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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999.
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[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ________________.
Commission file number 000-25295
FIRSTIER BANCORP, INC.
----------------------
(Exact name of small business issuer as specified in its charter)
Colorado 47-0484682
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(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
11210 Huron, Northglenn, CO. 80234
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(Address of principal executive offices, including zip code)
(303) 451-1010
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(Issuer's telephone number)
First Western Corp.
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(Former name, former address and former fiscal year, if
changed since last report.)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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
---- ----
As of September 30, 1999, there were 7,579,667 shares of the
registrant's common stock outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
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FIRSTIER BANCORP, INC.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION PAGE NO.
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Item 1. Financial Statements 2
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
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Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRSTIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1999 (Unaudited) and December 31, 1998
(In thousands)
September 30, December 31,
1999 1998
------------- ------------
(Unaudited)
ASSETS
Cash and due from banks .................................................... $ 26,975 $ 13,892
Interest bearing deposits in other banks ................................... -- 3
Federal funds sold ......................................................... 2,500 13,270
Investment securities:
Available-for-sale, at fair value ........................................ 39,361 27,082
Held-to-maturity, at amortized cost, fair value of $6,200, in 1999 and
$7,250, in 1998 ....................................................... 6,154 7,146
---------- ----------
Total investment securities ....................................... 45,515 34,228
Loans held for sale ........................................................ 2,948 5,193
Gross loans receivable: .................................................... 517,549 290,875
Less: unearned loan fees ................................................. (1,706) (886)
allowance for loan losses .......................................... (4,364) (2,187)
---------- ----------
Net loans receivable .............................................. 511,479 287,802
Premises and equipment, net ................................................ 10,437 8,308
Preferred securities issuance cost, net .................................... 1,092 --
Other assets ............................................................... 7,198 4,511
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TOTAL ASSETS ...................................................... $ 608,144 $ 367,207
========== ==========
LIABILITIES
Deposits:
Demand non-interest bearing .............................................. $ 56,184 $ 44,653
Demand interest bearing .................................................. 18,586 14,919
Time ..................................................................... 441,696 259,908
---------- ----------
Total deposits .................................................... 516,466 319,480
Federal funds sold and securities sold under agreements to repurchase ...... 20,268 5,080
Note payable ............................................................... 11,750 8,790
Federal Home Loan Bank borrowings .......................................... 8,593 8,650
Other liabilities .......................................................... 3,739 3,818
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Total liabilities ................................................. 560,816 345,818
Minority interest in consolidated subsidiaries ............................. -- 683
Company obligated mandatorily redeemable preferred securities of subsidiary
trust holding solely Junior Subordinated Debentures ...................... 23,000 --
STOCKHOLDERS' EQUITY
Preferred stock, 20,000,000 shares authorized; no shares issued and
outstanding at December 31, 1998 and September 30, 1999 (unaudited)..... -- --
Common stock, 50,000,000 shares authorized; shares issued and outstanding :
7,346,673 at December 31, 1998 and 7,579,667 at September 30, 1999
(unaudited) ............................................................ 1,520 837
Retained earnings .......................................................... 22,904 19,460
Accumulated other comprehensive income ..................................... (96) 409
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Total stockholders' equity ........................................ 24,328 20,706
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................ $ 608,144 $ 367,207
========== ==========
These consolidated financial statements should be read only in connection with
the accompanying notes to consolidated financial statements.
