Vail Banks Reports First Quarter 2004 Earnings AVON, Colo., April
19 /PRNewswire-FirstCall/ -- Vail Banks, Inc. today reported
diluted net income per share of $0.27 for the first quarter 2004
compared to $0.17 for first quarter 2003. The results included a
gain on the sale of the Company's Vail bank building of $1.678
million ($1.061 million, or $0.20 per diluted share, after tax).
Net income for the quarter was $1.473 million including the
building sale gain versus $975,000 in first quarter 2003. Net
income was $412,000 excluding the gain, a 58% decrease from first
quarter 2003. Results for the quarter are not comparable to fourth
quarter 2003 due to a net loss in the previous quarter resulting
from one-time charges to earnings. "We began to see an increase in
business activity in our markets," commented E. B. Chester,
Chairman of Vail Banks. "Our officers are taking advantage of this
market improvement by expanding our loan and deposit activities.
This effort will take some time to generate meaningful bottom- line
results, but the direction and momentum of our activity are
encouraging. The Vail building sale was a unique opportunity to
redeploy non-earning assets to invest in our strategic plan of
expanding our presence in the Front Range of Colorado and the Grand
Junction markets. We will continue to identify and exploit
situations where we can capitalize on appreciating asset values to
provide additional capital and funding for growth." Gary Judd,
President and CEO of Vail Banks, commented, "We are clearly
experiencing a positive shift in activity. We see excellent
opportunities ahead and are executing the plan we developed last
year. Our associates have a renewed enthusiasm and have accepted
the challenge of growing the Company and generating improved
earnings." Financial Highlights * Earnings per share Diluted net
income per share was $0.27 for first quarter, $0.07 excluding
building sale gain Compared to $0.17 for first quarter 2003, a 59%
increase including the gain, and a 59% decrease excluding the gain
Compared to ($0.35) for fourth quarter 2003 * Net Income Net income
was $1,473,000 for first quarter, $412,000 excluding building sale
gain Compared to $975,000 for first quarter 2003, a 51% increase
including the gain, and a 58% decrease excluding the gain Compared
to ($1,761,000) for fourth quarter 2003 * Return on assets Return
on assets was 1.00% for first quarter Compared to 0.69% for first
quarter 2003 Compared to (1.18%) for fourth quarter 2003 * Return
on equity Return on equity was 10.13% for first quarter Compared to
5.99% for first quarter 2003 Compared to (11.77%) for fourth
quarter 2003 * Net Interest Margin Net interest margin (fully tax
equivalent) was 4.17% for first quarter Compared to 4.89% for first
quarter 2003 Compared to 4.05% for fourth quarter 2003 * Efficiency
Ratio Efficiency ratio was 73% for first quarter Compared to 82%
for first quarter 2003 Compared to 130% for fourth quarter 2003 Top
Line Revenue Total revenue (net interest income and non-interest
income), excluding the building sale gain, decreased $1.337
million, or 16%, from the first quarter of 2003, due primarily to
lower interest income on loans and securities, and lower fee income
from mortgage brokerage activities. Revenues decreased $357,000, or
5%, from the fourth quarter 2003, which included a $358,000 gain on
sale of a single foreclosed property. Net interest income was
$5.037 million for the quarter compared to $5.657 million in the
first quarter 2003, and to $4.894 million in the fourth quarter
2003. Average loans for the quarter increased $4 million, or 5%
annualized, compared to the fourth quarter of 2003. Average
deposits increased $9 million, or 8% annualized, during the quarter
compared to the fourth quarter 2003. Non-interest income, excluding
the building sale gain, decreased 25%, or $717,000, as compared to
the first quarter of 2003, and decreased 19%, or $500,000, as
compared to the fourth quarter 2003, which included a $358,000 gain
on sale of a single foreclosed property. Mortgage broker fees were
$803,000 as the Company's mortgage subsidiary experienced soft
activity after the refinancing boom of 2002 and 2003. This
represents a decrease of 45%, or $647,000, from the first quarter
of 2003, and a decrease of 6%, or $50,000, from the fourth quarter
2003. Interest Rate Risk Management The net interest margin, on a
fully tax-equivalent basis, was 4.17% for the quarter compared to
4.05% in the fourth quarter 2003 and 4.89% in the first quarter
2003. Earning assets yielded 5.80% for the first quarter, an 87
basis point decrease from the first quarter 2003 yield of 6.67%,
and a 5 basis point increase from the fourth quarter 2003 yield of
5.75%. Interest expense as a percentage of earning assets decreased
to 1.63% in the first quarter from 1.78% in the first quarter 2003,
a decrease of 15 basis points, and decreased 7 basis points from
1.70% in the fourth quarter 2003. "The increase in loans and the
further investment of excess liquidity have improved our net
interest margin," said Dan Godec, President of WestStar Bank. "Our
credit officers are finding new opportunities for growing our
business. We also are deploying our increasing deposit funding into
short term investments until loan volume increases significantly."
