10QSB 1 fm10q33101-1872.txt FM10Q-3-31-01 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] Quarterly report under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2001 Commission file number 0-23409 High Country Bancorp, Inc. ----------------------------------------------------------------------- (Exact Name of Small business Issuer as Specified in Its Charter) Colorado 84-1438612 ------------------------------ ------------------- (State of Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 7360 West US Highway 50, Salida Colorado 81201 ---------------------------------------------------------- (Address of Principal Executive Offices) 719-539-2516 ---------------------------------------------------------- (Issuer's Telephone Number, Including Area Code) Check whether the issuer's: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90- days. Yes X No ------------- -------------- State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: Shares of common stock, $.01 par value outstanding as of March 31, 2001 1,037,725 HIGH COUNTRY BANCORP, INC. CONTENTS PART I - FINANCIAL INFORMATION Item 1: Financial Statements Consolidated Statements of Condition at June 30, 2000 and March 31, 2001 3 Statements of Consolidated Income for the Nine months and Three Months Ended March 31, 2001 and 2000 4 Statements of Consolidated Cash Flows for the Nine months Ended March 31, 2001 and 2000 5 Notes to Financial Statements 6 - 7 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 11 PART II - OTHER INFORMATION Item 1: Legal Proceedings 12 Item 2: Changes in Securities 12 Item 3: Defaults Upon Senior Securities 12 Item 4: Submission of Matters to a Vote of Security Holders 12 Item 5: Other Information 12 Item 6: Exhibits and Reports on Form 8-K 12 Signature 12 2 HIGH COUNTRY BANCORP, INC. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
March 31, June 30, ASSETS 2001 2000 ------------------------------ Cash and amounts due from banks $ 3,063,151 $ 4,392,623 Interest-bearing deposits at other institutions 4,176,969 1,320,918 Mortgage-backed securities, held to maturity 2,365,225 2,642,889 Securities held to maturity - 200,000 Loans receivable - net 137,183,140 119,897,542 Loans held for sale, lower of cost or market 481,000 - Federal Home Loan Bank stock, at cost 2,421,600 1,857,000 Accrued interest receivable 1,027,945 825,109 Property and equipment, net 6,085,624 6,071,939 Mortgage servicing rights 17,421 22,361 Prepaid expenses and other assets 433,862 458,530 Deferred income taxes 130,000 46,300 ------------ ------------ TOTAL ASSETS $157,385,937 $137,735,211 ============ ============ LIABILITIES AND EQUITY LIABILITIES Deposits $ 93,320,253 $ 82,770,398 Advances by borrowers for taxes and insurance 163,612 11,316 Escrow accounts 1,203,939 1,833,388 Accounts payable and other liabilities 860,831 762,553 Advances from Federal Home Loan Bank 45,381,666 36,238,333 Accrued income taxes payable 52,648 11,574 ------------ ------------ TOTAL LIABILITIES 140,982,949 121,627,562 ------------ ------------ Commitments and contingencies EQUITY Preferred stock-$.01 par value; authorized 1,000,000 shares; no shares issued or outstanding - - Common stock-$.01 par value; authorized 3,000,000 shares; issued and outstanding 1,037,725 shares (3/31/01) and 1,071,225 (6/30/00) 10,377 10,712 Paid-in capital 9,268,858 9,720,159 Retained earnings - substantially restricted 8,061,072 7,433,495 Note receivable from ESOP Trust (732,665) (732,665) Deferred stock awards (204,654) (324,052) ------------ ------------ TOTAL EQUITY 16,402,988 16,107,649 ------------ ------------ TOTAL LIABILITIES AND EQUITY $157,385,937 $137,735,211 ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3 HIGH COUNTRY BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended March 31, March 31, 2001 2000 2001 2000 ------------ ----------- ----------- ----------- Interest Income Interest on loans $ 3,069,164 $ 2,345,113 $ 8,710,074 $ 6,634,385 Interest on securities held-to-maturity 43,787 46,761 137,764 148,190 Interest on other interest-bearing assets 51,925 30,928 154,658 139,340 ----------- ----------- ----------- ----------- Total interest income 3,164,876 2,422,802 9,002,496 6,921,915 ----------- ----------- ----------- ----------- Interest Expense Deposits 943,913 684,056 2,683,318 2,100,736 Federal Home Loan Bank advances 712,259 422,194 1,992,746 1,093,756 ----------- ----------- ----------- ----------- Total interest expense 1,656,172 1,106,250 4,676,064 3,194,492 ----------- ----------- ----------- ----------- Net interest income 1,508,704 1,316,552 4,326,432 3,727,423 Provision for losses on loans 90,000 59,950 225,000 149,800 ----------- ----------- ----------- ----------- Net income after provision for loan losses 1,418,704 1,256,602 4,101,432 3,577,623 ----------- ----------- ----------- ----------- Noninterest Income Service charges on deposits 54,246 40,624 147,678 114,910 Income from loan sales 110,768 43,645 212,049 166,453 Title and escrow fees 77,717 33,997 208,569 34,227 Other 60,093 31,138 176,608 89,973 ----------- ----------- ----------- ----------- Total noninterest income 302,824 149,404 744,904 405,563 ----------- ----------- ----------- ----------- Noninterest Expense Compensation and benefits 686,389 563,863 1,940,705 1,635,997 Occupancy and equipment 290,121 181,702 815,933 503,822 Insurance and professional fees 53,290 67,568 184,623 174,877 Other 162,414 150,986 477,731 407,540 ----------- ----------- ----------- ----------- Total noninterest expense 1,192,214 964,119 3,418,992 2,722,236 ----------- ----------- ----------- ----------- Income before income taxes 529,314 441,887 1,427,344 1,260,950 Income tax expense 202,204 177,322 550,476 495,722 ----------- ----------- ----------- ----------- Net income $ 327,110 $ 264,565 $ 876,868 $ 765,228 =========== =========== =========== =========== Basic Earnings Per Common Share $ 0.33 $ 0.24 $ 0.89 $ 0.67 =========== =========== =========== =========== Diluted Earnings Per Common Share $ 0.33 $ 0.24 $ 0.89 $ 0.67 =========== =========== =========== =========== Weighted Average Common Shares Outstanding Basic 979,528 1,112,739 981,912 1,140,447 Diluted 993,185 1,112,739 981,912 1,140,447
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4 HIGH COUNTRY BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended March 31, 2001 2000 ------------ ------------ Operating Activities Net income $ 876,868 $ 765,228 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of: Deferred loan origination fees (109,539) (35,712) Premiums on investments 3,656 4,560 Compensation expense on Management Recognition Plan 118,457 116,546 Stock dividend received from FHLB -- (45,300) ESOP market value expense 23,872 12,454 Provision for losses on loans 225,000 150,000 Deferred income taxes (83,700) (17,600) Depreciation 297,242 137,881 Income taxes 41,074 (3,960) Net change in miscellaneous assets (173,228) (67,812) Net change in miscellaneous liabilities (531,171) 104,789 ------------ ------------ Net cash provided by operating activities 688,531 1,121,074 ------------ ------------ Investing Activities Net change in interest bearing deposits (2,856,051) 3,367,109 Net change in loans receivable (17,882,059) (13,698,002) Principal repayments of mortgage-backed securities-held-to-maturity 274,008 604,132 Redemption securities held to maturity 200,000 110,000 Purchase of Federal Home Loan Bank stock (564,600) (368,200) Purchases of property and equipment (310,927) (2,726,103) ------------ ------------ Net cash used by investing activities (21,139,629) (12,711,064) ------------ ------------ Financing Activities Net change in deposits 10,549,855 6,574,203 Net change in escrow funds 152,296 137,044 Purchase of common stock (474,567) (2,508,597) Cash dividends paid (249,291) (230,666) Proceeds (payment) on FHLB advances 9,143,333 9,560,000 ------------ ------------ Net cash provided by financing activities 19,121,626 13,531,984 ------------ ------------ Net (decrease) increase in cash and cash equivalents (1,329,472) 1,941,994 Cash and cash equivalents, beginning 4,392,623 2,248,971 ------------ ------------ Cash and cash equivalents, ending $ 3,063,151 $ 4,190,965 ============ ============ Supplemental disclosure of cash flow information Cash paid for: Taxes $ 606,953 $ 481,739 Interest 4,674,991 3,247,712
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5 HIGH COUNTRY BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 2001 Note 1. Nature of Business High Country Bancorp, Inc. (the "Company") was incorporated under the laws of the State of Colorado for the purpose of becoming the holding company of Salida Building and Loan Association (the "Association") in connection with the Association's conversion from a federally chartered mutual savings and loan association to a federally chartered stock savings and loan association, pursuant to its Plan of Conversion. The Company was organized in August 1997 to acquire all of the common stock of Salida Building and Loan Association upon its conversion to stock form, which was completed on December 9, 1997. In November 1999, the Association incorporated a new subsidiary, High Country Title and Escrow Company. This company is offering title insurance and escrow closing services with the Association's market area. In February 2000, the name of Salida Building and Loan Association was changed to High Country Bank (the "Bank"). Note 2. Basis of Presentation The accompanying unaudited consolidated financial statements, (except for the statement of financial condition at June 30, 2000, which is audited) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management all adjustments necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. The financial statements of the Company are presented on a consolidated basis with those of High Country Bank and it's subsidiary High Country Title and Escrow Company. The results of operations for the nine months ended March 31, 2001 are not necessarily indicative of the results of operations that may be expected for the year ended June 30, 2001. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The accounting policies followed are as set forth in Note 1. of the Notes to Financial Statements in the 2000 High Country Bancorp, Inc. financial statements Note 3. Regulatory Capital Requirements At March 31, 2001, the Bank met each of the three current minimum regulatory capital requirements. The following table summarizes the Bank's regulatory capital position at March 31, 2001: Tangible Capital: Actual $13,785,000 8.74% Required 2,365,000 1.50 Excess $11,420,000 7.24% Core Capital: Actual $13,785,000 8.74% Required 4,730,000 3.00 Excess $ 9,055,000 5.74% Risk-Based Capital: Actual $14,973,000 12.92% Required 9,272,000 8.00 Excess $ 5,701,000 4.92% 6 HIGH COUNTRY BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 2001 Tangible and core capital levels are shown as a percentage of total adjusted assets; risk-based capital levels are shown as a percentage of risk-weighted assets. Note 4. Earnings Per Share The Company adopted Financial Accounting Standards Board Statement No. 128 relating to earnings per share. The statement requires dual presentations of basic and diluted earnings per share on the face of the income statement and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shares in the earnings of the entity. 7 HIGH COUNTRY BANCORP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2000 AND MARCH 31, 2001 The Company's total assets increased by $19.7 million or 14.27% from $137.7 million at June 30, 2000 to $157.4 million at March 31, 2001. The increase in assets was due to loan growth of $17.3 million. Net loans totaled $137.2 million at March 31, 2001 and $119.9 million at June 30, 2000. The increase in loans occurred in commercial real estate loans which increased $9.1 million, commercial non-mortgage loans which increased $3.8 million, single family construction loans which increased $2.1 million, and land loans which increased $2.1 million. The bank benefited from strong local demand for purchase financing and loan refinancing during the nine months ending March 31, 2001. During the period, the Bank continued the program of ongoing loan sales of fixed-rate loans to the Federal Home Loan Mortgage Corporation (FHLMC). Loan sales for the nine months ended March 31, 2001 were $14.3 million compared to $9.2 million for the nine months ended March 31, 2000. At March 31, 2001, loans held for sale were $481,000. The loans are valued at the lower of cost or market. The allowance for loan losses totaled $1.2 million at March 31, 2001 and $1.0 million at June 30, 2000. At March 31, 2001 and June 30, 2000, the ratio of the allowance for loan losses to net loans was 0.87% and 0.84%, respectively. As of those dates the non-performing loans in the Association's portfolio were $709,000 and $533,000, respectively. The increase was due to the addition of one $220,000 loan secured by commercial real estate. This loan is also the largest non-performing loan. The total non-performing loans at March 31, 2001 include 24 loans secured by single family residences, business equipment and autos. There was $25,000 of loans charged off and less than $1,000 in recoveries of previous loan losses during the nine months ended March 31, 2001. The determination of the allowance for loan losses is based on a review and classification of the Bank's loan portfolio and other factors, including the market value of the underlying collateral, growth and composition of the loan portfolio, the relationship of the allowance for loan losses to outstanding loans, historical loss experience, delinquency trends and prevailing economic conditions. The Bank believes the current level of allowance for loan losses is adequate to provide for probable future losses, although there are no assurances that probable future losses, if any, will not exceed estimated amounts. At March 31, 2001, the Company's investment portfolio included mortgage-backed securities classified as "held to maturity" carried at amortized cost of $2.4 million and an estimated fair value of $2.4 million. The balance of the Company's investment portfolio at March 31, 2001 consists of interest bearing deposits with various financial institutions totaling $4.2 million. The deposits increased $2.9 million from $1.3 million at June 