U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
X ACT OF 1934
- ----
For the Quarterly Period Ended September 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ____ ACT OF 1934
For the transition period from ____________________ to ____________________
Commission File Number: 0-27126
First Colorado Bancorp, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-1320788
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
215 S. Wadsworth Blvd., Lakewood, CO 80226
- --------------------------------------- -----
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (303) 232-2121
--------------
N/A
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all documents and
reports required to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 subsequent to the preceding 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
--- ---
Number of shares outstanding of common stock
as of October 31, 1996
$0.10 Par Value Common Stock 18,181,077
- --------------------------------------- ------------------------------
Class Shares Outstanding
<PAGE>
FIRST COLORADO BANCORP, INC.
INDEX
Page Number
PART I - CONSOLIDATED FINANCIAL INFORMATION
Consolidated Statements of Financial Condition
at September 30, 1996 (unaudited) and
December 31, 1995 1
Consolidated Statements of Operations for the
Three and Nine Months Ended September 30,
1996 and 1995 (unaudited) 2
Consolidated Statements of Stockholders' Equity for the
Period from January 1, 1994 to December 31, 1995, and for
the Period from January 1, 1996 to September 30, 1996
(unaudited) 3
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30,
1996 and 1995 (unaudited) 4 - 6
Notes to Consolidated Financial Statements 7 - 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 17
PART II - OTHER INFORMATION 18
SIGNATURES 19
EXHIBIT
<PAGE>
First Colorado Bancorp, Inc. and Subsidiary
Consolidated Statements of Financial Condition
(Dollars in Thousands)
<TABLE>
<CAPTION>
As of
-------------------------------------------
September 30, 1996 December 31, 1995
------------------ -----------------
(unaudited)
Assets
<S> <C> <C>
Cash and due from banks $ 37,357 27,090
Federal funds sold and other interest-earning assets 7,296 86,580
Investment securities:
Held-to-maturity 76,459 54,362
Available-for-sale 11,845 24,417
Mortgage-backed and other asset-backed securities, net:
Held-to-maturity 287,224 302,380
Available-for-sale 7,739 8,506
Loans receivable, net 1,037,101 931,159
Accrued interest receivable 8,596 7,807
Office properties and equipment, net 22,844 21,760
Federal Home Loan Bank stock 9,400 8,829
Real estate owned 1,470 1,647
Core deposit intangible 2,823 3,018
Other assets 4,398 4,738
------------- -----------
Total assets $ 1,514,552 1,482,293
============= --=========
Liabilities
Deposits 1,114,706 1,080,289
Advances from Federal Home Loan Bank 122,015 125,670
Other borrowed money 5,102 5,543
Advances by borrowers for taxes and insurance 5,245 9,348
Accrued/deferred income taxes, net 1,840 4,645
Other liabilities 41,228 18,080
------------- -----------
Total liabilities $ 1,290,136 1,243,575
Stockholders' Equity
Common stock, $0.10 par value (50,000,000 shares
authorized; 20,134,256 and 20,023,337 shares
issued at September 30, 1996 and December 31, 1995,
respectively; 19,030,844 and 20,023,337 shares
outstanding at September 30, 1996 and
December 31, 1995, respectively) 2,013 2,002
Additional paid-in capital 150,394 149,837
Treasury stock (1,103,412 and 0 shares, respectively,
at cost) (15,762) 0
Unearned ESOP shares (13,404) (13,404)
Unearned MRP/MSBP shares (3,945) (182)
Net unrealized gain (loss) on securities available
for sale (net of tax) 160 (54)
Retained earnings, partially restricted 104,960 100,519
------------- -----------
Total stockholders' equity 224,416 238,718
------------- -----------
Total liabilities and stockholders' equity $ 1,514,552 1,482,293
============= --=========
</TABLE>
-1-
<PAGE>
First Colorado Bancorp, Inc. and Subsidiary
Consolidated Statements of Operations
(Dollars in Thousands, except per share amounts) (unaudited)
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30, September 30, September 30, September 30,
------------- ------------- ------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
Interest income:
<S> <C> <C> <C> <C>
Loans $ 20,025 17,399 58,074 48,927
Mortgage-backed securities 4,796 5,376 14,580 17,361
Investment securities 1,342 1,231 4,137 3,297
Other 157 29 1,165 90
----------- ----------- ----------- ----------
Total interest income 26,320 24,035 77,956 69,675
----------- ----------- ----------- ----------
Interest expense:
Deposits 12,530 12,378 36,369 35,877
Borrowed funds 1,987 2,803 6,079 7,839
----------- ----------- ----------- ----------
Total interest expense 14,517 15,181 42,448 43,716
----------- ----------- ----------- ----------
Net interest income 11,803 8,854 35,508 25,959
Provision (credit) for loan losses 218 (131) 525 (698)
----------- ----------- ----------- ----------
Net interest income after provision (credit) for loan losses 11,585 8,985 34,983 26,657
----------- ----------- ----------- ----------
Noninterest income:
Fees and service charges 1,212 1,067 3,563 3,062
Gain (loss) on sale of loans, net 75 22 141 (34)
Loss on sale of mortgage-backed and
other asset-backed securities, net -- (19) -- (381)
Net income from real estate operations 26 136 297 1,184
Rental income 44 40 125 127
----------- ----------- ----------- ----------
Total noninterest income 1,357 1,246 4,126 3,958
----------- ----------- ----------- ----------
Noninterest expense:
Compensation 3,278 2,712 8,857 7,831
Occupancy 926 949 2,860 2,707
Provision (credit) for losses on real estate owned (24) 42 4 13
Provision (credit) for losses on federal funds sold -- -- (18) 618
Professional fees 198 195 605 508
Advertising 234 215 760 616
Printing, supplies and postage 257 266 801 820
FDIC premiums 7,621 612 8,880 1,782
Other, net 785 186 2,128 982
----------- ----------- ----------- ----------
Total noninterest expense 13,275 5,177 24,877 15,877
----------- ----------- ----------- ----------
Earnings before income taxes (333) 5,054 14,232 14,738
Income tax expense (benefit) (161) 1,698 5,140 5,370
----------- ----------- ----------- ----------
Net earnings (loss) $ (172) 3,356 9,092 9,368
=========== =========== =========== ==========
Fully diluted earnings per share $ (0.01) NM 0.48 NM
=========== ===========
Fully diluted shares outstanding 18,604,427 NM 19,028,847 NM
=========== ===========
Dividends declared per share $ 0.08 NM 0.235 NM
=========== ===========
</TABLE>
NM - Not meaningful due to conversion and reorganization effective December
29, 1995.
