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 June 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 July 31, 1996
$0.10 Par Value Common Stock 19,797,056
Class Shares Outstanding
<PAGE>
FIRST COLORADO BANCORP, INC.
INDEX
Page Number
PART I - CONSOLIDATED FINANCIAL INFORMATION
Consolidated Statements of Financial Condition
at June 30, 1996 (unaudited) and
December 31, 1995 1
Consolidated Statements of Operations for the
Three and Six Months Ended June 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 June 30, 1996 (unaudited) 3
Consolidated Statements of Cash Flows
for the Six Months Ended June 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 - 18
PART II - OTHER INFORMATION 19
SIGNATURES 20
EXHIBIT
<PAGE>
<TABLE>
<CAPTION>
First Colorado Bancorp, Inc. and Subsidiary
Consolidated Statements of Financial Condition
(Dollars in Thousands)
As of
June 30, 1996 December 31, 1995
(unaudited)
Assets
<S> <C> <C>
Cash and due from banks $ 24,493 27,090
Federal funds sold and other
interest-earning assets 23,632 86,580
Investment securities:
Held-to-maturity 81,423 54,362
Available-for-sale 11,591 24,417
Mortgage-backed and other asset-backed
securities, net:
Held-to-maturity 303,715 302,380
Available-for-sale 8,027 8,506
Loans receivable, net 999,138 931,159
Accrued interest receivable 8,483 7,807
Office properties and equipment, net 22,450 21,760
Federal Home Loan Bank stock 9,249 8,829
Real estate owned 1,684 1,647
Other assets 7,445 7,756
--------- ----------
Total assets $1,501,330 1,482,293
========= ==========
Liabilities
Deposits $1,103,392 1,080,289
Advances from Federal Home Loan Bank 119,515 125,670
Other borrowed money 5,285 5,543
Advances by borrowers for taxes and
insurance 2,343 9,348
Accrued & deferred income taxes, net 4,789 4,645
Other liabilities 20,950 18,080
--------- ----------
Total liabilities 1,256,274 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 and outstanding at June 30,
1996 and December 31, 1995, respectively) 2,013 2,002
Additional paid-in capital 149,895 149,837
Unearned ESOP shares (13,404) (13,404)
MRP contra-account (182) (182)
Net unrealized gain (loss) on securities
available for sale (net of tax effect) 68 (54)
Retained earnings, partially restricted 106,666 100,519
--------- ----------
Total stockholders' equity 245,056 238,718
--------- ----------
Total liabilities and stockholders'
equity $ 1,501,330 $ 1,482,293
========= =========
</TABLE>
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<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 six months ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
Interest income:
<S> <C> <C> <C> <C>
Loans $19,432 16,647 38,049 31,528
Mortgage-backed securities 5,021 5,637 9,784 11,985
Investment securities 1,419 1,056 2,795 2,066
Other 239 27 1,008 61
---------- ---------- ---------- ----------
Total interest income 26,111 23,367 51,636 45,640
---------- ---------- ---------- ----------
Interest expense:
Deposits 11,929 12,316 23,839 23,499
Borrowed funds 1,994 2,619 4,092 5,036
---------- ---------- ---------- ----------
Total interest expense 13,923 14,935 27,931 28,535
---------- ---------- ---------- ----------
Net interest income 12,188 8,432 23,705 17,105
Provision (credit) for loan losses 77 142 307 (567)
---------- ---------- ---------- ----------
Net interest income after provision 12,111 8,290 23,398 17,672
---------- ---------- ---------- ----------
(credit) for loan losses
Noninterest income:
Fees and service charges 1,203 983 2,351 1,995
Gain (loss) on sale of loans, net 187 -- 66 (56)
Loss on sale of mortgage-backed and
other asset-backed securities, net -- -- -- (362)
Net income from real estate operations 142 75 271 1,048
Rental income 42 39 81 87
---------- ---------- ---------- ----------
Total noninterest income 1,574 1,097 2,769 2,712
---------- ---------- ---------- ----------
Noninterest expense:
Compensation 2,861 2,570 5,579 5,119
Occupancy 1,005 886 1,934 1,758
Provision (credit) for losses on real
estate owned 54 (3) 28 (29)
Provision (credit) for losses on
federal funds sold (18) -- (18) 618
Professional fees 210 135 407 313
Advertising 269 225 526 401
Printing, supplies and postage 269 263 544 554
FDIC premiums 641 585 1,259 1,170
Other, net 683 123 1,343 796
---------- ---------- ---------- ----------
Total noninterest expense 5,974 4,784 11,602 10,700
---------- ---------- ---------- ----------
Earnings before income taxes 7,711 4,603 14,565 9,684
Income tax expense 2,784 1,573 5,301 3,672
---------- ---------- ---------- ----------
Net earnings $ 4,927 3,030 9,264 6,012
========== ========== ========== ==========
Primary earnings per share $ 0.26 NM 0.49 NM
========== ==========
Primary shares outstanding 19,093,471 NM 19,069,651 NM
========== ==========
Fully diluted earnings per share $ 0.26 NM 0.49 NM
========== ==========
Fully diluted shares outstanding 19,094,767 NM 9,070,947 NM
========== ==========
Dividends declared per share $ 0.08 NM 0.155 NM
========== ==========
</TABLE>
NM - Not meaningful due to conversion and reorganization effective December
29, 1995.