30, 2000. The increase was associated with deposit growth and FHLMC loan sales. At March 31, 2001 deposits increased to $93.3 million from $82.8 million at June 30, 2000 or a net increase of 12.75%. The increase was primarily used to fund loan growth. Management is continually evaluating the investment alternatives available to the Company's customers, and adjusts the pricing on its savings products to maintain its existing deposits. Advances from the Federal Home Loan Bank increased to $45.4 million at March 31, 2001 from $36.2 million at June 30, 2000. The increase was used to fund loan growth. On November 9, 2000, the Company announced a plan to repurchase up to 10% or 107,122 shares of the outstanding stock. For the nine months ending March 31, 2001, the Company repurchased 33,500 shares at a cost of $475,000. On November 15, 2000, the Company paid dividends of $0.25 per share. The dividend payment of $249,000 partially offset the increase in retained earnings due to net income of $877,000. 8 HIGH COUNTRY BANCORP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000 Net Income. The Company's net income for the three months ended March 31, 2001 was $327,000 compared to $265,000 for the three months ended March 31, 2000. For the three months ended March 31, 2001, higher net interest income and non-interest income offset higher compensation and benefits expense and occupancy and equipment expenses. Net Interest Income. Net interest income for the three months ended March 31, 2001 was $1.5 million compared to $1.3 million for the three months ended March 31, 2000. The increase is attributed to increased interest earned on interest earning assets due to loan growth less the increase in interest expense due to the increase in interest bearing liabilities. The average yield on interest earning assets increased from 8.37% for the three months ended March 31, 2000 to 8.71% for the three months ended March 31, 2001. The increase was due to short-term loans repricing to higher rates and growth in loans at higher average rates as compared to the loan portfolio. The average cost of interest bearing liabilities also increased from 4.34% for the three months ended March 31, 2000 to 5.02% for the three months ended March 31, 2001. The increase in costs was due to higher deposit rates implemented to maintain and attract deposits and higher Federal Home Loan Advance rates on maturing and new advances. The interest rate spread decreased from 4.03% for the three months ended March 31, 2000 to 3.69% for the three months ended March 31, 2001. Provision for Loan Losses. The provision for loan losses was $90,000 for the three months ended March 31, 2001 as compared to $60,000 for the three months ended March 31, 2000. The increase reflects the growth in commercial real estate and non-mortgage loans and the need to maintain an adequate balance in the allowance for loan losses. For the three months ended March 31, 2001, commercial real estate loans increased $4.2 million and commercial non-mortgage loans increased $2.1 million. Non-interest Income. Non-interest income was $303,000 for the three months ended March 31, 2001 as compared to $149,000 for the three months ended March 31, 2000. Income from loan sales and title and escrow fees from High Country Title and Escrow Company accounted for the majority of the increase. Non-interest Expenses. Non-interest expenses were $1.2 million for the three months ended March 31, 2001 as compared to $1.0 million for the three months ended March 31, 2000. Increases occurred in compensation and benefit expense, occupancy expense and other expenses. The increases are tied to additional employees, the opening of the new home office, High Country Title and Escrow Company expenses and other expenses due to growth. COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED MARCH 31, 2001 AND 2000 Net Income. The Company's net income for the nine months ended March 31, 2001 was $877,000 compared to $765,000 for the nine months ended March 31, 2000. The increase in net income resulted primarily from increased interest income and non-interest income which offset increased interest, compensation, occupancy and other expenses. Net Interest Income. Net interest income for the nine months ended March 31, 2001 was $4.3 million compared to $3.7 million for the nine months ended March 31, 2000. The increase is attributed to increased interest earned on interest earning assets due to loan growth less the increase in interest 9 HIGH COUNTRY BANCORP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS expense due to the increase in interest bearing liabilities. The average yield on interest earning assets increased from 8.17% for the nine months ended March 31, 2000 to 8.66% for the nine months ended March 31, 