Table of Contents
Page
Report of Independent Auditors 1
Financial Statements
Consolidated Balance Sheets 4
Consolidated Statements of Income 5
Consolidated Statements of Comprehensive Income (Loss) 6
Consolidated Statements of Changes in Equity 7
Consolidated Statements of Cash Flows 8
Notes to Financial Statements 10
1
Report of Independent Auditors
The Board of Directors
Evergreen Federal Bank and Subsidiary
Report on the Audit of the Financial Statements
Opinion
We have audited the consolidated financial statements of Evergreen Federal Bank and Subsidiary,
which comprise the consolidated balance sheets as of September 30, 2023 and 2022, and the related
consolidated statements of income, comprehensive income (loss), changes in equity, and cash flows
for the years then ended, and the related notes to the consolidated financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the financial position of Evergreen Federal Bank and Subsidiary as of September 30, 2023
and 2022 and the results of its operations and its cash flows for the years then ended in accordance
with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America (GAAS). Our responsibilities under those standards are further described in the
Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are
required to be independent of Evergreen Federal Bank and Subsidiary and to meet our other ethical
responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with accounting principles generally accepted in the United States of
America, and for the design, implementation, and maintenance of internal control relevant to the
preparation and fair presentation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are
conditions or events, considered in the aggregate, that raise substantial doubt about Evergreen
Federal Bank and Subsidiary’s ability to continue as a going concern within one year after the date
that the financial statements are available to be issued.
2
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance
but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance
with GAAS will always detect a material misstatement when it exists. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control. Misstatements are considered material if there is a substantial likelihood that, individually or
in the aggregate, they would influence the judgment made by a reasonable user based on the
consolidated financial statements.
In performing an audit in accordance with GAAS, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, and design and perform audit procedures responsive to those risks.
Such procedures include examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of Evergreen Federal Bank and Subsidiary’s internal control.
Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluate the overall presentation of the
consolidated financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate,
that raise substantial doubt about Evergreen Federal Bank and Subsidiary’s ability to continue as
a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit, significant audit findings, and certain internal
control–related matters that we identified during the audit.
Portland, Oregon
December 6, 2023
Financial Statements
Evergreen Federal Bank and Subsidiary
See accompanying notes.
4
Consolidated Balance Sheets
September 30, 2023 and 2022
2023 2022
Cash 27,377,060$ 56,637,248$
Due from banks 457,200 612,204
Interest-bearing deposits with banks 1,681,743 1,721,224
Total cash and cash equivalents 29,516,003 58,970,676
Investment securities available-for-sale, at fair value 66,952,770 131,665,850
Restricted equity securities (FHLB) 760,800 737,800
Loans held-for-sale, net of deferred loan fees - 273,377
Loans receivable, net of deferred loan fees
and allowance for loan losses 455,975,501 412,435,397
Accrued interest receivable 1,736,314 1,525,784
Property and equipment, net of accumulated depreciation 23,113,576 19,875,985
Bank-owned life insurance, net of surrender charges 17,757,871 17,350,631
Net deferred tax assets 3,299,204 4,204,703
Other assets 1,353,461 1,472,255
Total assets 600,465,500$ 648,512,458$
Deposits 524,380,931$ 578,000,780$
Advance payments by borrowers for taxes and insurance 4,936,635 3,802,368
Accrued expenses and other liabilities 2,470,620 2,981,445
Note payable 600,000 800,000
Total liabilities 532,388,186 585,584,593
COMMITMENTS AND CONTINGENCIES (Note 13)
EQUITY
Retained income 73,944,816 71,267,829
Accumulated other comprehensive income (loss), net of tax (5,867,502) (8,339,964)
Total equity 68,077,314 62,927,865
Total liabilities and equity 600,465,500$ 648,512,458$
LIABILITIES
ASSETS
Evergreen Federal Bank and Subsidiary
See accompanying notes.
5
Consolidated Statements of Income
Years ended September 30, 2023 and 2022
2023 2022
INTEREST INCOME
Loan fees and interest 20,682,119$ 16,423,627$
Cash and investment securities 2,503,987 2,135,303
Restricted equity security dividends (FHLB) 28,710 21,190
Total interest income 23,214,816 18,580,121
INTEREST EXPENSE
Deposits 2,908,505 555,427
Borrowings 189,133 34,374
Total interest expense 3,097,638 589,801
Net interest income before (recapture of) provision
for loan losses 20,117,178 17,990,320
(RECAPTURE OF) PROVISION FOR LOAN LOSSES (271,000) (300,200)
Net interest income after (recapture of) provision
for loan losses 20,388,178 18,290,520
NONINTEREST INCOME
Service charges on deposit accounts 736,707 750,336
Gain on sale of loans 36,558 407,591
Service charges on loan accounts 413,575 443,452
Increase in cash surrender value of life insurance 310,117 262,538
Other income 385,494 362,068
Total noninterest income 1,882,451 2,225,985
NONINTEREST EXPENSE
Salaries and employee benefits 9,594,256 8,985,764
Occupancy 2,606,505 2,170,098
Data processing 1,111,787 1,065,203
Advertising, marketing, and promotional costs 753,710 614,462
Net loss on sale of investments 2,538,174 -
Other expense 2,129,278 2,106,380
Total noninterest expense 18,733,710 14,941,907
INCOME BEFORE PROVISION FOR INCOME TAXES 3,536,919 5,574,597
PROVISION FOR INCOME TAXES 859,932 1,452,481
NET INCOME 2,676,987$ 4,122,117$
Evergreen Federal Bank and Subsidiary
See accompanying notes.
6
Consolidated Statements of Comprehensive Income (Loss)
Years Ended September 30, 2023 and 2022
2023 2022
NET INCOME 2,676,987$ 4,122,117$
Other comprehensive income (loss), net of income taxes
Unrealized holding gains (losses) on available-for-sale
investment securities 839,788 (11,501,710)
Reclassification for net gain on available-for-sale
investment securities recognized in earnings 2,538,174 -
Income tax effects (905,500) 3,083,160
Total other comprehensive income (loss),
net of taxes
2,472,462 (8,418,550)
COMPREHENSIVE INCOME (LOSS) 5,149,449$ (4,296,433)$
Evergreen Federal Bank and Subsidiary
See accompanying notes.
7
Consolidated Statements of Changes in Equity
Years Ended September 30, 2023 and 2022
Accumulated Other
Comprehensive
Income (Loss)
Evergreen Federal Bank and Subsidiary
See accompanying notes.
