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 December 31, 2000
Commission file number 0-23409
High Country Bancorp, Inc.
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(Exact Name of Small business Issuer as Specified in Its Charter)
Colorado 84-1438612
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(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7360 West US Highway 50, Salida Colorado 81201
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(Address of Principal Executive Offices)
719-539-2516
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(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
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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 December 31, 2000
1,057,925
HIGH COUNTRY BANCORP, INC.
CONTENTS
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Statements of Condition at June 30, 2000
and December 31, 2000 3
Statements of Consolidated Income for the Six
Months and Three Months Ended December 31, 2000
and 1999 4
Statements of Consolidated Cash Flows for the Six
Months Ended December 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
2
HIGH COUNTRY BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
December 31, June 30,
ASSETS 2000 2000
------------ ------------
Cash and amounts due from banks $ 3,102,739 $ 4,392,623
Interest- bearing deposits at other institutions 2,328,313 1,320,918
Mortgage-backed securities, held to maturity 2,504,454 2,642,889
Securities held to maturity - 200,000
Loans receivable - net 132,807,215 119,897,542
Loans held for sale, lower of cost or market 171,910 -
Federal Home Loan Bank stock, at cost 2,286,600 1,857,000
Accrued interest receivable 973,278 825,109
Property and equipment, net 6,086,393 6,071,939
Mortgage servicing rights 20,884 22,361
Prepaid expenses and other assets 350,264 458,530
Deferred income taxes 94,500 46,300
------------ ------------
TOTAL ASSETS $150,726,550 $137,735,211
============ ============
LIABILITIES AND EQUITY
LIABILITIES
Deposits $ 87,296,901 $ 82,770,398
Advances by borrowers for taxes and insurance 302,732 11,316
Escrow accounts 1,208,536 1,833,388
Accounts payable and other liabilities 697,537 762,553
Advances from Federal Home Loan Bank 44,831,666 36,238,333
Accrued income taxes payable 17,551 11,574
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TOTAL LIABILITIES 134,354,923 121,627,562
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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 1,057,925 shares (12/31/00) and 1,071,225 (6/30/00) 10,579 10,712
Paid-in capital 9,564,405 9,720,159
Retained earnings - substantially restricted 7,733,962 7,433,495
Note receivable from ESOP Trust (732,665) (732,665)
Deferred stock awards (204,654) (324,052)
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TOTAL EQUITY 16,371,627 16,107,649
------------ ------------
TOTAL LIABILITIES AND EQUITY $150,726,550 $137,735,211
============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
HIGH COUNTRY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
December 31, December 31,
2000 1999 2000 1999
----------- ----------- ----------- -----------
Interest Income
Interest on loans $ 2,917,611 $ 2,172,028 $ 5,640,910 $ 4,289,271
Interest on securities held-to-maturity 46,509 48,868 93,977 101,429
Interest on other interest- bearing assets 54,414 37,978 102,733 108,413
----------- ----------- ----------- -----------
Total interest income 3,018,534 2,258,874 5,837,620 4,499,113
----------- ----------- ----------- -----------
Interest Expense
Deposits 901,663 713,947 1,739,405 1,416,680
Federal Home Loan Bank advances 677,201 335,894 1,280,487 671,562
----------- ----------- ----------- -----------
Total interest expense 1,578,864 1,049,841 3,019,892 2,088,242
----------- ----------- ----------- -----------
Net interest income 1,439,670 1,209,033 2,817,728 2,410,871
Provision for losses on loans 75,000 44,925 135,000 89,850
----------- ----------- ----------- -----------
Net income after provision
for loan losses 1,364,670 1,164,108 2,682,728 2,321,021
----------- ----------- ----------- -----------
Noninterest Income
Service charges on deposits 49,322 36,578 93,432 74,286
Income from loan sales 65,677 62,386 101,281 122,808
Title and escrow fees 68,257 - 130,852 -
Other 47,196 31,920 116,515 59,065
----------- ----------- ----------- -----------
Total noninterest income 230,452 130,884 442,080 256,159
----------- ----------- ----------- -----------
Noninterest Expense
Compensation and benefits 628,070 540,553 1,254,316 1,072,134
Occupancy and equipment 267,002 159,616 525,812 322,120
Insurance and professional fees 61,461 54,071 131,333 107,309
Other 162,445 137,862 315,317 256,554
----------- ----------- ----------- -----------
Total noninterest expense 1,118,978 892,102 2,226,778 1,758,117
----------- ----------- ----------- -----------
Income before income taxes 476,144 402,890 898,030 819,063