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FIRSTIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three months ended September 30, 1999 and 1998 (Unaudited) and nine months ended
September 30, 1999 and 1998 (Unaudited)
(In thousands, except share and per share data)
Three months ended September 30, Nine months ended September 30,
1999 1998 1999 1998
------------- -------------- ------------ --------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Interest income:
Loans, including fees ...................................... $ 12,178 $ 6,612 $ 29,820 $ 16,808
Taxable investment securities .............................. 531 392 1,340 775
Nontaxable investment securities ........................... 128 126 390 369
Dividends on investment securities ......................... 11 15 36 56
Federal funds sold ......................................... 132 381 546 707
------------ ------------ ------------ ------------
Total interest income ............................... 12,980 7,526 32,132 18,715
------------ ------------ ------------ ------------
Interest expense:
Deposits ................................................... 5,770 3,406 14,265 8,185
Federal funds purchased .................................... 36 2 60 8
Securities sold under agreements to repurchase ............. 56 33 157 75
Note payable ............................................... 66 72 150 182
Trust preferred securities ................................. 545 -- 1,360 --
Federal Home Loan Bank borrowings .......................... 138 116 392 305
------------ ------------ ------------ ------------
Total interest expense .............................. 6,611 3,629 16,384 8,755
------------ ------------ ------------ ------------
Net interest income ................................. 6,369 3,897 15,748 9,960
Provision for loan losses .................................... 745 60 2,174 180
------------ ------------ ------------ ------------
Net interest income after provision for loan losses .......... 5,624 3,837 13,574 9,780
------------ ------------ ------------ ------------
Non-interest income:
Fees for other customer services ........................... 559 229 1,431 726
Net gains from sale of loans ............................... 78 266 672 716
Commissions and fees from brokerage activities ............. 67 72 248 133
Investment securities transactions, net .................... -- 1 -- (3)
Other operating income ..................................... 150 209 402 409
------------ ------------ ------------ ------------
Total non-interest income ........................... 854 777 2,753 1,981
------------ ------------ ------------ ------------
Non-interest expenses:
Salaries and employee benefits ............................. 2,175 1,412 5,851 3,545
Net occupancy expense of premises .......................... 590 485 1,620 1,107
Purchased services ......................................... 569 458 1,324 906
Office supplies ............................................ 118 81 347 233
Minority interest in income of consolidated subsidiaries ... -- 33 -- 93
Other operating expenses ................................... 661 414 1,910 1,159
------------ ------------ ------------ ------------
Total non-interest expenses ......................... 4,113 2,883 11,052 7,043
------------ ------------ ------------ ------------
Income before income taxes .......................... 2,365 1,731 5,275 4,718
Income tax expense ........................................... 868 682 1,825 1,765
------------ ------------ ------------ ------------
NET INCOME ................................................... $ 1,497 $ 1,049 $ 3,450 $ 2,953
============ ============ ============ ============
Other comprehensive income:
Unrealized holding gains (losses) arising during the
period .................................................. (198) (26) (819) 6
Unrealized holding gains (losses) arising during prior
periods, realized during current period ................. 1 -- 45 --
Income tax (expense) benefit related to items of other
comprehensive income .................................... 67 9 263 (2)
------------ ------------ ------------ ------------
Other comprehensive income (loss), net of tax ....... (130) (17) (511) 4
------------ ------------ ------------ ------------
COMPREHENSIVE INCOME ......................................... $ 1,367 $ 1,036 $ 2,939 $ 2,957
============ ============ ============ ============
Income per share:
Basic and diluted earnings per share ......................... $ 0.20 $ 0.14 $ 0.46 $ 0.40
============ ============ ============ ============
Weighted average shares outstanding ...................... 7,579,667 7,346,673 7,527,891 7,346,673
============ ============ ============ ============
These consolidated financial statements should be read only in connection with
the accompanying notes to consolidated financial statements.
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FIRSTIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30, 1999 and 1998 (Unaudited)
(In thousands)
Nine months ended September 30,
-------------------------------
1999 1998
------------ ------------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income ..................................................................... $ 3,450 $ 2,953
Adjustments to reconcile net income to cash provided by operating
activities:
Provision for loan losses ................................................. 2,177 180
Depreciation and amortization ............................................. 873 493
Net gains from sale of loans .............................................. (672) (4,716)
Proceeds from sale of loans held for sale ................................. 44,190 40,660
Origination of loans held for sale ........................................ (41,273) (41,074)
Investment securities transactions, net ................................... 283 3
Increase in minority interest in consolidated subsidiaries ................ -- 2
Changes in deferrals and accruals:
Other assets .............................................................. (1,188) (545)
Other liabilities ......................................................... (1,792) 740
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Net cash provided by operating activities ............................... 6,048 2,696
---------- ----------
Cash flows from investing activities:
Net (increase) decrease in federal funds sold ............................... 10,770 (1,170)
Net (increase) decrease in interest bearing deposits in other banks ......... 3 143
Purchase of investment securities available-for-sale ........................ (71,081) (90,942)
Purchase of investment securities held-to-maturity .......................... (127) --
Proceeds from sale of investment securities available-for-sale .............. -- 30,154
Proceeds from maturities/paydowns of investment securities .................. 39,127 44,956
Net increase in loans ....................................................... (225,854) (83,267)
Expenditures for bank premises and equipment ................................ (2,950) (2,734)
Proceeds from sale of real estate owned ..................................... 162 --
---------- ----------
Net cash used in investing activities ................................... (229,950) (102,860)
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Cash flows from financing activities:
Net increase in deposits .................................................... 196,986 93,750
Net increase (decrease) in securities sold under agreements to repurchase ... 15,188 516
Advances from Federal Home Loan Bank ........................................ -- 7,500
Payments on Federal Home Loan Bank advances ................................. (57) --
Proceeds from note payable .................................................. 11,750 3,850
Payments on note payable .................................................... (8,790) (1,430)
Proceeds from trust preferred securities .................................... 23,000 --
Debt issuance cost .......................................................... (1,092) --
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Net cash provided by financing activities ............................... 236,985 104,186
---------- ----------
Net increase in cash and due from banks .......................................... 13,083 4,022
Cash and due from banks at beginning of period ................................... 13,892 10,427
---------- ----------
Cash and due from banks at end of period ......................................... $ 26,975 $ 14,449
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest .................................................................. $ 17,682 $ 8,631
Income taxes .............................................................. 2,004 1,444
Noncash transactions:
Conversion of loans to other real estate owned .............................. 91 761
Issuance of shares for minority interest of Firstate Bank ................... 683 --
These consolidated financial statements should be read only in connection with
the accompanying notes to consolidated financial statements.
