-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HVPbxTD8Auqup4xZiirKfAWg2LTEFB3f95LU7FWvcSb7IC1wy/4OScwGeF2sdZfS zmIRBvDcAniX4WV5T/9/tw== 0000930661-98-001678.txt : 19980812 0000930661-98-001678.hdr.sgml : 19980812 ACCESSION NUMBER: 0000930661-98-001678 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980811 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST STATE BANCORPORATION CENTRAL INDEX KEY: 0000897861 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 850366665 STATE OF INCORPORATION: NM FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12487 FILM NUMBER: 98681919 BUSINESS ADDRESS: STREET 1: 111 LOMAS AVE N W CITY: ALBUQUERQUE STATE: NM ZIP: 87102 BUSINESS PHONE: 5052417500 MAIL ADDRESS: STREET 1: PO BOX 3686 CITY: ALBUQUERQUE STATE: NM ZIP: 87190 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q.-QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 1998. or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _________________________________ to __________________________________________ COMMISSION FILE NUMBER 22-25144 FIRST STATE BANCORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEW MEXICO 85-0366665 (STATE OR OTHER JURISDICTION OF (IRS EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 7900 JEFFERSON NE ALBUQUERQUE, NEW MEXICO 87109 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (505) 241-7500 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 XX No -- -- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 3,416,271 shares of common stock, no par value, outstanding as of June 30, 1998. FIRST STATE BANCORPORATION Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements 1 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 PART II. OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities and Use of Proceeds None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders 8 Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K 9 SIGNATURES 9 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS FIRST STATE BANCORPORATION AND SUBSIDIARY Consolidated Condensed Balance Sheets (unaudited)
June 30 December 31 Assets 1998 1997 ------ ------------ ------------ Cash and due from banks $ 22,675,697 $ 20,999,596 Federal funds sold 7,500,000 11,000,000 ---------------------------- Total cash and cash equivalents 30,175,697 31,999,596 Investment securities: Held to maturity (at amortized cost, market value of $34,527,708 at June 30, 1998, and $15,291,473 at December 31, 1997) 34,508,075 15,235,174 Available for sale (at market, amortized cost of $36,669,918 at June 30, 1998, and $46,212,050 at December 31, 1997) 36,677,338 46,274,195 ---------------------------- Total Investments 71,185,413 61,509,369 ---------------------------- Loans and leases net of unearned interest 308,296,832 288,368,847 Less allowance for loan and lease losses 3,412,852 3,279,457 ---------------------------- Net loans and leases 304,883,980 285,089,390 Premises and equipment 15,994,568 14,056,096 Accrued interest receivable 2,612,402 2,278,376 Other real estate owned 1,080,920 1,327,192 Goodwill, net 725,572 777,675 Other assets 3,040,916 4,006,630 ---------------------------- Total assets $429,699,468 $401,044,324 ============================ Liabilities and Stockholders' Equity ------------------------------------ Liabilities: Deposits: Noninterest-bearing $ 80,790,840 $ 72,773,120 Interest-bearing 279,694,620 272,817,577 ---------------------------- Total deposits 360,485,460 345,590,697 Securities sold under agreements to repurchase 23,190,810 10,105,190 Other liabilities 2,631,814 2,597,599 Long-term debt 1,216,170 15,036,463 ---------------------------- Total liabilities 387,524,254 373,329,949 Stockholders' equity: Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding -- -- Common stock, no par value, 20,000,000 shares authorized, issued and outstanding 3,415,752 at June 30, 1998 and 2,583,867 at December 31, 1997 29,046,909 16,075,878 Retained earnings 13,123,408 11,597,484 Unrealized gains on investment securities available for sale 4,897 41,013 ---------------------------- Total stockholders' equity 42,175,214 27,714,375 ---------------------------- Total liabilities and stockholders' equity $429,699,468 $401,044,324 ============================ Book value per share $ 12.35 $ 10.73 ============================ Tangible book value per share $ 12.13 $ 10.40 ============================
See accompanying notes to consolidated condensed financial statements. 1 FIRST STATE BANCORPORATION AND SUBSIDIARY Consolidated Condensed Statements of Operations For the three and six months ended June 30, 1998 and 1997 (unaudited)
