U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 2000
Commission file number 0-23409
High Country Bancorp, Inc.
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(Exact Name of Small business Issuer as Specified in Its Charter)
Colorado 84-1438612
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(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7360 West US Highway 50, Salida Colorado 81201
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(Address of Principal Executive Offices)
719-539-2516
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(Issuer's Telephone Number, Including Area Code)
Check whether the issuer's: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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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State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Shares of common stock, $.01 par value outstanding as of September 30, 2000
1,071,225
<PAGE>
HIGH COUNTRY BANCORP, INC.
CONTENTS
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Statements of Condition at June 30, 2000
and September 30, 2000 3
Statements of Consolidated Income for the Three
Months Ended September 30, 2000 and 1999 4
Statements of Consolidated Cash Flows for the Three
Months Ended September 30, 2000 and 1999 5
Notes to Financial Statements 6 - 7
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 10
PART II - OTHER INFORMATION
Item 1: Legal Proceedings 11
Item 2: Changes in Securities 11
Item 3: Defaults Upon Senior Securities 11
Item 4: Submission of Matters to a Vote of Security Holders 11
Item 5: Other Information 11
Item 6: Exhibits and Reports on Form 8-K 11
Signature 11
2
<PAGE>
HIGH COUNTRY BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, June 30,
ASSETS 2000 2000
------------------------------------
<S> <C> <C>
Cash and amounts due from banks $ 2,684,494 $ 4,392,623
Interest- bearing deposits at other institutions 2,441,405 1,320,918
Mortgage-backed securities, held to maturity 2,576,707 2,642,889
Securities held to maturity 200,000 200,000
Loans receivable - net 128,364,175 119,897,542
Loans held for sale, lower of cost or market 385,325 -
Federal Home Loan Bank stock, at cost 2,062,000 1,857,000
Accrued interest receivable 929,851 825,109
Property and equipment, net 6,137,648 6,071,939
Mortgage servicing rights 21,626 22,361
Prepaid expenses and other assets 629,927 458,530
Deferred income taxes 76,200 46,300
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TOTAL ASSETS $146,509,358 $137,735,211
============ ============
LIABILITIES AND EQUITY
LIABILITIES
Deposits $ 87,555,005 $ 82,770,398
Advances by borrowers for taxes and insurance 141,336 11,316
Escrow accounts 1,323,733 1,833,388
Accounts payable and other liabilities 730,157 762,553
Advances from Federal Home Loan Bank 40,188,333 36,238,333
Accrued income taxes payable 199,094 11,574
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TOTAL LIABILITIES 130,137,658 121,627,562
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Commitments and contingencies
EQUITY
Preferred stock- $.01 par value; authorized 1,000,000
shares; no shares issued or outstanding - -
Common stock-$.01 par value; authorized 3,000,000 shares; issued and
outstanding 1,071,225 shares 10,712 10,712
Paid-in capital 9,723,796 9,720,159
Retained earnings - substantially restricted 7,693,909 7,433,495
Note receivable from ESOP Trust (732,665) (732,665)
Deferred MRP stock awards (324,052) (324,052)
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TOTAL EQUITY 16,371,700 16,107,649
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TOTAL LIABILITIES AND EQUITY $146,509,358 $137,735,211
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
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HIGH COUNTRY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
2000 1999
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<S> <C> <C>
Interest Income
Interest on loans $ 2,723,299 $ 2,117,243
Interest on securities held-to-maturity 47,468 52,561
Interest on other interest- bearing assets 48,319 70,435
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Total interest income 2,819,086 2,240,239
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Interest Expense
Deposits 837,742 702,733
Federal Home Loan Bank advances 603,286 335,668
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Total interest expense 1,441,028 1,038,401
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Net interest income 1,378,058 1,201,838
Provision for losses on loans 60,000 44,925
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Net income after provision
for loan losses 1,318,058 1,156,913
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Noninterest Income
Service charges on deposits 44,110 37,708
Income from loan sales 35,604 60,422
Title and escrow fees 62,595 -
Other 69,319 27,145
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Total noninterest income 211,628 125,275
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Noninterest Expense
Compensation and benefits 626,246 531,581
Occupancy and equipment 258,810 162,504
Insurance and professional fees 69,872 53,238
Other 152,872 118,692
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Total noninterest expense 1,107,800 866,015
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Income before income taxes 421,886 416,173
Income tax expense 161,472 156,400