Credit Risk Management Net charge-offs, on an annualized basis,
were 0.38% of average loans for the quarter, compared to net
charge-offs of 0.59% in the first quarter 2003 and net recoveries
of 0.05% in the fourth quarter 2003. At March 31, the allowance for
loan losses was 1.05% of total loans and 205% of non-performing
loans. Overall, non-performing assets comprised 0.72% of
loan-related assets at the end of the quarter compared to 0.68% at
the end of the fourth quarter 2003. "Our efforts over the past two
years to improve credit quality continue to pay off," said Lisa
Dillon, Vice Chairman of Vail Banks. "Nonaccrual loan levels
continue to decline and charge-offs remain at very reasonable
levels." Control of Non-interest Expenses Non-interest expense was
$6.516 million for the quarter versus $7.024 million in first
quarter 2003, and $9.825 million in fourth quarter 2003. The fourth
quarter 2003 included one-time charges to earnings of $3.189
million associated primarily with fixed assets no longer used and
core deposit intangibles determined to be impaired. Lower expenses
in the first quarter 2004 resulted from lower mortgage origination
costs due to reduced loan origination volumes, as well as lower
fixed asset related costs due to the retiring of certain assets in
2003. Operationally, Vail Bank's management has begun an intense
focus on monitoring and evaluating operating unit contribution.
Unit management responsibility and accountability have become the
cornerstones to managing growth and profitability as management
implements our strategic plan. Dividend Payment At its meeting on
April 19, the Board of Directors of Vail Banks declared a regular
quarterly dividend of $0.07 per share payable May 14 to
shareholders of record on April 30. Franchise Vail Banks, through
its subsidiary WestStar Bank, has 22 banking offices in 18
communities in Colorado, including Aspen, Avon, Breckenridge,
Cedaredge, Delta, Denver, Dillon, Edwards, Estes Park, Frisco,
Glenwood Springs, Granby, Grand Junction, Gypsum, Montrose,
Norwood, Telluride and Vail. Vail Banks warns caution should be
taken in relying upon any forward- looking statements in this
release, as they involve a number of risks and uncertainties that
could cause actual results to differ materially from any such
statements, including the risks and uncertainties discussed in the
Company's Annual Report on Form 10-K for the year ended December
31, 2003, under the caption "Certain Factors Affecting Forward
Looking Statements," which discussion is incorporated herein by
reference. Vail Banks, Inc. Financial Highlights (in thousands,
except share data) Three Months Ended Mar. 31, Dec. 31, Sept. 30,
June 30, Mar. 31, 2004 (2) 2003 2003 2003 2003 Earnings and
Performance Net income (loss) $1,473 (1,761) 363 1,137 975 Diluted
net income (loss) per share 0.27 (0.35) 0.07 0.20 0.17 Return on
assets 1.00% (1.18) 0.24 0.76 0.69 Return on equity 10.13 (11.77)
2.39 7.08 5.99 Net interest margin (FTE) 4.17 4.05 4.15 4.77 4.89
Efficiency ratio 73 130 93 80 82 Asset Quality Ratios Net
charge-offs (recoveries) to average loans 0.38% (0.05) 0.00 0.44
