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, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ____ ACT OF 1934
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, 1998
$0.10 Par Value Common Stock 16,841,360
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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 March 31, 1998 (unaudited) and
December 31, 1997 1
Consolidated Statements of Operations and
Comprehensive Income for the Three Months
Ended March 31, 1998 and 1997 (unaudited) 2
Consolidated Statements of Stockholders' Equity
for the Period from January 1, 1996 to December 31, 1997, and
for the Period from January 1, 1998 to March 31, 1998 (unaudited) 3
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1998 and 1997 (unaudited) 4 - 6
Notes to Consolidated Financial Statements (unaudited) 7 - 9
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 15
PART II -OTHER INFORMATION 16
SIGNATURES 17
EXHIBIT
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<PAGE>
First Colorado Bancorp, Inc. and Subsidiary
Consolidated Statements of Financial Condition
(dollars in thousands)
<TABLE>
<CAPTION>
03/31/98 12/31/97
-------- --------
(unaudited)
<S> <C> <C>
Assets
Cash and due from banks .................................. $ 24,103 $ 27,970
Federal funds sold and other interest-earning assets ..... 32,415 16,687
Investment Securities:
Held-to-maturity .................................... 79,812 73,944
Available-for-sale, at market value ................. 758 5,951
Mortgage-backed securities, net:
Held-to-maturity .................................... 193,210 209,543
Available-for-sale, at market value ................. 5,884 6,839
Loans receivable, net .................................... 1,173,430 1,164,602
Accrued interest receivable .............................. 8,208 8,356
Office properties and equipment, net ..................... 23,155 23,606
Federal Home Loan Bank stock ............................. 11,486 11,277
Real estate owned ........................................ 183 225
Core deposit intangible/goodwill ......................... 4,177 4,251
Other assets ............................................. 2,473 2,775
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Total assets ........................................ $ 1,559,294 $ 1,556,026
=========== ===========
Liabilities
Deposits ................................................. $ 1,189,386 $ 1,182,727
Advances from Federal Home Loan Bank ..................... 120,410 122,410
Other borrowed money ..................................... 4,368 4,479
Advances by borrowers for taxes and insurance ............ 4,286 8,369
Current/deferred income taxes ............................ 7,175 4,720
Other liabilities ........................................ 20,863 24,012
----------- -----------
Total liabilities ................................... 1,346,488 1,346,717
Stockholders' Equity
Preferred stock, $0.10 par value (25,000,000 shares
authorized; none issued) ............................... -- --
Common stock, $0.10 par value (50,000,000 shares
authorized; 20,134,256 shares issued
at March 31, 1998 and December 31, 1997;
16,826,798 and 16,808,372 shares
outstanding at March 31, 1998 and
December 31, 1997, respectively) ....................... 2,013 2,013
Additional paid-in capital ............................... 155,713 155,047
Treasury stock (3,307,458 and 3,325,884 shares,
respectively, at cost).................................. (53,301) (53,562)
Unearned ESOP shares ..................................... (10,188) (10,523)
Unearned MRP/MSBP shares ................................. (3,324) (3,338)
Accumulated other comprehensive income (net of tax) ...... (612) (215)
Retained earnings, partially restricted .................. 122,505 119,887
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Total stockholders' equity .......................... 212,806 209,309
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Total liabilities and stockholders' equity .......... $ 1,559,294 $ 1,556,026
=========== ===========
</TABLE>
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<PAGE>
First Colorado Bancorp, Inc. and Subsidiary
Consolidated Statements of Operations and Comprehensive Income
(Dollars in Thousands, except per share amounts) (unaudited)
<TABLE>
<CAPTION>
March 31, 1998 March 31, 1997
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<S> <C> <C>
Interest income:
Loans ......................................................... $ 22,534 $ 21,066
Mortgage-backed securities .................................... 3,367 4,354
Investment securities ......................................... 1,348 1,205
Other ......................................................... 283 90
-------- --------
Total interest income ........................................ 27,532 26,715
-------- --------
Interest expense:
Deposits ...................................................... 12,829 12,396
Borrowed funds ................................................ 2,009 2,071
