SECURITIES AND EXCHANGE COMMISSION
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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 September 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES 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 October 31, 1996
$0.10 Par Value Common Stock 16,790,573
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Class Shares Outstanding
<PAGE>
FIRST COLORADO BANCORP, INC.
INDEX
<TABLE>
<CAPTION>
Page Number
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PART I - CONSOLIDATED FINANCIAL INFORMATION
Consolidated Statements of Financial Condition
at September 30, 1997 (unaudited) and
December 31, 1996 1
Consolidated Statements of Operations for the
Three and Nine Months Ended September 30,
1997 and 1996 (unaudited) 2
Consolidated Statements of Stockholders' Equity for the
Period from January 1, 1996 to December 31, 1996, and for the
Period from January 1, 1997 to September 30, 1997 (unaudited) 3
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30,
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 - 16
PART II - OTHER INFORMATION 17
SIGNATURES 18
EXHIBIT
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First Colorado Bancorp, Inc. and Subsidiary
Consolidated Statements of Financial Condition
(Dollars in Thousands)
<TABLE>
<CAPTION>
As of
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September 30, 1997 December 31, 1996
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(unaudited)
<S> <C> <C>
Assets
Cash and due from banks $ 20,892 $ 21,449
Federal funds sold and other interest-earning assets 2,960 27,783
Investment Securities:
Held-to-maturity 73,937 61,642
Available-for-sale, at market value 6,782 11,099
Mortgage-backed securities, net:
Held-to-maturity 229,062 273,602
Available-for-sale, at market value 6,448 7,687
Loans receivable, net 1,122,509 1,061,524
Accrued interest receivable 8,165 8,059
Office properties and equipment, net 25,398 22,930
Federal Home Loan Bank stock 10,501 9,554
Real estate owned 1,247 1,457
Core deposit intangible 2,566 2,757
Other assets 2,138 3,956
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Total assets $1,512,605 $1,513,499
========== ==========
Liabilities
Deposits 1,148,866 1,135,823
Advances from Federal Home Loan Bank 130,310 122,515
Other borrowed money 4,605 5,009
Advances by borrowers for taxes and insurance 5,104 8,312
Current/deferred income taxes 5,794 4,529
Other liabilities 20,077 20,687
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Total liabilities 1,314,756 1,296,875
Stockholders' Equity
Common stock, $0.10 par value (50,000,000 shares authorized;
20,134,256 shares issued at September 30, 1997 and
December 31, 1996; 16,484,530 and 18,184,108 shares
outstanding at September 30, 1997 and December 31,
1996, respectively) 2,013 2,013
Additional paid-in capital 152,540 151,581
Treasury stock (3,649,726 and 1,950,148 shares,
respectively, at cost) (58,149) (28,957)
Unearned ESOP shares (11,703) (12,063)
Unearned MRP/MSBP shares (3,338) (3,929)
Unrealized gain on securities available for sale (net of tax) 307 365
Retained earnings, partially restricted 116,179 107,614
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Total stockholders' equity 197,849 216,624
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Total liabilities and stockholders' equity $1,512,605 $1,513,499
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</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 nine months ended
September 30, 1997 September 30, 1996 September 30, 1997 September 30, 1996
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<S> <C> <C> <C> <C>
Interest income:
Loans $ 22,008 20,025 64,604 58,074
Mortgage-backed securities 3,852 4,796 11,511 14,580
Investment securities 1,321 1,342 3,817 4,137
Other 46 157 243 1,165
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Total interest income
27,227 26,320 80,175 77,956
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Interest expense:
Deposits 12,919 12,530 38,053 36,369
Borrowed funds 2,261 1,987 6,526 6,079
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Total interest expense 15,180 14,517 44,579 42,448
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Net interest income 12,047 11,803 35,596 35,508
Provision (credit) for loan losses (1,320) 218 (766) 525
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Net interest income after provision
for loan losses 13,367 11,585 36,362 34,983
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Noninterest income:
Fees and service charges 1,336 1,212 3,794 3,563
Gain on sale of loans, net 79 75 178 141