Three months Three months Six months Six months Ended Ended Ended Ended June 30 June 30 June 30 June 30 1998 1997 1998 1997 --------------------------------------------------- Interest Income: Interest and fees on loans and leases $7,972,817 $7,009,509 $15,513,159 $13,497,671 Interest on investment securities: Taxable 860,607 724,241 1,672,322 1,378,752 Nontaxable 38,405 43,384 76,534 86,873 Federal funds sold 126,157 50,703 198,904 75,894 --------------------------------------------------- Total interest income 8,997,986 7,827,837 17,460,919 15,039,190 --------------------------------------------------- Interest expense: Deposits 2,871,287 2,645,045 5,690,637 5,171,498 Short-term borrowings 202,439 214,240 340,881 414,949 Long-term debt and capital lease 166,146 179,867 453,745 251,169 --------------------------------------------------- Total interest expense 3,239,872 3,039,152 6,485,263 5,837,616 --------------------------------------------------- Net interest income before provision for loan and lease losses 5,758,114 4,788,685 10,975,656 9,201,574 Provision for loan and lease losses 555,000 397,500 1,110,000 660,000 --------------------------------------------------- Net interest income after provision for loan and lease losses 5,203,114 4,391,185 9,865,656 8,541,574 --------------------------------------------------- Other Income: Service charges on deposit accounts 433,452 338,211 861,071 656,022 Other banking service fees 86,573 60,491 172,213 92,276 Credit card transaction fees 294,955 274,226 549,355 520,711 Operating lease income 221,563 255,701 434,545 493,264 Gain on sale or call of investment securities -- -- -- -- Other 217,279 110,706 352,790 254,672 --------------------------------------------------- Total other income 1,253,822 1,039,335 2,369,974 2,016,945 --------------------------------------------------- Other expenses: Salaries and employee benefits 2,188,246 1,788,336 4,276,017 3,525,450 Occupancy 557,198 519,463 1,098,596 1,045,947 Data Processing 184,054 145,115 350,296 282,758 Credit card interchange 164,755 167,786 299,378 312,305 Equipment 362,224 312,250 713,044 612,522 Leased equipment depreciation 149,935 167,321 287,236 321,845 Legal, accounting and consulting 119,548 88,522 251,103 196,357 Marketing 202,989 207,360 366,610 401,877 Other real estate owned expenses 30,623 63,150 54,346 123,499 Amortization of intangibles 26,163 26,163 52,102 52,102 Other 879,380 757,484 1,596,090 1,453,176 --------------------------------------------------- Total other expenses 4,865,115 4,242,950 9,344,818 8,327,838 --------------------------------------------------- Income before income taxes 1,591,821 1,187,570 2,890,812 2,230,681 Income tax expense 559,338 417,042 1,018,835 750,581 --------------------------------------------------- Net income $1,032,483 $ 770,528 $ 1,871,977 $ 1,480,100 =================================================== Earnings per common and common equivalent share $0.35 $ 0.31 $ 0.68 $ 0.63 =================================================== Earnings per common share-assuming full dilution $0.32 $ 0.28 $ 0.61 $ 0.57 =================================================== Dividends per common share $0.06 $ 0.05 $ 0.12 $ 0.10 ===================================================
See accompanying notes to consolidated condensed financial statements. 2 FIRST STATE BANCORPORATION AND SUBSIDIARY Consolidated Condensed Statements of Cash Flows For the three and six months ended June 30, 1998 and 1997 (unaudited)
Three months Three months Six months Six months Ended Ended Ended Ended June 30 June 30 June 30 June 30 1998 1997 1998 1997 ----------------------------------------------------------- Operating activities: Net Income $ 1,032,483 $ 770,528 $ 1,871,977 $ 1,480,100 ----------------------------------------------------------- Adjustments to reconcile net income to cash provide by operations: Provisions for loan and lease losses 555,000 397,500 1,110,000 660,000 Provision for decline in value of other real estate owned 22,550 20,007 22,550 41,307 Depreciation and amortization 698,082 636,720 1,139,294 927,746 Gain on call or sale of investment securities -- -- -- -- Increase in accrued interest receivable (218,050) (45,664) (334,026) (434,258) (Increase) decrease in other assets, net (412,815) (491,151) (108,421) (1,476,626) Increase (decrease) in other liabilities, net (198,286) (403,613) 91,481 234,619 ----------------------------------------------------------- Total adjustments 446,481 113,799 1,920,878 (47,212) ----------------------------------------------------------- Net cash provided by operating activities 1,478,964 884,327 3,792,855 1,432,888 ----------------------------------------------------------- Cash flows from investing activities: Net increase in loans (4,038,283) (12,239,537) (20,904,590) (23,669,753) Purchases