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Total interest expense ....................................... 14,838 14,467
-------- --------
Net interest income ............................................... 12,694 12,248
Provision for loan losses ......................................... 137 219
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Net interest income after provision for loan losses ............... 12,557 12,029
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Noninterest income:
Fees and service charges ...................................... 1,551 1,198
Gain (loss) on sale of loans, net ............................. 51 36
Net income from real estate operations ........................ 14 51
Rental income ................................................. 49 49
-------- --------
Total noninterest income ..................................... 1,665 1,334
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Noninterest expense:
Compensation .................................................. 3,846 3,213
Occupancy ..................................................... 1,079 941
Provision (credit) for losses on real estate owned ............ (4) 19
Professional fees ............................................. 190 180
Advertising ................................................... 212 202
Printing, supplies and postage ................................ 329 294
FDIC premiums ................................................. 185 178
Other, net .................................................... 758 657
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Total noninterest expense .................................... 6,595 5,684
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Earnings before income taxes ...................................... 7,627 7,679
Income tax expense ................................................ 2,821 2,864
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Net earnings ...................................................... $ 4,806 $ 4,815
======== ========
Other comprehensive income, net of tax:
Unrealized holding loss on securities arising
during the period .......................................... (397) (56)
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Comprehensive income .............................................. $ 4,409 $ 4,759
======== ========
Earnings per common share ......................................... $ 0.31 $ 0.31
======== ========
Earnings per common share, assuming dilution ...................... $ 0.29 $ 0.30
======== ========
</TABLE>
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<PAGE>
FIRST COLORADO BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Period from January 1, 1997 to March 31, 1998
(Activity for the Three Months Ended March 31, 1998 is Unaudited)
(Amounts in Thousands, except Share Amounts)
<TABLE>
<CAPTION>
Common Stock Common MRP/ Other
$0.10 par value Additional Stock Unearned MSBP Compre- Compre-
-------------------- Paid-in Treasury ESOP Contra hensive hensive Retained
Shares Amount Capital Shares Shares Account Income Income Earnings Total
------ ------- ------- ------ ------ ------- ------ ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 18,184,108 $ 2,013 $151,581 $(28,957) $(12,063) $(3,929) $ 365 -- $107,614 $216,624
Merger and acquisition 301,952 -- 1,646 4,278 -- -- -- -- -- 5,924
Exercise of employee stock
options 61,162 -- (661) 866 -- -- -- -- -- 205
Payment of ESOP liability -- -- -- -- 1,540 -- -- -- -- 1,540
Employees' vesting in
ESOP/MRP/MSBP -- -- 2,481 -- -- 591 -- -- -- 3,072
Dividends declared ($0.46
per share) -- -- -- -- -- -- -- -- (7,641) (7,641)
Purchase of Treasury stock (1,738,850) -- -- (29,749) -- -- -- -- -- (29,749)
Unrealized loss on
securities, net -- -- -- -- -- -- (580) $ (580) -- (580)
Net earnings -- -- -- -- -- -- -- 19,914 19,914 19,914
-------
Comprehensive income -- -- -- -- -- -- -- 19,334 -- --
---------- ------- -------- -------- -------- ------- ------ ======= -------- --------
Balance, December 31, 1997 16,808,372 2,013 155,047 (53,562) (10,523) (3,338) (215) -- 119,887 209,309
Exercise of employee
stock options 18,426 -- (84) 261 -- -- -- -- -- 177
Payment of ESOP liability -- -- -- -- 335 -- -- -- -- 335
Employees' vesting in
ESOP/MRP/MSBP -- -- 750 -- -- 14 -- -- -- 764
Dividends declared
($0.13 per share) -- -- -- -- -- -- -- -- (2,188) (2,188)
Unrealized loss on
securities, net -- -- -- -- -- -- (397) (397) -- (397)
Net earnings -- -- -- -- -- -- -- 4,806 4,806 4,806
-------
Comprehensive income -- -- -- -- -- -- -- 4,409 -- --
---------- ------- -------- -------- -------- ------- ------ ======= -------- --------
Balance, March 31, 1998 16,826,798 $ 2,013 $155,713 $(53,301) $(10,188) $(3,324) $ (612) -- $122,505 $212,806
========== ======= ======== ======== ======== ======= ====== ======== ========
</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, 1998 March 31, 1997