Net income from real estate
operations 133 26 271 297
Rental income 45 44 139 125
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Total noninterest income 1,593 1,357 4,382 4,126
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Noninterest expense:
Compensation 3,933 3,278 10,528 8,857
Occupancy 1,043 926 3,005 2,860
Provision (credit) for losses on
real estate owned (21) (24) (21) 4
Credit for losses on federal funds
sold -- -- -- (18)
Professional fees 193 198 527 605
Advertising 266 234 717 760
Printing, supplies and postage 263 257 848 801
FDIC premiums 183 7,621 543 8,880
Other, net 732 785 2,147 2,128
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Total noninterest expense 6,592 13,275 18,294 24,877
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Earnings before income taxes 8,368 (333) 22,450 14,232
Income tax expense 3,188 (161) 8,430 5,140
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Net earnings $ 5,180 (172) 14,020 9,092
============ ====== ====== ======
Primary earnings (loss) per share $ 0.32 (0.01) 0.87 0.48
Primary shares outstanding 15,955,863 18,479,601 16,149,346 18,904,021
Fully diluted earnings (loss) per share $ 0.32 (0.01) 0.86 0.48
Fully diluted shares outstanding 16,083,673 18,604,427 16,277,156 19,028,847
</TABLE>
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<PAGE>
FIRST COLORADO BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Period from January 1, 1996 to September 30, 1997
(Activity for the Nine Months Ended September 30, 1997 is Unaudited)
(Amounts in Thousands, except Share Amounts)
<TABLE>
<CAPTION>
Net
Unrealized
Gain (Loss)
Common MRP/ on
Common Stock Additional Stock Unearned MSBP Securities
$0.10 par value Paid-in Treasury ESOP Contra Available Retained
Shares Amount Capital Shares Shares Account For Sale Earnings Total
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 20,023,337 $2,002 149,837 -- (13,404) (182) (54) 100,519 238,718
Exercise of employee stock options 110,919 11 78 183 -- -- -- -- 272
Additional offering costs on common
stock issued for cash -- -- (175) -- -- -- -- -- (175)
Payment of ESOP liability -- -- -- -- 1,341 -- -- -- 1,341
Common stock purchased by MSBP -- -- -- -- -- (3,848) -- -- (3,848)
Employees' vesting in ESOP/MRP/MSBP -- -- 1,841 -- -- 101 -- -- 1,942
Purchase of Treasury stock (1,950,148) -- -- (29,140) -- -- -- -- (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
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Balance, December 31, 1996 18,184,108 2,013 151,581 (28,957) (12,063) (3,929) 365 107,614 216,624
Exercise of employee stock options 39,272 -- (402) 557 -- -- -- -- 155
Payment of ESOP liability -- -- -- -- 360 -- -- -- 360
Employees' vesting in ESOP/MRP/MSBP -- -- 1,361 -- -- 591 -- -- 1,952
Dividends declared ($0.33 per share) -- -- -- -- -- -- -- (5,455) (5,455)
Purchase of Treasury stock (1,738,850) -- -- (29,749) -- -- -- -- (29,749)
Change in net unrealized gain (loss) on
securities available-for-sale -- -- -- -- -- -- (58) -- (58)
Net earnings -- -- -- -- -- -- -- 14,020 14,020
---------- ------ ------- ------- ------- ------ --- ------- -------
Balance, September 30, 1997 16,484,530 $2,013 152,540 (58,149) (11,703) (3,338) 307 116,179 197,849
========== ====== ======= ======= ======= ====== === ======= =======
</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 nine months ended
September 30, 1997 September 30, 1996
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<S> <C> <C>
Cash flows from operating activities:
Interest and dividends from loans receivable, mortgage-backed
and other asset-backed securities, and investment securities $79,866 76,799
Interest from property tax certificates 9 0
Fees and service charges received 4,791 4,903
Rental income received 139 125
Proceeds from sale of loans held for sale 10,029 27,980
Originations of loans held for sale (9,696) (27,829)
Interest paid (9,619) (9,790)
Cash paid to suppliers and employees (18,561) (17,416)
Income taxes paid (7,130) (8,077)
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Net cash provided by operating activities 49,828 46,695
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Cash flows from investing activities:
Proceeds from maturities of investment and mortgage-backed
securities available for sale 5,000 11,000
Proceeds from maturities of investment and mortgage-backed
securities held to maturity 45,600 61,700
Purchase of investment securities available for sale (111) 0
Purchase of investment securities held to maturity (57,855) (81,965)
Principal repayments of mortgage-backed and asset-backed securities 45,733 50,267
Purchase of mortgage-backed and other asset-backed securities
