U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
X ACT OF 1934
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For the Quarterly Period Ended March 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
X EXCHANGE ACT OF 1934
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For the transition period from to
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Commission File Number: 0-27126
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First Colorado Bancorp, Inc.
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(Exact name of registrant as specified in its charter)
Colorado 84-1320788
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
215 S. Wadsworth Blvd., Lakewood, CO 80226
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (303) 232-2121
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N/A
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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
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Number of shares outstanding of common stock
as of April 30, 1997
$0.10 Par Value Common Stock 16,561,425
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Class Shares Outstanding
<PAGE>
FIRST COLORADO BANCORP, INC.
INDEX
Page Number
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PART I - CONSOLIDATED FINANCIAL INFORMATION
Consolidated Statements of Financial Condition
at March 31, 1997 (unaudited) and
December 31, 1996 1
Consolidated Statements of Operations for the
Three Months Ended March 31,
1997 and 1996 (unaudited) 2
Consolidated Statements of Stockholders' Equity
for the Period from January 1, 1995 to December 31,
1996, and for the Period from January 1, 1997 to
March 31, 1997 (unaudited) 3
Consolidated Statements of Cash Flows
for the Three Months Ended March 31,
1997 and 1996 (unaudited) 4 - 6
Notes to Consolidated Financial Statements 7 - 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 15
PART II - OTHER INFORMATION 16
SIGNATURES 17
EXHIBIT
<PAGE>
First Colorado Bancorp, Inc. and Subsidiary
Consolidated Statements of Financial Condition
(Dollars in Thousands)
As of
----------------------------------
March 31, 1997 December 31, 1996
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(unaudited)
Assets
Cash and due from banks $ 18,980 21,449
Federal funds sold and other 7,072 27,783
interest-earning assets
Investment securities:
Held-to-maturity 74,990 61,642
Available-for-sale 6,063 11,099
Mortgage-backed and other asset-backed
securities, net:
Held-to-maturity 258,728 273,602
Available-for-sale 7,471 7,687
Loans receivable, net 1,086,026 1,061,524
Accrued interest receivable 8,725 8,059
Office properties and equipment, net 22,952 22,930
Federal Home Loan Bank stock 9,710 9,554
Real estate owned 1,629 1,457
Other assets 7,168 7,302
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Total assets $1,509,514 1,514,088
========== ==========
Liabilities
Deposits 1,154,455 1,135,823
Advances from Federal Home Loan Bank 127,215 122,515
Other borrowed money 4,897 5,009
Advances by borrowers for taxes and insurance 4,791 8,312
Accrued income taxes 7,380 5,118
Other liabilities 18,687 20,687
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Total liabilities $1,317,425 $1,297,464
Stockholders' Equity
Common stock, $0.10 par value (50,000,000
shares authorized; 20,134,256 issued at
March 31, 1997 and December 31, 1996;
16,555,197 and 18,184,108 shares
outstanding at March 31, 1997 and December
31, 1996, respectively) 2,013 2,013
Additional paid-in capital 151,765 151,581
Treasury stock (3,579,059 and 1,950,148
shares, respectively, at cost) (56,812) (28,957)
Unearned ESOP shares (12,063) (12,063)
Unearned MRP/MSBP shares (3,929) (3,929)
Net unrealized gain (loss) on securities
available for sale (net of tax effect) 342 365
Retained earnings, partially restricted 110,773 107,614
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Total stockholders' equity 192,089 216,624
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Total liabilities and stockholders' equity $1,509,514 1,514,088
========== ==========
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<PAGE>
First Colorado Bancorp, Inc. and Subsidiary
Consolidated Statements of Operations
(Dollars in Thousands, except per share amounts) (unaudited)
For the three months ended
March 31, 1997 March 31, 1996
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Interest income:
Loans $ 21,066 18,617
Mortgage-backed securities 4,354 4,763
Investment securities 1,205 1,376
Other 90 769
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Total interest income 26,715 25,525
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Interest expense:
Deposits 12,396 11,910
Borrowed funds 2,071 2,098