of investment securities available for sale (7,125,000) (3,201,000) (15,059,400) (14,818,368) Maturities of investment securities available for sale 6,248,500 1,450,000 24,673,500 1,450,000 Purchases of investment securities held to maturity (110,623,000) --- (138,783,000) --- Maturities of investment securities held to maturity 94,798,000 1,020,000 119,498,000 3,720,000 Purchases of premises and equipment (1,638,776) (1,087,299) (2,994,292) (1,113,102) Sales of other real estate owned 252,358 622,863 252,358 622,863 Additions to other real estate owned, net 186 -- (28,636) -- ----------------------------------------------------------- Net cash used in investing activities (22,126,015) (13,434,973) (33,346,060) (33,808,360) ----------------------------------------------------------- Cash flows from financing activities: Net increase (decrease) in interest bearing deposits 5,012,905 (1,101,241) 6,877,043 22,476,337 Net increase in noninterest bearing deposits 5,213,803 6,280,622 8,017,720 12,395,864 Net increase (decrease) in securities sold under 10,809,442 20,872 13,085,620 (2,585,701) repurchase agreements Payments on Federal Home Loan Bank borrowings -- (4,000,000) -- (4,970,000) Issuance of subordinated debentures -- 13,800,000 -- 13,800,000 Payments on long-term debt (10,404) (12,247) (20,293) (22,323) Federal funds purchased, net -- -- -- (1,500,000) Common stock issued 48,644 126,205 115,271 244,166 Dividends paid (190,926) (128,815) (346,055) (238,775) Exercise of put warrants -- (308,000) -- (308,000) ----------------------------------------------------------- Net Cash provided by financing activities: 20,883,464 14,677,396 27,729,306 39,291,568 ----------------------------------------------------------- Increase (decrease) in cash and cash equivalents 236,413 2,126,750 (1,823,899) 6,916,096 Cash and cash equivalents at beginning of period 29,939,284 20,501,278 31,999,596 15,771,932 ----------------------------------------------------------- Cash and cash equivalents at end of period $ 30,175,697 $ 22,628,028 $ 30,175,697 $ 22,688,028 =========================================================== Supplemental disclosure of noncash investing and financing activities: Additions to other real estate owned in settlement of loans -- -- -- $ 93,578 =========================================================== Issuance of common stock upon conversion of subordinated debentures $ 12,855,761 $ 3,362,460 $ 12,855,761 $ 3,711,460 =========================================================== Issuance of long term debt for purchase of premises and equipment -- $ 1,050,000 -- $ 1,050,000 ===========================================================
3 FIRST STATE BANCORPORATION AND SUBSIDIARY Notes to Consolidated Condensed Financial Statements (Unaudited) 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS The accompanying consolidated condensed financial statements are unaudited and include the accounts of First State Bancorporation (the "Company") and its subsidiary, First State Bank of Taos (100% owned). All significant intercompany accounts and transactions have been eliminated. Information contained in the consolidated condensed financial statements and notes thereto of the Company should be read in conjunction with the Company's consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-KSB for the year ended December 31, 1997. The consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. 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 (consisting only of normally recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 1998, are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. 2. EARNINGS PER COMMON SHARE In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" (FAS 128). FAS 128 requires the computation of basic earnings per share and diluted earnings per share. Basic earnings per share is computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding during the period (the denominator). Diluted earnings per share is calculated by increasing the basic earning per share denominator by the number of additional common shares that would have been outstanding if dilutive potential common shares for options, warrants, and convertible securities had been issued and increasing the basic earnings per share numerator by the after tax amount of interest and amortization associated with the convertible debentures. FAS 128 is effective for years ended after December 15, 1997, and is required to be applied retroactively upon adoption. All previous periods have been restated to conform to the requirements of FAS 128. The following is a reconciliation of the numerators and denominators of basic and diluted earnings per share.