held to maturity (1,719) (35,066)
Origination of loans receivable (244,205) (275,697)
Net increase in customers' lines of credit (5,683) (9,082)
Principal repayments of loans receivable 189,534 178,090
Purchase of Federal Home Loan Bank Stock 0 (136)
Proceeds from sales of real estate owned and in judgment 835 812
Proceeds from sale of office properties and equipment 36 3
Purchase of office properties and equipment (1,804) (2,431)
Proceeds from sale of real estate held for investment and development 157 344
Other, net 208 226
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Net cash used by investing activities (24,274) (101,935)
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</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 nine months ended
September 30, 1997 September 30, 1996
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<S> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in deposits $ (21,257) 1,777
Proceeds of advances from Federal Home Loan Bank 233,700 56,700
Repayment of advances from Federal Home Loan Bank (225,905) (60,355)
Repayment of bonds payable and other borrowings (414) (456)
Net decrease in advances by borrowers for taxes and insurance (3,208) (4,103)
Purchase of treasury shares (29,749) (15,766)
Cash paid for stock offering and conversion costs 0 (2,135)
Net proceeds from exercised stock options 155 54
Net proceeds from ESOP/MRP/MSBP 2,312 (3,251)
Dividends paid (5,114) (3,596)
Other, net (1,454) 17,354
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Net cash used by financing activities (50,934) (13,777)
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Net decrease in cash and cash equivalents (25,380) (69,017)
Cash and cash equivalents at beginning of period 49,232 113,670
Cash and cash equivalents at end of period 23,852 44,653
========= =========
Reconciliation of net earnings to net cash provided by operating activities:
Net earnings 14,020 9,092
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Amortization of premiums and discounts on investments, net 1,064 787
Gain on sale of investment securities and loans receivable (178) (141)
Amortization of deferred loan origination fee income (536) (563)
Deferred loan origination fee income, net of deferred costs (6) 277
Provision for losses on loans receivable, federal funds
sold, and real estate owned and in judgment (766) 529
Gain on sale of real estate owned, net (103) (141)
Gain on sale of real estate held for investment and development (47) (24)
Stock dividends from Federal Home Loan Bank (947) (435)
Depreciation and amortization 1,315 1,366
Increase (decrease) in deferred income taxes 245 (88)
Interest expense credited to deposit accounts 34,300 32,640
Amortization of unearned discounts and deferred income (85) (157)
Decrease in loans held for sale 333 151
Increase in accrued interest receivable (106) (789)
Increase in other assets (204) (10)
Increase (decrease) in current income taxes payable 1,055 (2,849)
Increase in other liabilities 575 37
FDIC/SAIF assessment payable 0 7,000
Other, net (101) 13
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Net cash provided by operating activities 49,828 46,695
========= =========
</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 nine months ended
September 30, 1997 September 30, 1996
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<S> <C> <C>
Noncash investing and financing transactions:
Foreclosure of collateral securing loans, net of reserve $ 522 498
======== ====
Decrease in net unrealized loss on securities
available for sale, net of tax effect $ (58) (214)
======== ====
Deferred tax effect of change in unrealized loss on
securities available for sale $ (35) (132)
======== ====
</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 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 September 30, 1997, the Consolidated Statements of Operations for the
three and nine month periods ended September 30, 1997 and 1996, the
Consolidated Statement of Stockholders' Equity for the nine month period
ended September 30, 1997, and the Consolidated Statements of Cash Flows for
the nine month periods ended September 30, 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 and nine month periods
ended September 30, 1997 are not necessarily indicative of the results
which may be expected for the entire year or for any other period.
3. Earnings (Loss) per Share - Earnings (loss) per share for the three and
nine month periods ended September 30, 1997 was calculated based on the
number of primary shares and 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.
See Exhibit 11.