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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 $ 27,461 25,778
Fees and service charges received 2,122 1,540
Rental income received 49 49
Proceeds from sale of loans held for sale 7,266 2,425
Originations of loans held for sale (8,309) (1,714)
Interest paid (3,332) (3,311)
Cash paid to suppliers and employees (5,390) (5,950)
Income taxes paid (131) 0
--------- ---------
Net cash provided by operating activities $ 19,736 18,817
========= =========
Cash flows from investing activities:
Proceeds from maturities of investment and mortgage-backed
securities available for sale $ 5,200 5,000
Proceeds from maturities of investment and mortgage-backed
securities held to maturity 15,000 11,000
Purchase of investment securities held to maturity (20,833) (24,340)
Principal repayments of mortgage-backed and asset-backed securities 16,541 14,972
Origination of loans receivable (107,244) (76,130)
Net increase in customers' lines of credit (1,618) (2,518)
Principal repayments of loans receivable 100,899 52,979
Proceeds from sales of real estate owned and in judgment 42 251
Proceeds from sale of office properties and equipment 51 6
Purchase of office properties and equipment (83) (433)
Other, net 71 68
--------- ---------
Net cash provided (used) by investing activities $ 8,026 (19,145)
========= =======
</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, 1998 March 31, 1997
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<S> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in deposits $ (4,846) 7,500
Proceeds of advances from Federal Home Loan Bank 0 69,900
Repayment of advances from Federal Home Loan Bank (2,000) (65,200)
Repayment of bonds payable and other borrowings (112) (116)
Net decrease in advances by borrowers for taxes and insurance (4,083) (3,520)
Purchase of treasury shares 0 (28,067)
Net proceeds from exercised stock options 177 396
Proceeds from ESOP for repayment of debt 335 0
Dividends paid (2,185) (1,637)
Other, net (3,187) (2,108)
-------- --------
Net cash used by financing activities (15,901) (22,852)
-------- --------
Net increase (decrease) in cash and cash equivalents 11,861 (23,180)
Cash and cash equivalents at beginning of period 44,657 49,232
-------- ------
Cash and cash equivalents at end of period $ 56,518 26,052
======== ========
Reconciliation of net earnings to net cash provided by operating activities:
Net earnings $ 4,806 4,815
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Amortization of premiums and discounts on investments, net 69 104
Gain on sale of investment securities and loans receivable (51) (36)
Amortization of deferred loan origination fee income (27) (203)
Deferred loan origination fee income, net of deferred costs 124 78
Provision for losses on loans receivable, federal funds sold,
and real estate owned and in judgment 137 219
Gain on sale of real estate owned, net 0 (25)
Stock dividends from Federal Home Loan Bank (209) (156)
Depreciation and amortization 484 411
Decrease in deferred income taxes (216) (6)
Interest expense credited to deposit accounts 11,505 11,132
Amortization of unearned discounts and deferred income (52) (16)
Employee vesting in MRP/MSBP 764 0
Decrease (increase) in loans held for sale (1,043) 711
Increase (decrease) in accrued interest receivable 148 (666)
Increase (decrease) in other assets 346 (439)
Increase in current income taxes payable 2,906 2,870
Increase in other liabilities 98 106
Other, net (53) (82)
-------- --------
Net cash provided by operating activities $ 19,736 18,817
======== ========
</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, 1998 March 31, 1997
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<S> <C> <C>
Noncash investing and financing transactions:
Foreclosure of collateral securing loans, net of reserve $ 0 398
======== ===
Decrease in net unrealized loss on securities
available for sale, net of tax effect $ (397) (23)
======== ===
Deferred tax effect of change in unrealized loss on
securities available for sale $ (246) (13)
========= ===
</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. Since 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 March 31, 1998, the Consolidated Statements of
Operations for the three month periods ended March 31, 1998 and 1997,
the Consolidated Statement of Stockholders' Equity for the three month
period ended March 31, 1998, and the Consolidated Statements of Cash
Flows for the three month periods ended March 31, 1998 and 1997, 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, 1997 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 month period ended March 31, 1998 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 period
ended March 31, 1998 was calculated based on the number of basic
shares and 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 18, 1998, the Company declared a 13.0(cent)per
share cash dividend on the Company's common stock to shareholders of
record on April 3, 1998. The cash dividend was paid on April 20, 1998.