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Net income $ 260,414 $ 259,773
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Basic Earnings Per Common Share $ 0.26 $ 0.22
=========== ===========
Diluted Earnings Per Common Share $ 0.26 $ 0.22
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Weighted Average Common Shares
Outstanding Basic 984,442 1,178,883
Diluted 984,442 1,178,883
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
HIGH COUNTRY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
2000 1999
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<S> <C> <C>
Operating Activities
Net income $ 260,414 $ 259,773
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization of:
Deferred loan origination fees (33,202) (36,818)
Premiums on investments 1,141 2,127
Compensation expense on Management Recognition Plan -- 6,188
Stock dividend received from FHLB -- (21,100)
ESOP market value expense 3,637 6,172
Provision for losses on loans 60,000 45,000
Deferred income taxes (29,900) (5,600)
Depreciation 96,399 45,198
Income taxes 187,520 132,085
Net change in miscellaneous assets (275,404) (76,433)
Net change in miscellaneous liabilities (32,396) 24,884
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Net cash provided by operating activities 238,209 381,476
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Investing Activities
Net change in interest bearing deposits (1,120,487) 372,729
Net change in loans receivable (8,878,756) (3,210,425)
Principal repayments of mortgage-backed securities-held-to-maturity 65,041 265,178
Purchase of Federal Home Loan Bank stock (205,000)
Purchases of property and equipment (162,108) (349,244)
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Net cash used by investing activities (10,301,310) (2,921,762)
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Financing Activities
Net change in deposits 4,784,607 3,658,442
Net change in escrow funds (379,635) 125,218
Purchase of common stock -- (484,005)
Proceeds (payment) on FHLB advances 3,950,000 (50,000)
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Net cash provided by financing activities 8,354,972 3,249,655
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Net increase (decrease) in cash and cash equivalents (1,708,129) 709,369
Cash and cash equivalents, beginning 4,392,623 2,248,971
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Cash and cash equivalents, ending $ 2,684,494 $ 2,958,340
============ ============
Supplemental disclosure of cash flow information
Cash paid for:
Taxes $ 3,550 $ 29,915
Interest 1,451,072 1,044,287
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
HIGH COUNTRY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2000
Note 1. Nature of Business
High Country Bancorp, Inc. (the "Company") was incorporated under the laws of
the State of Colorado for the purpose of becoming the holding company of Salida
Building and Loan Association (the "Association") in connection with the
Association's conversion from a federally chartered mutual savings and loan
association to a federally chartered stock savings and loan association,
pursuant to its Plan of Conversion. The Company was organized in August 1997 to
acquire all of the common stock of Salida Building and Loan Association upon its
conversion to stock form, which was completed on December 9, 1997. In November
1999, the Association incorporated a new subsidiary, High Country Title and
Escrow Company. This company is offering title insurance and escrow closing
services with the Association's market area. In February 2000, the name of
Salida Building and Loan Association was changed to High Country Bank (the
"Bank").
Note 2. Basis of Presentation
The accompanying unaudited consolidated financial statements, (except for the
statement of financial condition at June 30, 2000, which is audited) have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management all adjustments necessary for a fair
presentation of the financial position and results of operations for the periods
presented have been included. The financial statements of the Company are
presented on a consolidated basis with those of High Country Bank and it's
subsidiary High Country Title and Escrow Company. The results of operations for
the three months ended September 30, 2000 are not necessarily indicative of the
results of operations that may be expected for the year ended June 30, 2001. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities as the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The accounting policies followed are as set forth in Note 1. of the Notes to
Financial Statements in the 2000 High Country Bancorp, Inc. financial statements
Note 3. Regulatory Capital Requirements
At September 30, 2000, the Bank met each of the three current minimum regulatory
capital requirements. The following table summarizes the Bank's regulatory
capital position at September 30, 2000:
<TABLE>
<CAPTION>
Tangible Capital:
<S> <C> <C>
Actual $13,383,000 9.11%
Required 2,203,000 1.50
Excess $11,180,000 7.61%
Core Capital:
Actual $13,383,000 9.11%
Required 4,405,000 3.00
Excess $ 8,978,000 6.11%
Risk-Based Capital:
Actual $14,445,000 13.70%
Required 8,437,000 8.00
Excess $ 6,008,000 5.70%
</TABLE>
6
<PAGE>
HIGH COUNTRY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 2000
Tangible and core capital levels are shown as a percentage of total
adjusted assets; risk-based capital levels are shown as a percentage of
risk-weighted assets.