4. Dividends - On September 17, 1997, the Company declared a 12.0(cent) per
share cash dividend on the Company's common stock to shareholders of record
on September 29, 1997. The cash dividend was paid on October 20, 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. The Company will
adopt Statement No. 128 on December 31, 1997 and based on current
estimates, does not believe the effect on adoption will have a significant
impact on the Company's financial position or results of operations.
Reporting Comprehensive Income. In July 1997 the FASB issued SFAS No. 130,
Reporting Comprehensive Income (SFAS No. 130). SFAS No. 130 is effective
for fiscal years beginning after December 15, 1997. This statement
establishes standards for reporting and presentation of comprehensive
income and its components (revenues, expenses, gains and losses) in a full
set of general purpose financial statements. It requires that all items
that are required to be recognized under accounting standards as components
of comprehensive income be reported in a financial statement that is
presented with the same prominence as other financial statements. SFAS No.
130 requires that companies (i) classify items of other comprehensive
income by their nature in a financial statement and (ii) display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of the
statement of financial condition. Reclassification of financial statements
for earlier periods provided for comprehensive purposes is required.
6. Acquisition of Delta Federal Savings, F.S.B. - Effective October 1, 1997,
the Company acquired 100% of the common stock of Delta Federal Savings,
F.S.B., Delta, Colorado ("Delta") through the merger of Delta with and into
the Bank. Delta was acquired for $5.8 million of the Company's common
stock. The Company expects to account for this transaction using the
purchase method of accounting. This Form 10-Q does not take into account
such acquisition.
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<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.
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 retained by the
Company from its initial sale of stock, 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
$58.1 million.
COMPARISON OF FINANCIAL CONDITION AT
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
The total assets of the Company decreased $894,000, or 0.1%, from $1,513.5
million at December 31, 1996 to $1,512.6 million at September 30, 1997. This
decrease is due primarily to a decrease in Fed funds sold and other
interest-earning assets of $24.8 million, or 89.3%, from $27.8 million at
December 31, 1996 to $3.0 million at September 30, 1997. Mortgage-backed and
other asset-backed securities also decreased, from $281.3 million at December
31, 1996 to $235.5 million at September 30, 1997, a decrease of $45.8 million,
or 16.3%. The decrease in both Fed funds sold and in mortgage-backed and other
asset-backed securities resulted from the Company utilizing those funds in the
origination of loans receivable and to repurchase its stock. Offsetting the
decrease was an increase in loans receivable of $61.0 million, or 5.7%.
Investment securities also increased, from $72.7 million at December 31, 1996,
to $80.7 million at September 30, 1997, an increase of $8.0 million, or 11.0%,
due to the Company's decision to increase its portfolio.
As of September 30, 1997, non-performing assets totaled $3.1 million, or 0.2% of
total assets, an increase from $2.9 million, or 0.2% of total assets, as of
December 31, 1996.
The increase in liabilities primarily occurred in the deposit portfolio, which
increased $13.0 million, or 1.1%, from $1,135.8 million at December 31, 1996, to
$1,148.9 million at September 30, 1997. Total advances from the Federal Home
Loan Bank increased by $7.8 million, or 6.4%, from $122.5 million as of December
31, 1996, to $130.3 million as of September 30, 1997.
Stockholders' equity decreased $18.8 million, or 8.7%, primarily due to net
earnings of $14.0 million for the nine months ended September 30, 1997, being
more than offset by dividends declared totaling $5.5 million and treasury stock
purchases totaling $29.7 million.
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<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
GENERAL. Net earnings for the three months ended September 30, 1997 increased
$5.4 million, to $5.2 million from a $172,000 loss for the three months ended
September 30, 1996. The increase was primarily due to a decrease in noninterest
expense, specifically in the FDIC premium category. President Clinton signed
legislation on September 30, 1996 requiring all banks and savings associations
with accounts insured by SAIF (administered by the Federal Deposit Insurance
Corporation) to pay a special assessment to recapitalize the fund. First
Federal's assessment was $7.0 million before taxes, which was charged to
earnings during the third quarter of 1996 and resulted in the $172,000 net loss
for the quarter. That decrease in noninterest expense was accompanied by a
decrease in the provision (credit) for loan losses.
