UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
( ) 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: 0-19376
Aspen Bancshares, Inc.
(Exact name of registrant as specified in its charter)
Colorado 84-10685
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
534 East Hyman Avenue, P. O. Box 3677, Aspen, Colorado 81612
(Address of principal executive offices) (Zip Code)
(970) 925-6700
(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.
(X) Yes ( ) No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
( ) Yes ( ) No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of October 15, 1996: 3,717,714
ASPEN BANCSHARES, INC.
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited interim financial statements have been prepared
in accordance with the instructions for Form 10-Q and do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. All adjustments which are,
in the opinion of management, of a normal recurring nature necessary to a
fair statement of the results for the interim periods presented have been
made. The results of operations for such interim periods are not
necessarily indicative of results of operations for a full year. The
statements should be read in conjunction with the summary of accounting
policies and the notes to the consolidated financial statements included in
Aspen Bancshares' Annual Report on Form 10-K for the year ended December
31, 1995, which is incorporated herein by this reference. In addition,
Aspen Bancshares, Inc. ("the Company") acquired Val Cor Bancorporation,
Inc. ("Val Cor") on June 18, 1996. The acquisition was accounted for using
the purchase method. The results of Val Cor have only been included in the
financial statements since that time.
ASPEN BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(unaudited)
(in thousands)
September 30,
1996 1995 December 31, 1995
ASSETS
Cash and Due From Banks $14,050 $ 12,209 $ 10,029
Interest Bearing Deposits in Banks 604 132 1,115
Securities:
Held to Maturity-Market Value at
9/30/95: $11,153 - 11,210 -
Available for Sale 74,594 41,733 42,183
Federal Funds Sold and Securities
Purchased Under Resale Agreements 7,220 1,700 20,740
Loans Held for Resale 5,204 236 9,550
Loans 332,077 265,662 254,992
Loan Loss Reserve (3,206) (2,191) (2,197)
------- ------- --------
Loans, Net 328,871 263,471 252,795
Property, Equipment, and Leasehold
Improvements 9,628 7,814 7,761
Accrued Interest Receivable 3,539 2,414 2,145
Other Assets 7,234 4,654 2,805
------- ------- --------
Total Assets $450,944 $345,573 $349,123
======== ======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand Noninterest Bearing $46,541 $34,567 $ 29,634
Demand Interest Bearing 151,626 112,662 108,987
Savings and Time Deposits Less
Than $100,000 142,173 104,877 108,907
Time Deposits $100,000 and Over 54,495 41,010 52,489
------- ------- --------
Total Deposits 394,835 293,116 300,017
------- ------- --------
Federal Funds Purchased 850 5,400 -
Other Borrowings 21,295 16,640 16,285
Other Liabilities 3,779 4,268 5,523
------- ------- --------
Total Liabilities 420,759 319,424 321,825
------- ------- --------
Shareholders' Equity:
Preferred Stock - 6,150 6,150
Common Stock 38 24 30
Additional Paid in Capital 11,631 4,796 4,879
Retained Earnings 19,546 16,026 16,994
Net Unrealized Loss on Securities
Available for Sale (1,030) (847) (755)
Total Shareholders' Equity 30,185 26,149 27,298
------- ------- --------
Total Liabilities and
Shareholders' Equity $ 450,944 $ 345,573 $349,123
======== ======== =========
ASPEN BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Interest Income:
Loans Receivable $ 7,926 $ 6,292 $ 21,428 $ 18,098
Investment Securities 1,154 866 2,470 2,771
Deposits in Banks 21 12 46 54
Federal Funds Sold 117 9 566 14
------- ------- -------- --------
Total Interest Income 9,218 7,179 24,510 20,937
------- ------- -------- --------
Interest Expense:
Deposits 3,793 2,789 10,127 7,520
Other 566 476 1,123 1,611
------- ------- -------- --------
Total Interest Expense 4,359 3,265 11,250 9,131
------- ------- -------- --------
Net Interest Income Before
Provision for Loan Losses 4,859 3,914 13,260 11,806
Provision for Loan Losses - 9 112 27
------- ------- -------- --------
Net Interest Income After
Provision for Loan Losses 4,859 3,905 13,148 11,779
------- ------- -------- --------
Non-interest Income:
Service Charges 292 176 691 537
Other Fees and Charges 271 172 806 541
Gain on Sale of Assets - 276 - 276
Gain on Sale of Investments - 14 18 64
Gain on Sale of Loans 174 114 479 185
------- ------- -------- --------