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Total interest expense 14,467 14,008
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Net interest income 12,248 11,517
Provision for loan losses 219 230
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Net interest income after provision
for loan losses 12,029 11,287
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Noninterest income:
Fees and service charges 1,198 1,148
Gain (loss) on sale of loans, net 36 (121)
Net income from real estate 51 129
operations
Rental income 49 39
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Total noninterest income 1,334 1,195
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Noninterest expense:
Compensation 3,213 2,718
Occupancy 941 929
Provision (credit) for losses on
real estate owned 19 (26)
Professional fees 180 197
Advertising 202 257
Printing, supplies and postage 294 275
FDIC premiums 178 618
Other, net 657 660
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Total noninterest expense 5,684 5,628
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Earnings before income taxes 7,679 6,854
Income tax expense 2,864 2,517
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Net earnings $ 4,815 4,337
=========== ==========
Fully diluted earnings per share $ 0.29 0.23
=========== ==========
Fully diluted shares outstanding 16,417,173 19,075,299
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<PAGE>
FIRST COLORADO BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Period from January 1, 1995 to March 31, 1997
(Activity for the Three Months Ended March 31, 1997 is Unaudited)
(Amounts in Thousands, except Share Amounts)
<TABLE>
<CAPTION>
Common
Common Stock Common Stock Additional Stock
$1.00 par value $0.10 par value Paid-in Treasury
Shares Amount Shares Amount Capital Shares
------ ------ ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 6,331,622 $ 6,332 -- $ -- 18,151 --
Exercise of employee stock options 39,515 40 -- -- 224 --
Payment of ESOP liability -- -- -- -- -- --
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 --
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 gain (loss)
on securities available for sale -- -- -- -- -- --
Net earnings -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 -- -- 20,023,337 2,002 149,837 --
Exercise of employee stock options -- -- 110,919 11 78 183
Additional offering costs on common stock
issued for cash -- -- -- -- (175) --
Payment of ESOP liability -- -- -- -- -- --
Common stock purchased by MSBP -- -- -- -- -- --
Employees' vesting in ESOP/MRP/MSBP -- -- -- -- 1,841 --
Purchase of Treasury stock -- -- (1,950,148) -- -- (29,140)
Dividends declared ($0.325 per share) -- -- -- -- -- --
Change in net unrealized gain (loss) on
securities available for sale -- -- -- -- -- --
Net earnings -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 -- -- 18,184,108 2,013 151,581 (28,957)
Exercise of employee stock options -- -- 14,939 -- (179) 212
Employees' vesting in ESOP/MRP/MSBP -- -- -- -- 363 --
Dividends declared ($0.10 per share -- -- -- -- -- --
Purchase of Treasury stock -- -- (1,643,850) -- -- (28,067)
Change in net unrealized gain (loss) on
securities available-for-sale -- -- -- -- -- --
Net earnings -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance, March 31, 1997 $ -- $ -- $16,555,197 $2,013 $ 151,765 $ (56,812)
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Unrealized
MRP/ Gain (Loss)
Unearned MSBP on Securities
ESOP Contra Available Retained
Shares Account For Sale Earnings Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995 (446) (258) (1,370) 85,605 108,014
Exercise of employee stock options -- -- -- -- 264
Payment of ESOP liability 446 -- -- -- 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 (13,404) -- -- -- --
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 gain
(loss) on securities available for sale -- -- 1,316 -- 1,316
Net earnings -- -- -- 12,638 12,638
-------- -------- --------- --------- ---------
Balance, December 31, 1995 (13,404) (182) (54) 100,519 238,718
Exercise of employee stock options -- -- -- -- 272
Additional offering costs on common stock
issued for cash -- -- -- -- (175)
Payment of ESOP liability 1,341 -- -- -- 1,341
Common stock purchased by MSBP -- -- -- -- (3,848)
Employees' vesting in ESOP/MRP/MSBP -- 101 -- -- 1,942
Purchase of Treasury stock -- -- -- -- (29,140)
Dividends declared ($0.325 per share) -- -- -- (6,277) (6,277)
Change in net unrealized gain (loss) on
securities available for sale -- -- 419 -- 419
Net earnings -- -- -- 13,372 13,372
-------- -------- --------- --------- ---------
Balance, December 31, 1996 (12,063) (3,929) 365 107,614 216,624
Exercise of employee stock options -- -- -- -- 33
Employees' vesting in ESOP/MRP/MSBP -- -- -- -- 363
