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