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<PAGE>
5. Recent Accounting Pronouncements - The Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 125, Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities (SFAS 125) and SFAS No. 127,
Deferral of the Effective Date of Certain Provisions of FASB Statement
No. 125 (SFAS 127) in June and December 1996, respectively. SFAS 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 are
measured initially at fair values and are amortized over the estimated
useful lives of the servicing assets. In addition, the impairment of
servicing assets is recognized through a valuation allowance. SFAS 125
also addresses the accounting and reporting standards for securities
lending, dollar-rolls, repurchase agreements and similar transactions.
The Company prospectively adopted SFAS 125 on January 1, 1997.
However, in accordance with SFAS 127, the Company deferred adoption of
the standard as it relates to securities lending, dollar-rolls,
repurchase agreements and similar transactions until January 1, 1998.
The adoption of SFAS 125 did not have a material impact on its 1997
consolidated financial statements.
In March 1997, the FASB issued SFAS No. 128, Earnings Per Share (SFAS
128) which replaced APB Opinion No. 15 related to standards for
computing and presenting earnings per share (EPS) and applies to
entities with publicly held common stock or potential common stock.
SFAS 128 replaces the presentation of primary EPS with a presentation
of basic EPS and requires dual presentation of basic and diluted EPS
on the face of the statement of operations for all entities with
complex capital structures. Also, SFAS 128 requires a reconciliation
of the numerator and denominator of the basic EPS computation to the
numerator and denominator of the diluted EPS computation. SFAS 128 is
effective for financial statements issued for periods ending after
December 15, 1997, including interim periods. SFAS 128 also requires
restatement of all prior period EPS data presented. The Company
adopted SFAS 128 in December 1997, and restated all per share amounts
for prior periods. The adoption of SFAS 128 did not hav a material
impact on the Company's reported earnings per share.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
Income (SFAS 130). SFAS 130, which is effective for fiscal years
beginning after December 15, 1997, establishes standards for reporting
and display of comprehensive income and its components in a full set
of general-purpose financial statements. Comprehensive income
represents the change in equity of a business enterprise during a
period from transactions and other events from nonowner sources.
Comprehensive income is comprised o net income and other comprehensive
income. SFAS 130 does not change the classifications currently
comprising net income. Other comprehensive income is classified into
foreign currency items, minimum pension liability adjustments and
unrealized gains and losses on certain investments in debt and equity
securities. All components of comprehensive income shall be reported
in the period in which they are recognized and be displayed in the
financial statements. The total of other comprehensive income for
period shall be transferred to a component of equity on a separate
line-item. As such, net unrealized gain (loss) on securities
available-for-sale becomes a component of other comprehensive income
upon implementation of SFAS 130. The Company adopted SFAS 130 in
January, 1998.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information (SFAS) 131). This statement
establishes standards relating to public business enterprises'
reporting of information about operating segments in financial reports
issued to shareholders. It also established standards for related
disclosures about products and services, geographic areas, and major
customers. This statement is effective for financial statements for
periods beginning after December 15, 1997. In the initial year of
application, comparative information for earlier years is to be
restated. This statement need not be applied to interim financial
statements in the initial year of application. SFAS 131 is not
expected to change the reporting requirements of the Company.