QUARTER ENDED JUNE 30, ---------------------------------------------------------------------------------- 1998 1997 ---------------------------------------------------------------------------------- Income Shares Per Share Income Shares Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount --------- ----------- --------- --------- ----------- --------- Basic EPS: Net income available to common stockholders $1,032,483 2,948,855 $ 0.35 $770,528 2,480,580 $ 0.31 ========= ========= Effect of dilutive securities: Options 106,953 70,395 Warrants -- 14,516 Convertible debentures $ 96,925 463,702 $129,159 607,650 ---------- --------- -------- -------- Diluted EPS: Net income available to common stockholders plus interest and amortization on convertible debentures $1,129,408 3,519,510 $ 0.32 $899,687 3,173,141 $ 0.28 ========== ========= ========= ======== ========= =========
4
SIX MONTHS ENDED JUNE 30, -------------------------------------------------------------------------------- 1998 1997 -------------------------------------------------------------------------------- Income Shares Per Share Income Shares Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ---------- ----------- --------- ---------- ----------- --------- Basic EPS: Net income available to common stockholders $1,871,977 2,767,924 $ 0.68 $1,480,100 2,345,689 $ 0.63 ========= ========= Effect of dilutive securities: Options 103,382 73,105 Warrants 14,898 Convertible debentures $ 276,436 643,786 $ 181,778 479,367 ---------- --------- ---------- --------- Diluted EPS: Net income available to common stockholders plus interest and amortization on convertible debentures $2,148,413 3,515,092 $ 0.61 $1,661,878 2,913,059 $ 0.57 ========== ========= ========= ========== ========= =========
3. CONVERTIBLE SUBORDINATED DEBENTURES On April 28, 1998, the Company notified the holders of its 7.5% Convertible Subordinated Debentures due 2017 that the Debentures would be called for redemption at 100% of the original principal plus accrued interest on May 29, 1998. The Indenture allowed management to redeem the Debentures at par when the Company's common stock closed at 140% of the exercise price ($16.75) for 30 consecutive trading days. As of April 24, 1998 this condition was met. All of the debenture holders exercised the conversion privilege resulting in 823,869 shares of common stock being issued and $12.8 million being added to common equity. 4. REPORTING COMPREHENSIVE INCOME In June 1997, the Financial Accounting Standards Board ("FASB") issued FAS No. 130, "Reporting Comprehensive Income" (FAS 130). FAS No. 130 requires disclosure in the financial statements of comprehensive income that encompasses earnings and those items currently required to be reported directly in the equity section of the balance sheet, such as unrealized gains and losses on available-for-sale securities. Management has adopted the provisions of FAS 130 effective January 1, 1998. The following table shows comprehensive income for the three and six months ended June 30:
THREE MONTHS ENDEDD JUNE 30, SIX MONTHS ENDEDD JUNE 30, ---------------------------------------------------------- 1998 1997 1998 1997 ---------------------------------------------------------- Net Income $1,032,483 $770,528 $1,871,977 $1,480,100 Unrealized gains (losses) on securities, net of tax arising during the period (39,927) 148,933 (36,116) (40,116) ---------------------------------------------------------- Comprehensive income $ 992,556 $919,461 $1,835,861 $1,439,984 ==========================================================
5. ACCOUNTING STANDARD ISSUED NOT YET IMPLEMENTED