0.59 Allowance for loan losses to loans 1.05 1.12 1.06 0.98 1.02
Allowance for loan losses to non-performing loans 205 201 157 182
109 Non-performing assets to loan-related assets 0.72 0.68 1.46
0.71 1.17 Risk assets to loan-related assets (1) 0.74 0.73 1.52
1.43 1.19 Capital Ratios Equity to assets at period end 9.81% 10.05
10.04 10.59 11.04 Tangible equity to assets at period end 3.86 3.63
3.88 4.41 4.84 Leverage ratio 7.88 7.45 7.86 8.47 9.59 Tier 1
capital ratio 12.04 11.50 12.17 12.95 13.57 Total capital ratio
14.07 13.72 14.09 14.60 14.99 Other Information at Period End Book
value per share $11.25 10.95 11.26 11.57 11.48 Tangible book value
per share 4.43 3.96 4.35 4.81 5.03 Closing market price 12.32 11.94
14.72 13.55 11.90 Shares outstanding 5,298,093 5,283,264 5,311,512
5,441,639 5,706,808 Full time equivalent associates 238 244 241 248
245 Banking offices 22 22 23 22 22 (1) Risk assets are
non-performing assets plus loans 90 days or more past due and
accruing. (2) Reflects the adoption of Financial Interpretation
Number 46 on January 1, 2004. Prior quarter information has not
been restated. Vail Banks, Inc. Balance Sheet (in thousands, except
share data) March 31, December 31, Percent Assets 2004 2003 Change
Cash and due from banks $14,514 21,628 (33)% Federal funds sold
81,260 79,280 2 Interest-bearing deposits in banks 2,000 2,000 0
Investment securities Available for sale 110,219 76,554 44 Held to
maturity 350 370 (5) Bank stocks 4,391 4,371 0 Investments in Trust
I and Trust II (1) 743 0 0 Loans held for sale 560 2,515 (78) Gross
loans 320,668 312,544 3 Allowance for loan losses (3,361) (3,503)
(4) Net deferred loan fee income (786) (770) 2 Premises and
equipment, net 34,201 38,147 (10) Goodwill, net 35,969 36,758 (2)
Other intangible assets, net 189 199 (5) Other assets 6,440 5,517
17 $607,357 575,610 6% Liabilities and Shareholders' Equity
Liabilities Deposits $482,240 448,515 8% Federal funds purchased
and securities sold under agreements to repurchase 583 907 0
Federal Home Loan Bank advances 34,770 39,461 (12) Trust preferred
(1) 0 24,000 (100) Subordinated notes to Trust I and Trust II (1)
24,743 0 0 Other liabilities 4,717 4,165 13 Total liabilities
547,053 517,048 6 Minority interest 696 703 (1) Shareholders'
equity Common equity 59,324 57,979 2 Accumulated other
comprehensive income 284 (120) (337) Total shareholders' equity
59,608 57,859 3 $607,357 575,610 6% Loan Mix at Period End
Commercial, industrial, and land $195,567 185,158 6% Real
estate--construction 60,326 63,844 (6) Real estate--mortgage 59,020
57,602 2 Consumer 5,755 5,940 (3) Total gross loans $320,668
312,544 3% Deposit Mix at Period End Interest bearing checking
$93,716 88,191 6% Savings 30,561 29,873 2 Money market 133,968
103,969 29 CDs under $100,000 54,385 55,978 (3) CDs $100,000 and
over 67,501 69,199 (2) Interest bearing deposits 380,131 347,210 9
Non-interest bearing checking 102,109 101,305 1 Total deposits
$482,240 448,515 8% Shares Outstanding at Period End 5,298,093
5,283,264 0% (1)Reflects the adoption of Financial Interpretation
Number 46 on January 1, 2004. Prior year information has not been
restated. Vail Banks, Inc. Statement of Income (in thousands,