-2-
<PAGE>
FIRST COLORADO BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Period from January 1, 1994 to September 30, 1996
(Activity for the Nine Months Ended September 30, 1996 is Unaudited)
(Amounts in Thousands, except Share Amounts)
<TABLE>
<CAPTION>
Common
Common Stock Common Stock Additional Stock Unearned
$1.00 par value $0.10 par value Paid-in Treasury ESOP
--------------- ---------------
Shares Amount Shares Amount Capital Shares Shares
------ ------ ------ ------ ------- ------ ------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 6,269,972 $6,270 - $ - 10,024 - (729)
Exercise of employee stock options 61,650 62 - - 390 - -
Payment of ESOP liability - - - - - - 283
Employees' vesting in MRP - - - - 200 - -
Dividends ($1.80 per share):
Declared for minority interest - - - - - - -
Waived by Parent - - - - 7,537 - -
Net unrealized loss on securities
available-for-sale - - - - - - -
Net earnings - - - - - - -
--------- ------ ---------- ------ -------- -------- -------
Balance, December 31, 1994 6,331,622 6,332 - - 18,151 - (446)
Exercise of employee stock options 39,515 40 - - 224 - -
Payment of ESOP liability - - - - - - 446
Contribution by First Savings Capital,
M.H.C. - - - - 31 - -
Exchange of common stock (6,371,137) (6,372) 6,619,539 662 5,710 - -
Common stock issued for cash, net of
offering costs - - 12,063,419 1,206 116,414 - -
Common stock issued to ESOP for
note receivable - - 1,340,379 134 13,270 - (13,404)
Employees' vesting in MRP - - - - 224 - -
Dividends declared ($0.88 per share) - - - - - - -
Reversal of dividends previously
waived by First Savings Capital, M.H.C. - - - - (4,187) - -
Change in net unrealized loss on
securities available-for-sale - - - - - - -
Net earnings - - - - - - -
--------- ------ ---------- ------ -------- -------- -------
Balance, December 31, 1995 - - 20,023,337 2,002 149,837 - (13,404)
Exercise of employee stock options - - 110,919 11 233 4 -
Additional offering costs on common
stock issued for cash - - - - (174) - -
Common stock purchased by MSBP - - - - - - -
Employees' vesting in MRP - - - - 498 - -
Purchase of Treasury stock
(1,103,412 shares) - - - - - (15,766) -
Dividends declared ($0.235 per share) - - - - - - -
Change in net unrealized gain (loss)
on securities available-for-sale - - - - - - -
Net earnings - - - - - - -
--------- ------ ---------- ------ -------- -------- -------
Balance, September 30, 1996 - $ - 20,134,256 $2,013 150,394 (15,762) (13,404)
========= ====== ========== ====== ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
Net
Unrealized
MRP/ Gain (Loss)
MSBP on
Contra Securities Retained
Available
Account For Sale Earnings Total
------- -------- -------- -----
<S> <C> <C> <C> <C>
Balance, January 1, 1994 (328) - 83,453 98,690
Exercise of employee stock options - - - 452
Payment of ESOP liability - - - 283
Employees' vesting in MRP 70 - - 270
Dividends ($1.80 per share):
Declared for minority interest - - (3,857) (3,857)
Waived by Parent - - (7,537) -
Net unrealized loss on securities
available-for-sale - (1,370) - (1,370)
Net earnings - - 13,546 13,546
------- -------- -------- --------
Balance, December 31, 1994 (258) (1,370) 85,605 108,014
Exercise of employee stock options - - - 264
Payment of ESOP liability - - - 446
Contribution by First Savings Capital,
M.H.C. - - - 31
Exchange of common stock - - - -
Common stock issued for cash, net of
offering costs - - - 117,620
Common stock issued to ESOP for
note receivable - - - -
Employees' vesting in MRP 76 - - 300
Dividends declared ($0.88 per share) - - (1,911) (1,911)
Reversal of dividends previously
waived by First Savings Capital, M.H.C. - - 4,187 -
Change in net unrealized loss on
securities available-for-sale - 1,316 - 1,316
Net earnings - - 12,638 12,638
------- ------ -------- --------
Balance, December 31, 1995 (182) (54) 100,519 238,718
Exercise of employee stock options - - (3) 245
Additional offering costs on common
stock issued for cash - - - (174)
Common stock purchased by MSBP (3,850) - - (3,850)
Employees' vesting in MRP 87 - - 585
Purchase of Treasury stock
(1,103,412 shares) - - - (15,766)
Dividends declared ($0.235 per share) - - (4,648) (4,648)
Change in net unrealized gain (loss)
on securities available-for-sale - 214 - 214
Net earnings - - 9,092 9,092
------- ------ -------- --------
Balance, September 30, 1996 (3,945) 160 104,960 224,416
======= ====== ======== ========
</TABLE>
-3-
<PAGE>
FIRST COLORADO BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
For the nine months ended
September 30, 1996 September 30, 1995
------------------ ------------------
Cash flows from operating activities:
Interest and dividends from loans receivable, mortgage-backed
<S> <C> <C>
and other asset-backed securities, and investment securities $ 76,799 67,856
Fees and service charges received 4,903 4,014
Rental income received 125 127
Proceeds from sale of loans held for sale 27,980 3,367
Originations of loans held for sale (27,829) (4,308)
Interest paid (9,790) (11,515)
Cash paid to suppliers and employees (17,416) (15,085)
Income taxes paid (8,077) (3,070)
----------- ----------
Net cash provided by operating activities $ 46,695 41,386
=========== ==========
Cash flows from investing activities:
Proceeds from sales of investment and mortgage-backed
securities available for sale $ 0 24,469
Proceeds from maturities of investment and mortgage-backed
securities available for sale 11,000 6,000
Proceeds from maturities of investment and mortgage-backed
securities held to maturity 61,700 29,500
Purchase of investment securities available for sale 0 (2,027)
Purchase of investment securities held to maturity (81,965) (47,878)
Principal repayments of mortgage-backed and asset-backed securities 50,267 51,756
Purchase of mortgage-backed and other asset-backed securities
held to maturity (35,066) 0
Origination of loans receivable (275,697) (260,757)
Principal repayments of loans receivable 169,008 123,521
Purchase of loans receivable 0 (17,932)
Purchase of Federal Home Loan Bank Stock (136) (941)
Proceeds from sales of real estate owned and in judgment 812 3,240
Proceeds from sale of office properties and equipment 3 77
Purchase of office properties and equipment (2,431) (2,941)
Proceeds from sale of real estate held for investment and development 344 191
Other, net 226 256
----------- ----------
Net cash used by investing activities $ (101,935) (93,466)
=========== ==========
</TABLE>
(Continued)
-4-
<PAGE>
FIRST COLORADO BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
For the nine months ended
September 30, 1996 September 30, 1995
------------------ ------------------
Cash flows from financing activities:
<S> <C> <C>
Net increase in deposits $ 1,777 40,902
Proceeds of advances from Federal Home Loan Bank 56,700 335,200
Repayment of advances from Federal Home Loan Bank (60,355) (317,578)
Repayment of bonds payable and other borrowings (456) (543)
Net decrease in advances by borrowers for taxes
and insurance (4,103) (1,417)
Cash paid for stock offering and conversion costs (2,135) 0
Net proceeds from exercised stock options 54 494
Proceeds from ESOP for repayment of debt 0 121
Purchase of shares for MSBP (3,251) 0
Purchase of Treasury shares (15,766) 0