DISCLOSURE ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION In June 1997, the FASB issued FAS No. 131, "Disclosure About Segments of an Enterprise and Related Information" (FAS 131). FAS 131 requires disclosures about segments of an enterprise and related information about the different types of business activities in which an enterprise engages and the different economic environments in which it operates. FAS 131 is effective for the Company's financial statements beginning December 31, 1998. The impact of FAS 131 is not expected to be material in relation to the consolidated financial statements. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES In June, 1998, the FASB issued FAS No.133, Accounting for Derivative Instruments and Hedging Activities. FAS No. 133 5 establishes accounting and reporting standards for derivative instruments. This Statement is effective for the fiscal year beginning after June 15, 1999. The impact of FAS 133 is not expected to be material in relation to the consolidated financial statements. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONSOLIDATED CONDENSED BALANCE SHEETS The Company's total assets increased by $28.7 million from $401.0 million as of December 31, 1997, to $429.7 million as of June 30, 1998, due to internal growth. For the first six months of 1998, net loans increased by $19.8 million from $285.1 million to $304.9 million while investment securities increased by $9.7 million from $61.5 million to $71.2 million. For the first six months of 1998, premises and equipment increased $1.9 million from $14.1 million to $16.0 million and other assets decreased $1.0 million from $4.0 million to $3.0 million. The decrease in other assets resulted from $1.0 million in offering costs being neted against common stock as a result of the debenture conversion. The increase in loans is due largely to the Company's efforts to increase its market share and increased economic activity and demand for loans and leases in the Company's market area. The following table presents the amount of loans and leases by category, at the dates indicated:
June 30, 1998 December 31, 1997 June 30, 1997 ------------- ----------------- ------------- (in thousands) Amount % Amount % Amount % ------ - ------ - ------- - Commercial 48,743 15.8% 45,480 15.8% 42,684 15.6% Real Estate- Mortgage 157,620 51.1% 153,550 53.3% 153,054 55.8% Real Estate-Construction 46,040 14.9% 41,943 14.5% 41,217 15.0% Consumer and Other 16,885 5.5% 16,809 5.8% 15,096 5.5% Leases 39,009 12.7% 30,587 10.6% 22,189 8.1% ------------------------------------------------------ 308,297 100.0% 288,369 100.0% 274,240 100.0% ======================================================
Investment securities increased by $9.7 million as a result of an increase in deposits and securities sold under agreement to repurchase. Deposits, which are the Company's main source of funds for loans, investments and federal funds sold, increased by $14.9 million from $345.6 million as of December 31, 1997, to $360.5 million as of June 30, 1998. Non interest-bearing deposits increased by $8.0 million and interest-bearing deposits increased by $6.9 million. For the first six months of 1998, long-term debt decreased by $13.8 million due to the conversion of 7.5% Convertible Subordinated Debentures (the "Debentures") into Common Stock of $12.8 million net of $1.0 million of unamortized offering costs. Securities sold under agreements to repurchase increased $13.1 million from $10.1 million to $23.2 million as a result of the company's efforts to attract customers with large short-term cash balances which the company invests in like termed securities at a positive spread. CONSOLIDATED RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1998. Net income for the Company for the three months ended June 30, 1998, was $1.03 million, an increase of $259,000 or 34% from $771,000 for the same period of 1997. The Company's annualized return on average assets was 0.99% for the second quarter of 1998, compared to 0.87% for the same period of 1997. The provision for loan losses increased by $157,500 to $555,000 for the three months ended June 30, 1998, from $397,500 for the three months ended June 30, 1997. The increase was due to loan growth and increased loan charge-offs. Net interest income before provision for loan losses increased $1.0 million to $5.8 million for the three months ended June 30, 1998, from $4.8 million for the three months ended June 30, 1997, primarily due to increased loan and investment security volume. The Company's net interest margin increased to 6.19% at June 30, 1998, from 6.00% at June 30, 1997. This increase is due to decreased cost of deposit liabilities and conversion of the Debentures. 