Dividends declared ($0.10 per share -- -- -- (1,656) (1,656)
Purchase of Treasury stock -- -- -- -- (28,067)
Change in net unrealized gain (loss) on
securities available-for-sale -- -- (23) -- (23)
Net earnings -- -- -- 4,815 4,815
-------- -------- --------- --------- ---------
Balance, March 31, 1997 $(12,063) $(3,9290) $ 342 $ 110,773 $ 192,089
-------- -------- --------- --------- ---------
</TABLE>
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<PAGE>
FIRST COLORADO BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
For the three months ended
March 31, 1997 March 31, 1996
-------------- --------------
Cash flows from operating activities:
Interest and dividends from loans receivable,
mortgage-backed and other asset-backed securities,
<S> <C> <C>
and investment securities $ 25,778 24,804
Fees and service charges received 1,540 1,760
Rental income received 49 39
Proceeds from sale of loans held for sale 2,425 3,360
Originations of loans held for sale (1,714) (6,765)
Interest paid (3,311) (3,328)
Cash paid to suppliers and employees (5,950) (5,269)
Income taxes paid 0 (48)
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Net cash provided by operating activities $ 18,817 14,553
======== =======
Cash flows from investing activities:
Proceeds from maturities of investment and
mortgage-backed securities available for sale $ 5,000 10,000
Proceeds from maturities of investment and
mortgage-backed securities held to maturity 11,000 20,000
Purchase of investment securities held to maturity (24,340) (45,922)
Principal repayments of mortgage-backed and
asset-backed securities 14,972 15,482
Purchase of mortgage-backed and other asset-backed
securities held to maturity 0 (35,066)
Origination of loans receivable (76,130) (95,003)
Net decrease (increase) in customers' lines of credit (2,518) 235
Principal repayments of loans receivable 52,979 68,741
Purchase of Federal Home Loan Bank Stock 0 (136)
Proceeds from sales of real estate owned and in
judgment 251 359
Proceeds from sale of office properties and equipment 6 2
Purchase of office properties and equipment (433) (574)
Other, net 68 71
-------- -------
Net cash used by investing activities $(19,145) (61,811)
======== =======
</TABLE>
(Continued)
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<PAGE>
FIRST COLORADO BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
For the three months ended
March 31, 1997 March 31, 1996
-------------- --------------
Cash flows from financing activities:
<S> <C> <C>
Net increase in deposits $ 7,500 3,372
Proceeds of advances from Federal Home Loan Bank 69,900 0
Repayment of advances from Federal Home Loan Bank (65,200) (7,000)
Repayment of bonds payable and other borrowings (116) (52)
Net decrease in advances by borrowers for taxes and (3,520) (4,495)
insurance
Purchase of treasury shares (28,067) 0
Cash paid for stock offering and conversion costs 0 (2,282)
Net proceeds from exercised stock options 396 162
Dividends paid (1,637) (480)
Other, net (2,108) 3,289
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Net cash used by financing activities (22,852) (7,486)
-------- ------
Net decrease in cash and cash equivalents (23,180) (54,744)
Cash and cash equivalents at beginning of year 49,232 113,670
Cash and cash equivalents at end of year $ 26,052 58,926
======== ======
Reconciliation of net earnings to net cash provided
by operating activities:
Net earnings $ 4,815 4,337
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Amortization of premiums and discounts
on investments, net 104 383
Gain on sale of investment securities and loans
receivable (36) (35)
Amortization of deferred loan origination fee
income (203) (127)
Deferred loan origination fee income, net of
deferred costs 78 316
Provision for losses on loans receivable, federal
funds sold, and real estate owned and in judgment 219 386
Gain on sale of real estate owned, net (25) (98)
Stock dividends from Federal Home Loan Bank (156) (132)
Depreciation and amortization 411 442
Decrease in deferred income taxes (6) (304)
Interest expense credited to deposit accounts 11,132 10,679
Amortization of unearned discounts and deferred
income (16) (25)
Decrease (increase) in loans held for sale 711 (3,405)
Increase in accrued interest receivable (666) (820)
Increase in other assets (439) (42)
Increase in current income taxes payable 2,870 2,773
Increase in other liabilities 106 231
Other, net (82) (6)
-------- ------
Net cash provided by operating activities $ 18,817 14,553
======== ======
</TABLE>
(Continued)
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<PAGE>
FIRST COLORADO BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
For the three months ended
March 31, 1997 March 31, 1996
-------------- --------------
Noncash investing and financing transactions:
<S> <C> <C>
Foreclosure of collateral securing loans, net of reserve $ 398 0
===== ======
Decrease in net unrealized loss on securities
available for sale, net of tax effect $ (23) (59)
===== ======
Deferred tax effect of change in unrealized loss on
securities available for sale $ (13) (37)
====== ======
</TABLE>
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<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 1996, 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 March 31, 1997, the Consolidated Statements of Operations for the three
month periods ended March 31, 1997 and 1996, the Consolidated Statement of
Stockholders' Equity for the three month period ended March 31, 1997, and the
Consolidated Statements of Cash Flows for the three month periods ended March
31, 1997 and 1996, 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, 1996 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 months ended March 31, 1997
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 month periods ended
March 31, 1997 and March 31, 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 Ownership 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.
See Exhibit 11.
4. Dividends - On March 19, 1997, the Company declared a 10.0(cent) per share
cash dividend on the Company's common stock to shareholders of record on
March 31, 1997. The cash dividend was paid on April 18, 1997.
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<PAGE>
5. Recent Accounting Pronouncements - Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities. The FASB issued SFAS No.
125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities (SFAS No. 125) and SFAS No. 127, Deferral of
the Effective Date of Certain Provisions of FASB Statement No. 125 (SFAS No.
127) in June and December 1996, respectively. SFAS No. 125 provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities. It requires entities to recognize
servicing assets and liabilities for all contracts to service financial
assets, unless the assets are securitized and all servicing is retained. The
servicing assets will be measured initially at fair values, and will be
amortized over the estimated useful lives of the servicing assets. In
addition, the impairment of servicing assets will be recognized through a
valuation allowance. SFAS No. 125 also addresses the accounting and reporting
standards for securities lending, dollar-rolls, repurchase agreements and
similar transactions. The Company will prospectively adopt SFAS No. 125 on
January 1, 1997. However, in accordance with SFAS No. 127, the Company will
defer adoption of the standard as it relates to securities lending,
dollar-rolls, repurchase agreements and similar transactions until January 1,
1998. The Company does not expect the adoption of SFAS No. 125 to have a
material impact on its consolidated financial statements.
Earnings per Share. On March 3, 1997, the FASB issued SFAS No. 128, Earnings
per Share (SFAS No. 128) which is effective for financial statements issued
for periods ending after December 15, 1997. SFAS No. 128 replaces APB Opinion
15, Earnings per Share, and simplifies the computation of earnings per share
(EPS) by replacing the presentation of primary EPS with a presentation of
basic EPS. In addition, the Statement requires dual presentation of basic and
diluted EPS by entities with complex capital structures. Basic EPS includes
no dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for
the period. Diluted EPS reflects the potential dilution of securities that
could share in the earnings of an entity, similar to fully diluted EPS. The
computation of EPS will be compatible with international standards, as the
International Accounting Standards Committee recently issued a comparable
standard.
-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"). The Mutual Holding Company
previously was the majority stockholder of the Bank and upon consummation of the
Conversion and Reorganization on December 29, 1995, the Mutual Holding Company
was merged with and into the Bank, and the Company acquired the Bank as a wholly
owned subsidiary. 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. As of
March 31, 1997, the Company had total assets of $1.5 billion, total deposits of
$1.2 billion, and stockholders' equity of $192.1 million, or 12.7% of total
assets.
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 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 have been invested in a loan to the Bank and in
deposits in the Bank, and in a stock repurchase program resulting in the
repurchase of 3.6 million shares of Company common stock for $56.8 million. All
intercompany accounts have been eliminated in the Company's consolidated
financial statements.