-2-
<PAGE>
<TABLE>
<CAPTION>
FIRST COLORADO BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Period from January 1, 1994 to June 30, 1996
(Activity for the Six Months Ended June 30, 1996 is Unaudited)
(Amounts in Thousands, except Share Amounts)
Net
Unrealized
Gain
Common Stock Common Stock Additional Unearned MRP (Loss)
$1.00 par value $0.10 par value Paid-in ESOP Contra on Securities Retained
Shares Amount Shares Amount Capital Shares Account For Sale Earnings Total
------ ----- ------ ------ ------- ------ ------- -------- -------- -----
Balance,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 1, 1994 6,269,972 $6,270 - $ - 10,024 (729) (328) - 83,453 98,690
Exercise of employee 61,650 62 - - 390 - - - - 452
stock options
Payment of ESOP liability - - - - - 283 - - - 283
Employees' vesting in MRP - - - - 200 - 70 - - 270
Dividends ($1.80 per share):
Declared for minority
interest - - - - - - - - (3,857) (3,857)
Waived by Parent - - - - 7,537 - - - (7,537) -
Net unrealized loss on
securities available for
sale - - - - - - - (1,370) - (1,370)
Net earnings - - - - - - - - 13,546 13,546
---------- ----- ---------- ----- ------- ------- ----- ----- ------- -------
Balance,
December 31, 1994 6,331,622 6,332 - - 18,151 (446) (258) (1,370) 85,605 108,014
Exercise of employee
stock options 39,515 40 - - 224 - - - - 264
Payment of ESOP liability - - - - - 446 - - - 446
Contribution by First
Savings Capital, MHC - - - - 31 - - - - 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 - - - - 117,620
Common stock issued to
ESOP for note receivable - - 1,340,379 134 13,270 (13,404) - - - -
Employees' vesting in MRP - - - - 224 - 76 - - 300
Dividends declared ($0.88
per share) - - - - - - - - (1,911) (1,911)
Reversal of dividends
previously waived - - - - (4,187) - - - 4,187 -
by First Savings
Capital, M.H.C.
Change in net unrealized
gain (loss) on securities - - - - - - - 1,316 - 1,316
available-for-sale
Net earnings - - - - - - - - 12,638 12,638
---------- ----- ---------- ----- ------- ------- ----- ----- ------- -------
Balance,
December 31, 1995 - - 20,023,337 2,002 149,837 (13,404) (182) (54) 100,519 238,718
Exercise of employee - - 110,919 11 233 - - - - 244
stock options
Additional offering costs
on common stock issued
for cash - - - - (175) - - - - (175)
Dividends declared - - - - - - - - (3,117) (3,117)
($0.155 per share)
Change in net unrealized
gain (loss) on securities
available-for-sale - - - - - - - 122 - 122
Net earnings - - - - - - - - 9,264 9,264
---------- ----- ---------- ----- ------- ------- ----- ----- ------- -------
Balance,
June 30, 1996 - $ - 20,134,256 $2,013 149,895 (13,404) (182) 68 106,666 245,056
========== ===== ========== ===== ======= ======= ===== ===== ======= =======
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
FIRST COLORADO BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in Thousands)
For the six months ended
June 30, 1996 June 30, 1995
Cash flows from operating activities:
Interest and dividends from loans receivable,
mortgage-backed and other asset-backed securities,
<S> <C> <C>
and investment securities $50,834 44,476
Fees and service charges received 3,365 2,506
Rental income received 81 87
Proceeds from sale of loans held for sale 24,673 1,599
Originations of loans held for sale (24,307) (2,088)
Interest paid (6,534) (7,447)
Cash paid to suppliers and employees (11,255) (9,988)
Income taxes paid (5,234) (1,595)
-------- --------
Net cash provided by operating activities 31,623 27,550
-------- --------
Cash flows from investing activities:
Proceeds from sales of investment and mortgage-backed
securities available for sale 0 20,444
Proceeds from maturities of investment and mortgage-backed
securities available for sale 11,000 5,000
Proceeds from maturities of investment and mortgage-backed