Income tax expense 186,800 162,000 348,272 318,400
----------- ----------- ----------- -----------
Net income $ 289,344 $ 240,890 $ 549,758 $ 500,663
=========== =========== =========== ===========
Basic Earnings Per Common Share $ 0.29 $ 0.21 $ 0.56 $ 0.43
=========== =========== =========== ===========
Diluted Earnings Per Common Share $ 0.29 $ 0.21 $ 0.56 $ 0.43
=========== =========== =========== ===========
Weighted Average Common Shares
Outstanding Basic 981,765 1,129,273 983,103 1,154,301
Diluted 981,765 1,129,273 983,103 1,154,301
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
HIGH COUNTRY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
December 31,
2000 1999
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Operating Activities
Net income $ 549,758 $ 500,663
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization of:
Deferred loan origination fees (69,368) (29,644)
Premiums on investments 2,292 3,293
Compensation expense on Management Recognition Plan 118,457 116,546
Stock dividend received from FHLB - (45,300)
ESOP market value expense 10,091 11,131
Provision for losses on loans 135,000 90,000
Deferred income taxes (48,200) (12,600)
Depreciation 194,557 90,735
Income taxes 5,977 (8,860)
Net change in miscellaneous assets (38,426) 101,095
Net change in miscellaneous liabilities (689,868) (23,029)
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Net cash provided by operating activities 170,270 794,030
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Investing Activities
Net change in interest bearing deposits (1,007,395) 3,460,350
Net change in loans receivable (13,147,215) (8,531,688)
Principal repayments of mortgage-backed securities-held-to-maturity 136,143 472,519
Redemption securities held to maturity 200,000 110,000
Purchase of Federal Home Loan Bank stock (429,600) (164,900)
Purchases of property and equipment (209,011) (1,385,100)
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Net cash used by investing activities (14,457,078) (6,038,819)
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Financing Activities
Net change in deposits 4,526,503 3,718,687
Net change in escrow funds 291,416 278,635
Purchase of common stock (165,037) (1,381,461)
Cash dividends paid (249,291) (230,666)
Proceeds (payment) on FHLB advances 8,593,333 4,560,000
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Net cash provided by financing activities 12,996,924 6,945,195
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Net (decrease) increase in cash and cash equivalents (1,289,884) 1,700,406
Cash and cash equivalents, beginning 4,392,623 2,248,971
------------ ------------
Cash and cash equivalents, ending $ 3,102,739 $ 3,949,377
============ ============
Supplemental disclosure of cash flow information
Cash paid for:
Taxes $ 406,222 $ 313,639
Interest 3,027,756 2,105,429
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
HIGH COUNTRY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 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 with the Association's market area. In February 2000, the name of
Salida Building and Loan Association was changed to High Country Bank (the
"Bank").
Note 2. Basis of Presentation
The accompanying unaudited consolidated financial statements, (except for the
statement of financial condition at June 30, 2000, which is audited) have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management all adjustments necessary for a fair
presentation of the financial position and results of operations for the periods
presented have been included. The financial statements of the Company are
presented on a consolidated basis with those of High Country Bank and it's
subsidiary High Country Title and Escrow Company. The results of operations for
the three months ended December 31, 2000 are not necessarily indicative of the
results of operations that may be expected for the year ended June 30, 2001. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities as the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The accounting policies followed are as set forth in Note 1. of the Notes to
Financial Statements in the 2000 High Country Bancorp, Inc. financial statements
Note 3. Regulatory Capital Requirements
At December 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 December 31, 2000:
Tangible Capital:
Actual $13,471,000 8.91%
Required 2,267,000 1.50
Excess $11,204,000 7.21%
Core Capital:
Actual $13,471,000 8.91%
Required 4,534,000 3.00
Excess $8,937,000 5.91%
Risk-Based Capital:
Actual $14,592,000 13.32%
Required 8,764,000 8.00
Excess $5,828,000 5.32%
6
HIGH COUNTRY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
December 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, 2000 AND DECEMBER 31, 2000
The Company's total assets increased by $13.0 million or 9.43% from $137.7
million at June 30, 2000 to $150.7 million at December 31, 2000. The increase in
assets was due to loan growth of $13.1 million.