NET INTEREST INCOME. Net interest income increased $244,000, or 2.1%, from $11.8
million during the three months ended September 30, 1996 to $12.0 million during
the three months ended September 30, 1997. This increase was primarily due to an
increase in total interest income of $907,000, or 3.4%, from $26.3 million for
the three months ended September 30, 1996 to $27.2 million for the three months
ended September 30, 1997. This increase was primarily the result of an increase
in interest income on loans receivable from $20.0 million in the three months
ended September 30, 1996 to $22.0 million in the three months ended September
30, 1997, due to an increase of four basis points in the average interest earned
on loans receivable and to an increase in the average portfolio balance of loans
receivable of $94.6 million, or 9.3%, to $1,112.2 million for the three months
ended September 30, 1997, from $1,017.6 million for the three months ended
September 30, 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. Interest income on investment securities
(including those available for sale) remained stable at $1.3 million for both
the three months ended September 30, 1996 and the three months ended September
30, 1997, due to the decrease in the average portfolio balance of $8.2 million,
or 8.3%, to $90.0 million for the three months ended September 30, 1997, from
$98.2 million for the three months ended September 30, 1996, being offset by an
increase in the average rate on investment securities of 40 basis points. 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 $944,000, or 19.7%, to $3.9 million for the three months
ended September 30, 1997, from $4.8 million for the three months ended September
30, 1996, due to the decrease in the average portfolio balance of $59.0 million,
or 19.5%, to $244.4 million for the three months ended September 30, 1997, from
$303.4 million for the three months ended September 30, 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.
The increase in interest income was combined with an increase in total interest
expense of $663,000, or 4.6%, from $14.5 million for the three months ended
September 30, 1996, to $15.2 million for the three months ended September 30,
1997. Interest paid on deposits increased by $389,000, or 3.1%, to $12.9 million
for the three months ended September 30, 1997, from $12.5 million for the three
months ended September 30, 1996. This increase was due primarily to an increase
in the average balance of the deposits of $38.0 million, or 3.4%, to $1,145.8
million for the three months ended September 30, 1997, from $1,107.8 million for
the three months ended September 30, 1996. Interest paid on borrowed funds also
increased by $274,000, or 13.8%, to $2.3 million for the three months ended
September 30, 1997, from $2.0 million for the three months ended September 30,
1996, due to an increase in the average balance of Federal Home Loan Bank
advances and other borrowed money of $16.6 million, or 13.5%, to $139.7 million
for the three months ended September 30, 1997, from $123.1 million for the three
months ended September 30, 1996.
-10-
<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 decreased by $1.5 million for the periods under comparison, from a
provision of $218,000 for the three months ended September 30, 1996 to a credit
of $1.3 million for the three months ended September 30, 1997. The credit for
the three months ended September 30, 1997 was due primarily to the recovery of
$1.5 million on a commercial real estate loan, offset by a provision of
$180,000. The provision for the three months ended September 30, 1997 reflects
management's recognition of and desire to appropriately reserve for the loan
growth for the Bank. Management believes that the allowance for loan losses is
adequate at September 30, 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 $236,000, or 17.4%, from
$1.4 million for the three months ended September 30, 1996 to $1.6 million for
the three months ended September 30, 1997. This increase was primarily the
result of an increase in fees and service charges of $124,000 and an increase in
the net income from real estate operations of $107,000.
NONINTEREST EXPENSE. Noninterest expense decreased by $6.7 million, or 50.3% for
the three months ended September 30, 1997 as compared to the three months ended
September 30, 1996. The majority of the decrease related to the one-time special
SAIF assessment expense of $7.0 million, causing the FDIC premium to decrease by
$7.4 million for the three months ended September 30, 1997 as compared to the
three months ended September 30, 1996. Other increases included $655,000 in
compensation expense and $117,000 in occupancy 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
September 30, 1997, primarily due to an increase of $663,000 resulting from
expense recognized on vesting benefit plans due to the price appreciation of the
fair market value of common stock in those plans.
INCOME TAX EXPENSE. Federal and state income taxes increased by $3.3 million for
the three months ended September 30, 1997 compared to the three months ended
September 30, 1996, due primarily to the increase in earnings before income
taxes.