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FIRSTIER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three month period ended September 30, 1999 and 1998 (Unaudited)
1. Summary of significant account policies
The accompanying unaudited interim financial statements have been
prepared in accordance with the instructions for Form 10-QSB and do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. All
adjustments that are, in the opinion of management, of a normal
recurring nature necessary for a fair statement of results for the
interim periods presented have been made. The results of operations for
such interim periods are not necessarily indicative of results of
operations for a full year. The statements should be read in
conjunction with the summary of significant accounting policies and
notes to consolidated financial statements included in the registration
statement of the Company declared effective on February 10, 1999 SEC
File Nos.333-67197 and 333-67197-01.
In the opinion of management, the accompanying financial statements
contain all adjustments necessary to present fairly the financial
position of the Company at September 30, 1999 and December 31, 1998,
and the results of operations and cash flows for the three and nine
month periods ended September 30, 1999 and 1998.
The consolidated financial statements include the accounts of the
Company's respective subsidiaries. All material intercompany
transactions have been eliminated.
2. Nature of Operations
FirsTier, a multibank holding company, offers full service community
banking through 15 banking locations in metropolitan Denver and
northern Colorado, and two banking locations in western and central
Nebraska. FirsTier's Colorado bank opened four new branches and a loan
production office during the first nine months of 1999.
3. Corporate Restructuring
On September 14, 1999 the company changed its state of incorporation to
Colorado and changed its name to FirsTier Bancorp, Inc. from First
Western Corp. As a result of the reincorporation, the Company's common
stock and surplus accounts have been combined. Also the Company
effected a 52.48 for one common stock split. All share and per share
amounts contained in these financial statements have been restated for
this reorganization.
4. 1999 Stock Incentive Plan
As of September 15, 1999 the Company adopted the 1999 Stock Incentive
Plan to provide incentives for eligible persons including employees,
non-employee directors and consultants to the company and its
subsidiaries. The total number of Company shares to be issued under
this plan shall not exceed 1,700,000 shares. Incentive awards may be
granted by the Company's Board of Directors under this plan. To date,
all stock options granted permit the holder to purchase, under certain
limitations, the Company's common stock at a price not less than 100%
of the market value of the stock on the date the option was granted.
These options terminate, contingent upon continued employment and other
factors, approximately 10 years from the date of grant. At the time of
the initial adoption of the plan, 500,000 shares were granted under
this plan to an executive officer. The exercise price per share is
$12.00 per share.
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5. Acquisition
In the first quarter of 1999, the Company exchanged 232,994 shares of
its common stock for the 8.6% of Firstate Bank (Kimball, NE) that it
did not own. Such minority shares were owned by individuals already
affiliated with the Company. As the Company and its four shareholders
at the time of the exchange owned 99.6% of the Nebraska bank and the
remaining 0.4% was owned by other persons who were affiliated with the
Company, it was determined by the boards of both entities that a book
value exchange ratio represented a fair value for all parties. The fair
value determined for this transaction was $683,000. No goodwill was
recognized in connection with this transaction.
6. Offering of Trust Preferred Securities by FW Capital I
On February 16, 1999 the Company and its wholly owned subsidiary FW
Capital I (the "Trust"), completed the sale of $23.0 million of 9.375%
Cumulative Trust Preferred Securities of the Trust. Net proceeds were
approximately $21.9 million after payment of sales commissions and
other offering costs, and were invested in Junior Subordinated
Debentures maturing February 16, 2029, issued by the Company to the
Trust in connection with the public offering.
Interest on the Junior Subordinated Debentures is paid by the Company
to the Trust. This interest is the sole revenue of the Trust and the
source for distributions by the Trust to the holders of the Trust
Preferred Securities.
For financial reporting purposes, the Trust is treated as a subsidiary
of the Company, and accordingly, the accounts of the Trust are included
in the consolidated financial statements of the Company. The Trust
Preferred Securities are presented as a separate line item in the
consolidated balance sheet under the caption "Company obligated
mandatorily redeemable preferred securities of subsidiary trust holding
solely Junior Subordinated Debentures." For financial reporting
purposes, the Company records distributions payable on the Trust
Preferred Securities as interest expense in the consolidated statements
of income.
