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 September 30, 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: (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 November 1, 2001
922,209
HIGH COUNTRY BANCORP, INC.
CONTENTS
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Statements of Condition at June 30, 2000 and
September 30, 2001 3
Statements of Consolidated Income for the Three Months
Ended September 30, 2001 and 2000 4
Statements of Consolidated Cash Flows for the Three Months
Ended September 30, 2001 and 2000 5
Notes to Financial Statements 6 - 7
Item 2: Management's Discussion and Analysis or Plan of Operations 8 -10
PART II - OTHER INFORMATION
Item 1: Legal Proceedings 11
Item 2: Changes in Securities and Use of Proceeds 11
Item 3: Defaults Upon Senior Securities 11
Item 4: Submission of Matters to a Vote of Security Holders 11
Item 5: Other Information 11
Item 6: Exhibits and Reports on Form 8-K 11
Signature 11
2
HIGH COUNTRY BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
September 30, June 30,
ASSETS 2001 2001
------------------------------
Cash and amounts due from banks $ 3,098,238 $ 2,759,671
Interest- bearing deposits at other institutions 16,791,612 9,175,856
Mortgage-backed securities, held to maturity 2,058,768 2,220,909
Loans receivable - net 135,909,594 135,916,318
Loans held for sale 357,300 917,500
Federal Home Loan Bank stock, at cost 2,421,600 2,421,600
Accrued interest receivable 1,092,884 1,121,412
Property and equipment, net 6,158,002 6,111,907
Mortgage servicing rights 11,237 14,504
Prepaid expenses and other assets 547,511 508,187
Deferred income taxes 180,000 162,800
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TOTAL ASSETS $168,626,746 $161,330,664
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LIABILITIES AND EQUITY
LIABILITIES
Deposits $107,340,261 $ 98,517,228
Advances by borrowers for taxes and insurance 120,708 29,724
Escrow accounts 1,061,762 1,070,624
Accounts payable and other liabilities 931,611 988,588
Advances from Federal Home Loan Bank 43,574,999 44,124,999
Accrued income taxes payable 321,474 40,167
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TOTAL LIABILITIES 153,350,815 144,771,330
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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 922,209 (September 30, 2001) and
1,028,992 shares (June 30, 2001) 9,222 10,290
Paid-in capital 7,463,269 9,151,686
Retained earnings - substantially restricted 8,621,749 8,215,667
Note receivable from ESOP Trust (626,865) (626,865)
Deferred MRP stock awards (191,444) (191,444)
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TOTAL EQUITY 15,275,931 16,559,334
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TOTAL LIABILITIES AND EQUITY $168,626,746 $161,330,664
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
HIGH COUNTRY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
September 30,
2001 2000
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Interest Income
Interest on loans $ 3,105,347 $ 2,723,299
Interest on securities held-to-maturity 35,610 47,468
Interest on other interest- bearing assets 138,411 48,319
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Total interest income 3,279,368 2,819,086
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Interest Expense
Deposits 985,554 837,742
Federal Home Loan Bank advances 672,645 603,286
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Total interest expense 1,658,199 1,441,028
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Net interest income 1,621,169 1,378,058
Provision for losses on loans 60,000 60,000
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Net interest income after provision
for loan losses 1,561,169 1,318,058
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Noninterest Income
Service charges on deposits 62,288 44,110
Loans sold 182,829 35,604
Title and escrow fees 93,615 62,595
Other 92,128 69,319
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Total noninterest income 430,860 211,628
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Noninterest Expense
Compensation and benefits 795,924 626,246
Occupancy and equipment 304,523 258,810
Insurance and professional fees 86,449 69,872
Other 147,551 152,872
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Total noninterest expense 1,334,447 1,107,800
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Income before income taxes 657,582 421,886
Income tax expense 251,500 161,472
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Net income $ 406,082 $ 260,414
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Basic Earnings Per Common Share $ 0.42 $ 0.26
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Diluted Earnings Per Common Share $ 0.42 $ 0.26