Total Other Income 737 752 1,994 1,603
Non-interest Expense:
Salaries and Benefits 1,837 1,289 4,574 3,983
Occupancy 464 366 1,244 1,086
Other Expense 1,182 1,073 3,172 2,876
SAIF Special Assessment 996 - 996 -
Loss on Sale of Investments 12 18 7 50
Loss on Sale of Loans - - 12 6
------- ------- -------- --------
Total Other Expense 4,491 2,746 10,005 8,001
------- ------- -------- --------
Income from Operations 1,105 1,911 5,137 5,381
------- ------- -------- --------
Provision for Income Tax 489 691 1,947 1,928
------- ------- -------- --------
Net Income $ 616 $ 1,220 $ 3,190 $ 3,453
======== ======== ========= =========
Net Income Available to Common Stock $ 616 $1,112 $ 3,082 $3,125
======== ======== ========= =========
Net Income per Share $ 0.16 $ 0.36 $ 0.92 $ 1.01
Net Income per Share-Fully Diluted $ 0.16 $ 0.32 $ 0.83 $ 0.93
Book Value per Share $ 8.12 $ 6.73 $ 8.12 $ 6.73
Average Number of Shares
Outstanding-Primary 3,841 3,113 3,341 3,088
Average Number of Shares
Outstanding-Fully Diluted 3,841 3,755 3,830 3,730
ASPEN BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)
(in thousands, except number of shares)
Net Unreal-
Additional ized Loss on
Paid-In Retained Securities Avail-
Shares Amount Shares Amount Capital Earnings able for Sale Total
Balance at December 31, 1995 246,000 $6,150 2,979,728 $30 $4,879 $16,994 $(755) $27,298
Net Income - - - - - 3,190 - 3,190
Dividends - - - - - (638) - (638)
Exercise of Options - - 1,562 - 10 - - 10
Conversion of Preferred (246,000) (6,150) 642,674 7 6,143 - - -
Conversion of Warrants - - 93,750 1 599 - - 600
Net Gain (Loss) - - - - - - (275) (275)
-------- ------- --------- ----- ------- ------- ----- --------
Balance at September 30, 1996 - $ - 3,717,714 $38 $11,631 $19,546 $(1,030) $30,185
======== ======= ========= ====== ======= ======= ======== ========
ASPEN BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Nine Months
Ended September 30,
1996 1995
Operating Activities:
Net Income $ 3,190 $ 3,453
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for Loan Losses 112 27
Depreciation and Amortization 597 565
Net Gain on Sale of Investments and Loans (422) (113)
Sales of Loans Originated for Resale 16,683 7,898
Loans Originated for Resale (11,921) (7,525)
(Increase) Decrease in Other Assets (4,429) (2,199)
(Increase) Decrease in Interest Receivable (1,394) (151)
Increase (Decrease) in Other Liabilities (2,245) (1,229)
Increase (Decrease) in Interest Payable 501 457
-------- --------
Net Cash Provided (Used) by Operating Activities 672 1,183
-------- --------
Investing Activities:
Federal Funds Sold, Net (Increase) Decrease 13,520 (1,700)
Net (Increase) Decrease in Interest Bearing
Deposits in Other Banks 511 2,085
Proceeds From Maturities and Sales of Held to
Maturity Investments - 3,239
Purchases of Held to Maturity Securities - (75)
Proceeds From the Sales of Available for Sale
Investments 6,137 11,143
Proceeds From Maturities of Available for Sale
Investments 10,376 926
Purchases of Available for Sale Securities (24,805) (2,282)
Decrease in Net Unrealized Loss on Securities
Available for Sale 388 (2,167)
Purchases of Trading Securities (467) -
Proceeds From the Sale of Trading Securities 472 486
Net Increase in Loans (35,701) (3,522)
Purchase of Property, Equipment, and Leasehold
Improvements (514) (1,048)
Sale of Property, Equipment, and Leasehold
Improvements 6 1,508
Acquisition of Subsidiary (372) -
-------- --------
Net Cash Used by Investing Activities (30,449) 8,593
-------- --------
Financing Activities:
Net Changes in Deposit Accounts 28,241 9,559
Change in Net Unrealized Loss on Securities
Available for Sale (275) 1,309
Exercise of Common Stock Options 10 30
Redemption of Preferred Stock - (300)
Conversion of Warrants 600 -
Dividends Paid (638) (678)
Federal Funds Purchased 850 (15,365)
Other Borrowed Funds 5,010 (1,226)
-------- --------
Net Cash Provided by Financing Activities 33,798 (6,671)
-------- --------
Net Increase (Decrease) in Cash and Cash
Equivalents 4,021 3,105
Cash and Cash Equivalents-Beginning of Year 10,029 9,104
-------- --------
Cash and Cash Equivalents-End of Year $ 14,050 $ 12,209
Cash Paid During the Year ======== ========
Interest $ 8,378 $ 8,724
Income Taxes 1,958 1,834
-------- --------
Total $ 10,336 $ 10,558
======== ========
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The Company is a bank holding company whose principal assets are the common
stock of Pitkin County Bank and Trust Company ("Pitkin"), a commercial bank
organized in 1979, the common stock of Centennial Savings Bank, F.S.B.