The Junior Subordinated Debentures are unsecured and rank junior and
are subordinate to all senior debt of the Company and constitute a full
and unconditional guarantee on a subordinated basis by the Company of
the obligations of the Trust under the Preferred Securities.
7. Comprehensive Income
The Financial Accounting Standards Board (FASB) has issued SFAS No.
130, "Reporting Comprehensive Income", which is effective for the
fiscal years beginning after December 15, 1997. This statement
establishes standards for reporting and display of comprehensive income
and its components (revenue, expenses, gains and losses) in a full set
of general purpose financial statements. This statement requires that
all items that are required to be recognized under accounting standards
as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. The Company adopted SFAS No. 130 on January 1, 1998.
Amounts formerly presented in Stockholder Equity as "Unrealized gains
on securities available for sale, net of taxes", are now reflected as
"Accumulated other comprehensive income".
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the Consolidated
Financial Statements and related notes. FirsTier's future operating results may
be affected by various trends and factors, which are beyond FirsTier's control.
These include the factors set forth in "Risk Factors" and "Cautionary
Statements" included in the registration statement of the Company declared
effective on February 10, 1999 SEC File Nos. 333-67197 and 333-67197-01.
Accordingly, past results and trends may not be reliable indicators of future
results or trends. With the exception of historical information, the matters
discussed below include forward-looking statements that involve risks and
uncertainties. FirsTier cautions readers that a number of important factors
could affect FirsTier's actual results and cause actual results to differ
materially from those in the forward-looking statements.
RESULTS OF OPERATIONS
Net interest income for the Company increased $2.5 million (63%) from $3.9
million for the three month period ended September 30, 1998, to $6.4 million for
the three month period ended September 30, 1999 and $5.8 million (58%) from
$10.0 million for the nine month period ended September 30, 1998, to $15.7
million for the nine month period ended September 30, 1999. The major components
of this increase were:
1. Interest income increased $ 5.5 million (72%) from $7.5
million for the three month period ended September 30, 1998 to
$13.0 million for the three month period ended September 30,
1999 and increased $13.4 million (72%) from $18.7 million for
the nine month period ended September 30, 1998 to $32.1
million for the nine month period ended September 30, 1999.
This is a direct result of average earning assets increasing
$241.5 million (87%) from $278.3 million for the three month
period ended September 30, 1998 to $519.8 million for the
three month period ended September 30, 1999, and increasing
$194.6 million (75%) from $260.1 million for the nine month
period ended September 30, 1998 to $454.7 million for the nine
month period ended September 30, 1999. Most of the Company's
earning assets (91% at September 30, 1999) are loans, a large
portion of which have floating rates and are tied to the prime
rate.
2. Interest expense increased $ 3.0 million (82%) from $3.6
million for the three month period ended September 30, 1998 to
$6.6 million for the three month period ended September 30,
1999 and increased $7.6 million (87%) from $8.8 million for
the nine month period ended September 30, 1998 to $16.4
million for the nine month period ended September 30, 1999.
This is a result of average interest bearing liabilities
increasing $208.9 million (86%) from $242.2 million for the
three month period ended September 30, 1998 to $451.1 million
for the three month period ended September 30, 1999, and
increasing $176.5 million (79%) from $222.6 million for the
nine month period ended September 30, 1998 to $399.1 million
for the nine month period ended September 30, 1999.
3. Net interest margin decreased 0.70% (13% change) from 5.60%
for the three month period ended September 30, 1998 to 4.90%
for the three month period ended September 30, 1999 and
decreased 0.49% (10% change) from 5.11% for the nine month
period ended September 30, 1998 to 4.62% for the nine month
period ended September 30, 1999. The sources of these changes
are:
a) Yields on earning assets decreased 0.83% (8% change)
from 10.82% for the three month period ended
September 30, 1998 to 9.99% for the three month
period ended September 30, 1999, and decreased 0.17%
(2% change) from 9.59% for the nine month period
ended September 30, 1998 to 9.42% for the nine month
period ended September 30, 1999. This reflects the
impact of an average 0.75% decrease in the prime
lending rate.
b) Costs of interest bearing liabilities decreased 0.13%
(2% change) from 5.99% for the three month period
ended September 30, 1998 to 5.86% for the three month
period ended September 30, 1999, and increased 0.23%
(4% change) from 5.24% for the nine month period
ended September 30, 1998 to 5.47% for the nine month
period ended September 30, 1999. This is the result
of bonus rates paid during promotional campaigns
related to the grand openings of new branch
locations, the lagged impact of market interest rate
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reductions on fixed rate time deposits, as well as
the impact of $23.0 million of trust preferred
securities at 9.375% included in the liability mix.