Dividends paid (3,596) (1,381)
Other, net 17,354 (5,110)
---------- -----------
Net cash provided (used) by financing activities (13,777) 50,688
---------- -----------
Net decrease in cash and cash equivalents (69,017) (1,392)
Cash and cash equivalents at beginning of year 113,670 30,239
Cash and cash equivalents at end of year $ 44,653 28,847
========== ===========
Reconciliation of net earnings to net cash provided by operating activities:
Net earnings $ 9,092 9,368
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Amortization of premiums and discounts on investments, net 787 77
Loss (gain) on sale of investment securities and loans receivable (141) 34
Loss on sale of mortgage-backed and other asset-backed securities 0 381
Amortization of deferred loan origination fee income (563) (592)
Deferred loan origination fee income, net of deferred costs 277 128
Provision (credit) for losses on loans receivable, federal funds
sold, and real estate owned and in judgment 529 (28)
Gain on sale of real estate owned, net (141) (972)
Gain on sale of real estate held for investment and development (24) (173)
Stock dividends from Federal Home Loan Bank (435) 0
Depreciation and amortization 1,366 1,201
Increase (decrease) in deferred income taxes (88) 1,960
Interest expense credited to deposit accounts 32,640 32,189
Amortization of unearned discounts and deferred income (157) (98)
Decrease (increase) in loans held for sale 151 (941)
Increase in accrued interest receivable (789) (1,206)
Increase in other assets (10) (314)
Increase (decrease) in current income taxes payable (2,849) 340
Decrease (increase) in other liabilities 37 (16)
FDIC/SAIF assessment payable 7,000 0
Other, net 13 48
---------- -----------
Net cash provided by operating activities $ 46,695 41,386
========== ===========
</TABLE>
(Continued)
-5-
<PAGE>
FIRST COLORADO BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
For the nine months ended
September 30, 1996 September 30, 1995
------------------ ------------------
Noncash investing and financing transactions:
Decrease in net unrealized loss on securities
<S> <C> <C>
available for sale, net of tax effect $ (214) (1,309)
====== ========
Deferred tax effect of change in unrealized loss on
securities available for sale $ (132) (811)
======= ========
</TABLE>
-6-
<PAGE>
FIRST COLORADO BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Principles of Consolidation - The consolidated financial statements include
the accounts of First Colorado Bancorp, Inc. (FCB) and its wholly owned
subsidiary, First Federal Bank of Colorado (formerly First Federal Savings
Bank of Colorado). The accounts of First Federal Bank of Colorado (FFB)
include its three wholly owned subsidiaries, First Savings Investment
Corporation (FSIC), First Savings Insurance Services (FSIS), and First
Savings Securities Corporation (FSSC) (collectively, the Bank). All
entities together are collectively referred to as the Company. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
The Company is a Colorado stock corporation organized in September 1995 to
facilitate the conversion of the Bank's holding company (formerly First
Savings Capital, M.H.C.) from the mutual to stock form of ownership and to
acquire and hold all of the capital stock of the Bank. In connection with
the conversion, First Savings Capital, M.H.C., which had owned 66% of the
Bank's common stock, was merged with and into the Bank, and its shares of
the Bank were canceled. On December 29, 1995, the Company issued 6,619,539
shares of its common stock for all of the remaining outstanding shares of
the Bank, and issued and sold 13,403,798 shares of its common stock at a
price of $10.00 per share. The Company is currently engaged in no
significant business activity other than its ownership of the Bank's common
stock.
2. Basis of Presentation - The Consolidated Statements of Financial Condition
as of September 30, 1996, the Consolidated Statements of Operations for the
three and nine month periods ended September 30, 1996 and 1995, the
Consolidated Statements of Stockholders' Equity for the nine month period
ended September 30, 1996, and the Consolidated Statements of Cash Flows for
the nine month periods ended September 30, 1996 and 1995, have been
prepared by the Company, without audit, and therefore do not include
information or footnotes necessary for a complete presentation of
consolidated financial condition, results of operations, and cash flows in
conformity with generally accepted accounting principles. It is suggested
that these Consolidated Financial Statements be read in conjunction with
the December 31, 1995 Financial Statements and notes thereto included with
the Company's Annual Report. However, in the opinion of management, all
adjustments (consisting of normal recurring adjustments) necessary for the
fair presentation of the consolidated financial statements have been
included. The results of operations for the three and nine month periods
ended September 30, 1996 are not necessarily indicative of the results
which may be expected for the entire year or for any other period.
3. Earnings per Share - Earnings per share for the three and nine month
periods ended September 30, 1996 was calculated based on the number of
fully diluted shares at period end. Stock options are regarded as common
stock equivalents computed using the Treasury Stock method. Shares acquired
by the Employee Stock Benefit Plan (ESOP) are not considered in the
weighted average shares outstanding until shares are committed to be
released to the employees' individual account or have been earned.
Earnings per share for the three and nine month periods ended September 30,
1995 was not meaningful due to the conversion and reorganization effective
December 29, 1995.
See Exhibit 11.
4. Dividends - On September 18, 1996, the Company declared an 8.0(cent) per
share cash dividend on the Company's common stock to shareholders of record
on September 30, 1996. The cash dividend was paid on October 18, 1996.
-7-
<PAGE>
5. Recent Accounting Pronouncements - Effective January 1, 1995, the Bank
adopted FASB Statement of Financial Accounting Standards Nos. 114,
"Accounting by Creditors for Impairment of a Loan" and 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures."
The provisions of these statements are applicable to all loans,
uncollateralized as well as collateralized, except for large groups of
smaller-balance homogeneous loans that are collectively evaluated for
impairment and loans that are measured at fair value or at the lower of
cost or fair value. Additionally, such provisions apply to all loans that
are renegotiated in troubled debt restructurings involving a modification
of terms.
Statement No. 114 requires that impaired loans be measured based on the
present value of expected future cash flows discounted at the loan's
effective interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent, except that loans renegotiated as part of a troubled
debt restructuring subsequent to the adoption of Statement Nos. 114 and 118
must be measured for impairment by discounting the total expected cash flow
under the renegotiated terms at each loan's original effective interest
rate.
