group, Inc.
Consolidated Statements of Operations
For the Three and Twelve Months Ended March 31, 2004 and 2003
(Dollar amounts in thousands, except per share amounts)
Three Months Ended Twelve Months Ended
March 31, March 31,
2004 2003 2004 2003
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
INTEREST INCOME:
Loans receivable $ 10,412 $ 10,756 $ 40,588 $ 42,798
Investment securities:
Taxable interest
income 572 460 2,113 2,514
Tax-exempt interest
income 29 45 151 205
Dividend income 66 109 322 419
---------- ---------- ---------- ----------
Total investment
security income 667 614 2,586 3,138
---------- ---------- ---------- ----------
Total interest
income 11,079 11,370 43,174 45,936
INTEREST EXPENSE:
Deposit accounts 2,778 3,211 11,929 13,581
Federal Home Loan Bank
advances and other
borrowings 1,194 1,314 4,902 5,702
---------- ---------- ---------- ----------
Total interest
expense 3,972 4,525 16,831 19,283
---------- ---------- ---------- ----------
Net interest
income 7,107 6,845 26,343 26,653
PROVISION FOR LOAN
LOSSES 100 - 525 390
---------- ---------- ---------- ----------
Net interest income
after provision
for loan losses 7,007 6,845 25,818 26,263
NONINTEREST INCOME:
Loan service fees 365 746 2,431 2,401
(Gain) Loss on sale of
securities 50 (80) (44) (84)
Gain on sale of loans 233 295 779 1,159
Other, net 715 580 3,108 2,271
---------- ---------- ---------- ----------
Total noninterest
income 1,363 1,541 6,274 5,747
---------- ---------- ---------- ----------
NONINTEREST EXPENSES:
Salaries and employee
benefits 2,622 3,315 11,691 12,406
Occupancy and equipment 731 763 2,958 3,103
Information processing
costs 365 366 1,491 1,455
Other, net 1,194 1,202 4,388 5,503
---------- ---------- ---------- ----------
Total noninterest
expenses 4,912 5,646 20,528 22,467
---------- ---------- ---------- ----------
Earnings before
federal income
taxes 3,458 2,740 11,564 9,543
FEDERAL INCOME TAXES 1,260 777 4,518 2,702
---------- ---------- ---------- ----------
NET INCOME $ 2,198 $ 1,963 $ 7,046 $ 6,841
========== ========== ========== ==========
Net income per common
share - basic $ 0.32 $ 0.28 $ 1.01 $ 0.96
========== ========== ========== ==========
Net income per common
share - diluted $ 0.30 $ 0.26 $ 0.95 $ 0.90
========== ========== ========== ==========
Weighted average shares
outstanding - basic 6,833,340 7,062,930 6,943,808 7,118,797
Weighted average shares
outstanding - diluted 7,330,087 7,562,311 7,443,547 7,582,503
Dividends paid per
share $ 0.110 $ 0.080 $ 0.400 $ 0.310
Page 8
EverTrust Financial Group, Inc.