Provision for loan losses increased by $685,000 (1,141%) from $60,000 for the
three month period ended September 30, 1998 to $745,000 for the three month
period ended September 30, 1999 and increased $2.0 million (1,108%) from
$180,000 for the nine month period ended September 30, 1998 to $2.2 million for
the nine month period ended September 30, 1999. In response to a sustained
significant growth rate in the Company's loan portfolio, management reviewed and
revised the methodology for estimating the adequacy of the allowance for loan
losses in the fourth quarter of 1998. The methodology was further revised in the
first quarter of 1999. The revised methodology permits a closer match between
period loan loss provisions and period loan originations.
Non-interest income increased $77,000 (10%) from $777,000 for the three month
period ended September 30, 1998 to $854,000 for the three month period ended
September 30, 1999 and increased $772,000 (39%) from $2.0 million for the nine
month period ended September 30, 1998 to $2.8 million for the nine month period
ended September 30, 1999. The two major components of the increase were:
1. Fees for other customer services increased $330,000 (144%)
from $229,000 for the three month period ended September 30,
1998 to $559,000 for the three month period ended September
30, 1999 and increased $705,000 (97%) from $726,000 for the
nine month period ended September 30, 1998 to $1.4 million for
the nine month period ended September 30, 1999. This increase
resulted from additional customer accounts at our branch
locations.
2. Net gains from sale of loans decreased $188,000 (71%) from
$266,000 for the three month period ended September 30, 1998
to $78,000 for the three month period ended September 30, 1999
and decreased $44,000 (6%) from $716,000 for the nine month
period ended September 30, 1998 to $672,000 for the nine month
period ended September 30, 1999. The Company experienced a
staffing turnover in the mortgage origination division in the
third quarter of 1999, which caused a temporary decrease in
the level of mortgage loans originated and sold. The vacant
positions have subsequently been filled.
Non-interest expense increased $1.2 million (43%) from $2.9 million for the
three month period ended September 30, 1998, to $4.1 million for the three month
period ended September 30, 1999 and $4.0 million (57%) from $7.0 million for the
nine month period ended September 30, 1998, to $11.1 million for the nine month
period ended September 30, 1999. The major components of the increase were:
1. Salaries and employee benefits increased $763,000 (54%) from
$1.4 million for the three month period ended September 30,
1998 to $2.2 million for the three month period ended
September 30, 1999 and increased $2.3 million (65%) from $3.5
million for the nine month period ended September 30, 1998 to
$5.9 million for the nine month period ended September 30,
1999. The increase is the result of staffing four additional
branch locations and a loan production office in 1999.
2. Net occupancy expense of premises increased $105,000 (22%)
from $485,000 for the three month period ended September 30,
1998 to $590,000 for the three month period ended September
30, 1999 and increased $513,000 (46%) from $1.1 million for
the nine month period ended September 30, 1998 to $1.6 million
for the nine month period ended September 30, 1999. The
increase represents the cost of five additional banking
facilities in 1999.
3. Purchased services increased $111,000 (24%) from $458,000 for
the three month period ended September 30, 1998 to $569,000
for the three month period ended September 30, 1999 and
increased $418,000 (46%) from $906,000 for the nine month
period ended September 30, 1998 to $1.3 million for the nine
month period ended September 30, 1999. The majority of this
increase is related to data processing services for new
branches and the costs related to year 2000 compliancy
upgrades.
4. Other non-interest expenses increased $247,000 (60%) from
$414,000 for the three month period ended September 30, 1998
to $661,000 for the three month period ended September 30,
1999 and increased $751,000 (65%) from $1.2 million for the
nine month period ended September 30, 1998 to $1.9 million for
the nine month
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period ended September 30, 1999. This increase results from
additional expenses relating to telephone, marketing, and FDIC
insurance, and is attributed to the increase in branch
locations.
Net income increased $448,000 (43%) from $1.0 million for the three month period
ended September 30, 1998 to $1.5 million for the three month period ended
September 30, 1999 and increased $497,000 (17%) from $3.0 million for the nine
month period ended September 30, 1998 to $3.5 million for the nine month period
ended September 30, 1999. The increased provision for loan losses made in the
first quarter of 1999 reduced the net income growth in the nine months year to
date figures.
FINANCIAL CONDITION
Total assets increased $240.9 million (66%) from $367.2 million as of December
31, 1998, to $608.1 million at September 30, 1999. This growth was the result
of:
1. Cash and due from banks increased $13.1 million (94%),
increasing from $13.9 million at December 31, 1998 to $27.0
million at September 30, 1999. This resulted from an increase
in the balance due from the Federal Reserve Bank representing
checks presented for payment but not yet available.
