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, 2000
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.)
130 West 2nd Street, 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, 2000: 1,091,250
HIGH COUNTRY BANCORP, INC.
CONTENTS
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Statements of Condition
at June 30, 1999 and March 31, 2000 3
Statements of Consolidated Income for
the Nine Months and Three Months Ended
March 31, 2000 and 1999 4
Statements of Consolidated Cash Flows
for the Nine Months Ended March 31,
2000 and 1999 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
HIGH COUNTRY BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
March 31, June 30,
2000 1999
ASSETS ------------ ------------
Cash and amounts due from banks $ 4,190,965 $ 2,248,971
Interest-bearing deposits at other institutions 1,042,840 4,409,949
Mortgage-backed securities, held to maturity 2,720,097 3,328,789
Securities held to maturity 200,000 310,000
Loans receivable - net 111,809,896 98,433,182
Loans held for sale, lower of cost or market 207,000 --
Federal Home Loan Bank stock, at cost 1,614,800 1,201,300
Accrued interest receivable 830,658 801,223
Property and equipment, net 5,451,947 2,863,725
Mortgage servicing rights 23,224 22,496
Prepaid expenses and other assets 424,313 386,664
Deferred income taxes 25,000 7,400
------------ ------------
TOTAL ASSETS $128,540,740 $114,013,699
============ ============
LIABILITIES AND EQUITY
LIABILITIES
Deposits $ 79,178,611 $ 72,604,408
Advances by borrowers for taxes and insurance 155,059 18,015
Accounts payable and other liabilities 760,819 656,030
Advances from Federal Home Loan Bank 32,245,000 22,685,000
Accrued income taxes payable 18,054 22,014
------------ ------------
TOTAL LIABILITIES 112,357,543 95,985,467
------------ ------------
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 1,091,250 shares
(3/31/00) and 1,298,719 shares
(6/30/99) 10,913 12,987
Paid-in capital 9,932,119 12,426,953
Retained earnings - substantially restricted 7,402,682 6,868,120
Note receivable from ESOP Trust (838,465) (838,465)
Deferred stock awards (324,052) (441,363)
------------ ------------
TOTAL EQUITY 16,183,197 18,028,232
------------ ------------
TOTAL LIABILITIES AND EQUITY $128,540,740 $114,013,699
============ ============
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,
2000 1999 2000 1999
------------ ------------ --------- ----------
Interest Income
Interest on loans $2,345,113 $1,976,784 $6,634,385 $5,729,049
Interest on securities held-to-maturity 46,761 60,641 148,190 197,734
Interest on other interest-bearing assets 30,928 88,272 139,340 328,823
---------- ---------- ---------- ----------
Total interest income 2,422,802 2,125,697 6,921,915 6,255,606
---------- ---------- ---------- ----------
Interest Expense
Deposits 684,056 663,226 2,100,736 2,002,381
Federal Home Loan Bank advances 422,194 327,517 1,093,756 913,720
---------- ---------- ---------- ----------
Total interest expense 1,106,250 990,743 3,194,492 2,916,101
---------- ---------- ---------- ----------
Net interest income 1,316,552 1,134,954 3,727,423 3,339,505
Provision for losses on loans 59,950 59,928 149,800 179,802
---------- ---------- ---------- ----------
Net income after provision
for loan losses 1,256,602 1,075,026 3,577,623 3,159,703
---------- ---------- ---------- ----------
Noninterest Income
Income from loan sales 43,645 -- 166,453 --
Service charges on deposits 40,624 33,726 114,910 105,179
Other 65,135 7,014 124,200 30,481
---------- ---------- ---------- ----------
Total noninterest income 149,404 40,740 405,563 135,660
---------- ---------- ---------- ----------
Noninterest Expense
Compensation and benefits 563,863 471,398 1,635,997 1,322,072
Occupancy and equipment 181,702 162,905 503,822 479,886
Insurance and professional fees 67,568 62,246 174,877 156,073
Other 150,986 124,195 407,540 352,952
---------- ---------- ---------- ----------
Total noninterest expense 964,119 820,744 2,722,236 2,310,983
---------- ---------- ---------- ----------