-11-
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
GENERAL. Net earnings for the nine months ended September 30, 1997 increased
$4.9 million, or 54.2%, to $14.0 million from $9.1 million for the nine months
ended September 30, 1996. The increase was primarily due to a decrease in net
noninterest expense and a decrease in the provision (credit) for loan losses.
The decrease in net noninterest expense can be attributed primarily to the 1996
one-time SAIF special assessment discussed previously.
NET INTEREST INCOME. Net interest income increased $88,000, or 0.2%, from $35.5
million during the nine months ended September 30, 1996 to $35.6 million during
the nine months ended September 30, 1997. This increase was primarily due to an
increase in total interest income of $2.2 million, or 2.8%, from $78.0 million
for the nine months ended September 30, 1996 to $80.2 million for the nine
months ended September 30, 1997. This increase was primarily the result of an
increase in interest income on loans receivable from $58.1 million in the nine
months ended September 30, 1996 to $64.6 million in the nine months ended
September 30, 1997, due primarily to an increase in the average portfolio
balance of loans receivable, which increased $111.5 million, or 11.4%, to
$1,092.6 million for the nine months ended September 30, 1997, from $981.1
million for the nine months ended September 30, 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.
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 $3.1 million, or 21.0%, to $11.5 million for the
nine months ended September 30, 1997, from $14.6 million for the nine months
ended September 30, 1996, due to the decrease in the average portfolio balance
of $53.2 million, or 17.1%, to $259.0 million for the nine months ended
September 30, 1997, from $312.2 million for the nine months ended September 30,
1996. In addition, in connection with an examination by the Office of Thrift
Supervision ("OTS") of the Company's mortgage-backed securities portfolio, a
non-cash charge of $827,000 was booked against interest on mortgage-backed
securities in second quarter 1997, relating to the assumptions used to amortize
the costs incurred in acquiring certain mortgage-backed securities. The decrease
in the average portfolio balance of mortgage-backed and other asset-backed
securities is due to management's decision to reinvest the cash flows from those
securities in loans receivable. Other interest income also decreased as did
interest income on investment securities. Other interest income decreased
$922,000, or 79.1%, from $1.2 million in the nine months ended September 30,
1996 to $243,000 in the nine months ended September 30, 1997, due to the
decrease in the average portfolio balance of $27.1 million, or 77.2%, to $8.0
million for the nine months ended September 30, 1997 from $35.1 million for the
nine months ended September 30, 1996. Interest income on investment securities
(including those available for sale) decreased from $4.1 million in the nine
months ended September 30, 1996 to $3.8 million in the nine months ended
September 30, 1997, due to the decrease in the average portfolio balance of
$11.0 million, or 11.0%, to $88.9 million for the nine months ended September
30, 1997, from $99.9 million for the nine months ended September 30, 1996.
The increase in interest income was combined with an increase in total interest
expense of $2.1 million, or 5.0%, from $42.4 million for the nine months ended
September 30, 1996, to $44.5 million for the nine months ended September 30,
1997. Interest paid on deposits increased $1.7 million, or 4.6%, to $38.1
million for the nine months ended September 30, 1997, from $36.4 million for the
nine months ended September 30, 1996. This increase was primarily due to the
increase in the average balance of the deposits of $49.9 million, or 4.6%, to
$1,143.1 million for the nine months ended September 30, 1997, from $1,093.2
million for the nine months ended September 30, 1996. This increase in interest
paid on deposits was accompanied by an increase in interest paid on borrowed
funds of $447,000, or 7.4%, to $6.5 million for the nine months ended September
30, 1997, from $6.1 million for the nine months ended September 30, 1996, due to
an increase in the average balance of Federal Home Loan Bank advances and other
borrowed money of $9.1 million, or 7.3%, to $134.7 million for the nine months
ended September 30, 1997, from $125.6 million for the nine months ended
September 30, 1996.