securities held to maturity 43,700 11,000
Purchase of investment securities held to maturity (68,765) (25,746)
Principal repayments of mortgage-backed and
asset-backed securities 33,636 32,231
Purchase of mortgage-backed and other asset-backed
securities held to maturity (35,066) 0
Origination of loans receivable (185,429) (178,288)
Principal repayments of loans receivable 116,392 66,032
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 573 2,701
judgment
Proceeds from sale of office properties and equipment 0 905
Purchase of office properties and equipment (1,620) (2,819)
Proceeds from sale of real estate held for investment
and development 344 39
Other, net 156 157
-------- --------
Net cash used by investing activities (85,215) (87,217)
-------- --------
</TABLE>
(Continued)
-4-
<PAGE>
<TABLE>
<CAPTION>
FIRST COLORADO BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in Thousands)
For the six months ended
June 30, 1996 June 30, 1995
Cash flows from financing activities:
<S> <C> <C>
Net increase in deposits $ 1,696 34,854
Proceeds of advances from Federal Home Loan Bank 24,000 256,000
Repayment of advances from Federal Home Loan Bank (30,155) (226,222)
Repayment of bonds payable and other borrowings (269) (434)
Net decrease in advances by borrowers for taxes and (7,005) (4,177)
insurance
Cash paid for stock offering and conversion costs (2,135) 0
Net proceeds from exercised stock options 69 165
Proceeds from ESOP for repayment of debt 0 81
Dividends paid (1,986) (904)
Other, net 3,832 (4,799)
------- -------
Net cash provided (used) by financing activities (11,953) 54,564
------- -------
Net decrease in cash and cash equivalents (65,545) (5,103)
Cash and cash equivalents at beginning of period 113,670 30,239
Cash and cash equivalents at end of period $ 48,125 25,136
======= =======
Reconciliation of net earnings to net cash provided by
operating activities:
Net earnings $ 9,264 6,012
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Amortization of premiums and discounts on investments,
net 571 (16)
Loss (gain) on sale of investment securities and
loans receivable (66) 56
Loss on sale of mortgage-backed and other asset-backed
securities 0 362
Amortization of deferred loan origination fee income (349) (470)
Deferred loan origination fee income, net of deferred costs 306 (138)
Provision for losses on loans receivable, federal funds sold
and real estate owned and in judgment 335 151
Gain on sale of real estate owned, net (144) (983)
Gain on sale of real estate held for investment
and development (24) (21)
Stock dividends from Federal Home Loan Bank (284) 0
Depreciation and amortization 945 767
Increase (decrease) in deferred income taxes (172) 1,962
Interest expense credited to deposit accounts 21,407 21,062
Amortization of unearned discounts and deferred
income (65) (71)
Decrease (increase) in loans held for sale 366 (489)
Increase in accrued interest receivable (676) (607)
Decrease (increase) in other assets (205) 17
Increase in current income taxes payable 239 115
Decrease (increase) in other liabilities 108 (131)
Other, net 67 (28)
------- -------
Net cash provided by operating activities $ 31,623 27,550
======= =======
</TABLE>
(Continued)
-5-
<PAGE>
FIRST COLORADO BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
For the six months ended
June 30, 1996 June 30, 1995
Noncash investing and financing transactions:
Decrease in net unrealized loss on securities
<S> <C> <C>
available for sale, net of tax effect $(122) (1,184)
==== ======
Deferred tax effect of change in unrealized loss on
securities available for sale $ (76) (733)
==== ======
</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. In 1995, the Company engaged in no significant business activity
other than its ownership of the Bank's common stock.