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Weighted Average Common Shares
Outstanding Basic 958,142 984,442
Diluted 976,668 984,442
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
HIGH COUNTRY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
September 30,
2001 2000
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Operating Activities
Net income $ 406,082 $ 260,414
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization of:
Deferred loan origination fees (44,305) (33,202)
Premiums on investments 1,577 1,141
ESOP market value expense 15,702 3,637
Provision for losses on loans 60,000 60,000
Deferred income taxes (17,200) (29,900)
Depreciation 115,242 96,399
Income taxes 281,307 187,520
Net change in miscellaneous assets (7,529) (275,404)
Net change in miscellaneous liabilities 34,007 (32,396)
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Net cash provided by operating activities 844,883 238,209
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Investing Activities
Net change in interest bearing deposits (7,615,756) (1,120,487)
Net change in loans receivable 551,229 (8,878,756)
Principal repayments of mortgage-backed securities-held-to-maturity 160,564 65,041
Purchase of Federal Home Loan Bank stock -- (205,000)
Purchases of property and equipment (161,337) (162,108)
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Net cash used by investing activities (7,065,300) (10,301,310)
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Financing Activities
Net change in deposits 8,823,033 4,784,607
Net change in escrow funds (8,862) (379,635)
Purchase of common stock (1,705,187) --
Proceeds (payment) on FHLB advances (550,000) 3,950,000
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Net cash provided by financing activities 6,558,984 8,354,972
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Net increase (decrease) in cash and cash equivalents 338,567 (1,708,129)
Cash and cash equivalents, beginning 2,759,671 4,392,623
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Cash and cash equivalents, ending $ 3,098,238 $ 2,684,494
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Supplemental disclosure of cash flow information
Cash paid for:
Taxes $ -- $ 3,550
Interest 1,672,483 1,451,072
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
HIGH COUNTRY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 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, 2001, 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 September 30, 2001 are not necessarily indicative of the
results of operations that may be expected for the year ended June 30, 2002. 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 2001 High Country Bancorp, Inc. financial statements
Note 3. Regulatory Capital Requirements
At September 30, 2001, the Bank met each of the three current minimum regulatory
capital requirements. The following table summarizes the Bank's regulatory
capital position at September 30, 2001:
Tangible Capital:
Actual $14,630,000 8.67%
Required 2,532,000 1.50
Excess $12,098,000 7.17%
Core Capital:
Actual $14,630,000 8.67%
Required 5,064,000 3.00
Excess $ 9,566,000 5.67%
Risk-Based Capital:
Actual $16,013,000 13.27%
Required 9,651,000 8.00
Excess $ 6,362,000 5.27%
6
HIGH COUNTRY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 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, 2001 AND SEPTEMBER 30, 2001
The Company's total assets increased by $7.3 million or 6.4% from $161.3 million
at June 30, 2001 to $168.6 million at September 30, 2001. The increase in assets
was due to interest-bearing deposit growth of $7.6 million.
Interest bearing deposits increased $7.6 million from $9.2 million at June 30,
2001 to $16.8 million at September 30, 2001. The increase during the quarter was
primarily due to deposit growth. In October 2001 following the quarter end, $3.5
million of the funds was used to purchase adjustable rate mortgage backed
securities. In the upcoming months, these funds may be used for paying down FHLB
advances, seasonal deposit withdrawals, loan demand and other investment
purchases. The balance of the Company's investment portfolio included
mortgage-backed securities classified as "held to maturity" carried at amortized
cost and estimated fair value of $2.1 million.
Net loans totaled $136.3 million at September 30, 2001 and $136.8 million at
June 30, 2001. During the three months ended September 30, 2001, commercial
mortgage loans increased $1.9 million and single family construction loans
increased $1.3 million. The bank benefited from strong local purchase financing
and loan refinancing. The loan growth in these areas offset a $3.1 million
decrease in single family mortgage loans associated with the refinancing of
portfolio loans into sold loans.