-12-
<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 decreased by $1.3 million for the periods under comparison, from a
provision of $525,000 for the nine months ended September 30, 1996 to a credit
of $766,000 for the nine months ended September 30, 1997. The credit for the
nine months ended September 30, 1997 was due primarily to the recovery of $1.5
million on a commercial real estate loan, offset by a provision of $734,000. The
provision for the nine months ended September 30, 1997 reflects management's
recognition of and desire to appropriately reserve for the loan growth for the
Bank. Management believes that the allowance for loan losses is adequate at
September 30, 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 $256,000, or 6.2%, from $4.1
million for the nine months ended September 30, 1996 to $4.4 million for the
nine months ended September 30, 1997. This increase was primarily the result of
an increase in fees and service charges of $231,000.
NONINTEREST EXPENSE. Noninterest expense decreased by $6.6 million, or 26.5% for
the nine months ended September 30, 1997 as compared to the nine months ended
September 30, 1996. The majority of the decrease related to the one-time special
SAIF assessment expense of $7.0 million in 1996, causing the FDIC premium to
decrease by $8.3 million for the nine months ended September 30, 1997 as
compared to the nine months ended September 30, 1996. Other significant
increases occurred in compensation expense ($1.7 million) and in occupancy
expense ($145,000).
The Bank experienced increased compensation costs during the nine months ended
September 30, 1997, primarily due to an increase of $478,000 in employee
compensation resulting from increased staffing and to an increase of $1.2
million resulting from expense recognized on vesting benefit plans due to the
price appreciation of the fair market value of common stock in those plans.
INCOME TAX EXPENSE. Federal and state income taxes increased by $3.3 million, or
64.0%, for the nine months ended September 30, 1997 compared to the nine months
ended September 30, 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 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 8.40% during the month of September, 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 September 30, 1997 amounted to $3.0
million, a decrease of $24.8 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 September 30, 1997 balance of $130.3
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 September 30, 1997, the Bank had total
outstanding commitments to fund loan originations or mortgage-backed security
purchases of $19.1 million.
The Bank can also access the capital markets to meet its cash needs, and did so
most recently in 1995.
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.
-14-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Bank's capital requirements and actual capital under OTS regulations are as
follows as of September 30, 1997:
<TABLE>
<CAPTION>
AMOUNT % OF ASSETS
----------- ------------
<S> <C> <C>
GAAP Capital $ 183,118 12.10%
=========== =====
Tangible Capital:
Actual $ 178,260 11.82%
Required 22,618 1.50
----------- -----
Excess $ 155,642 10.32%
=========== =====
Core Capital:
Actual $ 180,826 11.97%
Required 45,313 3.00
----------- -----
Excess $ 135,513 8.97%
=========== =====
Risk-based Capital:
Actual $ 183,152 22.67%
Required 64,644 8.00
----------- -----
Excess $ 118,508 14.67%
=========== =====
</TABLE>
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.
-15-
<PAGE>
KEY OPERATING RATIOS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ -------------------------
1997 (1) 1996 (1) 1997 (1) 1996 (1)
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Return on average assets 1.37% (0.05)% 1.24% 0.81%
Return on average equity 10.55 (0.29) 9.42 5.06
Net interest spread 2.79 2.61 2.73 2.65
Net interest margin 3.32 3.29 3.28 3.31
Noninterest expense to average
assets 1.75 3.54 1.62 2.22
Equity to assets (period end) 13.08 14.82 13.08 14.82
</TABLE>
<TABLE>
<CAPTION>
At September 30, At December 31,
1997 1996
---------------- --------------
(Dollars in Thousands,
except per share data)
(Unaudited)
<S> <C> <C>
Nonperforming loans $ 1,831 $ 1,457
Repossessed real estate 1,247 1,457
------- -------
Total nonperforming assets $ 3,078 $ 2,914
======= =======
Allowance for loan losses to nonperforming assets 141.50% 132.12%
Nonperforming loans to total loans 0.16% 0.14%
Nonperforming assets to total assets 0.20% 0.19%
Book value per share (2) $ 12.00 $ 11.91
</TABLE>
- --------------
(1) The ratios for the three- and nine-month periods are annualized where
appropriate.
(2) The number of shares outstanding as of September 30, 1997 and December 31,
1996 was 16,484,530 and 18,184,108, respectively. This includes shares
purchased by the ESOP.
-16-
<PAGE>
FIRST COLORADO BANCORP, INC.