("Centennial"), a thrift originally created in 1905 which has its
headquarters in Durango, Colorado, and the common stock of Val Cor, a bank
holding company formed in December, 1982. Val Cor owns 99.1% of the common
stock of Valley National Bank, a national bank headquartered in Cortez,
Colorado.
The Company acquired all of the stock of Centennial on October 6, 1993.
Centennial has five branches in Colorado, located in Grand Junction,
Montrose, Cortez, Pagosa Springs, and Dolores, and one branch in
Farmington, New Mexico. Centennial continues operating under its present
name and charter as a separate subsidiary of the Company. The acquisition
was accounted for using the purchase method of accounting.
Pitkin County Bank is headquartered in Aspen, Colorado, with a loan
production office in Telluride and a full service branch in El Jebel.
On June 18, 1996, the Company acquired all of the stock of Val Cor. Valley
has three branches in Colorado; two located in Cortez and one located in
Dolores. Valley continues to operate under its present name and charter as
a separate subsidiary of Val Cor. The total purchase price was
approximately $10.3 million including acquisition expenses. Pursuant to
the Third Amended Acquisition Agreement and Plan of Merger dated January
12, 1996, Val Cor's stockholders received from the Company $32.653 in cash
for each share of Val Cor common stock owned by them. The Company funded
the acquisition through a combination of bank debt of $6.5 million and cash
on hand.
As a result of the acquisition, Val Cor's assets and liabilities were
adjusted on June 18, 1996 to reflect their fair values in conformity with
the procedures specified by Accounting Principles Board Opinion No. 16,
Business Combinations, for transactions reported on the basis of the
purchase method. This resulted in a net increase in stockholders' equity as
of June 18, 1996 of approximately $4.2 million.
On March 28, 1996 a Registration Statement on Form S-3 filed under the
Securities Act of 1933 became effective with respect to Common Stock being
issued upon conversion of the Company's Cumulative Convertible Preferred
Stock ("the Preferred Stock") and upon conversion of warrants originally
issued to the underwriters of the Company's public offering in July, 1991.
All shares of the Preferred Stock were converted to Common Stock on April
15, 1996 at the rate of 2.6125 shares of Common Stock for each one share of
Preferred Stock, resulting in the issuance of 642,674 additional shares of
Common Stock. The warrants were converted to Common Stock on June 28,
1996, resulting in the issuance of 93,750 additional shares of Common
Stock. The following table presents pro forma earnings per share of
Common Stock at September 30, 1996, assuming conversion of the Preferred
Stock as of January 1, 1996.
Three Months Ended Nine Months Ended
September 30, 1996 September 30, 1996
Net Income $616,000 $3,190,000
Net Income per Share $ 0.17 $ 0.86
Average Number of
Shares Outstanding 3,718,000 3,718,000
Effective September 30, 1996, omnibus banking legislation was passed which
included extensive regulatory relief for banks and thrifts and provisions
to help resolve problems of the Savings Association Insurance Fund
("SAIF"). The deposits of Centennial are insured by the SAIF. The
legislation requires a one-time special assessment based on assessable
deposits at March 31, 1995. This assessment for Centennial ($996,000) is
included in operating expenses as of September 30, 1996 and is payable to
the FDIC before November 29, 1996.
Also effective during the period ended September 30, 1996, the omnibus tax
bill, H.R. 3445, was passed. As a part of this legislation, the following
changes were made to section 593 reserve method of accounting for bad debts
by savings institutions: pre-1988 base year reserves will not be recaptured
and post-1987 reserves will be recaptured ratably over a six-year period
beginning with the 1996 taxable year. The percent of income method for
calculating bad debt deductions for tax purposes was also eliminated. For
Centennial, these changes resulted in additional income tax expense as of
September 30, 1996 of approximately $130,000.