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<PAGE>
COMPARISON OF FINANCIAL CONDITION AT
MARCH 31, 1997 AND DECEMBER 31, 1996
The total assets of the Company decreased $4.6 million, or 0.3%, from $1,514.1
million at December 31, 1996 to $1,509.5 million at March 31, 1997. This
decrease is due primarily to a decrease in Fed funds sold and other
interest-earning assets of $20.7 million, or 74.5%, from $27.8 million at
December 31, 1996 to $7.1 million at March 31, 1997. Mortgage-backed and other
asset-backed securities also decreased, from $281.3 million at December 31, 1996
to $266.2 million at March 31, 1997, a decrease of $15.1 million, or 5.4%. The
decrease in both Fed funds sold and in mortgage-backed and other asset-backed
securities resulted from the Bank utilizing those funds in the origination of
loans receivable. Offsetting the decrease was an increase in loans receivable of
$24.5 million, or 2.3%. Investment securities also increased, from $72.7 million
at December 31, 1996, to $81.0 million at March 31, 1997, an increase of $8.3
million, or 11.4%, due to the Bank's decision to increase its liquidity
portfolio.
As of March 31, 1997 and December 31, 1996, non-performing assets totaled $2.9
million, or 0.2% of total assets.
The increase in liabilities primarily occurred in the deposit portfolio, which
increased $18.6 million, or 1.6%, from $1,135.8 million at December 31, 1996, to
$1,154.4 million at March 31, 1997. Total advances from the Federal Home Loan
Bank increased by $4.7 million, or 3.8%, from $122.5 million as of December 31,
1996, to $127.2 million as of March 31, 1997.
Stockholders' equity decreased $24.5 million, or 11.3%, primarily due to net
earnings of $4.8 million for the three months ended March 31, 1997, being more
than offset by dividends declared totaling $1.7 million and treasury stock
purchases totaling $28.1 million.
-10-
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
GENERAL. Net earnings for the three months ended March 31, 1997 increased
$478,000, or 11.0%, to $4.8 million from $4.3 million for the three months ended
March 31, 1996. The increase was primarily due to an increase in net interest
income.
NET INTEREST INCOME. Net interest income increased $731,000, or 6.3%, from $11.5
million during the three months ended March 31, 1996 to $12.2 million during the
three months ended March 31, 1997. This increase was primarily due to an
increase in total interest income of $1.2 million, or 4.7%, from $25.5 million
for the three months ended March 31, 1996 to $26.7 million for the three months
ended March 31, 1997. This increase was primarily the result of an increase in
interest income on loans receivable from $18.6 million in the three months ended
March 31, 1996 to $21.1 million in the three months ended March 31, 1997, due to
an increase in the average portfolio balance of loans receivable, which
increased $128.7 million, or 13.6%, to $1,072.9 million for the three months
ended March 31, 1997, from $944.2 million for the three months ended March 31,
1996. 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. The increase in interest income from loans receivable
was partially offset by a decrease in interest income on mortgage-backed and
other asset-backed securities (including those available for sale) of $409,000,
or 8.6%, to $4.4 million for the three months ended March 31, 1997, from $4.8
million for the three months ended March 31, 1996, due to the decrease in the
average portfolio balance of $43.0 million, or 13.6%, to $273.8 million for the
three months ended March 31, 1997, from $316.8 million for the three months
ended March 31, 1996. 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.
Other interest income also decreased as did interest income on investment
securities. Other interest income decreased $679,000, or 88.3%, from $769,000 in
the three months ended March 31, 1996 to $90,000 in the three months ended March
31, 1997, due to the decrease in the average portfolio balance of $25.4 million,
or 64.9%, to $13.7 million for the three months ended March 31, 1997 from $39.1
million for the three months ended March 31, 1996. Interest income on investment
securities (including those available for sale) decreased from $1.4 million in
the three months ended March 31, 1996 to $1.2 million in the three months ended
March 31, 1997, due to the decrease in the average portfolio balance of $13.1
million, or 13.0%, to $87.1 million for the three months ended March 31, 1997,
from $100.2 million for the three months ended March 31, 1996.