8
Consolidated Statements of Cash Flows
Years Ended September 30, 2023 and 2022
2023 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 2,676,987$ 4,122,117$
Adjustments to reconcile net income to net cash
from operating activities
Net accretion of discounts and amortization of
premiums on investment securities 88,147 160,436
(Recapture of) provision for loan losses (271,000) (300,200)
Depreciation of property and equipment 1,057,581 907,529
Amortization of promotional assets 176,975 144,389
Amortization of mortgage servicing asset 170,630 295,055
Origination of loans held for sale (1,722,500) (14,205,778)
Proceeds from sales of loans held for sale 2,032,435 15,233,442
Gain on sale of loans held for sale (36,558) (407,591)
Increase in the cash surrender value of bank-owned
life insurance (310,117) (352,692)
Loss from sale of investment securities 2,538,174 -
Change in deferred taxes - 246,700
Changes in other assets and liabilities
Accrued interest receivable and other assets (686,057) (670,078)
Accrued expenses and other liabilities (361,232) (870,311)
Net cash from operating activities 5,353,465 4,303,018
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment securities (932,500) (92,804,036)
Proceeds from sales of investment securities 66,397,220 -
Proceeds from investment maturities - 11,000,000
Purchase of restricted equities (FHLB) (23,000) (42,500)
Loans made to customers, net (43,269,104) (51,068,288)
Purchase of bank-owned life insurance - (1,475,837)
Purchases of property and equipment (4,295,172) (1,604,260)
Net cash from investing activities 17,877,444$ (135,994,921)$
Evergreen Federal Bank and Subsidiary
Consolidated Statements of Cash Flows (continued)
Years Ended September 30, 2023 and 2022
See accompanying notes.
9
2023 2022
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits (53,619,849)$ 34,570,823$
Payments on long term borrowings (200,000) (200,000)
Increase (decrease) in advance payments by
borrowers for taxes and insurance 1,134,267 (271,520)
Net cash from financing activities (52,685,582) 34,099,303
NET CHANGE IN CASH AND CASH EQUIVALENTS (29,454,673) (97,592,600)
CASH AND CASH EQUIVALENTS, beginning of year 58,970,676 156,563,276
CASH AND CASH EQUIVALENTS, end of year 29,516,003$ 58,970,676$
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid 2,206,909$ 589,801$
Income taxes paid 748,000$ 1,454,000$
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING ACTIVITIES
Change in fair value of investment securities
available-for-sale, net of taxes 2,472,462$ (8,418,550)$
Evergreen Federal Bank and Subsidiary
10
Notes to Financial Statements
Note 1 – Organization and Summary of Significant Accounting Policies
Description of business – Evergreen Federal Bank (the Bank) is a mutual institution that focuses on
traditional banking functions and community building activities. The Bank, chartered in 1934 and serving
Josephine, Jackson, and Curry Counties in Oregon, is headquartered in Grants Pass, Oregon and
operates branches in Grants Pass as well as in Ashland, Brookings, Rogue River, and Medford, Oregon.
The Bank is primarily engaged in the business of granting residential and commercial real estate loans
and provides a wide range of banking as well as other financial services primarily to individual customers.
Basis of consolidation – The consolidated financial statements include the accounts of the Bank and its
wholly-owned subsidiary, Affordable Housing. All material intercompany balances and transactions have
been eliminated in consolidation.
Use of estimates – The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States of America and reporting practices
applicable to the banking industry. In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported amount of assets and liabilities as of
the date of the consolidated balance sheets, revenues and expenses for the reporting period, and
disclosures of contingent assets and liabilities. Actual results could differ significantly from those
estimates.
Significant estimates are necessary in determining the fair value of financial instruments, the recorded
value of the allowance for loan losses, the valuation of the mortgage servicing asset, deferred tax assets
and liabilities, and the amount of impairment, if any, on investment securities and other real estate owned.
Management believes the assumptions used in arriving at these estimates are reasonable.
Cash and cash equivalents – For the purposes of the consolidated statements of cash flows, the Bank
considers all highly-liquid debt instruments purchased with an original maturity of three months or less to
be cash equivalents, including amounts due from banks and interest-bearing deposits with banks.
Investment securities – Investment securities are classified into one of two categories: (1) held‐to‐
maturity or (2) available‐for‐sale. The Bank does not purchase investment securities for trading purposes.
Investment securities that management has the positive intent and ability to hold until maturity are
classified as held-to-maturity and are carried at their remaining unpaid principal balance, net of
unamortized premiums or unaccreted discounts. Premiums are amortized and discounts are accreted
using the interest method over the period remaining until maturity.
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
11
Note 1 – Organization and Summary of Significant Accounting Policies (continued)
Securities classified as available‐for‐sale are those debt securities that the Bank intends to hold for an
indefinite period of time, but not necessarily to maturity. Any decision to sell a security classified as
available‐for‐sale would be based on various factors, including significant movements in interest rates,
changes in the maturity mix of the Bank’s assets and liabilities, liquidity needs, regulatory capital
considerations, and similar factors. Securities available‐for‐sale are carried at fair value. Unrealized gains
or losses, net of the related deferred tax effect, are reported as accumulated other comprehensive
income (loss) within equity. Realized gains and losses on sales of securities are recognized in earnings at
the time of sale and are determined by the specific identification method. Purchase premiums and
discounts are recognized in interest income using the interest method over the term to maturity of the
securities.
The Bank assesses other-than-temporary impairment (OTTI) or permanent impairment of its investment
securities based on whether it intends to sell a security or if it is likely that it would be required to sell the
security before recovery of the amortized cost basis of the investment, which may be maturity. For debt
securities, if the Bank intends to sell the security or it is likely that it will be required to sell the security
before recovering its cost basis, the entire impairment loss must be recognized in earnings as an OTTI. If
the Bank does not intend to sell the security and it is not likely that it will be required to sell the security,
but the Bank does not expect to recover the entire amortized cost basis of the security, only the portion of
the impairment loss representing credit losses would be recognized in earnings. The credit loss on a
security is measured as the difference between the amortized cost basis and the present value of the
cash flows expected to be collected. Projected cash flows are discounted by the original or current
effective interest rate depending on the nature of the security being measured for OTTI.
Restricted equity securities (FHLB) – The Bank’s investment in Federal Home Loan Bank of Des
Moines (FHLB) stock is a restricted equity security carried at cost ($100 per share) which approximates
fair value. As a member of the FHLB system, the Bank is required to maintain a minimum level of
investment in FHLB stock based on its asset size and outstanding FHLB advances. The Bank may
request redemption of any stock in excess of the amount required. Stock redemptions are made at the
discretion of the FHLB.
FHLB stock is generally viewed as a long-term investment. Accordingly, when evaluating FHLB stock for
impairment, its value is determined based on the ultimate recoverability of the par value rather than by
recognizing temporary declines in value. The Bank has concluded its FHLB stock investment is not
impaired as of September 30, 2023 and 2022.
Loans held-for-sale – Mortgage loans held-for-sale are reported at the lower of cost or market value.
Gains or losses on sales of loans that are held-for-sale are recognized at the time of sale and determined
by the difference between net sale proceeds and the net book value of the loans.
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
12
Note 1 – Organization and Summary of Significant Accounting Policies (continued)
Loans receivable – Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity are reported at the outstanding principal balance adjusted for the
allowance for loan losses, any net deferred fees or costs on originated loans and unamortized premiums
or unaccreted discounts on purchased loans. Loan origination fees, net of certain direct origination costs,
are deferred and amortized as an adjustment of the yield on the related loan using the interest method.
Interest on loans is calculated using the simple-interest method on daily balances of the principal amount
outstanding.