On September 17, 1996, Centennial voluntarily entered into a Supervisory
Agreement with the Office of Thrift Supervision ("OTS"), which is defined
as a "written agreement" within the meaning of Section 8 of the Federal
Deposit Insurance Act, 12 U.S.C., Section 1818. In addition, the Community
Reinvestment Act evaluation of Centennial rated it "Substantial
Noncompliance".
The Supervisory Agreement requires Centennial to take actions to achieve
compliance with applicable consumer and public-interest related laws,
regulations and safe and sound business practices related thereto, to
review its records to determine if disclosures of finance charges
and/or annual percentage rates to its customers were accurate and whether
restitution is required, to establish and maintain accurate and complete
records demonstrating its regulatory compliance with the various consumer
laws and regulations and to implement a compliance program relative to
consumer and public-interest related laws and regulations, which, among
other things, provides for written policies and procedures, increased
staff training, independent compliance testing and other actions necessary
to enhance Centennial's compliance with consumer and public-interest
related laws and regulations.
The following table provides a summary of the major elements of income and
expense for the third quarter of 1996 compared with the third quarter of
1995 and the first nine months of 1996 compared with the first nine months
of 1995.
Percentage
Three Months Ended Change
September 30, Increase
1996 1995 Change (Decrease)
Interest Income $ 9,218 $ 7,179 $ 2,039 28.4%
Interest Expense 4,359 3,265 1,094 33.5%
-------- -------- --------
Net Interest Income
4,859 3,914 945 24.1%
Provision for Loan Losses - 9 (9) (100.0%)
-------- -------- --------
Net Interest Income after
Provision for Loan Losses 4,859 3,905 954 24.4%
-------- -------- --------
Other Income 737 734 3 0.4%
Other Expense 4,491 2,728 1,763 64.6%
-------- -------- --------
Income from Operations 1,105 1,911 (806) (42.2%)
Provision for Income Tax 489 691 (202) (29.2%)
-------- -------- --------
Net Income $ 616 $ 1,220 $ (604) (49.5%)
======== ======== ========
Net Income Available to Common
Stock $ 616 $ 1,112 $ (496) (44.6%)
======== ======== ========
Earnings per Common Share $ 0.16 $ 0.36 $ (0.20) (55.6%)
Earnings per share-Fully
Diluted $ 0.16 $ 0.32 $ (0.16) (50.0%)
Percentage
Nine Months Ended Change
September 30, Increase
1996 1995 Change (Decrease)
Interest Income $ 24,510 $ 20,937 $ 3,573 17.1%
Interest Expense 11,250 9,131 2,119 23.2%
-------- -------- --------
Net Interest Income 13,260 11,806 1,454 12.3%
Provision for Loan Losses 112 27 85 314.8%
-------- -------- --------
Net Interest Income after
Provision for Loan Losses 13,148 11,779 1,369 11.6%
-------- -------- --------
Other Income 1,994 1,547 447 28.9%
Other Expense 10,005 7,945 2,060 25.9%
-------- -------- --------
Income from Operations 5,137 5,381 (244) (4.5%)
Provision for Income Tax 1,947 1,928 19 1.0%
-------- -------- --------
Net Income $ 3,190 $ 3,453 $ (263) (7.6%)
======== ======== ========
Net Income Available to Common
Stock $ 3,082 $ 3,125 $ (43) (1.4%)
======== ========= ========
Earnings per Common Share $ 0.92 $ 1.01 $ (0.09) (8.9%)
Earnings per share-Fully
Diluted $ 0.83 $ 0.93 $ (0.10) (10.8%)
Net Interest Income
The major portion of the Company's income results from net interest income,
which is the excess of interest generated by interest-earning assets,
including loan fees, over the interest paid for the funds required to
support these assets. Net interest income expressed as a percentage of
average total earning assets is referred to as the net interest margin.
Net interest income is influenced primarily by changes in a) the volume and
mix of earning assets and sources of funding, b) market rates of interest,
and c) income tax rates. The effect of some of these factors can be
influenced by management policies and actions. External factors, such as
customer loan demand, Federal Reserve Board monetary policy and changes in
tax laws, can have a significant effect on net interest income from one
period to another.