Income before income taxes 441,887 295,022 1,260,950 984,380
Income tax expense 177,322 107,600 495,722 372,570
---------- ---------- ---------- ----------
Net income $ 264,565 $ 187,422 $ 765,228 $ 611,810
========== ========== ========== ==========
Basic Earnings Per Common Share $ 0.24 $ 0.16 $ 0.67 $ 0.50
========== ========== ========== ==========
Diluted Earnings Per Common Share $ 0.24 $ 0.16 $ 0.67 $ 0.50
========== ========== ========== ==========
Weighted Average Common Shares
Outstanding Basic 1,112,739 1,206,029 1,140,447 1,225,481
Diluted 1,112,739 1,206,029 1,140,447 1,225,481
Dividends Paid Per Share $ -- $ -- $ 0.20 $ 0.20
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
HIGH COUNTRY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
March 31,
2000 1999
---------- ----------
Operating Activities
Net income $ 765,228 $ 611,810
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of:
Deferred loan origination fees (35,712) (178,444)
Discounts on investments 4,560 11,674
Stock dividend received from FHLB (45,300) (59,500)
Compensation expense on Management Recognition
Plan 116,546 110,358
ESOP market value expense 12,454 19,171
Provision for losses on loans 150,000 180,000
Deferred income taxes (17,600) (33,700)
Depreciation 137,881 142,048
Income taxes (3,960) --
Net change in miscellaneous assets (67,812) (46,236)
Net change in miscellaneous liabilities 104,789 (220,978)
----------- -----------
Net cash provided by operating
activities 1,121,074 536,203
----------- -----------
Investing Activities
Net change in loans receivable (13,698,002) (14,754,034)
Principal repayments of mortgage-backed
securities held-to-maturity 604,132 830,324
Redemption securities held to maturity 110,000 --
Purchase of FHLB stock (368,200) (55,700)
Purchases of property and equipment (2,726,103) (344,692)
Purchase of stock for MRP -- (551,721)
----------- -----------
Net cash used by investing activities (16,078,173) (14,875,823)
----------- -----------
Financing Activities
Net change in deposits 6,574,203 7,265,331
Net change in mortgage escrow funds 137,044 82,522
Purchase of common stock (2,508,597) --
Cash dividends paid (230,666) (245,456)
Proceeds (payment)on FHLB advances 9,560,000 3,885,000
----------- -----------
Net cash provided by financing
activities 13,531,984 10,987,397
----------- -----------
Net (decrease) increase in cash and
cash equivalents (1,425,115) (3,352,223)
Cash and cash equivalents, beginning 6,658,920 9,962,414
----------- -----------
Cash and cash equivalents, ending $ 5,233,805 $ 6,610,191
=========== ===========
Supplemental disclosure of cash flow
information
Cash paid for:
Taxes $ 481,739 $ 396,458
Interest 3,247,712 2,899,266
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
HIGH COUNTRY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
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 within 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,
1999, 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. The results of operations for
the nine months ended March 31, 2000 are not necessarily
indicative of the results of operations that may be expected for
the year ended June 30, 2000. 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 1999 High Country
Bancorp, Inc. financial statements
Note 3. Regulatory Capital Requirements
At March 31, 2000, 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,
2000:
Tangible Capital:
Actual $13,077,000 10.14%
Required 1,934,000 1.50
Excess $11,143,000 8.64%
Core Capital:
Actual $13,077,000 10.14%
Required 3,867,000 3.00
Excess $ 9,210,000 7.14%
Risk-Based Capital:
Actual $14,033,000 15.48%
Required 7,252,000 8.00
Excess $ 6,781,000 7.48%
6
HIGH COUNTRY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
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 1999 AND MARCH 31,
2000
The Company's total assets increased by $14.5 million or 12.7%
from $114.0 million at June 30 1999 to $128.5 million at March
31, 2000. The increase in assets was due to loan growth of
$13.6 million.