Allowance for loan losses – The allowance for loan losses represents management’s recognition of the
assumed risks of extending credit and its evaluation of the quality of the loan portfolio. The allowance is
maintained at a level considered adequate to provide for potential loan losses based on management’s
assessment of various factors affecting the loan portfolio, including a review of problem loans, business
conditions, loss experience, and an overall evaluation of the quality of the portfolio. The allowance is
increased or decreased by provisions charged to operations and reduced by loans charged-off, net of
recoveries. Regulatory examiners may require the Bank to recognize additions to or reductions of the
allowance based upon their judgment about information available to them at the time of their
examinations.
Uncollectible interest on loans is charged-off or an allowance is established by a charge to income equal
to all interest previously accrued. Interest is subsequently recognized only to the extent cash payments
are received until delinquent interest is paid in full and, in management’s judgment, the borrower’s ability
to make periodic interest and principal payments is probable, in which case the loan and loan interest is
returned to accrual status.
Impaired loans and related income – A loan is considered impaired when management determines that
it is probable that all contractual amounts of principal and interest will not be paid as scheduled in the loan
agreement. These loans often include loans on nonaccrual status that are past due 90 days or more,
nonaccrual status loans which have been restructured, and other loans that management considers to be
impaired. The recorded net investment in impaired loans, including accrued interest, is limited to the
present value of the expected cash flows of the impaired loan, the observable fair market value of the
loan, or the fair value of the loan’s collateral, if the loan is collateral dependent.
Loans are reported as troubled debt restructurings when the Bank, for economic or legal reasons related
to the borrower’s financial difficulties, grants significant concessions to a borrower that it would not
otherwise consider. The concessions may be granted in various forms, including reduction in the stated
interest rate, reduction in the loan balance or accrued interest, and extension of the maturity date. As a
result of these concessions, restructured loans are impaired as the Bank will not collect all amounts due,
both principal and interest, in accordance with the terms of the original loan agreement. Impairment
reserves on non-collateral dependent restructured loans are measured by comparing the present value of
expected future cash flows on the restructured loans, discounted at the interest rate of the original loan
agreement, to the loan’s carrying value. These impairment reserves are recognized as a specific
component to be provided for in the allowance for loan losses.
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
13
Note 1 – Organization and Summary of Significant Accounting Policies (continued)
When a loan is placed on nonaccrual status, all interest previously accrued but not collected is reversed
and charged against interest income. Income on nonaccrual loans is then recognized only when the loan
is brought current or when, in the opinion of management, the borrower has demonstrated the ability to
resume payments of principal and interest. Interest income on restructured loans is recognized pursuant
to the terms of new loan agreements. Interest income on other impaired loans is monitored and is based
upon the terms of the underlying loan agreement.
Mortgage loan transactions and servicing – When loans are sold with the servicing rights retained, the
Bank recognizes mortgage servicing rights based on estimated fair value. Fair values are calculated by
the Bank based on the size of the loan, its contractual and expected maturity and servicing value factors
from the Federal Home Loan Mortgage Corporation fee quote tables as well as data provided by third-
party vendors. Impairment of mortgage servicing rights is measured based upon the characteristics of the
individual loans, including note rate, term, underlying collateral, current market conditions, and estimates
of net servicing income. The Bank accounts for its recorded value and possible impairment of mortgage
servicing rights on a loan-by-loan basis. The book value allocated to mortgage servicing rights is recorded
among “other assets” and amortized in proportion to, and over the period of, estimated net servicing
income.
Property and equipment – Property and equipment are stated at cost less accumulated depreciation.
The cost of property and equipment is depreciated using the straight-line method over the estimated
useful lives of the related assets, ranging typically from 3 to 39 years.
Bank-owned life insurance – Bank-owned life insurance is carried at the cash surrender value and
reflects the Banks’s investment in the recorded asset, net of surrender charges. Changes in the cash
surrender value of the contracts are included in earnings as gains or losses in the period they arise.
Income taxes – Income taxes are accounted for using an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary
differences between the financial statement and tax basis of assets and liabilities at the applicable
enacted tax rates. A valuation allowance is provided when it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The Bank evaluates the realizability of its deferred tax
assets by assessing its valuation allowance and by adjusting the amount of such allowance, if necessary.
The factors used to assess the likelihood of realization include the Bank’s forecast of future taxable
income and available tax planning strategies that could be implemented to realize the net deferred tax
assets. Failure to achieve forecasted taxable income in applicable tax jurisdictions could affect the
ultimate realization of deferred tax assets and could result in an increase in the Bank’s effective tax rate
on future earnings.
The Bank recognizes the tax benefit from uncertain tax positions only if it is more likely than not that the
tax positions will be sustained on examination by the taxing authorities, based on the technical merits of
the position. A tax benefit is measured based on the largest benefit that has a greater than 50% likelihood
of being realized upon ultimate settlement. The Bank recognizes interest and penalties related to income
tax matters in “other expense”. The Bank does not anticipate that the amount of unrecognized tax
benefits will significantly increase or decrease in the next 12 months.
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
14
Note 1 – Organization and Summary of Significant Accounting Policies (continued)
Advertising, marketing, and promotional costs – The Bank expenses most advertising and marketing
costs as they are incurred. Advertising, marketing and promotional costs of $753,710 and $614,462 were
recorded for the years ended September 30, 2023 and 2022, respectively, which includes both costs that
are expensed as incurred and the amortization of prepaid costs, as described below.
The Bank capitalizes amounts as prepaid costs for such expenditures that benefit future periods. Prepaid
costs are included in other assets and amortized over the period the Bank receives a benefit, which was
estimated to be three to ten years as of September 30, 2023. For the years ended September 30, 2023
and 2022, the Bank capitalized $55,000 and $283,668, respectively, as prepaid costs and recognized
$176,975 and $144,389, respectively, in amortization expense, included in advertising, marketing and
promotional costs.
As of September 30, 2023 and 2022, prepaid costs were $449,349 and $571,324, net of accumulated
amortization, respectively, which are recorded within “other assets.”
Off-balance sheet financial instruments – The Bank holds no derivative financial instruments.
However, in the ordinary course of business, the Bank has entered into off-balance sheet financial
instruments consisting of commitments to fund loans and extend credit and to acquire investment
securities. These financial instruments are recorded in the financial statements when they are funded or
related fees are incurred or received.
Fair value measurements – The Bank uses fair value measurements to define fair value. Fair value is
defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly
transaction between market participants at the measurement date.
The Bank determines fair value based upon quoted prices when available or through the use of
alternative approaches, such as matrix or model pricing, when market quotes are not readily accessible
or available. The valuation techniques used are based on observable and unobservable inputs.
Observable inputs reflect market data obtained from independent sources, while unobservable inputs
reflect the Bank’s market assumptions.
These two types of inputs create the following fair value hierarchy:
Level 1 inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the
entity has the ability to access at the measurement date.
Level 2 inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset
or liability, either directly or indirectly. These might include quoted prices for similar assets and
liabilities in active markets and inputs other than quoted prices that are observable for the asset or
liability, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 inputs – Unobservable inputs for determining the fair values of assets or liabilities that reflect
an entity’s own assumptions about the assumptions that market participants would use in pricing the
assets or liabilities.
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
15
Note 1 – Organization and Summary of Significant Accounting Policies (continued)
The following methods and assumptions were used by the Bank in estimating fair values of assets and
liabilities for disclosure purposes:
Cash and cash equivalents – The carrying amounts of short-term instruments approximate their fair value.