2. Basis of Presentation - The Consolidated Statement of Financial Condition as
of June 30, 1996, the Consolidated Statements of Operations for the three and
six month periods ended June 30, 1996 and 1995, the Consolidated Statement of
Stockholders' Equity for the six month period ended June 30, 1996, and the
Consolidated Statements of Cash Flows for the six month periods ended June
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 six month periods ended
June 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 six month periods
ended June 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 six month periods ended June 30, 1995
was not meaningful due to the conversion and reorganization effective
December 29, 1995.
See Exhibit 11.
4. Dividends - On June 19, 1996, the Company declared an 8.0(cent) per share
cash dividend on the Company's common stock to shareholders of record on July
5, 1996. The cash dividend was paid on July 19, 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 ("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, a 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 $51.6
million loan to the Bank and in deposits in the Bank. 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 six month periods ended
June 30, 1996 are for the Company while the consolidated results of operations
for the three and six month periods ended June 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
JUNE 30, 1996 AND DECEMBER 31, 1995
The total assets of the Company increased $19.0 million, or 1.3%, from $1,482.3
million at December 31, 1995 to $1,501.3 million at June 30, 1996. This increase
is due primarily to an increase in loans receivable of $68.0 million, or 7.3%.
Investment securities also increased, from $78.8 million at December 31, 1995,
to $93.0 million at June 30, 1996, an increase of $14.2 million, or 18.1%, as a
result of the Company's decision to utilize some of the offering proceeds to
increase its investment portfolio. Mortgage-backed and other asset-backed
securities increased slightly, from $310.9 million at December 31, 1995 to
$311.7 million at June 30, 1996, an increase of $0.8 million, or 0.3%. The
funding for these increases came primarily from Federal funds sold and other
interest-earning assets, which decreased $63.0 million, or 72.7%, from $86.6
million at December 31, 1995 to $23.6 million at June 30, 1996.
As of June 30, 1996, non-performing assets totaled $3.6 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 $23.1 million, or 2.1%, from $1,080.3 million at December 31, 1995, to
$1,103.4 million at June 30, 1996. Total advances from the Federal Home Loan
Bank decreased by $6.2 million, or 4.9%, from $125.7 million as of December 31,
1995, to $119.5 million as of June 30, 1996.
Stockholders' equity increased $6.3 million, primarily due to net earnings of
$9.3 million for the six months ended June 30, 1996, offset by dividends
declared totaling $3.1 million.
-10-
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
GENERAL. Net earnings for the three months ended June 30, 1996 increased $1.9
million, or 62.6%, to $4.9 million from $3.0 million for the three months ended
June 30, 1995. The increase was primarily due to an increase in net interest
income, offset by an increase in 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 increased the average
balance of interest-earning assets.
NET INTEREST INCOME. Net interest income increased $3.8 million, or 44.5%, from
$8.4 million during the three months ended June 30, 1995 to $12.2 million during
the three months ended June 30, 1996. This increase was primarily due to an
increase in total interest income of $2.7 million, or 11.7%, from $23.4 million
for the three months ended June 30, 1995 to $26.1 million for the three months
ended June 30, 1996. This increase was primarily the result of an increase in
interest income on loans receivable from $16.6 million in the three months ended
June 30, 1995 to $19.4 million in the three months ended June 30, 1996, due to
the increases in the interest rate earned on loans receivable and in the average
portfolio balance of loans receivable, which increased $112.6 million, or 13.0%,
to $980.8 million for the three months ended June 30, 1996, from $868.2 million
for the three months ended June 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
$1.1 million in the three months ended June 30, 1995 to $1.4 million in the
three months ended June 30, 1996, due to an increase in the average portfolio
balance of $24.3 million, or 31.0%, to $103.0 million for the three months ended
June 30, 1996, from $78.7 million for the three months ended June 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 $616,000,
or 10.9%, to $5.0 million for the three months ended June 30, 1996, from $5.6
million for the three months ended June 30, 1995, due to the decrease in the
average portfolio balance of $38.4 million, or 10.7%, to $320.8 million for the
three months ended June 30, 1996, from $359.2 million for the three months ended
June 30, 1995.
The increase in interest income was combined with a decrease in total interest
expense of $1.0 million, or 6.8%, from $14.9 million for the three months ended
June 30, 1995, to $13.9 million for the three months ended June 30, 1996.