except share data) Three months ended March 31, Percent 2004 2003
Change Interest income Interest on loans $5,290 6,202 (15)% Fees on
loans 774 547 41 Interest on investment securities 773 869 (11)
Interest on federal funds sold and short-term investments 204 132
55 Investments in Trust I and Trust II (1) 19 0 0 Total interest
income 7,060 7,750 (9) Interest expense Deposits 1,019 1,172 (13)
Borrowings 372 309 20 Federal funds purchased and securities sold
under agreements to repurchase 1 0 0 Trust preferred (1) 0 612
(100) Subordinated notes to Trust I and Trust II (1) 631 0 0 Total
interest expense 2,023 2,093 (3) Net interest income 5,037 5,657
(11) Provision for loan losses 158 125 26 Net interest income after
provision 4,879 5,532 (12) Non-interest income Gain on sale of
building 1,678 0 0 Other non-interest income 2,166 2,883 (25) Total
non-interest income 3,844 2,883 33 Non-interest expense 6,516 7,024
(7) Income before taxes 2,207 1,391 59 Income taxes 734 416 76 Net
Income $1,473 975 51 % Diluted net income per share $0.27 0.17 59 %
Weighted average shares outstanding - diluted 5,401,988 5,833,830
(7) Profitability Ratios Return on assets 1.00 % 0.69 Return on
equity 10.13 5.99 Net interest margin (FTE) 4.17 4.89 Net
chargeoffs 0.38 0.59 Efficiency ratio 73 82 Average Balances Assets
$592,350 570,783 4 % Earning assets 498,642 476,666 5 Loans 314,667
338,411 (7) Deposits 466,117 442,859 5 Shareholders' equity 58,472
65,969 (11) (1) Reflects the adoption of Financial Interpretation
Number 46 on January 1, 2004. Prior year information has not been
restated. Vail Banks, Inc. Statement of Income by Quarter (in
thousands, except share data) Three Months Ended Mar. Dec. Sept.
June Mar. 31, 31, 30, 30, 31, 2004 2003 2003 2003 2003 Interest
income Interest on loans $5,290 5,437 5,702 6,154 6,202 Fees on
loans 774 801 616 639 547 Interest on investment securities 773 557
850 1,128 869 Interest on federal funds sold and short-term
investments 204 210 191 157 132 Investments in Trust I and Trust II
(1) 19 0 0 0 0 Total interest income 7,060 7,005 7,359 8,078 7,750
Interest expense Deposits 1,019 1,068 1,172 1,232 1,172 Borrowings
372 430 439 424 309 Federal funds purchased and securities sold
under agreements to repurchase 1 1 0 0 0 Trust preferred (1) 0 612
612 611 612 Subordinated notes to Trust I and Trust II (1) 631 0 0
0 0 Total interest expense 2,023 2,111 2,223 2,267 2,093 Net
interest income 5,037 4,894 5,136 5,811 5,657 Provision for loan
losses 158 164 164 125 125 Net interest income after provision
4,879 4,730 4,972 5,686 5,532 Non-interest income Deposit related
685 757 747 824 752 Mortgage broker fees 803 853 1,299 1,334 1,450
Gain on sale of building 1,678 0 0 0 0 Other 678 1,056 702 687 681
3,844 2,666 2,748 2,845 2,883 Non-interest expense Salaries and
employee benefits 4,019 4,578 4,403 4,287 4,325 Occupancy 845 1,259
850 808 820 Furniture and equipment 562 673 696 691 708
Amortization of intangible assets 10 561 19 18 19 Other 1,080 2,754
1,326 1,091 1,152 6,516 9,825 7,294 6,895 7,024 Income (loss)
before taxes 2,207 (2,429) 426 1,636 1,391 Income tax expense