The increase in interest income was combined with an increase in total interest
expense of $459,000, or 3.3%, from $14.0 million for the three months ended
March 31, 1996, to $14.5 million for the three months ended March 31, 1997.
Interest paid on deposits increased by $486,000, or 4.1%, to $12.4 million for
the three months ended March 31, 1997, from $11.9 million for the three months
ended March 31, 1996. This increase was due primarily to an increase in the
average balance of the deposits of $60.2 million, or 5.6%, to $1,138.4 million
for the three months ended March 31, 1997, from $1,078.2 million for the three
months ended March 31, 1996, offsetting a decrease of six basis points in the
cost of deposits. Interest paid on borrowed funds decreased slightly, by
$27,000, or 1.3% for the three months ended March 31, 1997, compared to the
three months ended March 31, 1996, due to a $1.5 million increase in the average
balance of Federal Home Loan Bank advances and other borrowed money for the
three months ended March 31, 1997 compared to the three months ended March 31,
1996 being offset by a decrease of fifteen basis points in the cost of
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 for losses on loans
decreased by $11,000 for the periods under comparison, from $230,000 for the
three months ended March 31, 1996 to $219,000 for the three months ended March
31, 1997. Management believes that the allowance for loan losses is adequate at
March 31, 1997. 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 $139,000, or 11.6%, from
$1.2 million for the three months ended March 31, 1996 to $1.3 million for the
three months ended March 31, 1997. This increase was primarily the result of an
increase in fees and service charges of $50,000 and an increase in the gain on
the sale of loans of $157,000, offset by a decrease of $78,000 in net income
from real estate operations.
NONINTEREST EXPENSE. Noninterest expense increased by $56,000, or 1.0% for the
three months ended March 31, 1997 as compared to the three months ended March
31, 1996. The increase was primarily due to an increase of $495,000 in
compensation expense offset by a decrease of $440,000 in the federal deposit
insurance premium expense. Minor changes in other noninterest expense categories
also contributed to the total increase.
The Bank experienced increased compensation costs during the three months ended
March 31, 1997, primarily due to an increase of $239,000 in employee
compensation resulting from increased staffing and to an increase of $253,000
resulting from expense recognized on benefit plans (including the purchase of
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,
beginning 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. The increase in compensation expense was offset by a
decrease in the federal deposit insurance premium expense, due primarily to the
reduction in the premium rate as a result of the September 30, 1996 legislation
recapitalizing the Savings Association Insurance Fund.
INCOME TAX EXPENSE. Federal and state income taxes increased by $347,000, or
13.8%, for the three months ended March 31, 1997 compared to the three months
ended March 31, 1996, due primarily to the increase in earnings before income
taxes.
-12-
<PAGE>
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 8.7% during the
month of March, 1997. 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 March 31, 1997 amounted to $7.1
million, a decrease of $20.7 million from December 31, 1996. 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 March 31, 1997 balance of $127.2
million of Federal Home Loan Bank advances compared to $122.5 million as of
December 31, 1996. 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 March 31, 1997, the Bank had total
outstanding commitments to fund loan originations or mortgage-backed security
purchases of $16.7 million.
The Bank can also access the capital markets to meet its cash needs, and
recently did so through the 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.
-13-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Bank's capital requirements and actual capital under OTS regulations are as
follows as of March 31, 1997:
AMOUNT % OF ASSETS
------ -----------
GAAP Capital $172,375 11.70%
========
Tangible Capital:
Actual $167,340 11.11%
Required 22,590 1.50
-------- -----
Excess $144,750 9.61%
========
Core Capital:
Actual $170,033 11.27%
Required 45,260 3.00
-------- -----
Excess $124,773 8.27%
========
Risk-based Capital:
Actual $172,149 21.92%
Required 62,829 8.00
-------- -----
Excess $109,320 13.92%
========
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.