Interest paid on deposits decreased $387,000, or 3.1%, to $11.9 million for the
three months ended June 30, 1996, from $12.3 million for the three months ended
June 30, 1995, due to a decrease of 25 basis points in the cost of deposits
offsetting an increase in the average balance of the deposits of $26.2 million,
or 2.4%, to $1,096.5 million for the three months ended June 30, 1996, from
$1,070.3 million for the three months ended June 30, 1995. The decrease in the
cost of deposits was primarily due to a 36 basis point decrease in the cost of
time deposits, as the use of the deposit portfolio as a source of funds was
de-emphasized in 1996 due to the available proceeds from the Offering. Interest
paid on borrowed funds also decreased, by $625,000, or 23.9%, to $2.0 million
for the three months ended June 30, 1996, from $2.6 million for the three months
ended June 30, 1995, due to a decrease in the average balance of Federal Home
Loan Bank advances and other borrowed money of $38.0 million, or 23.4%, to
$124.7 million for the three months ended June 30, 1996, from $162.8 million for
the three months ended June 30, 1995. This decrease reflects the use of a
portion of the proceeds from the Offering to repay borrowings.
-11-
<PAGE>
PROVISION 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 for losses on loans
decreased by $65,000 for the periods under comparison, from a provision of
$142,000 for the three months ended June 30, 1995 to a provision of $77,000 for
the three months ended June 30, 1996. The decrease for the three months ended
June 30, 1996 was due primarily to the continued favorable market conditions in
the Colorado real estate market. The provision reflects management's recognition
of and desire to appropriately reserve for the past and expected future loan
growth for the Bank. Management believes that the allowance for loan losses is
adequate at June 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 $477,000, or 43.5%, from
$1.1 million for the three months ended June 30, 1995 to $1.6 million for the
three months ended June 30, 1996. This increase was primarily the result of an
increase in fees and service charges of $220,000 and an increase in the gain on
the sale of loans of $187,000, primarily due to increased originations of fixed
rate loans which the Bank sells in the secondary market as part of its interest
rate risk management.
NONINTEREST EXPENSE. Noninterest expense increased by $1.2 million, or 24.9% for
the three months ended June 30, 1996 as compared to the three months ended June
30, 1995. The major increase of $560,000 occurred in the other, net, noninterest
expense category. In addition, the Bank experienced increases in compensation
expense of $291,000, in occupancy expense of $119,000, and in professional fees
of $75,000. Minor changes in other noninterest expense categories also
contributed to the total increase.
During the three months ended June 30, 1995, the Bank recognized $463,000 of
income in partial settlement of an IRS audit as an offset to other, net,
noninterest expense, which represents the majority of the $560,000 increase in
other, net, noninterest expense for the three month periods ending June 30, 1996
as compared to the same period in 1995. In addition, the Bank experienced
increased compensation costs during the three months ended June 30, 1996,
primarily due to an increase of $341,000 in employee benefits combined with a
$50,000 decrease in employee compensation. Approximately one half of the
compensation increase was 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. Occupancy cost increased
primarily due to the depreciation expense and other office expense associated
with the three new offices opened in 1995 and 1996. Those new offices also
contributed to the increase in employee compensation mentioned above.
The Company expects 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. It is expected that the MSBP will purchase 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.
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 $400,000 partial payment on the claim was
received in June, 1996 and resulted in a recovery of $18,000 in the second
quarter of 1996. Further claim payments are anticipated although the Bank cannot
predict the amount or the timing of any such payments.
INCOME TAX EXPENSE. Federal and state income taxes increased by $1.2 million, or
77.0%, for the three months ended June 30, 1996 compared to the three months
ended June 30, 1995, due primarily to the increase in earnings before income
taxes.
-12-
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
GENERAL. Net earnings for the six months ended June 30, 1996 increased $3.3
million, or 54.1%, to $9.3 million from $6.0 million for the six months ended
June 30, 1995. The increase was primarily due to an increase in net interest
income, offset by an increase in 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 increased the average
balance of interest-earning assets.