A loan evaluated for impairment pursuant to Statement No. 114 is deemed to
be impaired when, based on current information and events, it is probable
that the Bank will be unable to collect all amounts due according to the
contractual terms of the loan agreement. An insignificant payment delay,
which is defined by the Bank as up to ninety days, will not cause a loan to
be classified as impaired. A loan is not impaired during the period of
delay in payment if the Bank expects to collect all amounts due, including
interest accrued at the contractual interest rate for the period of delay.
Thus, a demand loan or other loan with no stated maturity is not impaired
if the Bank expects to collect all amounts due, including interest accrued
at the contractual interest rate, during the period the loan is
outstanding. All loans identified as impaired are evaluated independently.
The Bank does not aggregate such loans for evaluation purposes.
The adoption of Statement Nos. 114 and 118 did not have a material adverse
impact on the Company's financial condition or operations.
Effective January 1, 1996, the Company adopted SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of". This statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Adoption of this
statement has not had a significant effect on the consolidated financial
statements.
Effective January 1, 1996, the Company adopted SFAS No. 122, "Accounting
for Mortgage Servicing Rights". This statement requires that a mortgage
banking enterprise recognize as separate assets rights to service mortgage
loans for others, regardless of how those servicing rights are acquired. An
entity that sells or securitizes mortgage loans with servicing rights
retained should allocate the total cost of the mortgage loans to the
mortgage servicing rights and the loans (without the mortgage servicing
rights) based on their relative fair values. As of June 30, 1996, adoption
of this statement has not had a significant effect on the consolidated
financial statements.
SFAS No. 123, "Accounting for Stock-Based Compensation", was issued by the
FASB in October 1995. It establishes financial accounting and reporting
standards for stock-based employee compensation plans as well as
transactions in which an entity issues its equity instruments to acquire
goods or services from non-employees. This statement defines a fair value
based method of accounting for employee stock option or similar equity
instrument. However, it also allows an entity to continue to measure
compensation cost for its employee stock compensation plans using the
intrinsic value based method of accounting prescribed by APB Opinion No.
25, "Accounting for Stock Issued to Employees". Entities electing to remain
with the accounting in APB Opinion No. 25 must make pro forma disclosures
of net earnings and earnings per share as if the fair value based method
accounting defined by SFAS No. 123 had been applied. SFAS No. 123 is
applicable to fiscal year 1996. The Company does not currently expect to
adopt the accounting prescribed by SFAS No. 123; however, the Company will
include the disclosures required by SFAS No. 123 in future consolidated
financial statements.
-8-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
First Colorado Bancorp, Inc. (the "Company") is a Colorado corporation organized
in September 1995 at the direction of the Board of Directors of the First
Federal Bank of Colorado (the "Bank") to facilitate the conversion of First
Savings Capital, M.H.C. (the "Mutual Holding Company") from the mutual to stock
form of ownership and to acquire and hold all of the capital stock of the Bank
(collectively, the "Conversion and Reorganization"). Prior to the consummation
of the Conversion and Reorganization, the Mutual Holding Company was the
majority stockholder of the Bank and upon consummation of the Conversion and
Reorganization, the Mutual Holding Company was merged with and into the Bank.
The Company acquired the Bank as a wholly owned subsidiary upon the consummation
of the Conversion and Reorganization on December 29, 1995. In connection with
the Conversion and Reorganization, the Company sold 13,403,798 shares of its
common stock to the public in an initial public offering and issued 6,619,539
shares in exchange for the outstanding shares of the Bank held by persons other
than the Mutual Holding Company. Stockholders' equity increased by $117.5
million as a result of the Conversion and Reorganization.
The primary activity of the Company is holding the common stock of the Bank. The
Company is therefore a unitary savings and loan holding company. The Company has
no significant assets other than all of the outstanding shares of Bank Common
Stock, the note evidencing the Company's $13.4 million loan to the Bank's
Employee Stock Ownership Plan ("ESOP") and the portion of the net proceeds from
the Offerings retained by the Company, which are currently invested in a $34.8
million loan to the Bank and in deposits in the Bank. The Company has also
established a small equity position in other financial institutions. All
intercompany accounts have been eliminated in the Company's consolidated
financial statements.
Since the Conversion and Reorganization was completed on December 29, 1995, the
consolidated results of operations for the three and nine month periods ended
September 30, 1996 are for the Company while the consolidated results of
operations for the three and nine month periods ended September 30, 1995 are for
the Bank. Any references to the consolidated results of operations will, by
definition, incorporate that distinction.
-9-
<PAGE>
COMPARISON OF FINANCIAL CONDITION AT
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
The total assets of the Company increased $32.3 million, or 2.2%, from $1,482.3
million at December 31, 1995 to $1,514.6 million at September 30, 1996. This
increase is due primarily to an increase in loans receivable of $105.9 million,
or 11.4%. Investment securities also increased, from $78.8 million at December
31, 1995, to $88.3 million at September 30, 1996, an increase of $9.5 million,
or 12.1%, as a result of the Company's decision to utilize some of the offering
proceeds to increase its investment portfolio. The funding for these increases
came primarily from Fed funds sold and other interest-earning assets, which
decreased $79.3 million, or 91.6%, from $86.6 million at December 31, 1995 to
$7.3 million at September 30, 1996. Mortgage-backed and other asset-backed
securities also decreased, from $310.9 million at December 31, 1995 to $295.0
million at September 30, 1996, a decrease of $15.9 million, or 5.1%.
As of September 30, 1996, non-performing assets totaled $3.3 million, or 0.2% of
total assets, as compared to $4.0 million, or 0.3% of total assets as of
December 31, 1995.
The increase in liabilities primarily occurred in the deposit portfolio, which
increased $34.4 million, or 3.2%, from $1,080.3 million at December 31, 1995, to
$1,114.7 million at September 30, 1996. Total advances from the Federal Home
Loan Bank decreased by $3.7 million, or 2.9%, from $125.7 million as of December
31, 1995, to $122.0 million as of September 30, 1996.
Stockholders' equity decreased $14.3 million, or 6.0%, primarily due to net
earnings of $9.1 million for the nine months ended September 30, 1996, being
more than offset by dividends declared totaling $4.6 million, Treasury Stock
purchases totaling $15.8 million, and Management Stock Bonus Plan purchases
totaling $3.8 million.
-10-
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
GENERAL. Net earnings for the three months ended September 30, 1996 decreased
$3.5 million, or 105.1%, to a $172,000 loss from a $3.4 million gain for the
three months ended September 30, 1995. The decrease was primarily due to an
increase in noninterest expense, specifically in the FDIC premium category.