PART II
Item 1. Legal Proceedings - From time to time, the Company is a
party to routine legal proceedings in the ordinary course of
business, such as claims to enforce liens, condemnation
proceedings on properties in which the Company holds
security interests, claims involving the making and
servicing of real property loans, and other issues incident
to the business of the Company. There were no lawsuits
pending or known to be contemplated against the Company at
September 30, 1997 that would have a material effect on the
operations or income of the Company or the Bank, taken as a
whole.
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 - Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Exhibit 11 - Statement Regarding Computation
of Earnings per Share
(b) Reports on Form 8-K - On October 2, 1997, the Company
filed a Current Report on Form 8-K announcing the
completion of the Company's acquisition of Delta,
through the merger of Delta with and into the Bank.
-17-
<PAGE>
FIRST COLORADO BANCORP, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
First Colorado Bancorp, Inc. (Registrant)
Date: November 12, 1997 By: /s/ Malcolm E. Collier, Jr.
---------------------------
Malcolm E. Collier, Jr.
Chairman of the Board
Chief Executive Officer
Date: November 12, 1997 By: /s/ Brian L. Johnson
--------------------
Brian L. Johnson
Executive Vice President
Treasurer
-18-
FIRST COLORADO BANCORP, INC.
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the three months For the nine months
Ended September 30, Ended September 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net earnings (loss) (000's) $ 5,180 $ (172) $ 14,020 $ 9,092
============ ============ ============ ============
Weighted average shares outstanding 15,453,578 18,253,696 15,647,061 18,678,116
Common stock equivalents due to dilutive
effect of stock options 502,285 225,905 502,285 225,905
------------ ------------ ------------ ------------
Total weighted average common shares
and equivalents outstanding 15,955,863 18,479,601 16,149,346 18,904,021
============ ============ ============ ============
Primary earnings (loss) per share $ 0.32 $ (0.01) $ 0.87 $ 0.48
============ ============ ============ ============
Weighted average shares outstanding
15,453,578 18,253,696 15,647,061 18,678,116
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 630,095 350,731 630,095 350,731
------------ ------------ ------------ ------------
Total weighted average common shares and
equivalents outstanding for fully diluted
computation 16,083,673 18,604,427 16,277,156 19,028,847
============ ============ ============ ============
Fully diluted earnings (loss) per share $ 0.32 $ (0.01) $ 0.86 $ 0.48
============ ============ ============ ============
</TABLE>
Earnings per share of common stock for the three and nine month periods ended
September 30, 1997 and September 30, 1996 has been determined by dividing net
income for the period by the weighted average number of shares of common stock
outstanding, net of unearned ESOP shares of 1,072,303 and 1,206,341,
respectively.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 20,892
<INT-BEARING-DEPOSITS> 2,960
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 13,230
<INVESTMENTS-CARRYING> 302,999
<INVESTMENTS-MARKET> 293,969
<LOANS> 1,122,509
<ALLOWANCE> 4,356
<TOTAL-ASSETS> 1,512,605
<DEPOSITS> 1,148,866
<SHORT-TERM> 54,310
<LIABILITIES-OTHER> 30,975
<LONG-TERM> 80,605
0
0
<COMMON> 2,013
<OTHER-SE> 195,836
<TOTAL-LIABILITIES-AND-EQUITY> 1,512,605
<INTEREST-LOAN> 64,604
<INTEREST-INVEST> 15,328
<INTEREST-OTHER> 243
<INTEREST-TOTAL> 80,175
<INTEREST-DEPOSIT> 38,053
<INTEREST-EXPENSE> 44,579
<INTEREST-INCOME-NET> 35,596
<LOAN-LOSSES> (766)
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 18,294
<INCOME-PRETAX> 22,450
<INCOME-PRE-EXTRAORDINARY> 14,020
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,020
<EPS-PRIMARY> 0.87
<EPS-DILUTED> 0.86
<YIELD-ACTUAL> 3.28
<LOANS-NON> 1,831
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,181
<CHARGE-OFFS> 67
<RECOVERIES> 1,561
<ALLOWANCE-CLOSE> 4,356
<ALLOWANCE-DOMESTIC> 4,356
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