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<PAGE>
In January 1997, the SEC issued Release No. 33-7386, which requires
enhanced descriptions of accounting policies for derivative financial
instruments and derivative commodity instruments in the footnotes to
financial statements. The release also requires certain quantitative
and qualitative disclosures outside financial statements about market
risks inherent in market risk sensitive instruments and other
financial instruments. The requirements regarding accounting policy
descriptions were effective for any fiscal period ending after June
15, 1997. However, because derivative financial and commodity
instruments hav not materially affected the Company's consolidated
financial position, cash flows or results of operations, this part of
the release does not affect the Company's 1997 financial statements
disclosures. The quantitative and qualitative disclosures required by
the release were initially provided in the Company's annual report on
Form 10-K for the year ending December 31, 1998.
6. Reorganization and Merger Agreement ("the agreement") to be acquired
by Commercial Federal Corporation ("Commercial Federal"). Under the
terms of the agreement, Commercial Federal will acquire through a
tax-free reorganization all of the outstanding shares of the Company's
common stock in exchange for Commercial Federal's common stock. The
exchange ratio will be determined based upon the average closing price
of Commercial Federal's common stock during a twenty consecutive
trading day period endin five trading days prior to closing. Based on
Commercial Federal's closing price prior to March 8, 1998, First
Colorado shareholders would receive .8807 shares of Commercial Federal
common stock for each share of First Colorado Bancorp, Inc. common
stock. The acquisition is subject to regulatory approvals, the
Company's and Commercial Federal's shareholder approval and other
conditions and is expected to close in the third quarter of 1998.
Regardless of whether the proposed acquisition is consummated, the
following discussion addresses the financial condition, results of
operation, liquidity and capital resources and ongoing strategy of the
Company.
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 saving 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 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 3.7
million shares of Company common stock for $58.9 million (3.3 million shares
with a cost of $53.3 million at March 31, 1998).
-9-
<PAGE>
COMPARISON OF FINANCIAL CONDITION AT
MARCH 31, 1998 AND DECEMBER 31, 1997
The total assets of the Company increased $3.3 million, or 2.1%, from $1,556.0
million at December 31, 1997 to $1,559.3 million at March 31, 1998. This
increase is due primarily to an increase in Fed funds sold and other
interest-earning assets of $15.7 million, or 94.3%, from $16.7 million at
December 31, 1997 to $32.4 million at March 31, 1998. Loans receivable also
increased, from $1,164.6 million at December 31, 1997, to $1,173.4 million at
March 31, 1998, an increase of $8.8 million, or 0.8%. Investment securities also
increased, from $79.9 million at December 31, 1997, to $80.6 million at March
31, 1998, an increase of $675,000, or 0.8%. Offsetting these increases was a
decrease in mortgage-backed securities, from $216.4 million at December 31, 1997
to $199.1 million at March 31, 1998, a decrease of $17.3 million, or 8.0%. The
decrease in mortgage-backed securities resulted from the Company utilizing those
funds in the origination of loans receivable. In addition, cash and due from
banks decreased from $28.0 million at December 31, 1997 to $24.1 million at
March 31, 1998, a decrease of $3.9 million, or 13.9%.
Non-performing assets remained relatively stable, totaling $2.7 million, or 0.2%
of total assets at March 31, 1998 and at December 31, 1997.
Liabilities remained stable, primarily due to an increase in the deposit
portfolio of $6.7 million, or 0.6%, from $1,182.7 million at December 31, 1997,
to $1,189.4 million at March 31, 1998, which was offset by a decrease in
advances from the Federal Home Loan Bank of $2.0 million, or 1.6%, from $122.4
million at December 31, 1997, to $120.4 million at March 31, 1998, and a
decrease in other liabilities of $3.1 million, or 13.1%, from $24.0 million at
December 31, 1997 to $20.9 million at March 31, 1998.
Stockholders' equity increased $3.5 million, or 1.7%, primarily due to net
earnings of $4.8 million for the three months ended March 31, 1998, offset by
dividends declared totaling $2.2 million.
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<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
GENERAL. Net earnings remained constant at $4.8 million for the three months
ended March 31, 1998 from the three months ended March 31, 1997. This was due to
an increase in noninterest expense offsetting increases in net interest income
and noninterest income.