-14-
<PAGE>
KEY OPERATING RATIOS
Three Months Ended
March 31,
1997 (1) 1996 (1)
-------- --------
(Dollars in Thousands,
except per share data)
(Unaudited)
Return on average assets... 1.28% 1.17%
Return on average equity... 9.52 7.21
Net interest spread........ 2.82 2.55
Net interest margin........ 3.38 3.24
Noninterest expense to
average assets............ 1.51 1.52
Equity to assets (period end) 12.73 16.19
At March 31, At December 31,
1997 1996
------------ ---------------
(Dollars in Thousands,
except per share data)
(Unaudited)
Nonperforming loans..................... $ 1,314 $ 1,457
Repossessed real estate................. 1,629 1,457
-------- --------
Total nonperforming assets........... $ 2,943 $ 2,914
======== ========
Allowance for loan losses to 136.49% 132.12%
nonperforming assets....................
Nonperforming loans to total loans...... 0.12% 0.14%
Nonperforming assets to total assets.... 0.20% 0.19%
Book value per share (2)................ $ 11.60 $ 11.91
- --------------
(1) The ratios for the three-month period are annualized where appropriate.
(2) The number of shares outstanding as of March 31, 1997 and December 31, 1996
was 16,555,197 and 18,184,108, respectively. This includes shares purchased
by the ESOP.
-15-
<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 or
addresses other issues incident to the business of the Bank.
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 January 21, 1997, the Company announced that it
had received non-objection from the OTS to purchase up to 10% or 1,818,410
shares of the Company's common stock.
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
-16-
<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: May 7, 1997 By: /s/ Malcolm E. Collier, Jr.
---------------------------
Malcolm E. Collier, Jr.
Chairman of the Board
Chief Executive Officer
Date: May 7, 1997 By: /s/ Brian L. Johnson
--------------------
Brian L. Johnson
Vice President
Treasurer
-17-
FIRST COLORADO BANCORP, INC.
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
For the three months
Ended March 31,
1997 1996
------------- -----------
Net Income (000's) $ 4,815 $ 4,337
=========== ===========
Weighted Average Shares Outstanding 16,006,335 18,868,838
Common stock equivalents due to
dilutive effect of stock options 436,325 204,318
----------- -----------
Total weighted average common
shares equivalents outstanding 16,442,660 19,073,156
=========== ===========
Primary Earnings Per Share $ 0.29 $ 0.23
=========== ===========
Weighted Average Shares Outstanding 16,006,335 18,868,838
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 410,838 206,461
----------- -----------
Total weighted average common
shares and equivalents outstanding
for fully diluted computation 16,417,173 19,075,299
=========== ===========
Fully diluted earnings per share $ 0.29 $ 0.23
=========== ===========
Earnings per share of common stock for the three month periods ended March 31,
1997 and March 31, 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 1,072,303 and 1,206,341, respectively.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 18,980
<INT-BEARING-DEPOSITS> 7,072
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 13,534
<INVESTMENTS-CARRYING> 347,252
<INVESTMENTS-MARKET> 337,639
<LOANS> 1,086,026
<ALLOWANCE> 4,017
<TOTAL-ASSETS> 1,509,514
<DEPOSITS> 1,154,455
<SHORT-TERM> 56,805
<LIABILITIES-OTHER> 30,858
<LONG-TERM> 75,307
0
0
<COMMON> 2,013
<OTHER-SE> 190,076
<TOTAL-LIABILITIES-AND-EQUITY> 1,509,514
<INTEREST-LOAN> 21,066
<INTEREST-INVEST> 5,559
<INTEREST-OTHER> 90
<INTEREST-TOTAL> 26,715
<INTEREST-DEPOSIT> 12,396
<INTEREST-EXPENSE> 14,467
<INTEREST-INCOME-NET> 12,248
<LOAN-LOSSES> 219
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,684
<INCOME-PRETAX> 7,679
<INCOME-PRE-EXTRAORDINARY> 4,815
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,815
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0.29
<YIELD-ACTUAL> 3.38
<LOANS-NON> 1,314
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 77
<ALLOWANCE-OPEN> 3,850
<CHARGE-OFFS> 64
<RECOVERIES> 12
<ALLOWANCE-CLOSE> 4,017
<ALLOWANCE-DOMESTIC> 4,017
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
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