President Clinton signed legislation on September 30, 1996 requiring all banks
and savings associations with accounts insured by SAIF (administered by the
Federal Deposit Insurance Corporation) to pay a special assessment to
recapitalize the fund. First Federal's assessment was $7.0 million before taxes,
which was charged to earnings during the third quarter of 1996 and resulted in
the $172,000 net loss for the quarter. As a result of the SAIF recapitalization,
the Bank believes the SAIF premium it will pay in future years will be reduced
significantly from its current assessment, which will have a positive effect on
future earnings. That increase in noninterest expense was partially offset by an
increase in net interest income, as the proceeds from the conversion and
reorganization of the Company increased the average balance of interest-earning
assets.
NET INTEREST INCOME. Net interest income increased $2.9 million, or 33.3%, from
$8.9 million during the three months ended September 30, 1995 to $11.8 million
during the three months ended September 30, 1996. This increase was primarily
due to an increase in total interest income of $2.3 million, or 9.5%, from $24.0
million for the three months ended September 30, 1995 to $26.3 million for the
three months ended September 30, 1996. This increase was primarily the result of
an increase in interest income on loans receivable from $17.4 million in the
three months ended September 30, 1995 to $20.0 million in the three months ended
September 30, 1996, due to an increase of 18 basis points in the interest earned
on loans receivable and to an increase in the average portfolio balance of loans
receivable, which increased $113.0 million, or 12.5%, to $1,017.6 million for
the three months ended September 30, 1996, from $904.6 million for the three
months ended September 30, 1995. The increase in the average portfolio balance
of loans receivable resulted primarily from a strong economy in the Company's
market area coupled with an aggressive program to attract new loan originations
in both the mortgage and nonmortgage portfolios. Interest income on investment
securities (including those available for sale) also increased, from $1.2
million in the three months ended September 30, 1995 to $1.3 million in the
three months ended September 30, 1996, due to the increase in the average
portfolio balance of $14.5 million, or 17.3%, to $98.2 million for the three
months ended September 30, 1996, from $83.7 million for the three months ended
September 30, 1995. The increase in the average investment portfolio balance was
primarily due to the investment of proceeds from the Offering. These increases
in interest income were partially offset by a decrease in interest income on
mortgage-backed and other asset-backed securities (including those available for
sale) of $580,000, or 10.8%, to $4.8 million for the three months ended
September 30, 1996, from $5.4 million for the three months ended September 30,
1995, due to the decrease in the average portfolio balance of $36.2 million, or
10.7%, to $303.4 million for the three months ended September 30, 1996, from
$339.6 million for the three months ended September 30, 1995. The decrease in
the average portfolio balance of mortgage-backed and other asset-backed
securities is due to management's decision to reinvest the cash flows from these
securities in loans receivable.
The increase in interest income was combined with a decrease in total interest
expense of $664,000, or 4.4%, from $15.2 million for the three months ended
September 30, 1995, to $14.5 million for the three months ended September 30,
1996. Interest paid on deposits increased slightly, by $152,000, or 1.2%, to
$12.5 million for the three months ended September 30, 1996, from $12.4 million
for the three months ended September 30, 1995. This increase was due primarily
to an increase in the average balance of the deposits of $24.6 million, or 2.3%,
to $1,107.8 million for the three months ended September 30, 1996, from $1,083.2
million for the three months ended September 30, 1995, offsetting a decrease of
five basis points in the cost of deposits. The relatively flat cost of deposits
for the two periods under comparison was primarily due to the use of the deposit
portfolio as a source of funds being de-emphasized in 1996 due to the available
proceeds from the Offering. Interest paid on borrowed funds decreased, by
$816,000, or 29.1%, to $2.0 million for the three months ended September 30,
1996, from $2.8 million for the three months ended September 30, 1995, due to a
decrease in the average balance of Federal Home Loan Bank advances and other
borrowed money of $48.9 million, or 28.4%, to $123.1 million for the three
months ended September 30, 1996, from $172.0 million for the three months ended
September 30, 1995. This decrease reflects the use of a portion of the proceeds
from the Offering to repay borrowings.
-11-
<PAGE>
PROVISION (CREDIT) FOR LOSSES ON LOANS. In determining the provision for losses
on loans, management analyzes, among other things, the Bank's loan portfolio,
market conditions and the Bank's market area. The provision (credit) for losses
on loans increased by $349,000 for the periods under comparison, from a credit
of $131,000 for the three months ended September 30, 1995 to a provision of
$218,000 for the three months ended September 30, 1996. The credit for the three
months ended September 30, 1995 was due primarily to the continued favorable
market conditions in the Colorado real estate market. The provision for the
three months ended September 30, 1996 reflects management's recognition of and
desire to appropriately reserve for the loan growth for the Bank. Management
believes that the allowance for loan losses is adequate at September 30, 1996.
There can be no assurances that the allowance will be adequate to cover losses
which may in fact be realized in the future and that additional provisions will
not be required.
NONINTEREST INCOME. Noninterest income increased by $111,000, or 8.9%, from $1.2
million for the three months ended September 30, 1995 to $1.3 million for the
three months ended September 30, 1996. This increase was primarily the result of
an increase in fees and service charges of $145,000 and an increase in the gain
on the sale of loans of $53,000, offset by an increase in the loss on the sale
of mortgage-backed and other asset-backed securities of $19,000 and a decrease
of $110,000 in net income from real estate operations.
NONINTEREST EXPENSE. Noninterest expense increased by $8.1 million, or 156.4%
for the three months ended September 30, 1996 as compared to the three months
ended September 30, 1995. The majority of the increase related to the one-time
special SAIF assessment expense of $7.0 million, causing the FDIC premium to
increase by $7.0 million for the three months ended September 30, 1996 as
compared to the three months ended September 30, 1995. The other major increases
were comprised of $599,000 in the other, net, noninterest expense category and
of $566,000 in compensation expense. Minor changes in other noninterest expense
categories also contributed to the total increase.
During the three months ended September 30, 1995, the Bank recognized $346,000
income in partial settlement of an IRS audit and a $79,000 refund of
overpayments as an offset to other, net, noninterest expense, which represents
the majority of the $599,000 total increase in other, net, noninterest expense
for the three month periods ending September 30, 1996 and 1995. Other, net
noninterest expense increases occurred in consumer loan fee expense ($65,000)
and in debit/credit card and ATM expense ($47,000). In addition, the Bank
experienced increased compensation costs during the three months ended September
30, 1996, primarily due to an increase of $271,000 in employee compensation
resulting from increased staffing and to an increase of $258,000 resulting from
expense recognized on benefit plans (including the purchase of 1,340,379 shares
of common stock of the Company by the ESOP in connection with the Conversion and
Reorganization) due to the price appreciation of the fair market value of common
stock in those plans. The ESOP purchased its shares with a 10 year loan from the
Company. Shares are expensed as they are released. Also in the third quarter of
1996, the Company experienced additional compensation expense due to the
adoption by shareholders of a Management Stock Bonus Plan ("MSBP") whereby
various officers and directors of the Bank will be granted restricted stock over
a five-year period. The MSBP purchased shares of Common Stock of the Company for
the plan in open market purchases. Such purchased shares will be expensed over a
five year period beginning July 24, 1997 at fair market value.