NET INTEREST INCOME. Net interest income increased $446,000, or 3.6%, from $12.2
million during the three months ended March 31, 1997 to $12.7 million during the
three months ended March 31, 1998. This increase was primarily due to an
increase in total interest income of $817,000, or 3.1%, from $26.7 million for
the three months ended March 31, 1997 to $27.5 million for the three months
ended March 31, 1998. Total interest income primarily increased as the result of
an increase in interest income on loan receivable from $21.1 million in the
three months ended March 31, 1997 to $22.5 million in the three months ended
March 31, 1998, due to an increase in the average portfolio balance of loans
receivable, which increased $98.9 million, or 9.2%, to $1,171.8 million for the
three months ended March 31, 1998, from $1,072.9 million for the three months
ended March 31, 1997. 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 securities (including those available for sale) of $1.0 million,
or 22.7%, to $3.4 million for the three months ended March 31, 1998, from $4.4
million for the three months ended March 31, 1997, due to the decrease in the
average portfolio balance of $66.1 million, or 24.1%, to $207.7 million for the
three months ended March 31, 1998, from $273.8 million for the three months
ended March 31, 1997. The decrease in the average portfolio balance of
mortgage-backed securities is due to management's decision to reinvest the cash
flows from these securities in loans receivable. Other interest income also
increased as did interest income on investment securities. Other interest income
increased $193,000, or 214.4%, from $90,000 in the three months ended March 31,
1997 to $283,000 in the three months ended March 31, 1998, due to the increase
in the average portfolio balance of $9.6 million, or 70.3%, to $23.3 million for
the three months ended March 31, 1998 from $13.7 million for the three months
ended March 31, 1997. Interest income on investment securities (including those
available for sale) increased from $1.2 million in the three months ended March
31, 1997 to $1.3 million in the three months ended March 31, 1998, due to the
increase in the average portfolio balance of $3.9 million, or 4.5%, to $91.0
million for the three months ended March 31, 1998, from $87.1 million for the
three months ended March 31, 1997.
The increase in interest income was offset by an increase in total interest
expense of $371,000, or 2.6%, from $14.5 million for the three months ended
March 31, 1997, to $14.8 million for the three months ended March 31, 1998.
Interest paid on deposits increased by $433,000, or 3.5%, to $12.8 million for
the three months ended March 31, 1998, from $12.4 million for the three months
ended March 31, 1997. This increase was due primarily to an increase in the
average balance of the deposits of $47.2 million or 4.1%, to $1,185.6 million
for the three months ended March 31, 1998, from $1,138.4 million for the three
months ended March 31, 1997, offsetting a decrease of three basis points in the
cost of deposits. Interest paid on borrowed funds decreased slightly, by
$62,000, or 3.0% for the three months ended March 31, 1998, compared to the
three months ended March 31, 1997, due to a $4.1 million decrease in the average
balance of Federal Home Loan Bank advances and other borrowed money for the
three months ended March 31, 1998 compared to the three months ended March 31,
1997.
-11-
<PAGE>
PROVISION FOR LOAN LOSSES. In determining the provision for loan losses,
management analyzes, among other things, the Bank's loan portfolio, market
conditions and the Bank's market area. The provision for loan losses decreased
by $82,000 for the periods under comparison, from $219,000 for the three months
ended March 31, 1997 to $137,000 for the three months ended March 31, 1998.
Management believes that the allowance for loan losses is adequate at March 31,
1998. 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 $331,000, or 24.8%, from
$1.3 million for the three months ended March 31, 1997 to $1.7 million for the
three months ended March 31, 1998. This increase was primarily the result of an
increase in fees and service charges of $353,000, due primarily to increased
transaction account activity, and an increase in the gain on the sale of loans
of $15,000, offset by a decrease of $37,000 in net income from real estate
operations.