NET INTEREST INCOME. Net interest income increased $6.6 million, or 38.6%, from
$17.1 million during the six months ended June 30, 1995 to $23.7 million during
the six months ended June 30, 1996. This increase was primarily due to an
increase in total interest income of $6.0 million, or 13.1%, from $45.6 million
for the six months ended June 30, 1995 to $51.6 million for the six months ended
June 30, 1996. This increase was primarily the result of an increase in interest
income on loans receivable from $31.5 million in the six months ended June 30,
1995 to $38.0 million in the six months ended June 30, 1996, due to the
increases in the interest rate earned on loans receivable and in the average
portfolio balance of loans receivable, which increased $130.7 million, or 15.7%,
to $962.9 million for the six months ended June 30, 1996, from $832.1 million
for the six months ended June 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
$2.1 million in the six months ended June 30, 1995 to $2.8 million in the six
months ended June 30, 1996, due to the increase in the average portfolio balance
of $25.5 million, or 33.6%, to $101.3 million for the six months ended June 30,
1996, from $75.8 million for the six months ended June 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 $2.2 million,
or 18.4%, to $9.8 million for the six months ended June 30, 1996, from $12.0
million for the six months ended June 30, 1995, due to the decrease in the
average portfolio balance of $56.9 million, or 15.2%, to $317.2 million for the
six months ended June 30, 1996, from $374.0 million for the six months ended
June 30, 1995.
The increase in interest income was combined with a decrease in total interest
expense of $604,000, or 2.1%, from $28.5 million for the six months ended June
30, 1995, to $27.9 million for the six months ended June 30, 1996. Interest paid
on deposits increased $340,000, or 1.4%, to $23.8 million for the six months
ended June 30, 1996, from $23.5 million for the six months ended June 30, 1995,
due to the increase in the average balance of the deposits of $33.2 million, or
3.2%, to $1,086.3 million for the six months ended June 30, 1996, from $1,053.1
million for the six months ended June 30, 1995. The increase in the average
balance of deposits was accompanied by a 7 basis point decrease in the cost of
deposits for the six months ended June 30, 1996 from the six months ended June
30, 1995. This increase in interest paid on deposits was offset by a decrease in
interest paid on borrowed funds of $944,000, or 18.7%, to $4.1 million for the
six months ended June 30, 1996, from $5.0 million for the six months ended June
30, 1995, due to a decrease in the average balance of Federal Home Loan Bank
advances and other borrowed money of $31.2 million, or 19.7%, to $126.9 million
for the six months ended June 30, 1996, from $158.1 million for the six months
ended June 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 $874,000 for the periods under comparison, from a credit
of $567,000 for the six months ended June 30, 1995 to a provision of $307,000
for the six months ended June 30, 1996. The credit for the six months ended June
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 six months
ended June 30, 1996 reflects management's recognition of and desire to
appropriately reserve for the past and expected future loan growth for the Bank.
Management believes that the allowance for loan losses is adequate at June 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 $57,000, or 2.1%, from $2.7
million for the six months ended June 30, 1995 to $2.8 million for the six
months ended June 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
$362,000, 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 $356,000, offset by a decrease in net income from
real estate operations of $777,000, 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 six months ended
June 30, 1996.
NONINTEREST EXPENSE. Noninterest expense increased by $902,000, or 8.4% for the
six months ended June 30, 1996 as compared to the six months ended June 30,
1995. The major increase of $547,000 occurred in the other, net, noninterest
expense category. Additional increases in compensation expense of $460,000, in
occupancy expense of $176,000, and in advertising expense of $125,000 were
partially offset by the decrease of $636,000 in the provision for losses on
federal funds sold to account for the majority of the decrease in noninterest
expense. Increases in professional fees ($94,000, due primarily to increased
reporting requirements as a result of the Conversion and Reorganization) and
FDIC premiums ($89,000, due primarily to an increased deposit portfolio) also
contributed to the total increase.
During the six months ended June 30, 1995, the Bank recognized $463,000 of
income in partial settlement of an IRS audit as an offset to other, net,
noninterest expense, which represents the majority of the $547,000 increase in
other, net, noninterest expense for the six month periods ending June 30, 1996
as compared to the same period in 1995. In addition, the Bank experienced
increased compensation costs during the six months ended June 30, 1996,
primarily due to an increase of $559,000 in employee benefits combined with a
$99,000 decrease in employee compensation. Approximately one half of the
compensation increase was 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. Occupancy cost increased
primarily due to the depreciation expense and other office expense associated
with the three new offices opened in 1995 and 1996. Those new offices also
contributed to the increase in employee compensation mentioned above.
The Company expects 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. It is expected that the MSBP will purchase 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.
-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 $400,000 partial payment on the claim was
received in June, 1996 and resulted in a recovery of $18,000 in the second
quarter of 1996. Further claim payments are anticipated although the Bank cannot
predict the amount or the timing of any such payments.