For the nine months ended September 30, 1996, net interest income rose by
$1.454 million, or 12.3%, over 1995. The increase was accounted for by a
13.8% rise in average earning assets for the first nine months, and a 2.9%
increase in the yield on average earning assets. For the quarter ended
September 30, 1996, average loans increased 14.3% or $37.0 million.
Average investment securities decreased 11.0% or $6.9 million for the
quarter ended September 30, 1996 as funds from maturing securities and
sales of securities were used to supply loan demand. The acquisition of
Val Cor increased the average balance sheet of the Company by approximately
$27.8 million as Val Cor's averages were only included since June 18,
1996.
For the nine months ended September 30, 1996, the net interest margin
decreased 6 basis points, from 4.88% as of September 30, 1995 to 4.82% as
of September 30, 1996. Average interest bearing deposits increased $47.0
million or 18.9%, partially replacing other borrowings which decreased
27.3% or $9.3 million. Time deposits accounted for most of the increase in
average deposits. The net interest margin decreased 29 basis points or
5.9%, from 4.89% in the third quarter of 1995 to 4.60% in the third quarter
of 1996. The net interest spread, which is the difference between the rate
earned on earning assets less the rate paid on interest-bearing
liabilities, decreased from 4.36% for the nine months ended September 30,
1995 to 4.23% for the nine months ended September 30, 1996, and decreased
from 4.34% for the third quarter of 1995 to 4.04% for the third quarter of
1996.
The tables on pages 10 and 11 present average balances, interest income and
interest expense, as well as average rates earned and paid on the Company's
major asset and liability items for the three months and nine months ended
September 30, 1996 and 1995.
ASPEN BANCSHARES, INC. AND SUBSIDIARIES
ANALYSIS OF CHANGE IN NET INTEREST INCOME
(unaudited)
(in thousands)
Three Months Ended
September 30, 1996 September 30, 1995
Average Income/ Yield/ Average Income/ Yie
ASSETS Balance Expense Rate(1) Balance Expense Rat
Interest-Earning Assets:
Interest-Bearing Deposits
in Financial Institutions $2,251 $21 3.73% $1,256 $12 3.82%
U.S. Treasury and Agency
Securities 44,513 697 6.26% 26,089 357 5.47%
Tax Exempt Securities 5,709 69 4.83% 3,402 42 4.94%
Other Securities 25,660 388 6.05% 28,654 467 6.52%
Federal Funds Sold 9,071 117 5.16% 623 9 5.78%
Loans (2) 334,896 7,926 9.47% 260,229 6,292 9.67%
------- ----- ------- -----
Total Earning Assets 422,100 9,218 8.74% 320,253 7,179 8.97%
------- ----- ------- -----
Cash and Due from Banks 12,420 10,866
Premises and Equipment 9,596 8,839
Accrued Interest Receivable 3,483 2,212
Allowance for Loan Losses (3,215) (2,191)
Net Unrealized Gain (Loss)
on Securities Available
for Sale (1,648) (1,457)
Other Assets 6,695 3,664
------- -------
Total Assets $449,431 $342,186
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
Demand Deposits $142,119 $1,151 3.24% $114,065 $909 3.19%
Savings Deposits 26,267 196 2.98% 19,509 147 3.01%
Time Deposits Over $100,000 52,728 775 5.88% 37,895 575 6.07%
Other Time Deposits 114,907 1,671 5.82% 80,517 1,158 5.75%
Other Borrowings 35,323 566 6.41% 30,818 476 6.18%
------- ----- ------- -----
Total Interest-Bearing
Liabilities 371,344 4,359 4.70% 282,804 3,265 4.62%
------- -------
Noninterest-Bearing Deposits 45,007 29,781
Other Liabilities 3,057 3,920
Shareholders' Equity 30,023 25,681
------- -------
Total Liabilities
and Shareholders' Equity $449,431 $342,186
======= =======
Net Interest Income $4,859 $3,914
===== =====
Net Interest Spread 4.04% 4.34%
Net Interest Margin 4.60% 4.89%
(1)Annualized
(2)Includes Loans Held for Sale
ASPEN BANCSHARES, INC. AND SUBSIDIARIES
ANALYSIS OF CHANGE IN NET INTEREST INCOME
(unaudited)
(in thousands)