6 Total non-interest income increased by $300,000 to $1.3 million for the three months ended June 30, 1998, compared to $1.0 million for the same period of 1997, primarily due to an increase in service charges on deposit accounts and other banking and service fees of $121,000. Total non-interest expense increased by $700,000 to $4.9 million for the second quarter of 1998, from $4.2 million for the same period of 1997. Salaries and employee benefits increased by $400,000 as a result of additions to personnel due to growth, annual salary increases, and a $65,000 charge relating to compensation expense for employee stock options. CONSOLIDATED RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998. Net income for the Company for the six months ended June 30, 1998, was $1.9 million, an increase of $400,000 or 27% from $1.5 million for the same period of 1997. The Company's annualized return on average assets was 0.93% for the first six months of 1998, compared to 0.86% for the same period of 1997. The provision for loan losses increased by $440,000 to $1.1 million for the six months ended June 30, 1998, from $660,000 for the six months ended June 30, 1997. The increase was due to loan growth and increased loan charge-offs. Net interest income before provision for loan losses increased $1.8 million to $11.0 million for the six months ended June 30, 1998, from $9.2 million for the six months ended June 30, 1997, primarily due to increased loan and investment security volume. The Company's net interest margin increased to 6.09% at June 30, 1998, from 5.96% at June 30, 1997. This increase is due to decreased cost of deposit liabilities and conversion of the Debentures. Total non-interest income increased by $400,000 to $2.4 million for the six months ended June 30, 1998, compared to $2.0 million for the same period of 1997, primarily due to an increase in service charges on deposit accounts and other banking and service fees of $285,000. Total non-interest expense increased by $1.0 million to $9.3 million for the first six months of 1998, from $8.3 million for the same period of 1997. Salaries and employee benefits increased by $750,000 as a result of additions to personnel due to growth, annual salary increases, and a $150,000 charge relating to compensation expense for employee stock options. ALLOWANCE FOR LOAN AND LEASE LOSSES AND NON-PERFORMING ASSETS The following tables set forth the Allowance for Loan and Lease Losses and Non- Performing assets.
(Dollars in thousands) ALLOWANCE FOR LOAN AND LEASE LOSSES: June 30, 1998 December 31, 1997 June 30, 1997 -------------- ------------------ -------------- Balance beginning of period $ 3,279 $ 2,510 $ 2,510 Provision for loan and lease losses 1,110 1,537 660 Net charge-offs 976 768 262 -------------------------------------------------- Balance end of period $ 3,413 $ 3,279 $ 2,908 ================================================== Allowance for loan and lease losses to non-performing loans and leases 1.11% 1.14% 1.06% Allowance for loan and lease losses to non-performing loans and leases 70% 102% 66% NON-PERFORMING ASSETS: June 30, 1998 December 31, 1997 June 30, 1997 -------------- ----------------- ------------- Accruing loans - 90 days past due $ 29 $ 107 $ 279 Non-accrual loans 4,828 3,123 4,140 -------------------------------------------------- Total non-performing loans 4,857 3,230 4,419 Other real estate owned 1,081 1,327 754 -------------------------------------------------- Total non-performing assets $ 5,938 $ 4,557 $ 5,173 ================================================== Potential problem loans and leases $ 1,490 $ 3,873 -- Total non-performing assets to total assets 1.38% 1.14% 1.41%