2. Federal funds sold decreased $10.8 million (81%), decreasing
from $13.3 million at December 31, 1998 to $2.5 million at
September 30, 1999. This is the result of moving excess
liquidity from fed funds sold to short term investments in
securities, taking advantage of higher yields available on
investment securities.
3. Investment securities increased by $11.3 million (33%),
increasing from $34.2 million at December 31, 1998 to $45.5
million at September 30, 1999. Excess liquidity at the bank
subsidiary level was used for the purchase of callable US
agency bonds with above market coupon rates, short term to
call maturities, and 5 year or less final maturities.
4. Loans held for sale decreased $2.2 million (43%), decreasing
from $5.2 million at December 31, 1998 to $2.9 million at
September 30, 1999. The Company continued to originate single
family mortgages, however, as a result of staff turnover,
reduced production levels resulted in a lower level of loans
outstanding in the loans held for sale category at September
30, 1999.
5. Net loans receivable increased $223.7 million (78%),
increasing from $287.8 million at December 31, 1998 to $511.5
million at September 30, 1999. This resulted from an increase
in loan demand in the Company's market areas, the continued
growth of several of the Company's newer branches, and the
opening of four new branches and a loan production office by
the Company during the first nine months of 1999.
Total deposits increased $197.0 million (62%) from $319.5 million as of December
31, 1998 to $516.5 million at September 30, 1999. The change was the result of:
1. Demand non-interest bearing deposits increased $11.5 million
(26%), increasing from $44.7 million at December 31, 1998 to
$56.2 million at September 30, 1999. This increase is
attributed to the continued growth of several of the Company's
newer branches, the opening of four new branches and the
addition of a cash management function.
2. Demand interest bearing deposits increased $3.7 million (25%),
increasing from $14.9 million at December 31, 1998 to $18.6
million at September 30, 1999. This resulted primarily from
the addition of several seasoned bankers who focus on cash
management services, and servicing high net worth customers.
3. Time deposits increased $181.8 million (70%), increasing from
$259.9 million at December 31, 1998 to $441.7 million at
September 30, 1999. The Company utilized promotional
campaigns, designed to generate an increase in certificates of
deposit with balances of less than $100,000, to achieve this
growth.
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Federal funds sold and securities sold under agreements to repurchase increased
$15.2 million (299%) from $5.1 million as of December 31, 1998 to $20.3 million
at September 30, 1999. The increase was attributed to federal funds purchased at
September 30, 1999 to support the uncollected deposits at the Federal Reserve
Bank.
Note payable increased $3.0 million (34%) from $8.8 million as of December 31,
1998 to $11.8 million at September 30, 1999. In February 1999 the balance of the
line was paid with proceeds of the Cumulative Trust Preferred Securities. In
June 1999 the Company began to draw on the line of credit to fund capital needs
of its Colorado bank.
Company obligated mandatorily redeemable preferred securities of subsidiary
trust holding solely Junior Subordinated Debentures increased $23.0 million from
$0.0 as of December 31, 1998 to $23.0 million at September 30, 1999. On February
16, 1999, the Company and its wholly owned subsidiary, FW Capital 1 (the
"Trust"), completed the sale of $23.0 million of 9.375% Cumulative Trust
Preferred Securities of the Trust. Net proceeds were approximately $21.9 million
after payment of sales commissions and other offering costs, and were invested
in Junior Subordinated Debentures issued by the Company to the Trust in
connection with the public offering. Interest on the Junior Subordinated
Debentures is paid by the Company to the Trust. This interest is the sole
revenue of the trust and the source for distributions by the Trust to the
holders of the Trust Preferred Securities.
Allowance for loan losses increased $2.2 million (100%) from $2.2 million as of
December 31, 1998 to $4.4 million at September 30, 1999. The following table
presents, for the periods indicated, an analysis of the allowance for loan loses
and related ratios:
Nine Months Ended
September 30, 1999 September 30, 1998
------------------ ------------------
(in thousands)
Balance beginning of period .......................... $ 2,187 $ 1,321
Provision for loan losses ............................ 2,174 180
Net charge offs ...................................... (3) (91)
------------ ------------
Balance end of period ................................ $ 4,364 $ 1,592
============ ============
Ratios:
Allowance for loan losses to total loans ............. 0.85% 0.69%
Allowance for loan losses to non-performing loans .... 348% 230%
The allowance for loan losses represents management's recognition of the risks
of extending credit and its evaluation of the quality of the loan portfolio. The
allowance for loan losses is maintained at a level that is considered adequate
to provide for anticipated loan losses, based on various factors affecting the
loan portfolio, including a review of problem loans, business conditions,
historical loss experience, evaluation of the underlying collateral and holding
and disposal costs. The allowance is increased by additional charges to
operating income and reduced by loans charged off, net of recoveries.