INCOME TAX EXPENSE. Federal and state income taxes increased by $1.6 million, or
44.4%, for the six months ended June 30, 1996 compared to the six months ended
June 30, 1995, due primarily to the increase 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 12.5% during the
month of June, 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 June 30, 1996 amounted to $23.6
million, a decrease of $63.0 million from December 31, 1995. This decrease
reflects the desired 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 which provide an
additional source of funds. The Bank had a June 30, 1996 balance of $119.5
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 June 30, 1996, the Bank had total
outstanding commitments to fund loan originations or mortgage-backed security
purchases of $34.1 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 June 30, 1996:
AMOUNT % OF ASSETS
GAAP Capital $245,056 16.32%
=======
Tangible Capital:
Actual $176,140 11.77%
Required 22,441 1.50
------- -----
Excess $153,699 10.27%
=======
Core Capital:
Actual $179,028 11.94%
Required 44,969 3.00
------- -----
Excess $134,059 8.94%
=======
Risk-based Capital:
Actual $180,287 24.06%
Required 59,936 8.00
------- ------
Excess $120,351 16.06%
=======
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>
RECENT DEVELOPMENTS
DISPARITY IN INSURANCE PREMIUMS AND SPECIAL ASSESSMENT. Federal law requires
that the Federal Deposit Insurance Corporation ("FDIC") maintain the reserve
level of each of the Savings Association Insurance Fund ("SAIF") and the Bank
Insurance Fund ("BIF") at 1.25% of insured deposits. Reserves are funded through
payments by insured institutions of insurance premiums. On September 30, 1995,
due to the BIF reaching the required reserve level, the FDIC reduced the
insurance premiums for members of BIF to a range of between 0.04% and 0.31% of
deposits while maintaining the current range of between 0.23% and 0.31% of
deposits for members of SAIF. In November 1995, the FDIC lowered BIF premiums
further, whereby approximately 92% of BIF-insured institutions pay only the
statutory minimum of $2,000 annually. This reduction in insurance premiums for
BIF members could place SAIF members, primarily thrift institutions, such as the
Bank, at a material competitive disadvantage to BIF members and, for the reasons
set forth below, could have a material adverse effect on the results of
operations and financial condition of the Bank in future periods thereby
effecting the value of the Common Stock.
A disparity in insurance premiums between those required for SAIF members, such
as the Bank, and BIF members will allow BIF members to attract and retain
deposits at a lower effective cost than that of SAIF members. In the event BIF
members in the Bank's market area, as a result of the reduction in insurance
premiums, increase the interest rates paid on deposits, this could put
competitive pressure on the Bank to raise the interest rates paid on deposits
thus increasing its cost of funds and possibly reducing net interest income. The
resultant competitive disadvantage could result in the Bank losing deposits to
BIF members who have a lower cost of funds and are therefore able to pay higher
rates of interest on deposits. Although the Bank has other sources of funds,
these other sources may have higher costs than those of deposits, resulting in
lower net yields on loans originated using such funds.
Several alternatives to mitigate the effect of the BIF/SAIF insurance premium
disparity have recently been proposed by the U.S. Congress, federal regulators,
industry lobbyists and the executive branch of the United States Government. One
plan that has gained support of several sponsors would require all SAIF member
institutions, including the Bank, to pay a one-time fee of approximately 0.85%
($0.85 for every $100 of deposits) on the amount of deposits held as of March
31, 1995 by the member institution to recapitalize the SAIF. Thereafter, deposit
insurance premiums would be similar for all FDIC insured institutions. If an 85
basis point (0.85%) assessment was effected, based on deposits as of March 31,
1995, the Bank's pro rata share would amount to $9.1 million before taxes. This
assessment would have resulted in the Bank reporting a loss for the quarter
ended June 30, 1996. Management of the Bank is unable to predict whether this
proposal or any similar proposal will be enacted or whether ongoing SAIF
premiums will be reduced to a level comparable to that of BIF premiums.