7 Loans secured by real estate and other real estate owned comprise approximately $5.3 million of the non-performing assets as of June 30, 1998. Based primarily on the appraised values of the underlying properties, specific reserves of $122,000, within the Allowances for Loan and Lease Losses and other real estate owned, have been established for these loans and properties. Management believes that the economies in its market areas are strong. LIQUIDITY AND CAPITAL EXPENDITURES The Company's primary sources of funds are customer deposits, loan repayments, and maturities of investment securities. The Company has additional sources of liquidity in the form of borrowings. Borrowings include federal funds purchased, securities sold under repurchase agreements and borrowings from the Federal Home Loan Bank. On April 28, 1998, the Company notified the holders of its 7.5% Debentures that the Debentures would be called for redemption at 100% of the original principal plus accrued interest on May 29, 1998. The Indenture allowed management to redeem the Debentures at par when the Company's common stock closed at 140% of the exercise price ($16.75) for 30 consecutive trading days. As of April 24, 1998 this condition was met. All of the Debenture holders exercised the conversion priviledge resulting in 823,869 shares of common stock being issued and $12.8 million being added to common equity. FORWARD-LOOKING STATEMENTS Statements which are forward-looking are not historical facts, and involve risks and uncertainties that could cause the Company's results to differ materially from those in any forward-looking statements. These risks include the possible loss of key personnel, need for additional capital should the Company experience faster than anticipated growth, changes in economic conditions, interest rate risk, factors which could affect the Company's ability to compete in its trade areas, changes in regulations and governmental policies, and the risks described in the Company's Securities and Exchange Commission filings. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On June 5, 1998 the Company held its annual meeting of shareholders. At that meeting the following items were submitted to a vote of security holders: 1. The following three directors were elected: SHARES VOTED ------------------ NAME TERM FOR WITHOLD - ----- ------- --------- ------- H. Patrick Dee 3 Years 2,501,874 9,651 Leonard J. Delayo Jr. 3 Years 2,504,874 6,901 Bradford M. Johnson 3 Years 2,504,374 7,151 The following directors term of office continue until the annual meeting indicated: 1999, Douglas M. Smith, MD, Herman N. Wisenteiner, and Kevin L. Reid, and 2000, Eloy A. Jeantete, Michael R. Stanford, and Marshall G. Martin. 2. To approve an Amendment to First State Bancorporation's 1993 Stock Option Plan to increase the number of shares available for grant from 225,000 to 400,000. Votes: For 1,436,909; Against 111,657; Abstain 29,833; Not voted 933,126. 3. Proposal to ratify the selection of KPMG Peat Marwick LLP as the independent public accountants of the Company. Votes: For 2,541,054; Against 22,349; Abstain 38,122. 8 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K EXHIBIT 27 FINANCIAL DATA SCHEDULE SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIRST STATE BANCORPORATION
Date: August 7, 1998 By: Michael R. Stanford -------------- --------------------------------------------------------------------- Michael R. Stanford, President & Chief Executive Officer Date: August 7, 1998 By: H. Patrick Dee -------------- --------------------------------------------------------------------- H. Patrick Dee, Executive Vice President & Chief Operating Officer Date: August 7, 1998 By: Brian C. Reinhardt -------------- --------------------------------------------------------------------- Brian C. Reinhardt, Senior Vice President and Chief Financial Officer
9 EX-27 2 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 22,675,697 0 7,500,000 0 36,677,338 34,508,075 34,527,708 308,296,832 3,412,852 429,699,468 360,485,460 23,190,810 2,631,814 1,216,170 0 0 42,170,317 4,897 429,699,468 15,513,159 1,947,760 0 17,460,919 5,690,637 6,485,263 10,975,656 1,110,000 0 9,344,818 2,890,812 1,871,977 0 0 1,871,977 0.68 0.61 5.67 4,828,000 29,000 0 1,490,000 3,279,000 1,074,000 98,000 3,413,000 3,413,000 0 0
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