2001. The increase was due to short-term loans repricing to higher rates and growth in loans at higher average rates as compared to the loan portfolio. The average cost of interest bearing liabilities also increased from 4.40% for the nine months ended March 31, 2000 to 5.02% for the nine months ended March 31, 2001. The increase in costs was due to higher deposit rates implemented to maintain and attract deposits and higher Federal Home Loan Advance rates on maturing and new advances. The interest rate spread decreased from 3.77% for the nine months ended March 31, 2000 to 3.64% for the nine months ended March 31, 2001. Provision for Loan Losses. The provision for loan losses was $225,000 for the nine months ended March 31, 2001 as compared to $150,000 for the nine months ended March 31, 2000. The increase reflects the growth in commercial real estate, commercial non-mortgage and land loans and the need to maintain an adequate balance in the allowance for loan losses. For the nine months ended March 31, 2001, these loan categories increased a total of $15.0 million. Non-interest Income. Non-interest income was $745,000 for the nine months ended March 31, 2001 as compared to $406,000 for the nine months ended March 31, 2000. Title and escrow fees from High Country Title and Escrow Company accounted for the majority of the increase. The increase was due to a full nine months of operation in comparison to the previous period of only three months for nine months ended March 31, 2000. Increases in the other non-interest income categories were due to strong loan demand and growth in deposit accounts. Non-interest Expenses. Non-interest expense was $3.4 million for the nine months ended March 31, 2001 as compared to $2.7 million for the nine months ended March 31, 2000. Increases occurred in compensation and benefit expense, occupancy expense and other expenses. The increases are tied to additional employees, the opening of the new home office, High Country Title and Escrow Company expenses and other expenses due to growth. LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of funds consist of deposits, FHLB advances, repayment of loans and mortgage-backed securities, maturities of investments and interest-bearing deposits, and funds provided from operations. While scheduled repayments of loans and mortgage-backed securities and maturities of investment securities are predicable sources of funds, deposit flows and loan prepayments are greatly influenced by the general level of interest rates, economic conditions and competition. The Company uses its liquidity resources principally to fund existing and future loan commitments, to fund maturing certificates of deposit and demand deposit withdrawals, to fund maturing FHLB advances, to invest in other interest-earning assets, to maintain liquidity, and to meet operating expenses. Management believes that proceeds from loan repayments and other sources of funds will be adequate to meet the Company's liquidity needs for the immediate future. The OTS repealed a statutory liquidity requirement in late 2000. The Bank was previously required to maintain a minimum ratio of 4%. Under revised regulations, the Bank is required to maintain sufficient liquidity to ensure a safe and sound operation. Management believes that the Bank's sources of liquidity for potential uses are adequate under the revised regulations. IMPACT OF INFLATION AND CHANGING PRICES The financial statements and related data presented herein have been prepared in accordance with 10 HIGH COUNTRY BANCORP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS generally accepted accounting principles, which require the measurement of financial position and results of operations in terms of historical dollars without considering changes in the relative purchasing power of money over time because of inflation. Unlike most industrial companies, virtually all of the assets and liabilities of the Company are monetary in nature. As a result, interest rates have a more significant impact on the Company's performance than the effects of general levels of inflation. Interest rates do not necessarily move in same direction or in the same magnitude as the prices of goods and services. 11 HIGH COUNTRY BANCORP, INC. PART II - OTHER INFORMATION ITEM 1: Legal Proceedings None ITEM 2: Changes in Securities None ITEM 3: Defaults Upon Senior Securities Not Applicable ITEM 4: Submission of Matters to a Vote of Security Holders. None ITEM 5: Other Information None ITEM 6: Exhibits and Reports on Form 8-K None SIGNATURE 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 thereunto duly authorized. High Country Bancorp, Inc. Registrant Date May 2, 2001 /s/ Larry D. Smith ---------------------------------------- Larry D. Smith, President 12