INCOME TAX EXPENSE. Federal and state income taxes decreased by $1.9 million, or
109.5%, for the three months ended September 30, 1996 compared to the three
months ended September 30, 1995, due primarily to the decrease in earnings
before income taxes.
-12-
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
GENERAL. Net earnings for the nine months ended September 30, 1996 decreased
$276,000, or 2.9%, to $9.1 million from $9.4 million for the nine months ended
September 30, 1995. The decrease was primarily due to an increase in net
interest income being more than offset by an increase in net noninterest
expense. The substantial increase in net interest income can be attributed
primarily to the increase in capital, as the proceeds from the conversion and
reorganization of the Company increased the average balance of interest-earning
assets, while the increase in net noninterest expense can be attributed
primarily to the one-time SAIF special assessment discussed previously.
NET INTEREST INCOME. Net interest income increased $9.5 million, or 36.8%, from
$26.0 million during the nine months ended September 30, 1995 to $35.5 million
during the nine months ended September 30, 1996. This increase was primarily due
to an increase in total interest income of $8.3 million, or 11.9%, from $69.7
million for the nine months ended September 30, 1995 to $78.0 million for the
nine months ended September 30, 1996. This increase was primarily the result of
an increase in interest income on loans receivable from $48.9 million in the
nine months ended September 30, 1995 to $58.1 million in the nine months ended
September 30, 1996, due to a 25 basis point increase in the interest rate earned
on loans receivable and to an increase in the average portfolio balance of loans
receivable, which increased $127.7 million, or 15.0%, to $981.1 million for the
nine months ended September 30, 1996, from $853.4 million for the nine months
ended September 30, 1995. The increase in the average portfolio balance of loans
receivable resulted primarily from a strong economy in the Company's market area
coupled with an aggressive program to attract new loan originations in both the
mortgage and nonmortgage portfolios. Interest income on investment securities
(including those available for sale) also increased, from $3.3 million in the
nine months ended September 30, 1995 to $4.1 million in the nine months ended
September 30, 1996, due to the increase in the average portfolio balance of
$21.4 million, or 27.2%, to $99.9 million for the nine months ended September
30, 1996, from $78.5 million for the nine months ended September 30, 1995. The
increase in the average investment portfolio balance was primarily due to the
investment of proceeds from the offering. These increases in interest income
were partially offset by a decrease in interest income on mortgage-backed and
other asset-backed securities (including those available for sale) of $2.8
million, or 16.0%, to $14.6 million for the nine months ended September 30,
1996, from $17.4 million for the nine months ended September 30, 1995, due to
the decrease in the average portfolio balance of $50.3 million, or 13.9%, to
$312.2 million for the nine months ended September 30, 1996, from $362.5 million
for the nine months ended September 30, 1995. The decrease in the average
portfolio balance of mortgage-backed and other asset-backed securities is due to
management's decision to reinvest the cash flows from those securities in loans
receivable.
The increase in interest income was combined with a decrease in total interest
expense of $1.3 million, or 2.9%, from $43.7 million for the nine months ended
September 30, 1995, to $42.4 million for the nine months ended September 30,
1996. Interest paid on deposits increased $492,000, or 1.4%, to $36.4 million
for the nine months ended September 30, 1996, from $35.9 million for the nine
months ended September 30, 1995. This increase was primarily due to the increase
in the average balance of the deposits of $30.4 million, or 2.9%, to $1,093.2
million for the nine months ended September 30, 1996, from $1,062.8 million for
the nine months ended September 30, 1995, offsetting a decrease of six basis
points in the cost of deposits. This increase in interest paid on deposits was
offset by a decrease in interest paid on borrowed funds of $1.7 million, or
22.5%, to $6.1 million for the nine months ended September 30, 1996, from $7.8
million for the nine months ended September 30, 1995, due to a decrease in the
average balance of Federal Home Loan Bank advances and other borrowed money of
$34.5 million, or 21.5%, to $125.6 million for the nine months ended September
30, 1996, from $160.1 million for the nine months ended September 30, 1995. This
decrease reflects the use of a portion of the proceeds from the Offering to
repay borrowings.
-13-
<PAGE>
PROVISION (CREDIT) FOR LOSSES ON LOANS. In determining the provision for losses
on loans, management analyzes, among other things, the Bank's loan portfolio,
market conditions and the Bank's market area. The provision (credit) for losses
on loans increased by $1.2 million for the periods under comparison, from a
credit of $698,000 for the nine months ended September 30, 1995 to a provision
of $525,000 for the nine months ended September 30, 1996. The credit for the
nine months ended September 30, 1995 was due primarily to the favorable market
conditions in the Colorado real estate market, resulting in the historical loss
factors used for the general loss provision being adjusted downward and the
excess reserve being recognized as a credit for losses on loans. The provision
for the nine months ended September 30, 1996 reflects management's recognition
of and desire to appropriately reserve for the loan growth for the Bank.
Management believes that the allowance for loan losses is adequate at September
30, 1996. There can be no assurances that the allowance will be adequate to
cover losses which may in fact be realized in the future and that additional
provisions will not be required.
NONINTEREST INCOME. Noninterest income increased by $168,000, or 4.2%, from $4.0
million for the nine months ended September 30, 1995 to $4.1 million for the
nine months ended September 30, 1996. This increase was primarily the result of
a decrease in the loss on the sale of mortgage-backed and other asset-backed
securities of $381,000, primarily due to sales of available-for-sale
mortgage-backed securities in the first quarter of 1995 that resulted in a loss,
and an increase in fees and service charges of $501,000, offset by a decrease in
net income from real estate operations of $887,000, primarily due to a profit on
the sale of real estate owned in the first quarter of 1995. There were no
comparable sales of mortgage-backed securities or real estate owned during the
nine months ended September 30, 1996.