Net loans totaled $112.0 million at March 31, 2000 and $98.4
million at June 30 1999. The increase in loans occurred in
commercial real estate loans which increased $7.9 million,
consumer loans which increased $1.7 million, residential loans
which increased $1.5 million, residential construction loans
which increased $1.2 million, and in other loan categories which
increased $1.3 million.
Fixed-rate loan sales to the Federal Home Loan Mortgage
Corporation for the nine months ended March 31, 2000 totaled
$9.2 million. At March 31, 2000, loans held for sale were
$207,000. The loans are valued at the lower of cost or market.
The allowance for loan losses totaled $956,000 at March 31, 2000
and $909,000 at June 30 1999. As of those dates the
non-performing loans in the Bank's portfolio were $627,000 and
$275,000, respectively. The increase was primarily due to the
addition of two secured commercial loans totaling $195,000 and
two single family mortgage loans totaling $165,000. The total
non-performing loans at March 31, 2000 include 24 loans secured
by single family residences, business inventory, equipment and
autos. The largest non-performing loan balance was $100,000 and
is secured by inventory and equipment. There was $104,000 of
loans charged off and less than $1,000 of recoveries of previous
loan losses during the nine months ended March 31, 2000. The
determination of the allowance for loan losses is based on
management's analysis, performed on a quarterly basis, of
various 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. Although management believes
its allowance for loan losses is adequate, there can be no
assurance that additional allowances will not be required or
that losses on loans will not be incurred. At March 31, 2000
and June 30 1999, the ratio of the allowance for loan losses to
net loans was .85% and .92%, respectively.
At March 31, 2000, the Company's investment portfolio included
mortgage-backed securities and local municipal bonds classified
as "held to maturity" carried at amortized cost of $2.9 million
and an estimated fair value of $2.9 million. The balance of the
Company's investment portfolio at March 31, 2000 consists of
interest bearing deposits with various financial institutions.
Interest bearing deposits decreased by $3.4 million from June
30, 1999 to $1.0 million at March 31, 2000. The funds were used
for loan growth.
Property and equipment increased $2.6 million for the nine
months ended March 31, 2000. The majority of the increase is
associated with the construction of the Bank's new home office
in Salida, Colorado. The office opened on April 3, 2000.
Property and equipment depreciation costs will increase by an
estimated $42,000 per quarter beginning with the quarter ending
June 30, 2000.
At March 31, 2000 deposits increased to $79.2 million from $72.6
million at June 30 1999 or a net increase of 9.1%. The increase
was 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.
8
HIGH COUNTRY BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Advances from the Federal Home Loan Bank increased to $32.2
million at March 31, 2000, from $22.7 million at June 30, 1999.
The increase was used to fund loan growth.
In December 1999, the Company completed a stock repurchase
program announced on May 24, 1999. A total of 132, 250 shares
or 10% of the Company's outstanding common stock was repurchased
at a total cost of $1,667,000. The Company announced the
commencement of a second stock repurchase program on March 20,
2000. The program will acquire up to 10% of the Company's
outstanding common stock or 119,025 shares over a twelve month
period. For the three months ended March 31, 2000, the Company
repurchased 99,000 shares at a total cost of $1,127,000.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH
31, 2000 AND 1999
Net Income. The Company's net income for the three months
ended March 31, 2000 was $265,000 compared to net income of
$187,000 for the three months ended March 31, 1999. The $78,000
increase in net income for the three months ended March 31, 2000
resulted principally from increased interest income, income from
loan sales and other income which offset increased interest
expense and compensation.
Net Interest Income. Net interest income for the three months
ended March 31, 2000 was $1,317,000 compared to $1,135,000 for
the three months ended March 31, 1999. 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. For the
three months ended March 31, 2000, the interest rate spread
increased from 3.56% for the three months ended March 31, 1999
to 4.03% for the three months ended March 31, 2000. The
increased spread was primarily due to an increase in the average
yield on earning assets from 8.06% at March 31, 1999 to 8.37% at
March 31, 2000. The interest rate spread was also affected by a
decrease in the average cost of interest bearing liabilities
from 4.50% at March 31, 1999 to 4.34% at March 31, 2000.