The following table presents information and ratios of the Company's
non-performing assets as of the dates indicated:
September 30,
---------------------------------
1999 1998
------------ ------------
(in thousands)
Loans 90 days or more delinquent and still accruing
interest ......................................... $ 550 $ 414
Non-accrual loans .................................... 705 279
Restructured loans ................................... -- --
------------ ------------
Total non-performing loans ...................... 1,255 693
Real estate acquired by foreclosure .................. 91 778
------------ ------------
Total non-performing assets ..................... $ 1,346 $ 1,471
============ ============
Ratios:
Non-performing assets to total assets ................ 0.22% 0.44%
Non-performing loans to total loans .................. 0.24% 0.28%
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LIQUIDITY
FirsTier continuously forecasts and manages its liquidity in order to satisfy
cash flow requirements of depositors and borrowers and to allow FirsTier to meet
its own cash flow needs. Management has identified two major categories of
liquidity:
1) Ongoing business cash flows:
The Company's major source of cash flows is provided by financing
activities, $236.9 million for the nine-month period ended September
30, 1999 and $104.2 million for the nine-month period ended September
30, 1998. Cash provided consisted primarily of deposit growth and
proceeds from the issuance of trust preferred securities for the
nine-month period ended September 30, 1999, and deposit growth and
advances from the Federal Home Loan Bank for the nine-month period
ended September 30, 1998.
The major use of cash flows for the Company is in investing activities
$230.0 million for the nine-month period ended September 30, 1999 and
$102.9 million for the nine-month period ended September 30, 1998. For
the nine-month period ended September 30, 1999, the major components of
this use were a $225.9 million increase in net loans, and a net
increase of $32.1 million in investment securities. For the nine-month
period ended September 30, 1998, the major components of this use were
a $83.3 million increase in net loans, and a net increase of $15.8
million in investment securities.
2) Backup sources of liquidity
Management believes it has developed sufficient backup sources of
liquidity to meet the Company's needs for the foreseeable future. These
internal and external sources include, but are not limited to:
1. The ability to raise deposits through branch promotional
campaigns
2. Maturity of overnight federal funds sold ($3 million available
as of September 30, 1999)
3. Sale of available-for-sale securities ($39 million available
as of September 30, 1999)
4. Available borrowing lines ($28 million available as of
September 30, 1999)
5. Increased borrowing lines available at the Federal Home Loan
Bank with the purchase of additional Federal Home Loan Bank
stock ($38 million available as of September 30, 1999)
DATA PROCESSING SYSTEMS AND YEAR 2000 COMPLIANCE
As a result of computer routines employed by early programers, many existing
software programs and operating systems may be unable to distinguish the year
2000 from the year 1900. Management presently believes that due to modifications
implemented in the first half of 1999 to existing software and conversion to new
software, the year 2000 issue will not pose significant operational problems for
the Company. Substantially all of the Company's data processing services are
provided under a contract with First Commerce Technologies, an affiliate of the
National Bank of Commerce, Lincoln, Nebraska. First Commerce Technologies has
been engaged by the Company to ensure that its systems are fully year 2000
compliant. Substantially all of the year 2000 services of First Commerce
Technologies have been completed, and it provides the Company with status
reports on a monthly basis. Management believes that, to date, the Company's
software programs and operating systems are completely converted, tested and
year 2000 compliant. Implementation of the Company's plan to test in-house and
outsourced software has been completed. Applications considered to be mission
critical were tested during the first quarter of 1999, with successful results.
Compliance audits performed to date on the Company's subsidiaries have been
positive and no specific items of improvement were noted.
In conjunction with the implementation of the year 2000 plan, the Company has
also made substantial investments in computer hardware and software to keep its
banks competitive in the marketplace. With the majority of the expenditures
completed, management estimates that the Company has spent a total of $1.0
million on technology upgrades, with approximately $160,000 being spent directly
on year 2000 compliance. The plan implementation team is responsible for
progress and provides a status report to the board of directors on a monthly
basis.
In the event that a year 2000 related interruption should occur over which the
Company has no control the Company has developed a two prong contingency plan
which would be implemented based on the expected duration and nature of the
interruption. In the event of a loss of computer communications, loss of
utilities or a expected short duration interruption, a manual back up process
has been developed and was completely tested in the third quarter of 1999. In
the event that
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the Company's primary service provider fails and is unsuccessful in implementing
its backup contingency plan, the Company has identified an alternate vendor.
Management believes that the alternate vendor has the ability to provide the
service to meet the Company's needs because this vendor has software that is
year 2000 compliant which is installed with other parties and would provide a
warranty to the Company as to year 2000 compliance. In the event the Company
were to use the alternate vendor, management believes that the monthly
processing costs could increase marginally, and a one-time conversion cost in
the range of $75,000 to $125,000 would probably be incurred.