NONINTEREST EXPENSE. Noninterest expense increased by $9.0 million, or 56.7% for
the nine months ended September 30, 1996 as compared to the nine months ended
September 30, 1995. The majority of the increase related to the one-time special
SAIF assessment expense of $7.0 million, causing the FDIC premium to increase by
$7.1 million for the nine months ended September 30, 1996 as compared to the
nine months ended September 30, 1995. The other major increases occurred in the
other, net, noninterest expense category ($1.1 million) and in compensation
expense ($1.0 million). Additional increases in occupancy expense of $153,000,
in advertising expense of $144,000, and in professional fees of $97,000, due
primarily to stockholder related matters, were offset by the decrease of
$636,000 in the provision for losses on federal funds sold to contribute to the
net increase in noninterest expense.
During the nine months ended September 30, 1995, the Bank recognized $809,000
income in settlement of an IRS audit as an offset to other, net, noninterest
expense, which represents the majority of the $1.1 million total increase in
other, net, noninterest expense for the nine month periods ending September 30,
1996 and 1995. In addition, the Bank experienced increased compensation costs
during the nine months ended September 30, 1996, primarily due to an increase of
$502,000 in employee compensation, resulting from increased staffing, and from
an increase of $491,000 related to compensation expense recognized on benefit
plans (including the purchase of 1,340,379 shares of common stock of the Company
by the ESOP in connection with the Conversion and Reorganization) due to the
price appreciation of the fair market value of common stock of the Company held
by such plans. The ESOP purchased its shares with a 10 year loan from the
Company. Shares are expensed as they are released. In the third quarter of 1996,
the Company began experiencing additional compensation expense due to the
adoption by shareholders of a Management Stock Bonus Plan ("MSBP") whereby
various officers and directors of the Bank will be granted restricted stock over
a five-year period. The MSBP purchased shares of Common Stock of the Company for
the plan in open market purchases. Such purchased shares will be expensed over a
five year period beginning July 24, 1997 at fair market value. Occupancy costs
increased primarily due to depreciation and other office expenses associated
with the three new offices opened in 1995 and 1996. Those new offices also
contributed to the increase in employee compensation mentioned above.
-14-
<PAGE>
The provision for losses on federal funds sold booked in 1995 resulted when the
Superintendent of Banks of the State of New York took possession of the business
and property of Nationar, a New York-chartered trust company. The Bank wrote
down its $1.0 million federal funds sold to Nationar to $382,500 and filed a
proof of claim for the monies due. A partial payment on the claim totaling
$400,000 was received in June, 1996 and resulted in a recovery of $18,000 in the
second quarter of 1996. Further claim payments are anticipated, however, the
Bank cannot predict the amount or the timing of any such payments.
INCOME TAX EXPENSE. Federal and state income taxes decreased by $230,000, or
4.3%, for the nine months ended September 30, 1996 compared to the nine months
ended September 30, 1995, due primarily to the decrease in earnings before
income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Bank is required to maintain a minimum level of liquid assets as defined by
the Office of Thrift Supervision (OTS) regulations. This requirement, which may
be varied from time to time depending upon economic conditions and deposit
flows, is based upon a percentage of deposits and short-term borrowings. The
required ratio is currently 5%. The Bank's liquidity averaged 10.6% during the
month of September, 1996. The Bank adjusts its liquidity level in order to meet
funding needs for deposit outflows, payment of real estate taxes from escrow
accounts on mortgage loans, repayment of borrowings when applicable, and loan
funding commitments. The Bank also adjusts its liquidity level as appropriate to
meet its asset/liability management objectives.
The Bank's primary sources of funds are deposits, amortization and prepayments
of loans and mortgage-backed and other asset-backed securities, sales and
maturities of investment securities, Federal Home Loan Bank of Topeka advances,
borrowings from commercial banks, and funds provided from operations. While
scheduled loan amortization and maturing investment securities are a relatively
predictable source of funds, deposit flow and loan prepayments are greatly
influenced by market interest rates, economic conditions and competition. The
Bank manages the pricing of its deposits to maintain a steady deposit balance.
In addition, the Bank invests any excess funds in federal funds and overnight
deposits which provide liquidity to meet lending requirements. Federal Funds
sold and other interest-earning assets at September 30, 1996 amounted to $7.3
million, a decrease of $79.3 million from December 31, 1995. This decrease
reflects the utilization of excess Federal Funds sold and other interest-earning
assets in funding loans receivable.
When the Bank requires funds beyond its ability to generate them internally,
borrowing agreements exist with other financial institutions to provide an
additional source of funds. The Bank had a September 30, 1996 balance of $122.0
million of Federal Home Loan Bank advances compared to $125.7 million as of
December 31, 1995. These borrowings were used to fund the Bank's cash needs. The
Bank also anticipates that it will require additional short-term borrowings to
meet its current loan commitments. At September 30, 1996, the Bank had total
outstanding commitments to fund loan originations or mortgage-backed security
purchases of $33.5 million.
The Bank can also access the capital markets to meet its cash needs, and
recently did so through its conversion and reorganization, as explained above.
As required by regulation, the Bank must maintain a minimum regulatory tangible
capital ratio of 1.5% of tangible assets, a minimum core capital ratio of 3% of
adjusted tangible assets, and a minimum risk-based capital ratio of 8% of total
risk-weight assets.
-15-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Bank's capital requirements and actual capital under OTS regulations are as
follows as of September 30, 1996:
AMOUNT % OF ASSETS
------ -----------
GAAP Capital $ 177,488 11.70%
=========
Tangible Capital:
Actual $ 172,281 11.40%
Required 22,666 1.50
--------- ----
Excess $ 149,615 9.90%
=========
Core Capital:
Actual $ 175,104 11.57%
Required 45,416 3.00
--------- ----
Excess $ 129,688 8.57%
=========
Risk-based Capital:
Actual $ 176,540 22.87%
Required 61,764 8.00
--------- ----
Excess $ 114,776 14.87%
=========
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements of the Company and notes thereto,
presented elsewhere herein, have been prepared in accordance with GAAP, which
require the measurement of financial condition and operating results in terms of
historical dollars without considering the change in the relative purchasing
power of money over time due to inflation. The impact of inflation is reflected
in the increased cost of the Company's operations . Unlike most industrial
companies, nearly all the assets and liabilities of the Company are financial.
As a result, interest rates have a greater impact on the Company's performance
than do the effects of general levels of inflation. Interest rates do not
necessarily move in the same direction or to the same extent as the prices of
goods and services.