Investment securities available-for-sale – Fair values for investment securities are based on quoted
market prices or the market values for comparable securities.
Restricted equity securities (FHLB) – The fair value of FHLB stock approximates redemption value.
Loans receivable and loans held-for-sale – Fair values are estimated by stratifying the loan portfolio into
groups of loans with similar financial characteristics. Loans are segregated by type, such as real estate,
commercial, and consumer, with each category further segmented into fixed and adjustable rate interest
terms.
The fair value of fixed rate loans is calculated by discounting scheduled cash flows through the
anticipated maturities adjusted for prepayment estimates. For mortgage loans held-for-sale, the Bank
uses secondary market rates in effect for loans of similar size to discount cash flows. For other fixed rate
loans, cash flows are discounted at rates currently offered for similar maturities. Adjustable interest rate
loans are assumed to approximate fair value because they generally reprice within the short-term.
Fair values are adjusted for credit risk based on assessment of risk identified with specific loans and risk
adjustments on the remaining portfolio based on credit loss experience. Assumptions regarding credit risk
are judgmentally determined using specific borrower information, internal credit quality analysis, and
historical information on segmented loan categories for nonspecific borrowers.
Bank-owned life insurance – The carrying amount approximates fair value.
Deposits – The fair value of deposits with no stated maturity, such as checking, passbook savings, and
money market accounts, is equal to the amount payable on demand. The fair value of certificates of
deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using
the rates currently offered for deposits of similar maturities.
Off-balance sheet instruments – The Bank’s off-balance sheet instruments include unfunded
commitments to extend credit and borrowing facilities available to the Bank. The fair value of these
instruments is not considered practicable to estimate because of the lack of quoted market prices and the
inability to estimate fair value without incurring excessive costs.
Limitations – Fair value estimates are made at a specific point in time, based on relevant market
information and information about the financial instrument. These estimates do not reflect any premium or
discount that could result from offering for sale at one time the Bank’s entire holdings of a particular
financial instrument.
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
16
Note 1 – Organization and Summary of Significant Accounting Policies (continued)
Reclassifications – Certain account reclassifications have been made to the financial statements, when
necessary, to conform to current year presentation. These reclassifications did not affect previously
reported net income or members’ equity.
Comprehensive income (loss) – Recognized revenue, expenses, gains and losses are included in net
income (loss). Certain changes in assets and liabilities, such as unrealized gains and losses on available-
for-sale securities, are reported on a cumulative basis, net of tax effects, as a separate component of
equity on the Consolidated Balance Sheet. Changes in such items, along with net income (loss), are
components of comprehensive income (loss).
Revenue Recognition – The Bank applies Accounting Standards Codification Topic 606 (“ASC 606”) to
account for revenue from contracts with customers, which (i) creates a single framework for recognizing
revenue from contracts with customers that fall within its scope and (ii) revises when it is appropriate to
recognize a gain (loss) from the transfer of nonfinancial assets, such as OREO. The majority of the
Bank’s revenues come from interest income and other sources, including loans and investments that are
outside the scope of ASC 606. The Bank’s services that fall within the scope of ASC 606 are presented
within non-interest income and are recognized as revenue as the Bank satisfies its obligation to the
customer. Services within the scope of ASC 606 include: service charges on deposit and loan accounts.
The following revenue streams are within scope of ASC 606, while the remainder of non-interest streams
are generally out of scope.
Service charges on deposit accounts – The Bank earns fees from its members for deposit related account
maintenance and transaction-based activity. Account maintenance fees consist primarily of account fees
and analyzed account fees charged on deposit accounts on a monthly basis. The performance obligation
is satisfied and the fees are recognized on a monthly basis as the service period is completed.
Transaction-based fees are charged for specific services provided including non-sufficient funds,
overdraft transfers, and wire services. The performance obligation is satisfied as the transaction
completes resulting in the immediate recognition of the income. This also includes interchange income,
which is earned when a debit card issued by the Bank is used to purchase goods or services at a
merchant. The income earned on each transaction is determined by a combination of the transaction
amount, merchant type, and other factors. The performance obligation is satisfied and the resulting
income is earned when the transaction completes and is charged to the cardholders’ card. Accordingly,
the income is recognized in the period in which the performance obligation is satisfied.
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
17
Note 1 – Organization and Summary of Significant Accounting Policies (continued)
Service charges on loan accounts – The Bank earns fees from its members for loan related account
maintenance and transaction-based activity. The bank earns various fees related to the servicing of loans
such as late payments and lines of credit fees. Loan related fees are earned as the maintenance of the
loan occurs and the actual fee is paid by the member. The performance obligation is satisfied as the
transaction completes resulting in the immediate recognition of the income. The Bank earns servicing
fees for collecting loan and escrow payments for loans that were sold to Federal Home Loan Mortgage
Corporation. The servicing fees are earned as the servicing occurs.
Subsequent events – Subsequent events are events or transactions that occur after the balance sheet
date but before the consolidated financial statements are available to be issued. The Bank recognizes in
the consolidated financial statements the effects of all subsequent events that provide additional evidence
about conditions that existed at the balance sheet date, including the estimates inherent in the process of
preparing the consolidated financial statements. The Bank’s consolidated financial statements do not
recognize subsequent events that provide evidence about conditions that did not exist at the balance
sheet date, but arose after that date and before the consolidated financial statements were available to be
issued. The Bank has evaluated subsequent events through December 6, 2023, which is the date the
consolidated financial statements became available for issuance.
Note 2 – Investment Securities
The amortized cost, gross unrealized gains and losses, and estimated fair value of available-for-sale
investment securities at September 30, 2023 are summarized below:
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
U.S. Treasury securities 71,014,215$ -$ (7,316,685)$ 63,697,530$
U.S. Government agency securities 3,954,938 - (699,698) 3,255,240
74,969,153$ -$ (8,016,383)$ 66,952,770$
The amortized cost, gross unrealized gains and losses, and estimated fair value of available-for-sale
investment securities at September 30, 2022 are summarized below:
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
U.S. Treasury securities 139,112,497$ -$ (10,711,927)$ 128,400,570$
U.S. Government agency securities 3,947,697 - (682,417) 3,265,280
143,060,194$ -$ (11,394,344)$ 131,665,850$
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
18
Note 2 – Investment Securities (continued)
The following table presents the gross unrealized losses and fair value of the Bank’s investment
securities, aggregated by investment category and length of time that individual securities have been in a
continuous unrealized loss position, at September 30, 2023:
Gross Gross Gross
Estimated Unrealized Estimated Unrealized Estimated Unrealized
Fair Value Losses Fair Value Losses Fair Value Losses
U.S. Treasury Securities 923,560$ (10,567)$ 62,773,970$ (7,306,118)$ 63,697,530$ (7,316,685)$
U.S. Government agency
securities - - 3,255,240 (699,698) 3,255,240 (699,698)
Totals 923,560$ (10,567)$ 66,029,210$ (8,005,816)$ 66,952,770$ (8,016,383)$
Less than 12 Months
12 Months or Greater
Totals
At September 30, 2023, 36 securities held by the Bank have unrealized losses and are considered to be
temporarily impaired investments. Temporary impairment of these securities is due to interest rate risk
associated with fixed-rate obligations. Management believes that, while actual fluctuations in unrealized
losses may occur over the life of investment securities, the temporary impairment of each investment
security in an unrealized loss position at September 30, 2023, will reverse as the individual investment
security approaches its contractual maturity date.