Nine Months Ended
September 30, 1996 September 30, 1995
Average Income/ Yield/ Average Income/ Yiel
ASSETS Balance Expense Rate(1) Balance Expense Rate
Interest-Earning Assets:
Interest-Bearing Deposits
in Financial Institutions $1,627 $46 3.77% $1,636 $54 4.40%
U.S. Treasury and Agency
Securities 27,210 1,187 5.82% 29,497 1,213 5.48%
Tax Exempt Securities 3,703 140 5.04% 3,643 144 5.27%
Other Securities 24,419 1,143 6.24% 29,044 1,414 6.49%
Federal Funds Sold 14,548 566 5.19% 318 14 5.87%
Loans (2) 295,214 21,428 9.68% 258,187 18,098 9.35%
------- ------ ------- ------
Total Earning Assets 366,721 24,510 8.91% 322,325 20,937 8.66%
------- ------ ------- ------
Cash and Due from Banks 10,526 8,372
Premises and Equipment 8,315 8,922
Accrued Interest Receivable 2,644 2,178
Allowance for Loan Losses (2,559) (2,190)
Net Unrealized Gain (Loss) on
Securities Available for Sale (1,377) (2,020)
Other Assets 3,417 3,875
------- -------
Total Assets $387,687 $341,462
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
Demand Deposits $123,505 $2,987 3.22% $120,636 $2,833 3.13%
Savings Deposits 21,030 473 3.00% 20,370 463 3.03%
Time Deposits Over $100,000 51,262 2,295 5.97% 33,438 1,414 5.64%
Other Time Deposits 100,201 4,372 5.82% 74,531 2,810 5.03%
Other Borrowings 24,793 1,123 6.04% 34,118 1,611 6.30%
------- ------ ------- ------
Total Interest-Bearing
Liabilities 320,791 11,250 4.68% 283,093 9,131 4.30%
------- ------ ------- ------
Noninterest-Bearing Deposits 36,639 29,115
Other Liabilities 3,602 4,960
Shareholders' Equity 26,655 24,294
------- -------
Total Liabilities
and Shareholders' Equity $387,687 $341,462
======= =======
Net Interest Income $13,260 $11,806
====== ======
Net Interest Spread 4.23% 4.36%
Net Interest Margin 4.82% 4.88%
(1) Annualized
(2) Includes Loans Held for Sale
ASPEN BANCSHARES, INC. AND SUBSIDIARIES
ANALYSIS OF VOLUME AND RATE CHANGES ON NET INTEREST INCOME AND EXPENSE
(unaudited)
(in thousands)
For the Nine Months Ended
September 30, 1996 over
September 30, 1995
Yield/
Volume(1) Rate(2) Total
Increase (Decrease) in Interest Income:
Interest-Bearing Deposits in Financial
Institutions $(0) $(8) $(8)
U.S. Treasury and Agency Securities (100) 74 (26)
Tax Exempt Securities 2 (6) (4)
Other Securities (216) (55) (271)
Federal Funds Sold 554 (2) 552
Loans (3) 2,688 642 3,330
------ ----- -----
Total Earning Assets $2,927 $646 $3,573
====== ===== ======
Increase (Decrease) in Interest Expense:
Demand Deposits $69 $85 $154
Savings Deposits 15 (5) 10
Time Deposits Over $100,000 798 83 881
Other Time Deposits 1,120 442 1,562
Federal Funds Purchased and Other Borrowed Money (422) (66) (488)
------- ----- -----
Total Interest-Bearing Liabilities $1,580 $539 $2,119
======= ===== ======
Increase (Decrease) in Net Interest Income $1,347 $107 $1,454
======= ===== ======
(1) Represents the difference between the average balances of the two periods ap
to the current year average rate, adjusted from an annualized rate to nine
month activity.
(2) Represents the difference between the average rates of the two periods appli
the prior year average balance, adjusted from an annualized rate to nine mon
activity.
(3) Loans held for sale are included.
Other Income
Overall, other income increased 24.4%, or $391,000, for the first nine
months of 1996 versus the same period in 1995. This is primarily
attributable to an increase of $294,000 in gains on sales of loans. Other
fees and charges increased 49.0% for the nine months ended September 30,
1996 over September 30, 1995 also primarily due to an increase in mortgage
servicing fees related to the increase in mortgage loan demand. Service
charges increased $154,000 or 28.7% for the nine months ended September 30,
1996 over September 30, 1995. The addition of Val Cor accounted for
approximately $114,000 of the increase in service charges.