Net loans totaled $132.8 million at December 31, 2000 and $119.9 million at June
30, 2000. The increase in loans occurred in commercial real estate loans which
increased $4.9 million, single family construction loans which increased $2.6
million, land loans which increased $1.9 million, commercial non-mortgage loans
which increased $1.7 million and single family mortgage loans which increased
$1.2 million. The bank benefited from strong local demand for purchase financing
during the six months ending December 31, 2000.
During the period, the Bank continued the program of ongoing loan sales of
fixed-rate loans to the Federal Home Loan Mortgage Corporation and for the six
months ended December 31, 2000 loan sales totaled $6.3 million. At December 31,
2000, loans held for sale were $172,000. The loans are valued at the lower of
cost or market.
The allowance for loan losses totaled $1.1 million at December 31, 2000 and $1.0
million at June 30, 2000. As of those dates the non-performing loans in the
Association's portfolio were $618,000 and $533,000, respectively. The increase
was due to the addition of one $220,000 loan secured by commercial real estate.
This loan is also the largest non-performing loan. The total non-performing
loans at December 31, 2000 include 20 loans secured by single family residences,
business equipment and autos. There was $17,000 of loans charged off and less
than $1,000 in recoveries of previous loan losses during the six months ended
December 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. The Company has had
minimal losses on loans in prior years. At December 31, 2000 and June 30, 2000,
the ratio of the allowance for loan losses to net loans was 0.84%.
At December 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 $2.5 million and an estimated fair value
of $2.5 million. The balance of the Company's investment portfolio at December
31, 2000 consists of interest bearing deposits with various financial
institutions totaling $2.3 million.
At December 31, 2000 deposits increased to $87.3 million from $82.8 million at
June 30, 2000 or a net increase of 5.47%. 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.
Advances from the Federal Home Loan Bank increased to $44.8 million at December
31, 2000 from $36.2 million at June 30, 2000. The increase was used to fund loan
growth.
On November 9, 2000, the Company announced a plan to repurchase up to 10% or
107,122 shares of the outstanding stock. For the six months ending December 31,
2000, the Company repurchased 13,300 shares at a cost of $165,000. On November
15, 2000, the Company paid dividends of $0.25 per share. The dividend payment of
$249,000 partially offset the increase in retained earnings due to net income of
$550,000.
8
HIGH COUNTRY BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2000 AND
1999
Net Income. The Company's net income for the three months ended December 31,
2000 was $289,000 compared to $241,000 for the three months ended December 31
1999. For the three months ended December 31, 2000, higher net interest income
and non-interest income offset higher compensation and benefits expense,
occupancy expenses and other expenses.
Net Interest Income. Net interest income for the three months ended December 31,
2000 was $1.4 million compared to $1.2 million for the three months ended
December 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 average yield on
interest earning assets increased from 8.12% for the three months ended December
31, 1999 to 8.74% for the three months ended December 31, 2000. The increase was
due to short-term loans repricing to higher rates and growth in loans at higher
average rates as compared to the loan portfolio. The average cost of interest
bearing liabilities also increased from 4.42% for the three months ended
December 31, 1999 to 5.11% for the three months ended December 31, 2000. The
increase in costs was due to higher deposit rates implemented to maintain and
attract deposits and higher Federal Home Loan Advance rates on maturing and new
advances. The interest rate spread decreased from 3.71% for the three months
ended December 31, 1999 to 3.63% for the three months ended December 31, 2000.
Allowance for Loan Losses. The provision for loan losses was $75,000 for the
three months ended December 31, 2000 as compared to $45,000 for the three months
ended December 31, 1999. The increase reflects the growth in commercial real
estate and non-mortgage loans and the need to maintain an adequate balance in
the allowance for loan losses. For the three months ended December 31, 2000,
commercial real estate loans increased $1.8 million and commercial non-mortgage
loans increased $1.7 million.