NONINTEREST EXPENSE. Noninterest expense increased by $911,000, or 16.0% for the
three months ended March 31, 1998 as compared to the three months ended March
31, 1997. The increase was primarily due to an increase of $633,000 in
compensation expense accompanied by an increase of $138,000 in occupancy expense
and an increase of $101,000 in other 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, 1998, primarily due to an increase of $230,000 in employee
compensation resulting from increased staffing (primarily due to the acquisition
of Delta Federal Savings, F.S.B. on September 30, 1997) and to an increase of
$403,000 resulting from expense recognized on benefit plans due to the price
appreciation of the fair market value of common stock in those plans. The
increase in occupancy expense was due primarily to an increase in depreciation
expense of $71,000 (due to technology equipment purchases) and to an increase of
$54,000 in expense for leased office space (due primarily to a $49,000 expense
of leasehold improvements when changing a branch office location). The increase
in other expense was due to a general increase in various general and
administrative expenses from the three months ended March 31, 1997 to the three
months ended March 31, 1998.
INCOME TAX EXPENSE. Federal and state income taxes decreased by $43,000, or
1.5%, for the three months ended March 31, 1998 compared to the three months
ended March 31, 1997, due primarily to the decrease 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 4%. The
Bank's liquidity averaged 12.04% during the month of March, 1998. 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, 1998 amounted to $32.4
million, an increase of $15.7 million from December 31, 1997. This increase
reflects the cash flow generated from loans receivable in the current low
interest rate environment.
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, 1998 balance of $120.4
million of Federal Home Loan Bank advances compared to $122.4 million as of
December 31, 1997. These borrowings were used to fund the Bank's cash needs. The
Bank does not anticipate that it will require additional short-term borrowings
to meet its current loan commitments. At Marc 31, 1998, the Bank had total
outstanding commitments to fund loan originations or mortgage-backed security
purchases of $46.3 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.
-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, 1998:
AMOUNT % OF ASSETS
------ -----------
(in thousands)
GAAP Capital $ 201,959 12.95%
=======
Tangible Capital:
Actual $ 197,069 12.67%
Required 23,323 1.50
------ ----
Excess $ 173,746 11.17%
=======
Core Capital:
Actual $ 201,246 12.91%
Required 62,361 3.00
------ ----
Excess $ 138,885 9.91%
=======
Risk-based Capital:
Actual $ 204,804 24.43%
Required 67,058 8.00
------ ----
Excess $ 137,746 16.43%
=======
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,
--------------------------
1998 (1) 1997 (1)
-------- --------
(Unaudited)
Return on average assets............... 1.23% 1.28%
Return on average equity............... 9.08 9.52
Net interest spread.................... 2.85 2.82
Net interest margin.................... 3.40 3.38
Noninterest expense to average
assets............................... 1.69 1.51
Equity to assets (period end)........... 13.65 12.73
<TABLE>
<CAPTION>
At March 31, At December 31,
1998 1997
------------- ---------------
(Dollars in thousands,
except per share data)
(Unaudited)
<S> <C> <C>
Nonperforming loans........................................ $ 2,560 $ 2,466
Repossessed real estate.................................... 183 225
----------- -----------
Total nonperforming assets.............................. $ 2,743 $ 2,691
=========== ===========
Allowance for loan losses to nonperforming assets.......... 176.16% 175.25%
Nonperforming loans to total loans......................... 0.22% 0.21%
Nonperforming assets to total assets....................... 0.18% 0.17%
Book value per share (2)................................... $ 12.65 $ 12.45
</TABLE>
- --------------
(1) The ratios for the three-month period are annualized where appropriate.
(2) The number of shares outstanding as of March 31, 1998 and December 31,
1997 was 16,826,798 and 16,808,372, respectively. This includes shares
purchased by the ESOP.