The following table presents the gross unrealized losses and fair value of the Bank’s investment
securities, aggregated by investment category and length of time that individual securities have been in a
continuous unrealized loss position, at September 30, 2022:
Gross Gross Gross
Estimated Unrealized Estimated Unrealized Estimated Unrealized
Fair Value Losses Fair Value Losses Fair Value Losses
U.S. Treasury securities 102,741,270$ (7,094,294)$ 25,659,300$ (3,617,633)$ 128,400,570$ (10,711,927)$
U.S. Government agency
securities - - 3,265,280 (682,417) 3,265,280 (682,417)
102,741,270$ (7,094,294)$ 28,924,580$ (4,300,050)$ 131,665,850$ (11,394,344)$
Less than 12 Months
12 Months or Greater
Totals
At September 30, 2022, 59 securities held by the Bank had unrealized losses and were considered to be
temporarily impaired investments.
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
19
Note 2 – Investment Securities (continued)
The amortized cost and estimated fair value of available-for-sale investment securities by expected
maturity at September 30, 2023, are as described in the following table.
Amortized Estimated
Cost Fair Value
Due one year or less 3,017,725$ 2,885,850$
Due after one to five years 61,507,146 55,375,000
Due after five to 10 years 10,444,282 8,691,920
74,969,153$ 66,952,770$
During the year ended September 30, 2023, the Bank sold investment securities for proceeds of
$66,397,220 that resulted in gross realized losses of $2,538,174.
The Bank pledged three securities as of September 30, 2023, with an amortized cost of $7,751,686 to
secure customer deposits greater than $250,000.
Note 3 – Restricted Equity Securities (FHLB)
As a member of the FHLB system, the Bank is required to maintain a minimum level of investment in
FHLB stock based on asset size and specific percentage of its outstanding FHLB advances. As of
September 30, 2023 and 2022, the minimum stock requirements were $760,800 and $737,800,
respectively.
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
20
Note 4 – Loans Receivable, Deferred Loan Fees, and Allowance for Loan Losses
The composition of loan balances at September 30 is summarized as follows:
2023 2022
Loans
Residential 1–4 family 187,169,330$ 170,154,396$
Commercial 269,923,242 244,253,584
Home equity 5,261,750 4,855,838
Consumer 1,128,638 861,084
Other 42,574 47,239
Total loans 463,525,534 420,172,140
Less
Allowance for loan losses (6,560,866) (6,867,199)
Deferred loan fees, net of costs (989,167) (869,544)
Total loans receivable, net of deferred loan fees and
allowance for loan losses 455,975,501$ 412,435,397$
The following table summarizes activity related to the allowance for loan losses by significant segments of
the loan portfolio as of and for the years ended September 30, 2023 and 2022:
Residential
1-4 Family Commercial Home Equity Consumer Other Total
Allowance
Beginning balance
2,464,170$ 4,295,878$ 53,109$ 53,355$ 687$
6,867,199$
Charge-offs - (35,333) - - - (35,333)
Recoveries - - - - - -
Provision (recapture) 177,646 (455,021) (4,617) 11,079 (88) (271,000)
Ending balance
2,641,816$ 3,805,525$ 48,492$ 64,434$ 599$ 6,560,866$
Ending balance individually
evaluated for impairment
-$ -$ -$ -$ -$ -$
Ending balance collectively
evaluated for impairment
2,641,816$ 3,805,525$ 48,492$ 64,434$ 599$ 6,560,866$
Loans
Total loans 187,169,330$ 269,923,242$ 5,261,750$ 1,128,638$ 42,574$ 463,525,534$
Ending loan balance: individually
evaluated for impairment
335,146$ 1,452,311$ -$ -$ -$ 1,787,457$
Ending loan balance: collectively
evaluated for impairment
186,834,184$ 268,470,931$ 5,261,750$ 1,128,638$ 42,574$ 461,738,077$
2023
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
21
Note 4 – Loans Receivable, Deferred Loan Fees, and Allowance for Loan Losses (continued)
Residential
1-4 Family Commercial Home Equity Consumer Other Total
Allowance
Beginning balance 2,351,247$ 4,720,466$ 48,752$ 43,515$ 3,419$ 7,167,399$
Charge-offs - - - - - -
Recoveries - - - - - -
Provision (recapture) 112,923 (424,588) 4,357 9,840 (2,732) (300,200)
Ending balance
2,464,170$ 4,295,878$ 53,109$ 53,355$ 687$ 6,867,199$
Ending balance individually
evaluated for impairment
-$ -$ -$ -$ -$ -$
Ending balance collectively
evaluated for impairment
2,464,170$ 4,295,878$ 53,109$ 53,355$ 687$ 6,867,199$
Loans
Total loans 170,154,396$ 244,253,584$ 4,855,838$ 861,084$ 47,239$ 420,172,140$
Ending loan balance: individually
evaluated for impairment
351,539$ 1,173,172$ -$ -$ -$ 1,524,711$
Ending loan balance: collectively
evaluated for impairment
169,802,857$ 243,080,412$ 4,855,838$ 861,084$ 47,239$ 418,647,429$
2022
The following table presents the loan portfolio by loan classification and credit quality indicator as of
September 30:
2023 2022 2023 2022 2023 2022
Grade
Pass 186,908,589$ 169,642,530$ 259,580,637$ 243,181,431$ 5,261,750$ 4,855,838$
Special Mention - - 8,937,560 - - -
Substandard 260,741 511,866 1,405,045 1,072,153 - -
Doubtful - - - - -
Loss - - - - - -
Total 187,169,330$ 170,154,396$ 269,923,242$ 244,253,584$ 5,261,750$ 4,855,838$
2023 2022 2023 2022 2023 2022
Grade
Pass 1,128,638$ 861,084$ 42,574$ 47,239$ 452,922,188$ 418,588,122$
Special Mention - - - - 8,937,560 -
Substandard - - - - 1,665,786 1,584,019
Doubtful - - - - - -
Loss - - - - - -
Total 1,128,638$ 861,084$ 42,574$ 47,239$ 463,525,534$ 420,172,140$
Total
Home Equity
Consumer
Residential 1-4 Family
Commercial
Other
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
22
Note 4 – Loans Receivable, Deferred Loan Fees, and Allowance for Loan Losses (continued)
The following describes the criteria by which loans are categorized by credit quality indicator:
Pass – Pass assets are well protected by the current net worth and paying capacity of the obligor or
guarantors, if any, or by the fair value, less costs to acquire and sell any underlying collateral in a timely
manner.
Special mention – A special mention asset has potential weaknesses that deserve management’s close
attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment
prospects for the asset or in the institution’s credit position at some future date. Special mention assets
are not adversely classified and do not expose an institution to sufficient risk to warrant adverse
classification.
Substandard – A substandard asset is inadequately protected by the current sound worth and paying
capacity of the obligor or by the collateral pledged, if any. Assets so classified must have a well-defined
weakness, or weaknesses that jeopardize the liquidation of the debt. They are characterized by the
distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful – An asset classified as doubtful has all the weaknesses inherent in one classified substandard
with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of
currently known facts, conditions, and values, highly questionable and improbable.