-16-
<PAGE>
KEY OPERATING RATIOS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------
1996 (1) 1995 (1) 1996 (1) 1995 (1)
-------- -------- -------- --------
(Dollars in Thousands, (Dollars in Thousands,
except per share data) except per share data)
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Return on average assets................ (0.05%) 0.96% 0.81% 0.92%
Return on average equity................ (0.29) 11.55 5.06 11.06
Net interest spread..................... 2.61 2.37 2.64 2.37
Net interest margin..................... 3.29 2.66 3.31 2.66
Noninterest expense to average
assets............................... 3.54 1.49 2.22 1.55
Equity to assets (period end)........... 14.82 8.42 14.82 8.42
</TABLE>
<TABLE>
<CAPTION>
At September 30, At December 31,
1996 1995
---- ----
(Dollars in Thousands,
except per share data)
(Unaudited)
<S> <C> <C>
Nonperforming loans........................................ $ 1,809 $ 1,960
Repossessed real estate.................................... 1,470 1,647
Nonperforming investments.................................. 0 382
----------- -----------
Total nonperforming assets.............................. $ 3,279 $ 3,989
=========== ===========
Allowance for loan losses to nonperforming assets.......... 102.47% 73.35%
Nonperforming loans to total loans......................... 0.17% 0.21%
Nonperforming assets to total assets....................... 0.22% 0.27%
Book value per share (2)................................... $ 11.79 $ 11.92
</TABLE>
- --------------
(1) The ratios for the three- and nine-month periods are annualized.
(2) The number of shares outstanding as of September 30, 1996 and December 31,
1995 was 19,030,844 and 20,023,337, respectively. This includes shares
purchased by the ESOP.
-17-
<PAGE>
FIRST COLORADO BANCORP, INC.
PART II
Item 1. Legal Proceedings - The Bank is not engaged in any legal proceedings of
a material nature at the present time. From time to time, the Bank is a party to
legal proceedings wherein it enforces its security interest in loans.
Item 2. Changes in Securities - Not applicable.
Item 3. Defaults upon Senior Securities - Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders - The Company held a
special meeting of stockholders on July 24, 1996 (the "Special Meeting"). The
purpose of the Special Meeting was to seek stockholder approval of the Company's
stock option plan (the "Option Plan") and the Bank's management stock bonus plan
("MSBP"). The following table indicates the voting on each matter considered.
For Against Abstain
--- ------- -------
Option Plan 12,927,840 2,231,534 222,250
MSBP 14,063,286 1,263,322 244,234
Item 5. Other Information - On July 24, 1996, the Board of Directors of the
Company declared a dividend distribution of one Preferred Share Purchase Right
on each outstanding share of common stock, par value $.10 per share. The Rights
will be exercisable only if a person or group acquires 15% or more of the
Company's common stock or announces a tender offer the consummation of which
would result in ownership by a person or group of 15% or more of the common
stock. The Rights are intended to enable the Company's stockholders to realize
the long-term value of their investment in the Company and are designed to
assure that all of First Colorado Bancorp's stockholders receive fair and equal
treatment in the event of any proposed takeover of the Company. They will not
prevent a takeover, but should encourage anyone seeking to acquire the Company
to negotiate with the Board prior to attempting a takeover.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 -Statement Regarding Computation of Earnings per Share
(b) Reports on Form 8-K
On July 11, 1996, the Company filed a current report on Form 8-K with
the Commission announcing that it had received non-objection from the
OTS to purchase of up to 5% or 1,006,712 shares of the Company's common
stock (Items 5 and 7).
On July 25, 1996, the Company filed a current report on Form 8-K with
the Commission announcing the adoption of a shareholder rights plan
(Items 5 and 7). See "Item 5 - Other Information."
On September 18, 1996, the Company filed a current report on Form 8-K
with the Commission announcing that it had received non-objection from
the OTS to purchase of up to 5% or 956,392 shares of the Company's
common stock (Items 5 and 7).
-18-
<PAGE>
FIRST COLORADO BANCORP, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
First Colorado Bancorp, Inc. (Registrant)
Date: November 12, 1996 By: /s/ Malcolm E. Collier, Jr.
---------------------------
Malcolm E. Collier, Jr.
Chairman of the Board
Chief Executive Officer
Date: November 12, 1996 By: /s/ Brian L. Johnson
--------------------
Brian L. Johnson
Vice President
Treasurer
-19-
FIRST COLORADO BANCORP, INC.
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the three months For the nine months
Ended September 30, Ended September 30,
1996 1995 1996 1995
-------------- ------------- ------------ --------
<S> <C> <C> <C> <C>
Net Income (000's) $ (172) NM $ 9,092 NM
============== ==============
Weighted Average Shares Outstanding 18,253,696 NM 18,678,116 NM
Common stock equivalents due to dilutive
effect of stock options 225,905 NM 225,905 NM
-------------- --------------
Total weighted average common shares
and equivalents outstanding 18,479,601 NM 18,904,021 NM
============== ==============
Primary Earnings Per Share $ (0.01) NM $ 0.48 NM
============== ==============
Weighted Average Shares Outstanding 18,253,696 NM 18,678,116 NM
Common stock equivalents due to dilutive
effect of stock options using end of
period market value versus average
market value for period when utilizing
the treasury stock method regarding stock options 350,731 NM 350,731 NM
-------------- --------------
Total weighted average common shares and
equivalents outstanding for fully diluted
computation 18,604,427 NM 19,028,847 NM
============== ==============
Fully diluted earnings per share $ (0.01) NM $ 0.48 NM
============== ==============
</TABLE>
Earnings per share of common stock for the three and nine month periods ended
September 30, 1996 has been determined by dividing net income for the period by
the weighted average number of shares of common stock outstanding, net of
unearned ESOP shares of 1,206,341.
NM - Not meaningful due to conversion and reorganization effective December 29,
1995.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 37,357
<INT-BEARING-DEPOSITS> 7,296
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 19,584
<INVESTMENTS-CARRYING> 363,683
<INVESTMENTS-MARKET> 353,329
<LOANS> 1,037,101
<ALLOWANCE> 3,360
<TOTAL-ASSETS> 1,514,552
<DEPOSITS> 1,114,706
<SHORT-TERM> 49,605
<LIABILITIES-OTHER> 48,313
<LONG-TERM> 77,512
0
0
<COMMON> 2,013
<OTHER-SE> 222,403
<TOTAL-LIABILITIES-AND-EQUITY> 1,514,552
<INTEREST-LOAN> 58,074
<INTEREST-INVEST> 18,717
<INTEREST-OTHER> 1,165
<INTEREST-TOTAL> 77,956
<INTEREST-DEPOSIT> 36,369
<INTEREST-EXPENSE> 42,448
<INTEREST-INCOME-NET> 35,508
<LOAN-LOSSES> 525
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 24,877
<INCOME-PRETAX> 14,232
<INCOME-PRE-EXTRAORDINARY> 9,092
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,092
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
<YIELD-ACTUAL> 3.31
<LOANS-NON> 1,809
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 627
<ALLOWANCE-OPEN> 2,926
<CHARGE-OFFS> 171
<RECOVERIES> 82
<ALLOWANCE-CLOSE> 3,360
<ALLOWANCE-DOMESTIC> 3,360
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