During the quarter, the Bank sold $11.8 million of fixed-rate loans to the
Federal Home Loan Mortgage Corporation. At September 30, 2001, loans held for
sale were $357,000. The loans are valued at the lower of cost or market.
The allowance for loan losses totaled $1.4 million at September 30, 2001 and
$1.3 million at June 30, 2001. At September 30, 2001 and June 30, 2001, the
ratio of the allowance for loan losses to net loans was 1.01% and 0.99%,
respectively. As of those dates the non-performing loans in the Bank's portfolio
were $1.9 and $1.8 million, respectively. The total non-performing loans at
September 30, 2001 include 33 loans secured by commercial real estate, single
family residences, vacant land, business equipment and autos. The largest
non-performing loan totals $728,000 and is a business purpose loan secured by
two single family residences and vacant land. No loss is expected on this loan.
During the three months ended September 30, 2001, there were $25,000 of loans
charged off and no recoveries of previous loan losses. The determination of the
allowance for loan losses is based on a review and classification of the Bank's
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. Particular attention was
focused on the Bank's commercial loan portfolio and any impaired loans. 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 September 30, 2001 deposits increased to $107.3 million from $98.5 million at
June 30, 2001 or a net increase of 8.96%. Seasonal growth, competitive rates and
stock market uncertainty fueled the growth. The increase funded investment in
interest bearing deposits.
Advances from the Federal Home Loan Bank decreased to $43.6 million at September
30, 2001 from $44.1 million at June 30, 2001. Over the next few quarters,
advances are expected to decrease as they mature and are paid off with interest
bearing deposits.
In September 2001, the Bank completed the stock repurchase program that it
commenced in November 2000. For the three months ended September 30, 2001, the
Bank repurchased 106,783 shares at a cost of $1.7 million.
8
HIGH COUNTRY BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
AND 2000
Net Income. The Company's net income for the three months ended September 30,
2001 was $406,000 compared to $260,000 for the three months ended September 30
2000. The increase in net income resulted primarily from increased interest
income and non-interest income which offset increased interest, compensation and
occupancy expense.
Net Interest Income. Net interest income for the three months ended September
30, 2001 was $1.7 million compared to $1.4 million for the three months ended
September 30, 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 decreased from 8.53% for the three months ended
September 30, 2000 to 8.45% for the three months ended September 30, 2001. The
decrease was due to growth in low earning interest bearing deposits. The average
cost of interest bearing liabilities also decreased from 4.93% for the three
months ended September 30, 2000 to 4.75% for the three months ended September
30, 2001. The decrease in costs was due to falling deposit rates and less
reliance on higher costing Federal Home Loan Advances. The interest rate spread
increased from 3.60% for the three months ended September 30, 2000 to 3.70% for
the three months ended September 30, 2001.
Non-interest Income. Non-interest income was $431,000 for the three months ended
September 30, 2001 as compared to $212,000 for the three months ended September
30, 2000. Loan origination growth from favorable mortgage loan interest rates
increased income from loan sales. The increased loan activity also helped boost
title and escrow fees from High Country Title and Escrow Company and other loan
fees.
Non-interest Expenses. Non-interest expenses were $1.3 million for the three
months ended September 30, 2001 as compared to $1.1 million for the three months
ended September 30, 2000. Increases occurred in compensation and benefit
expense, occupancy expense and other expenses. The increases are tied to
additional employees associated with 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.
9
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.
10
HIGH COUNTRY BANCORP, INC.
PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings
None
ITEM 2: Changes in Securities and Use of Proceeds
None
ITEM 3: Defaults Upon Senior Securities
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
(a) The following exhibit is filed herewith:
Exhibit 3.2 Bylaws of High Country Bancorp, Inc.,
as amended
(b) No reports on Form 8-K were filed during the quarter
ended September 30, 2001
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 November 5, 2001 /s/ Larry D. Smith
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Larry D. Smith, President
11