Non-interest Income. Non-interest income was $149,000 for the
three months ended March 31, 2000 as compared to $41,000 for the
three months ended March 31, 1999. The increase is due to
income from loan sales of $44,000 and an increase in other
non-interest income of $58,000 which includes loan origination
fees and title insurance fees.
Non-interest Expenses. Non-interest expenses were $964,000 for
the three months ended March 31, 2000 as compared to $821,000
for the three months ended March 31, 1999. The majority of the
increase occurred in compensation and benefit expense, which
increased $93,000, due to additional employees associated with
growth.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED MARCH
31, 2000 AND 1999
Net Income. The Company's net income for the nine months ended
March 31, 2000 was $765,000 compared to net income of $612,000
for the nine months ended March 31, 1999. The increase in net
income resulted primarily from increased interest income and
income from loan sales which offset increased interest expense
and compensation.
9
HIGH COUNTRY BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Net Interest Income. Net interest income for the nine months
ended March 31, 2000 was $3,727,000 compared to $3,340,000 for
the nine months ended March 31, 1999. 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
interest rate spread increased from 3.61% for the nine months
ended March 31, 1999 to 3.77% for the nine months ended March
31, 2000. The increase was caused by a decrease in the average
cost of interest bearing liabilities from 4.64% at March 31,
1999 to 4.40% at March 31, 2000. The decrease in the cost was
due to an increase in non-interest bearing checking and other
lower cost deposit accounts. The decrease in cost was offset by
a decrease in the average yield on earning assets from 8.25% at
March 31, 1999 to 8.17% at March 31, 2000. The decrease was due
to refinancing of higher rate mortgage loans to lower rates.
Allowance for Loan Loss. The provision for loan losses for the
nine months ended March 31, 2000 was $150,000 as compared to
$180,000 for the nine months ended March 31, 1999. The decrease
in the provision was due to an analysis of the loss history of
the loans held by the Bank. The Bank continues to provide for
loan losses based on the mix of new loans and the need to
maintain an adequate balance in the allowance for loan losses.
Non-interest Income. Non-interest income was $406,000 for the
nine months ended March 31, 2000 was compared to $136,000 for
the nine months ended March 31, 1999. The majority of the
increase is due to income from loan sales of $166,000 for the
nine months ended March 31, 2000.
Non-interest Expenses. Non-interest expenses were $2,722,000
for the nine months ended March 31, 2000 as compared to
$2,311,000 for the nine months ended March 31, 1999. The
majority of the increase occurred in compensation and benefit
expense, which increased $314,000, due to additional employees
associated with growth.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds consist of deposits,
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
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 Bank is required to maintain minimum levels of liquid assets
as defined by OTS regulations. This requirement, which may be
varied at the direction of the OTS depending upon economic
conditions and deposit flows, is based upon a percentage of
deposits and short-term borrowings. The required minimum ratio
was 5% until November 24, 1997 when the requirement was lowered
to 4%. The Bank has historically maintained a level of liquid
assets in excess of regulatory requirements. The Bank's
liquidity ratios at March 31, 2000 and 1999 were 5.63% and
5.04%, respectively.
10
HIGH COUNTRY BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related data presented herein have
been prepared in accordance with 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.
YEAR 2000 READINESS DISCLOSURE
The Company has not experienced any abnormalities on its
information processing systems due to the effect of the year
2000. The Company and the Bank will continue to monitor the
information processing systems as the year continues. It is
management's opinion that any additional year 2000 related
expenses will not have a material effect on the Company's
financial position. All additional costs will be expensed as
incurred.
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
On February 15, 2000, the Salida Building and Loan
Association changed its name to High Country Bank.
High Country Bank remains a federally chartered stock
savings institution.
ITEM 6: Exhibits and Reports on Form 8-K
On March 20, 2000, the Company filed a current report
on Form 8-K. In the current report on Form 8-K, the
Company reported under Item 5 the commencement of a
stock repurchase program to acquire up to 10% of the
Company's outstanding common stock.
Exhibit 27 Financial Data Schedule
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 9, 2000 /s/ Larry D. Smith
-------------------------
Larry D. Smith, President
12