-15-
<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 March 31, 1998 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
<TABLE>
<CAPTION>
(a) Exhibits
<S> <C>
2.1 Reorganization and Merger Agreement Between Registrant and Commercial
Federal Corporation dated as of March 9, 1998.*
2.2 Stock Option Agreement dated as of March 9, 1998.*
3(i) Articles of Incorporation of First Colorado Bancorp, Inc.**
3(ii)Bylaws of First Colorado Bancorp, Inc.**
4.1 Stock Certificate of First Colorado Bancorp, Inc.**
4.2 Preferred Share Purchase Rights Agreement***
10.1 Severance Agreement with Malcolm E. Collier, Jr.****
10.2 Form of Severance Agreement with Key Officers*****
10.3 1992 Stock Option Plan*****
10.4 1992 Management Recognition Plan*****
10.5 1996 Stock Option Plan*****
10.6 1996 Management Stock Bonus Plan*****
11 Statement Regarding Computation of Earnings per Share
27 Financial Data Schedule******
(b) Reports on Form 8-K - On March 9, 1998, the Company filed a
Current Report on Form 8-K announcing that the Company had
approved an Agreement of Merger and Reorganization with
Commercial Federal Corporation whereby the Company will merge
with Commercial Federal Corporation and each share of Company
common stock will be exchanged for a certain amount of Commercial
Federal Corporation common stock in accordance with the Agreement
of Merger and Reorganization.
- ---------------------------
* Incorporated by reference to the Registrant's Current Report on Form 8-K
filed with the SEC on March 18, 1998.
** Incorporated by reference to the Registration Statement on Form S-1 (file
no. 33-97228) declared effective by the SEC on November 13, 1995.
*** Incorporated by reference to the Registrant's Current Report on Form 8-K
filed with the SEC on July 25, 1996.
**** Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995.
***** Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996.
****** Filed electronically only.
</TABLE>
-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 14, 1998 By: /s/ Malcolm E. Collier, Jr.
---------------------------
Malcolm E. Collier, Jr.
Chairman of the Board
Chief Executive Officer
Date: May 14, 1998 By: /s/ Brian L. Johnson
--------------------
Brian L. Johnson
Executive Vice President
Treasurer
-17-
FIRST COLORADO BANCORP, INC.
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the three months
Ended March 31,
1998 1997
----------- ----------
<S> <C> <C>
Net Income (000's) $ 4,$06 $ 4,815
=========== ==========
Weighted average shares outstanding 15,660,723 15,696,179
Basic earnings per share $ 0.31 $ 0.31
=========== ==========
Effect of dilutive securities:
Stock Options 738,572 431,850
Nonvested MRP/MSBP shares 69,217 55,638
----------- ----------
Total weighted average common shares and
equivalents outstanding for fully diluted
computation 16,468,512 16,183,667
=========== ===========
Diluted earnings per share $ 0.29 $ 0.30
=========== ===========
</TABLE>
Earnings per share of common stock for the three month periods ended March 31,
1998 and March 31, 1997 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 918,265 and 1,072,303, respectively.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM THE
QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 24,103
<INT-BEARING-DEPOSITS> 4,815
<FED-FUNDS-SOLD> 27,600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6,642
<INVESTMENTS-CARRYING> 273,022
<INVESTMENTS-MARKET> 271,359
<LOANS> 1,173,430
<ALLOWANCE> 4,832
<TOTAL-ASSETS> 1,559,294
<DEPOSITS> 1,189,386
<SHORT-TERM> 38,410
<LIABILITIES-OTHER> 32,324
<LONG-TERM> 86,368
0
0
<COMMON> 2,013
<OTHER-SE> 210,793
<TOTAL-LIABILITIES-AND-EQUITY> 1,559,294
<INTEREST-LOAN> 22,534
<INTEREST-INVEST> 4,715
<INTEREST-OTHER> 283
<INTEREST-TOTAL> 27,532
<INTEREST-DEPOSIT> 12,829
<INTEREST-EXPENSE> 14,838
<INTEREST-INCOME-NET> 12,694
<LOAN-LOSSES> 137
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,595
<INCOME-PRETAX> 7,627
<INCOME-PRE-EXTRAORDINARY> 4,806
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,806
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.29
<YIELD-ACTUAL> 3.40
<LOANS-NON> 2,560
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,716
<CHARGE-OFFS> 45
<RECOVERIES> 24
<ALLOWANCE-CLOSE> 4,832
<ALLOWANCE-DOMESTIC> 4,832
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