Loss – An asset, or portion thereof, classified as loss is considered uncollectible and of such little value
that its continuance on the Bank’s books as an asset, without establishment of a specific valuation
allowance or charge-off, is not warranted. This classification does not necessarily mean that an asset has
no recovery or salvage value; but rather, there is much doubt about whether, how much, or when the
recovery would occur. As such, it is not practical or desirable to defer the write off.
The following table provides an aging analysis of the Bank’s loans as of September 30:
Recorded
Greater Loans on Investment >
30-59 Days 60-89 Days Than Total Past
Nonaccrual
90 Days and
Past Due Past Due 90 Days Due Current Total Status Accruing
Residential 1-4 family 39,693$ -$ -$ 39,693$
187,129,637$
187,169,330$
260,741$
-$
Commercial - - 120,367 120,367
269,802,875
269,923,242
331,160
-
Home equity - - - -
5,261,750
5,261,750
-
-
Consumer - - - -
1,128,638
1,128,638
-
-
Other - - - -
42,574
42,574
-
-
Total 39,693$ -$ 120,367$ 160,060$ 463,365,474$ 463,525,534$ 591,901$ -$
Residential 1-4 family -$ 46,012$ -$ 46,012$
170,108,384$
170,154,396$
511,866$
-$
Commercial - - - -
244,253,584
244,253,584
-
-
Home equity - - - -
4,855,838
4,855,838
-
-
Consumer - - - -
861,084
861,084
-
-
Other - - - -
47,239
47,239
-
-
Total -$ 46,012$ -$ 46,012$ 420,126,129$ 420,172,140$ 511,866$ -$
2023
2022
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
23
Note 4 – Loans Receivable, Deferred Loan Fees, and Allowance for Loan Losses (continued)
The following table summarizes impaired loan information by significant segment of the loan portfolio as
of and for the years ended September 30, 2023 and 2022:
Unpaid Average Interest
Recorded Principal Related Recorded Income
Investment Balance Allowance Investment Recognized
With no related allowance recorded
Residential 1-4 family 335,146$ 342,258$ -$ 341,035$ 15,786$
Commercial 1,452,311 1,532,279 - 1,519,838 77,137
Total impaired loans
Residential 1-4 family 335,146 342,258 - 341,035 15,786
Commercial 1,452,311 1,532,279 - 1,519,838 77,137
Total
1,787,457$ 1,874,537$ -$ 1,860,873$ 92,923$
With no related allowance recorded
Residential 1-4 family 351,539$ 358,282$ -$ 355,825$ 15,887$
Commercial 1,173,172 1,235,667 - 1,191,436 75,184
Total impaired loans
Residential 1-4 family 351,539 358,282 - 355,825 14,887
Commercial 1,173,172 1,235,667 - 1,191,436 75,184
Total
1,524,711$ 1,593,949$ -$ 1,547,261$ 90,071$
2023
2022
The Bank offers a variety of modifications to borrowers as troubled debt restructurings. The modification
categories offered can generally be described in the following categories:
Rate modification – A modification in which the interest rate is changed.
Term modification – A modification in which the maturity date, timing of payments, or frequency of
payments is changed.
Interest only modification – A modification in which the loan is converted to interest only payments for a
period of time.
Payment modification – A modification in which the dollar amount of the payment is changed, other than
an interest only modification described above.
Combination modification – Any other type of modification, including the use of multiple categories above.
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
24
Note 4 – Loans Receivable, Deferred Loan Fees, and Allowance for Loan Losses (continued)
There was one troubled debt restructuring during the year ended September 30, 2023.The following table
presents the troubled debt restructured by type of modification that occurred during the year ended
September 30, 2023 and 2022:
Number of Pre Post Number of Pre Post
Contracts Modification Modification Contracts Modification Modification
Payment modification
Residential 1 212,969 212,969 1 239,365 239,365
1 212,969 212,969 1 239,365 239,365
2023
2022
Troubled debt restructurings that are on accrual and nonaccrual status as of September 30, 2023 and
2022 were as follows:
Accrual Nonaccrual
Status Status
Residential 1-4 family 335,967$ -$
Commercial 1,121,453 210,792
1,457,420$ 210,792$
Residential 1-4 family 112,174$ 239,365$
Commercial 1,173,172 -
1,285,346$ 239,365$
2023
2022
During the years ended September 30, 2023 and 2022, there were no troubled debt restructured loans for
which there was a payment default within a period of 12 months following the restructure.
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
25
Note 5 – Mortgage Loans Serviced for Others
Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets.
The unpaid principal balances of these loans at September 30 are summarized as follows:
2023 2022
Mortgage loan portfolios serviced for
Federal Home Loan Mortgage Corporation 146,953,705$ 158,334,892$
Assets, liabilities, revenues, and expenses recognized by the Bank that relate to loans serviced for others
as of and for the years ended September 30, include the following:
2023 2022
Mortgage servicing asset (included in "other assets") 231,461$ 397,512$
Mortgage servicing revenues (included in "service charges
on loan accounts") 381,886 418,132
Mortgage servicing asset amortization expense (included in
"other expense") 170,630 295,054
Custodial escrow balances held for others (included in
"advance payments by borrowers for taxes and
insurance") 1,581,048 1,434,971
Note 6 – Property and Equipment
Property and equipment at September 30 are summarized as follows:
2023 2022
Land 9,417,819$ 9,417,819$
Buildings and improvements 27,124,327 21,919,629
Equipment and furniture 3,445,377 3,049,250
39,987,523 34,386,698
Less accumulated depreciation (16,881,136) (15,859,705)
23,106,387 18,526,993
Construction in progress 7,189 1,348,992
Property and equipment, net of accumulated
depreciation 23,113,576$ 19,875,985$
Depreciation expense of $1,057,581 and $907,529 was recognized for the years ended September 30,
2023 and 2022, respectively.
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
26
Note 7 – Deposits
Deposit accounts at September 30 consist of the following:
Total Weighted Average Total Weighted Average
Deposits Interest Rate Deposits Interest Rate
Savings accounts 179,625,377$ 0.18% 237,841,126$ 0.04%
Interest-bearing demand 170,417,551 0.60% 200,018,814 0.21%
Time certificates 91,750,589 3.18% 43,977,705 0.82%
Noninterest-bearing demand 53,684,670 - 61,357,355 -
Money market accounts 28,902,744 0.87% 34,805,780 0.07%
Total deposits 524,380,931$ 578,000,780$
2023
2022
As of September 30, 2023, the scheduled maturities of time certificates of deposit were as follows:
2024 82,966,404$
2025 5,875,449
2026 876,112
2027 489,110
2028 242,171
Thereafter 1,301,343
91,750,589$
Years ending September 30,
Time certificates of deposit of $250,000 or more aggregated to $26,283,130 and $8,098,391 at
September 30, 2023 and 2022, respectively.