POSSIBLE ELIMINATION OF THRIFT CHARTER AND BAD DEBT DEDUCTION. In connection
with Congress' debate regarding the disparity between the BIF and the SAIF
premium assessments various proposals have been put forth to merge the two
insurance funds and, in the process, eliminate the thrift charter. In addition,
certain of these proposals call for the consolidation of the OTS into one of the
other federal banking agencies, such as the Comptroller of the Currency. Under
these proposals, the two insurance funds would be merged by 1998 and at that
time, all federally chartered thrift institutions, would be required to become
either national commercial banks, state commercial banks, or state chartered
thrifts. Congress also proposes doing away with state thrift charters and
certain aspects of the Bank's bad debt deduction. If the Bank is required to
become a commercial bank or Congress changes the existing law as it relates to
the bad debt deduction, the Bank may incur adverse tax consequences as the Bank
may be required to recapture into income some or all of its bad debt deduction
for prior years. At the present time, the Bank's management is unable to predict
whether any of these proposals will be passed by Congress, in what form they may
be passed by Congress, or what effect they may have on the Bank, its financial
condition, or its results of operations.
-17-
<PAGE>
KEY OPERATING RATIOS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 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... 1.32% 0.88% 1.24% 0.89%
Return on average equity... 8.09 10.74 7.65 10.81
Net interest spread........ 2.73 2.28 2.64 2.37
Net interest margin........ 3.40 2.57 3.33 2.65
Noninterest expense to
average assets............. 1.60 1.39 1.56 1.59
Equity to assets (period end) 16.32 8.25 16.32 8.25
</TABLE>
<TABLE>
<CAPTION>
At June 30, At December 31,
1996 1995
(Dollars in Thousands,
except per share data)
(Unaudited)
<S> <C> <C>
Nonperforming loans..................... $ 1,937 $ 1,960
Repossessed real estate................. 1,684 1,647
Nonperforming investments............... 0 382
-------- --------
Total nonperforming assets........... $ 3,621 $ 3,989
======== ========
Allowance for loan losses to
nonperforming assets.................... 87.74% 73.35%
Nonperforming loans to total loans...... 0.19% 0.21%
Nonperforming assets to total assets.... 0.24% 0.27%
Book value per share (2)................ $ 12.17 $ 11.92
</TABLE>
- --------------
(1) The ratios for the three- and six-month periods are annualized.
(2) The number of shares outstanding as of June 30, 1996 and December 31, 1995
was 20,134,256 and 20,023,337, respectively. This includes shares purchased
by the ESOP.
-18-
<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 - Not applicable.
Item 5. Other Information - On July 8, 1996, First Colorado Bancorp, Inc.,
announced that the Office of Thrift Supervision has approved a stock repurchase
program providing for the repurchase of up to 1,006,712 shares of the Company's
common stock representing up to 5% of the 20,134,256 shares of Common Stock
outstanding. Shares may be purchased in the open market during the period ending
December 31, 1996, subject to the availability of stock, market conditions, the
trading price of the stock and the Company's financial performance. Repurchased
shares will be held as treasury shares and will be utilized for general
corporate purposes, including the issuances of shares in connection with the
exercise of stock options awarded under the Company stock benefit plans.
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 - None.
-19-
<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: August 7, 1996 By: /s/ Malcolm E. Collier, Jr.
Malcolm E. Collier, Jr.
Chairman of the Board
Chief Executive Officer
Date: August 7, 1996 By: /s/ Brian L. Johnson
Brian L. Johnson
Vice President
Treasurer
-20-
FIRST COLORADO BANCORP, INC.
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the three months For the six months
Ended June 30, Ended June 30,
1996 1995 1996 1995
--------- --------- -------- ------
<S> <C> <C> <C> <C>
Net Income (000's) $ 4,927 NM $ 9,264 NM
========= =========
Weighted Average Shares Outstanding 18,916,478 NM 18,892,658 NM
Common stock equivalents due to
dilutive effect of stock options 176,993 NM 176,993 NM
--------- ----------
Total weighted average common
shares and equivalents outstanding 19,093,471 NM 19,069,651 NM
========== ==========
Primary Earnings Per Share $ 0.26 NM $ 0.49 NM
========= =========
Weighted Average Shares Outstanding 18,916,478 NM 18,892,658 NM
Common stock equivalents due to
dilutive effect of stock options
using end of period market value
for period when utilizing the
treasury stock method regarding
stock options 178,289 NM 178,289 NM
---------- ---------
Total weighted average common
shares and equivalents outstanding
for fully diluted computation 19,094,767 NM 19,070,947 NM
========== ==========
Fully diluted earnings per share $ 0.26 NM $ 0.49 NM
========= =========
</TABLE>
Earnings per share of common stock for the three and six month periods ended
June 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 the Conversion and Reorganization effective December
29, 1995.
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<PERIOD-END> JUN-30-1996
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<TOTAL-ASSETS> 1,501,330
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