Non-interest Income. Non-interest income was $230,000 for the three months ended
December 31, 2000 as compared to $130,000 for the three months ended December
31, 1999. Title and escrow fees from High Country Title and Escrow Company
accounted for the majority of the increase.
Non-interest Expenses. Non-interest expenses were $1.1 million for the three
months ended December 31, 2000 as compared to $892,000 for the three months
ended December 31, 1999. Increases occurred in compensation and benefit expense,
occupancy expense and other expenses. The increases are tied to additional
employees, the opening of the new home office, High Country Title and Escrow
Company expenses and other expenses due to growth.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED DECEMBER 31, 2000 AND
1999
Net Income. The Company's net income for the six months ended December 31, 2000
was $550,000 compared to $501,000 for the six months ended December 31 1999. The
increase in net income resulted primarily from increased interest income and
non-interest income which offset increased interest, compensation, occupancy and
other expenses.
Net Interest Income. Net interest income for the six months ended December 31,
2000 was $2.8 million compared to $2.4 million for the six months ended December
31, 1999. The increase is attributed to increased interest earned on interest
earning assets due to loan growth less the increase in interest
9
HIGH COUNTRY BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
expense due to the increase in interest bearing liabilities. The average yield
on interest earning assets increased from 8.10% for the six months ended
December 31, 1999 to 8.65% for the six months ended December 31, 2000. The
increase was due to short-term loans repricing to higher rates and growth in
loans at higher average rates as compared to the loan portfolio. The average
cost of interest bearing liabilities also increased from 4.44% for the six
months ended December 31, 1999 to 5.03% for the six months ended December 31,
2000. The increase in costs was due to higher deposit rates implemented to
maintain and attract deposits and higher Federal Home Loan Advance rates on
maturing and new advances. The interest rate spread decreased from 3.63% for the
six months ended December 31, 1999 to 3.62% for the six months ended December
31, 2000.
Allowance for Loan Losses. The provision for loan losses was $135,000 for the
six months ended December 31, 2000 as compared to $90,000 for the six months
ended December 31, 1999. The increase reflects the growth in commercial real
estate, commercial non-mortgage and land loans and the need to maintain an
adequate balance in the allowance for loan losses. For the six months ended
December 31, 2000, these loan categories increased a total of $8.5 million.
Non-interest Income. Non-interest income was $442,000 for the six months ended
December 31, 2000 as compared to $256,000 for the six months ended December 31,
1999. Title and escrow fees from High Country Title and Escrow Company and an
increase in other income accounted for the majority of the increase.
Non-interest Expenses. Non-interest expenses were $2.2 million for the six
months ended December 31, 2000 as compared to $1.8 million for the six months
ended December 31, 1999. Increases occurred in compensation and benefit expense,
occupancy expense and other expenses. The increases are tied to additional
employees, the opening of the new home office, High Country Title and Escrow
Company expenses and other expenses due to growth.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds consist of deposits, 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 is
4%. The Bank has historically maintained a level of liquid assets in excess of
regulatory requirements. The Bank's liquidity ratios at December 31, 2000 and
1999 were 4.59% and 5.69%, respectively.
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
10
HIGH COUNTRY BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
results of operations in terms of historical dollars without considering changes
in the relative purchasing power of money over time because of inflation. Unlike
most industrial companies, virtually all of the assets and liabilities of the
Company are monetary in nature. As a result, interest rates have a more
significant impact on the Company's performance than the effects of general
levels of inflation. Interest rates do not necessarily move in same direction or
in the same magnitude as the prices of goods and services.
11
HIGH COUNTRY BANCORP, INC.
PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings
None
ITEM 2: Changes in Securities
None
ITEM 3: Defaults Upon Senior Securities
Not Applicable
ITEM 4: Submission of Matters to a Vote of Security Holders.
The Company held its annual meeting on October 26, 2000 in
Salida, Colorado to vote on the election of two directors of
the Company. At the meeting, Robert B. Mitchell and Timothy R.
Glenn were elected to three-year terms, each receiving more
than 97% of the votes cast.
ITEM 5: Other Information
None
ITEM 6: Exhibits and Reports on Form 8-K
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
High Country Bancorp, Inc.
Registrant
Date February 7, 2001 /s/ Larry D. Smith
---------------- -----------------------------------
Larry D. Smith, President
12