Interest expense on all deposit accounts is summarized as follows for the years ended September 30:
2023 2022
Time certificates 1,622,013$ 373,889$
Savings accounts 215,957 41,066
Demand deposits 872,437 121,262
Money market accounts 198,098 19,210
Total interest expense on deposits 2,908,505$ 555,427$
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
27
Note 8 – Borrowing Facilities and Note Payable
As a member of the FHLB, the Bank has entered into an “Advances, Security and Deposit Agreement”
which provides for a credit arrangement. Borrowings under the credit arrangement are collateralized by
the Bank’s FHLB stock, the Bank’s deposits at the FHLB, and other instruments, which may be pledged.
The Bank had a blanket pledge of loans collateralizing its FHLB borrowing arrangement totaling
$387,248,215 at September 30, 2023. Term and overnight advances under the FHLB agreement are
limited to 45% of the Bank’s assets. The maximum total borrowing available from the FHLB was
$234,701,675 at September 30, 2023.
The Bank also maintains an overnight line of credit facility with the Federal Reserve Bank of San
Francisco. Advances are secured by commercial real estate loans. Interest is charged daily on advances
at an amount set by the Federal Reserve Bank’s Board of Governors (5.50% at September 30, 2023).
The Bank also has an unsecured overnight line of credit with US Bank. Available borrowing capacity for
overnight line of credit accounts was $12,281,931 at September 30, 2023. No borrowings were
outstanding under these facilities at September 30, 2023.
During fiscal 2017, the Bank purchased a building and land with a down payment of $200,000 and an
installment note payable of $1,800,000. The note requires payments of $200,000 on the first business
day of January each year and matures January 1, 2026. The interest rate was 4.00% per annum for the
first five years. The note had a one-time rate adjustment on June 1, 2022 which was below the floor of
4.00% so the interest rate will remain at 4.00% per annum for the remaining term of the note. The note
payable is collateralized by the building, and may be prepaid at any time by the agreement of both parties
and is callable by the lender by giving the Bank a 30-day advance notice. The outstanding balance on the
note payable was $600,000 and $800,000 at September 30, 2023 and 2022, respectively.
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
28
Note 9 – Income Taxes
The following is a summary of income tax expense:
2023 2022
Current taxes
Federal expense 700,764$ 881,880$
State expense 159,168 323,901
859,932 1,205,781
Deferred taxes
Federal (benefit) (37,400) 223,300
State (benefit) 37,400 23,400
- 246,700
Provision for income taxes 859,932$ 1,452,481$
The nature and components of deferred tax assets and liabilities as of September 30 are as follows:
2023 2022
Deferred tax assets
Allowance for loan loss 1,865,088$ 1,808,316$
Unrealized losses on investment securities 2,148,879 3,054,379
Non-accrual interest 2,214 477
Deferred compensation 213,374 205,720
Other 4,183 12,362
Total deferred tax assets 4,233,738 5,081,254
Deferred tax liabilities
Accumulated depreciation (750,565) (683,443)
Stock dividends (101,698) (101,698)
Prepaids and other (58,905) (69,652)
Loan fees (23,366) (21,758)
Total deferred tax liabilities (934,534) (876,551)
Net deferred tax assets 3,299,204$ 4,204,703$
There were no valuation allowances offsetting deferred tax assets as of September 30, 2023 and 2022,
because management believes that it is more likely than not that the Bank’s deferred tax assets will be
realized by offsetting future taxable income with reversing taxable differences and through anticipated
future operating income.
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
29
Note 9 – Income Taxes (continued)
An analysis of the variations from the expected statutory tax rates and the effective tax rates is as follows:
Amount Percent Amount Percent
Tax expense at federal
statutory rate 742,753$ 21.00% 1,170,471$ 21.00%
State tax, net of federal
tax benefit 218,488 6.18 339,317 6.09
Bank-owned life insurance (78,764) (2.23) (68,214) (1.22)
Other (22,545) (0.64) 10,907 0.06
Income tax expense 859,932$ 26.07% 1,452,481$ 26.29%
2023
2022
Note 10 – Regulatory Capital Requirements
The Bank is subject to various regulatory capital requirements administered by federal banking agencies.
Failure to meet minimum capital requirements can initiate certain mandatory – and possibly additional
discretionary – actions by regulators that, if undertaken, could have a direct material effect on the Bank’s
consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative
measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory
accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative
judgments by the regulators about components, risk weightings, and other factors.
The federal banking agencies issued the Community Bank Leverage Ratio (CBLR) Framework which
allows qualified institutions to opt into the CBLR framework in place of the risk-based capital guidelines.
The CBLR framework provides a simple measure of capital adequacy for certain qualifying community
banking organizations. Evergreen opted into CBLR framework effective January 1, 2020. Management
believes, as of September 30, 2023 and 2022 that the Bank meets all capital adequacy requirements to
which it is subject.
The most recent notification from the Office of the Comptroller of the Currency categorized the Bank as
well-capitalized under the regulatory framework for prompt corrective action. Management believes that
the Bank continues to maintain its well-capitalized status as of September 30, 2023.
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
30
Note 10 – Regulatory Capital Requirements (continued)
Actual
Amount Ratio Amount Ratio
As of September 30, 2023
(dollars in thousands)
Community Bank 73,945$ 12.14% 54,813$ >9.0 %
Leverage Ratio
Core Capital 73,945$ 12.14% 54,813$ >9.0 %
As of September 30, 2022
(dollars in thousands)
Community Bank 71,268$ 10.96% 58,527$ >9.0%
Leverage Ratio
Core Capital 71,268$ 10.96% 58,527$ >9.0%
Framework
Well-Capitalized
under the CBLR
Note 11 – Retirement and Incentive Compensation Plans
The Bank contributes to a simplified employee pension plan with individual participant accounts for each
employee who meets certain criteria relative to age and length of service. Contributions, which are at the
discretion of the Board of Directors, are for amounts of up to 15% of includable compensation for eligible
participants. Contributions to the plan were $878,288 and $899,649 for the years ended September 30,
2023 and 2022, respectively.
The Bank also has incentive compensation plans established by the Board of Directors for executives and
employees. Under these plans, incentive compensation is established and allocated to eligible employees
based on certain performance criteria. At the Board’s discretion, key executives are also granted one-time
bonuses based upon performance. During the years ended September 30, 2023 and 2022, $242,651 and
$553,183, respectively, were charged to expense pursuant to these incentive compensation plans.
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
31
Note 11 – Retirement and Incentive Compensation Plans (continued)
The Bank has purchased bank-owned life insurance (BOLI) to support split-dollar life insurance
arrangements it has made with certain key employees. Some of these arrangements provide for death
benefits only during employment, to be split between the Bank and an employee’s named beneficiaries,
and some of these arrangements provide for death benefits to be made available to an employee’s
named beneficiaries continuing after retirement. For those arrangements that provide for a post-
retirement death benefit, the Bank recognizes current service cost and accrues an obligation on its
balance sheet within accrued expenses and other liabilities. As of September 30, 2023 and 2022, the
Bank accrued $97,123 and $90,155 respectively, for this obligation.