Other Expenses
Other expenses, excluding the SAIF special assessment, increased $1.008
million or 12.6% from the nine months ended September 30, 1995 to the
similar period in 1996 and $749,000 or 27.3% for the three months ended
September 30, 1996 over the same period in 1995, excluding the SAIF special
assessment. The addition of Val Cor accounted for the majority of the
increase in other expenses, totaling $807,000 since the acquisition date.
Other expenses include items such as occupancy, data processing, insurance,
and legal fees. Salaries and benefits increased $591,000 or 14.8% in the
first nine months of 1996 versus the same period in 1995. Staff increased
from 161 to 223 employees from September 30, 1995 to September 30, 1996,
primarily due to the acquisition of Val Cor. At September 30, 1996, Pitkin
had 64 employees, Centennial had 113 employees and Valley had 46 employees.
Provision for Income Taxes
The effective tax rate for the nine months ended September 30, 1996 is
37.9% compared to 35.8% for the nine months ended September 30, 1995. These
rates are less than the statutory tax rate of 39.5%, primarily due to
earnings on investments which are tax-exempt for state purposes. The
increase in the tax rate in 1996 over 1995 is due to the repeal of the 8%
bad debt deduction allowed to thrift institutions.
Allowance for Loan Loss
The Company maintains its allowance for loan losses at a level considered
by management to be adequate to cover the risk of loss in the loan
portfolio at a particular point in time. In determining whether an
additional amount should be added to the reserve in excess of the amount of
loan losses, management takes into consideration a number of factors,
including loss experience in relation to outstanding loans and the existing
level of the reserve for losses, a continuing review of problem loans and
overall portfolio quality, regular examinations of the loan portfolio
conducted by the Company's staff and by State and Federal supervisory
authorities and economic conditions. During the period from September 30,
1995 to September 30, 1996, loans increased 25.0%, or $66.4 million. The
increase is attributable to continued strong loan demand and approximately
$41 million to the acquisition of Val Cor. The loan loss reserve increased
46.3% or $1.015 million from $2.191 million at September 30, 1995 to $3.206
million at September 30, 1996, primarily attributable to the acquisition of
Val Cor. Management of the Company established this level of reserve
after extensive analysis and continuing reviews.
Beginning with fiscal 1995, the Company adopted Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan" (SFAS
No. 114), and Financial Accounting Standards No. 118, "Accounting by
Creditors for Impairment of a Loan-Income Recognition and Disclosures"
(SFAS No. 118).
A loan is impaired when, based on current information and events, it is
probable that the Company will be unable to collect all amounts due
according to the contractual terms of the loan agreement. Loans are not
classified as impaired because of minimal payment delays or insignificant
shortfalls in amounts if management expects to collect all amounts due
including interest. Management determines loan impairments on a loan by
loan basis for the entire portfolio.
Accrual of interest can be discontinued on impaired loans and loans
designated as nonaccrual loans. Accrual of interest on loans is generally
discontinued either when reasonable doubt exists as to the full, timely
collection of interest or principal, or when a loan becomes contractually
past due 90 days or more with respect to interest or principal. When a
loan is placed on impaired or nonaccrual status, all interest previously
accrued but not collected is charged against income. Income on such loans
is then recognized only to the extent that cash is received and where the
future collection of principal is probable. Interest accruals are resumed
on such loans only when they are brought fully current with respect to such
interest and principal and when, in the judgment of management, the loans
are estimated to be fully collectible as to both principal and interest.
For impaired loans based on SFAS No. 114, the entire change in present
value of expected cash flows is reported as bad debt expense in the same
manner in which impairment initially was recognized or as a reduction in
the amount of bad debt expense that otherwise would be reported. The
Company had no loans considered impaired at September 30, 1996.
The following table presents an analysis of the Loan Loss Reserve and
Nonperforming Assets.
LOAN LOSS RESERVE ANALYSIS
(unaudited)
(in thousands)
September 30,
1996 1995
Balance, Beginning of Period $2,197 $2,178
Provision Charged to Operations 112 27
Loans Charged Off (43) (17)
Recoveries of Loans Previously Charged Off 35 3
Other-Val Cor Balance at Acquisition Date 905 -
------- -------
Balance, End of Period $3,206 $2,191
======= =======
Ending Loan Portfolio (1) $337,281 $265,898
======= =======
Allowance For Loan Losses as a Percentage
of Ending Loan Portfolio 0.95% 0.82%
======= =======
NONPERFORMING ASSETS
(unaudited)
(in thousands)
September 30,
1996 1995
Non-accrual Loans $346 $10
Loans 90 days Past Due and Still Accruing Interest 2,023 337
------ -----
Total Nonperforming Loans and Assets $2,369 $347
====== =====
Nonperforming Loans to Total Ending Loans 0.70% 0.13%
====== =====
Nonperforming Assets to Total Ending Loans
and Other Assets Acquired 0.70% 0.13%
====== =====
(1) Includes Loans Held for Sale
Real Estate Owned
There was no other real estate owned at September 30, 1996.