(benefit) 734 (668) 63 499 416 Net Income (Loss) $1,473 (1,761) 363
1,137 975 Diluted net income (loss) per share $0.27 (0.35) 0.07
0.20 0.17 (1)Reflects the adoption of Financial Interpretation
Number 46 on January 1, 2004. Prior year information has not been
restated. Vail Banks, Inc. Supplemental Information (in thousands)
Three Months Ended Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
2004 (1) 2003 2003 2003 2003 Average Balances Assets $592,350
589,586 600,424 597,540 570,783 Earning assets 498,642 492,696
504,361 502,526 476,666 Loans 314,667 311,001 315,602 331,727
338,411 Deposits 466,117 457,108 466,356 460,655 442,859 Interest
bearing liabilities 428,143 427,518 439,842 439,295 406,379
Shareholders' equity 58,472 59,340 60,244 64,374 65,969 Average
Deposit Mix Interest bearing checking 92,413 89,817 88,494 86,478
79,400 Savings 30,708 30,019 30,125 30,053 29,846 Money market
119,881 108,637 109,159 109,791 110,554 CDs under $100,000 55,109
58,357 60,940 59,942 58,513 CDs $100,000 and over 66,746 71,979
81,565 84,742 70,585 Interest bearing deposits 364,857 358,809
370,283 371,006 348,898 Non-interest bearing checking 101,260
98,299 96,073 89,649 93,961 Total deposits 466,117 457,108 466,356
460,655 442,859 Net Interest Margin Analysis Net interest income
$5,037 4,894 5,136 5,811 5,657 Fully taxable equivalent adjustment
132 133 146 167 89 Net interest income (FTE) 5,169 5,027 5,282
5,978 5,746 Yields (FTE) Loans 7.75% 7.96 7.94 8.21 8.09 Investment
securities 4.05 3.28 4.01 4.63 4.64 Other earning assets 0.99 0.90
0.94 1.16 1.19 Total earning assets 5.80 5.75 5.90 6.58 6.67 Cost
of funds Interest bearing deposits 1.12 1.18 1.26 1.33 1.36 Other
interest bearing liabilities 6.38 6.02 5.99 6.08 6.50 Total
interest bearing liabilities 1.90 1.96 2.01 2.07 2.09 Total
interest expense to earning assets 1.63 1.70 1.75 1.81 1.78 Net
interest margin (FTE) 4.17 4.05 4.15 4.77 4.89 (1) Reflects the
adoption of Financial Interpretation Number 46 on January 1, 2004.
Prior year information has not been restated. Vail Banks, Inc.
Asset Quality (in thousands) Three Months Ended Mar. Dec. Sept.
June Mar. 31, 31, 30, 30, 31, 2004 2003 2003 2003 2003 Asset
Quality Nonaccrual loans $1,636 1,747 2,105 1,722 3,089
Restructured loans 0 0 0 0 0 Total non-performing loans 1,636 1,747
2,105 1,722 3,089 Foreclosed properties 674 362 2,496 542 796 Total
non-performing assets 2,310 2,109 4,601 2,264 3,885 90+ days past
due and accruing 64 164 163 2,323 83 Total risk assets $2,374 2,273
4,764 4,587 3,968 Allowance for Loan Losses Beginning Balance
$3,503 3,299 3,138 3,381 3,747 Provision for loan losses 158 164
164 125 125 Loan charge-offs 338 78 73 416 534 Loan recoveries 38
118 70 48 43 Net charge-offs (recoveries) 300 (40) 3 368 491 Ending
Balance $3,361 3,503 3,299 3,138 3,381 Net Charge-Offs (Recoveries)
to Average Loans 0.38 % (0.05) 0.00 0.44 0.59 Loans Past Due 30
Days or More and Accruing 2.48 0.47 2.18 2.47 1.59 DATASOURCE: Vail
Banks, Inc. CONTACT: Lisa M. Dillon, Vice Chairman,
+1-970-476-2002, , or Peter G. Williston, Sr. Executive Vice
President/CFO, +1-970-328-9711, , both of Vail Banks, Inc.
Copyright