Note 12 – Other Expenses
Other expenses included in noninterest expense included the following for the years ended
September 30:
2023 2022
Deposit Insurance Fund Assessment 254,239$ 168,230$
EFT/ATM expense 180,817 264,248
Mortgage servicing rights amortization 170,630 295,054
Postage and shipping expense 152,349 149,098
Audit and accounting services 136,540 142,500
Mortgage loan and appraisal expense 135,889 182,078
Donations 111,268 116,401
Assessment expenses 104,132 131,415
Checking and savings administrative costs 99,171 79,282
Stationary, printing, and office supplies 80,109 66,935
Other expenses 704,135 511,138
2,129,278$ 2,106,380$
Note 13 – Commitments and Contingencies
Financial instruments with off-balance sheet risk – The Bank is a party to financial instruments with
off-balance sheet risk in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to fund loans, commitments to extend credit and
acquire investment securities, construction loans in progress, and the issuance of letters of credit. These
instruments involve, to varying degrees, elements of credit and interest rate risk which have not been
recognized in the consolidated balance sheets. All financial instruments held or issued by the Bank are
held or issued for purposes other than trading.
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
32
Note 13 – Commitments and Contingencies (continued)
The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial
instrument for commitments to fund loans, commitments to extend credit and acquire investment
securities, construction loans in progress, and letters of credit written is represented by the contractual
notional amount of those instruments. The Bank uses the same credit policies in making commitments
and conditional obligations as it does for on-balance sheet instruments. Management does not anticipate
any material loss as a result of these transactions.
The following summarizes the Bank’s off-balance sheet commitments as of September 30, 2023:
Contract or
Notional Amount
Financial instruments whose contract amounts
contain credit risk
Commitments to fund other loans 12,551,800$
Commitment to fund unused lines of credit 20,377,988
Commitments to extend credit on construction loans 28,975,970
Standby letters of credit 930,011
62,835,769$
Commitments to fund loans, commitments to extend credit, and construction loans in progress are
agreements to lend to a customer as long as there is no violation of any condition established in the loan
contract or agreement. Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to expire without being
drawn upon, total commitment amounts do not necessarily represent future cash requirements. The Bank
evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained,
if deemed necessary by the Bank upon funding of loans or extensions of credit, is based on
management’s credit evaluation of the customer. Collateral held varies but consists primarily of real
estate.
Letters of credit written are conditional commitments issued by the Bank to guarantee the performance of
a customer to a third party. Those guarantees are primarily issued to support public and private borrowing
arrangements, including commercial papers, bond financing, and similar transactions. The credit risk
involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to
customers. The Bank holds cash, marketable securities, or real estate as collateral supporting those
commitments for which collateral is deemed necessary.
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
33
Note 13 – Commitments and Contingencies (continued)
Operating lease commitments – The Bank leases certain property to a non-related third party under a
non-cancellable lease agreement. The lease, which was set to expire March 6, 2019, allows for the tenant
to exercise a renewal option for four successive terms of five years and requires a base monthly payment
calculated at the greater of $10,000 or 6% of net sales. The Bank has renewed the lease for an additional
term through March 2024. Minimum total future rental income expected from this commitment is as
follows:
Years ending September 30, 2024 51,935$
Total minimum payment to be received 51,935$
Employment Agreements – The Bank has entered into employment agreements with certain members
of executive management that require payments in the event of certain contingencies. Until such events
occur, no accrual of such amounts is required.
Legal contingencies – The Bank may become a defendant in certain claims and legal actions arising in
the ordinary course of business. In the opinion of management, after consultation with legal counsel,
there are no matters presently known to the Bank that are expected to have a material adverse effect on
the consolidated financial condition of the Bank.
Note 14 – Fair Value Measurements
Assets measured on a nonrecurring basis are assets that, due to an event or circumstance, were required
to be re‐measured at fair value after initial recognition in the financial statements at some time during the
reporting period. There were no assets measured on a nonrecurring basis that were re-measured for the
years ended September 30, 2023 and 2022, respectively.
The following disclosures are made of fair value information about financial instruments where it is
practicable to estimate that value. In cases where quoted market values are not available, the Bank
primarily uses present value techniques to estimate the fair values of its financial instruments. Valuation
methods require considerable judgment, and the resulting estimates of fair value can be significantly
affected by the assumptions made and methods used. Accordingly, the estimates provided herein do not
necessarily indicate amounts which could be realized in a current market exchange.
In addition, as the Bank normally intends to hold the majority of its financial instruments until maturity, it
does not expect to realize many of the estimated amounts disclosed. The disclosures also do not include
estimated fair value amounts for items which are not defined as financial instruments but which have
significant value.
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
34
Note 14 – Fair Value Measurements (continued)
The following fair value measurements exclude certain financial instruments and all non-financial
instruments. Any aggregation of the fair value amounts presented in the following table would not
represent the underlying value of the Bank. The carrying amount and estimated fair value of financial
instruments as of September 30 is summarized as follows (in thousands):
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial assets
Cash and cash equivalents 29,516,003$ 29,516,003$ 58,970,676$ 58,970,676$
Investment securities 66,952,770 66,952,770 131,665,850 131,665,850
Restricted equity securities 760,800 760,800 737,800 737,800
Loans held-for-sale - - 273,377 273,377
Loans receivable 463,525,534 374,020,000 420,172,140 395,989,000
Financial liabilities
Checking, savings, and money
market accounts 432,630,342 432,630,342 534,023,075 534,023,000
Time certificates of deposit 91,750,589 91,026,000 43,977,705 42,464,000
2023
2022
Note 15 – Concentrations of Credit Risk
Most of the Bank’s lending activity is with customers located within the markets it serves in southern
Oregon. The majority of such customers are also depositors of the Bank. The Bank originates first
mortgage, home equity, consumer, and commercial loans. The distribution of commitments to extend
credit approximates the distribution of loans outstanding. Generally, loans are secured by real estate,
personal property, and deposit accounts. Rights to collateral vary and are legally documented and
enforceable to the extent practicable. Although the Bank has a diversified loan portfolio, local economic
conditions may affect borrowers’ ability to meet the stated repayment terms.
The Bank maintains balances in correspondent bank accounts that at times may exceed federally insured
limits. Management believes that its risk of loss associated with such balances is minimal due to the
financial strength of the correspondent banks.
Evergreen Federal Bank and Subsidiary
Notes to Financial Statements
35
Note 16 – Related-Party Transactions
The Bank has purchased various products and services owned by various directors. Total amounts paid
were $87,078 and $74,318 for the years ended September 30, 2023 and 2022, respectively.
Certain directors and executive officers are also customers of and have had banking transactions with the
Bank in the ordinary course of business, and the Bank expects to have such transactions in the future. All
loans and commitments to loan included in such transactions are made in compliance with applicable
laws on substantially the same terms (including interest rates and collateral) as those prevailing at the
time for comparable transactions with other persons, and in the opinion of the management of the Bank,
do not involve more than the normal risk of collection or present any other unfavorable features. The
amount of loans outstanding to directors, executive officers, and companies with which they are
associated was as follows:
2023 2022
BALANCE, beginning of year 490,934$ 178,279$
Loans made 10,646 406,885
Loans repaid (72,159) (94,230)
BALANCE, end of year 429,421$ 490,934$
Directors’ and senior officers’ deposit accounts at September 30, 2023 and 2022 were $7,076,148 and
$5,410,971, respectively.
The amount of loan commitments outstanding to directors, executive officers, and companies with which
they are associated was $100,000 and $92,100 at September 30, 2023 and 2022.