Other Banks Owned
The Company had no other banks owned at September 30, 1996.
At September 30, 1996, Pitkin owned 70.8% of the total capital stock of
Thatcher Financial Group, Inc. ("TFG"). Pitkin acquired the stock at sale
of the collateral on a loan made by Pitkin. TFG's primary asset was 100%
of the common stock of Thatcher Bank, F.S.B. Pitkin also had a loan
collateralized by the stock of Thatcher Bank and an art collection. During
1993, Pitkin sold the stock of Thatcher Bank and the art collection.
Proceeds from the sales were used to satisfy outstanding loan principal,
interest and expenses related to the loans made by Pitkin. Directors of
TFG, who are parties related to Pitkin, are in the process of determining
outstanding liabilities, including possible federal and state income taxes
payable. The determination of some of these liabilities is dependent upon
the final outcome of pending litigation. After determination and payment
of outstanding liabilities of TFG, TFG directors plan to distribute the
remaining funds, if any, to the shareholders of TFG. There is no
determination as to when this can be accomplished. Pitkin has not recorded
any receivable with respect to its ownership of TFG stock. At September
30, 1996, TFG had assets, primarily cash and investments, of approximately
$1 million (unaudited).
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
See discussion in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995, which is incorporated herein by this
reference.
In May, 1996, management of Centennial determined that it had no
further liability regarding clean-up costs on a property that was obtained
through foreclosure. Management had previously accrued approximately
$112,000 in other liabilities for costs to protect Centennial's interest.
The accrual was reversed.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit
Number Description of Exhibit
3.1 Articles of Incorporation of Aspen Bancshares, Inc. (1)
3.2 Bylaws of Aspen Bancshares, Inc. (1)
10.1 Pitkin County Bank and Trust Co. Building Lease (1)
10.2 Form of Loan Participation Agreement (1)
10.3 Incentive Stock Option Plan (1)
10.4 Non-qualified Stock Option Plan (2)
10.5 Third Amended Acquisition Agreement and Plan of
Merger between Aspen Bancshares, Inc. and Val Cor
Bancorporation, Inc. dated January 12, 1996 (3)
10.6 Loan Agreement between Aspen Bancshares, Inc. and The
Laredo National Bank dated June 18, 1996 (4)
11.0 Statement Regarding Computation of Per Share Earnings:
Weighted Average Shares Outstanding:
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------ ------ ------ ------
Common Stock 3,718 2,971 3,229 2,971
Incentive Stock Options 84 63 79 56
Warrants - 49 - 42
Nonqualified Stock Options 39 30 33 19
------ ------ ------ ------
Primary Shares Outstanding 3,841 3,113 3,341 3,088
Convertible Preferred and Warrants - 642 489 642
------ ------ ------ ------
Fully Diluted Shares Outstanding 3,841 3,755 3,830 3,730
====== ====== ====== ======
Net Income Net Income
Net Income $616 $1,220 $3,190 $3,453
Less: Preferred Dividends Paid - 108 108 328
------ ------ ------ ------
Net Income Available to Common
Stock $616 $1,112 $3,082 $3,125
====== ====== ====== ======
27.0 Financial Data Schedule
(1) Incorporated by reference from the Company's Form S-1 Registration
Statement, File No. 33-37098
(2) Incorporated by reference from the Company's Form S-8 Registration
Statement, File No. 33-93908
(3) Incorporated by reference from the Company's Form S-3 Registration
Statements, File No. 33-97700
(4) Incorporated by reference from the Company's Form 10-Q for the period
ended June 30, 1996, File No. 0-19376
b. Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ASPEN BANCSHARES, INC.
Date: By:/s/Charles B. Israel
Charles B. Israel, President and CEO
Date: By:/s/Amy G. Beidleman
Amy G. Beidleman, Vice President, CFO and
Secretary
17