Pursuant to guidelines of the banking industry regulators, the Company's bank
subsidiaries have sent direct mail to their customers regarding the year 2000
issue and the need for readiness. However, response to these inquiries has not
been significant. Management intends to continue to solicit customer response on
this matter. Since September 1998, commercial loan customers have been required
to sign year 2000 compliance statements as a part of the loan documentation
process. Failure of the Company's customers to prepare for year 2000
compatibility could have a significant adverse effect on customers' operations
and profitability, thus inhibiting their ability to repay loans and adversely
affecting the Company's operations. The Company does not have sufficient
information accumulated from customers to enable management to assess the degree
to which customers' operations are susceptible to potential problems relating to
the year 2000 issue or, further, to quantify the potential lost revenue to the
Company in this case.
In July 1999, the Year 2000 Act was signed into law. The Year 2000 Act
establishes uniform, national legal standards and liability limitations
governing lawsuits arising from actual or potential year 2000 failures,
including a duty of potential plaintiffs to mitigate damages both before and
after a year 2000 failure, strict enforcement of any contractual terms and
limitations on the ability of plaintiffs to seek punitive damages. The Year 2000
Act will most likely be interpreted by the courts. The Company is unable to
predict the extent to which it may collect or be required to pay in the event of
a lawsuit.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
An action by unanimous written consent of the
Company's shareholders was made as of September 14,
1999. The following actions were taken:
o The Company reincorporated in the state of
Colorado.
o The corporate name was changed to FirsTier
Bancorp Inc.
o A 52.48 for one stock split was made.
o The 1999 FirsTier Corporation Stock
Incentive Plan was adopted.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(i) Exhibits filed with this Form 10-QSB:
Exhibit No. Description
2 Articles of merger merging First Western Corp. into
FirsTier Bancorp, Inc.
3i Articles of Incorporation of FirsTier Bancorp, Inc.
3ii Bylaws of of FirsTier Bancorp, Inc.
10.14 1999 FirsTier Corporation Stock Incentive Plan
adopted as of September 15, 1999.
10.15 Agreement concerning the sale of FIRSTIER mark, dated
September 17, 1999, by and between U.S. Bancorp, U.S.
Bank National Association and Firstate Bank of
Colorado.
27 (a) Financial Data Schedule.
27 (b) Restated Financial Data Schedule.
(ii) Exhibits previously filed and incorporated herein by reference:
Exhibit No. Description
4.1 Form of Subordinated Indenture dated February 15,
1999 between the Registrant and Wilmington Trust
Company, as Indenture Trustee (1).
4.2 Form of Junior Subordinated Debenture (included as an
exhibit to Exhibit 4.1).
4.5 Form of Amended and Restated Trust Agreement of FW
Capital I (1).
4.7 Form of Preferred Securities Guarantee Agreement (1).
99 Risk Factors incorporated by reference from First
Western's Rule 424(b) Prospectus filed on February
10, 1999(2).
-------
(1) Filed with the Registration Statement on Form SB-2, SEC File
No. 333-67107, on November 13, 1998.
(2) Filed with the 10-QSB on August 12, 1999.
(b) Reports on Form 8-K -- None
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FIRSTIER BANCORP, INC.
Date: October 29, 1999 By: /s/ Timothy D. Wiens
---------------- ----------------
President
Date: October 29, 1999 By: /s/ Ronald B. James
---------------- ---------------
Ronald B. James, Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
----------- -----------
2 Articles of merger merging First Western Corp. into
FirsTier Bancorp, Inc.
3i Articles of Incorporation of FirsTier Bancorp, Inc.
3ii Bylaws of of FirsTier Bancorp, Inc.
10.14 1999 FirsTier Corporation Stock Incentive Plan
adopted as of September 15, 1999.
10.15 Agreement concerning the sale of FIRSTIER mark, dated
September 17, 1999, by and between U.S. Bancorp, U.S.
Bank National Association and Firstate Bank of
Colorado.
27 (a) Financial Data Schedule.
27 (b) Restated Financial Data Schedule.
4.1 Form of Subordinated Indenture dated February 15,
1999 between the Registrant and Wilmington Trust
Company, as Indenture Trustee (1).
4.2 Form of Junior Subordinated Debenture (included as an
exhibit to Exhibit 4.1).
4.5 Form of Amended and Restated Trust Agreement of FW
Capital I (1).
4.7 Form of Preferred Securities Guarantee Agreement (1).
99 Risk Factors incorporated by reference from First
Western's Rule 424(b) Prospectus filed on February
10, 1999(2).
-------
(1) Filed with the Registration Statement on Form SB-2, SEC File
No. 333-67107, on November 13, 1998.
(2) Filed with the 10-QSB on August 12, 1999.