Yield and Margin Calculations (dollar amounts in thousands)
For the Three and Twelve Months Ended March 31, 2004 and 2003
(Unaudited)
Three Months Ended March 31,
----------------------------------------------------
2004 2003
-------------------------- --------------------------
Interest Interest
Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost
--------- --------- ------ --------- --------- ------
(Dollars in Thousands)
Interest-earning
assets:
Loans
receivable(1) $664,581 $ 10,412 6.27% $622,828 $10,756 6.91%
Investment
securities 72,450 601 3.32% 38,929 448 4.60%
Federal Home
Loan Bank
stock 6,585 65 3.95% 6,232 104 6.68%
Cash and cash
equivalent 536 1 0.75% 17,450 62 1.42%
-------- -------- ------ -------- ------- ------
Total
interest-
earning
assets 744,152 11,079 5.96% 685,439 11,370 6.64%
-------- ------ ------- ------
Noninterest-
earning assets 14,751 18,917
-------- --------
Total average
assets $758,903 $704,356
======== ========
Interest-bearing
liabilities:
Savings
accounts $ 12,664 $ 21 0.66% $ 12,340 $ 28 0.91%
Checking
accounts 98,044 252 1.03% 63,211 191 1.21%
Money market
deposit
accounts 155,546 492 1.27% 133,919 540 1.61%
Time deposits 260,452 2,013 3.09% 274,842 2,452 3.57%
-------- -------- ------ -------- ------- ------
Total
deposits 526,706 2,778 2.11% 484,312 3,211 2.65%
Borrowings 114,882 1,194 4.16% 102,651 1,314 5.12%
-------- -------- ------ -------- ------- ------
Total
interest-
bearing
liabilities 641,588 3,972 2.48% 586,963 4,525 3.08%
-------- ------ ------- ------
Noninterest-
bearing
liabilities 27,837 22,495
-------- --------
Total average
liabilities 669,425 609,458
Average equity 89,478 94,898
-------- --------
Total
liabilities
and equity $758,903 $704,356
======== ========
Net interest
income $ 7,107 $ 6,845
======== =======
Interest rate
spread 3.48% 3.55%
====== ======
Net interest
margin 3.82% 3.99%
====== ======
Ratio of average
interest-
earning
assets to
average
interest-
bearing
liabilities 115.99% 116.78%
======== =======
Page 9
EverTrust Financial Group, Inc.
Yield and Margin Calculations (dollar amounts in thousands)
For the Three and Twelve Months Ended March 31, 2004 and 2003
(Unaudited)
Twelve Months Ended March 31,
----------------------------------------------------
2004 2003
-------------------------- --------------------------
Interest Interest
Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost
--------- --------- ------ --------- --------- ------
(Dollars in Thousands)
Interest-earning
assets:
Loans
receivable(1) $621,517 $40,588 6.53% $598,963 $42,798 7.15%
Investment
securities 60,975 1,974 3.24% 45,608 2,437 5.34%
Federal Home
Loan Bank
stock 6,460 315 4.88% 6,085 388 6.38%
Cash and cash
equivalent 30,538 297 0.97% 20,723 313 1.51%
-------- ------- ------ -------- ------- ------
Total interest-
earning
assets 719,490 43,174 6.00% 671,379 45,936 6.84%
------- ------ ------- ------
Noninterest-
earning assets 14,531 14,671
-------- --------
Total average
assets $734,021 $686,050
======== ========
Interest-bearing
liabilities:
Savings
accounts $ 12,616 $ 92 0.73% $ 11,721 $ 142 1.21%
Checking
accounts 84,376 919 1.09% 58,088 801 1.38%
Money market
accounts 145,929 1,978 1.36% 129,717 2,508 1.93%
Time deposits 271,674 8,940 3.29% 261,243 10,130 3.88%
-------- ------- ------ -------- ------- ------
Total
deposits 514,595 11,929 2.32% 460,769 13,581 2.95%
Borrowings 99,365 4,902 4.93% 112,685 5,702 5.06%
-------- ------- ------ -------- ------- ------
Total interest-
bearing
liabilities 613,960 16,831 2.74% 573,454 19,283 3.36%
------- ------ ------- ------
Noninterest-
bearing
liabilities 27,663 19,755
-------- --------
Total average
liabilities 641,623 593,209
Average equity 92,398 92,841
-------- --------
Total
liabilities
and equity $734,021 $686,050
======== =========
Net interest
income $26,343 $26,653
======= =======
Interest rate
spread 3.26% 3.48%
====== ======
Net interest
margin 3.66% 3.97%
====== ======
Ratio of average
interest-earning
assets to average
interest-bearing
liabilities 117.19% 117.08%
======= =======
- ------
(1) Average loans receivable includes non-performing loans. Interest
income does not include interest on loans 90 days or more past due.
- ----------------
Contact:
EverTrust Financial Group
Brad Ogura, 425-258-0380
Page 10