Note 4. Earnings Per Share
The Company adopted Financial Accounting Standards Board Statement No. 128
relating to earnings per share, effective for the quarter ended December
30, 1997. The statement requires dual presentations of basic and diluted
earnings per share on the face of the income statement and requires a
reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation. Basic EPS excludes 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 that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shares in the earnings of the entity.
7
<PAGE>
HIGH COUNTRY BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2000 AND SEPTEMBER 30, 2000
The Company's total assets increased by $8.8 million or 6.4% from $137.7 million
at June 30, 2000 to $146.5 million at September 30, 2000. The increase in assets
was due to loan growth of $8.5 million.
Net loans totaled $128.4 million at September 30, 2000 and $119.9 million at
June 30, 2000. The increase in loans occurred in commercial real estate loans
which increased $3.1 million, single family mortgage loans which increased $2.4
million, single family construction loans which increased $1.6 million and land
loans which increased $1.0 million. The bank benefited from strong local demand
for purchase financing during the three months ending September 30, 2000.
During the quarter, the Bank continued the program of ongoing loan sales of
fixed-rate loans to the Federal Home Loan Mortgage Corporation and for the three
months ended September 30, 2000 loan sales totaled $2.2 million. At September
30, 2000, loans held for sale were $385,000. The loans are valued at the lower
of cost or market.
The allowance for loan losses totaled $1.1 million at September 30, 2000 and
$1.0 million at June 30, 2000. As of those dates the non-performing loans in the
Association's portfolio were $709,000 and $533,000, respectively. The increase
was due to the addition of one $220,000 loan secured by commercial real estate.
This loan is also the largest non-performing loan. The total non-performing
loans at September 30, 2000 include 22 loans secured by single family
residences, business equipment and autos. There was $1,000 of loans charged off
and no recoveries of previous loan losses during the three months ended
September 30, 2000. The determination of the allowance for loan losses is based
on management's analysis, performed on a quarterly basis, of various factors,
including the market value of the underlying collateral, growth and composition
of the loan portfolio, the relationship of the allowance for loan losses to
outstanding loans, historical loss experience, delinquency trends and prevailing
economic conditions. Although management believes its allowance for loan losses
is adequate, there can be no assurance that additional allowances will not be
required or that losses on loans will not be incurred. The Company has had
minimal losses on loans in prior years. At September 30, 2000 and June 30, 2000,
the ratio of the allowance for loan losses to net loans was 0.82% and 0.84%,
respectively.
At September 30, 2000, the Company's investment portfolio included
mortgage-backed securities and local municipal bonds classified as "held to
maturity" carried at amortized cost of $2.8 million and an estimated fair value
of $2.8 million. The balance of the Company's investment portfolio at September
30, 2000 consists of interest bearing deposits with various financial
institutions totaling $2.4 million.
At September 30, 2000 deposits increased to $87.6 million from $82.8 million at
June 30, 2000 or a net increase of 5.8%. The increase was used to fund loan
growth. Management is continually evaluating the investment alternatives
available to the Company's customers, and adjusts the pricing on its savings
products to maintain its existing deposits.
Advances from the Federal Home Loan Bank increased to $40.2 million at September
30, 2000 from 36.2 million at June 30, 2000. The increase was used to fund loan
growth.
8
<PAGE>
HIGH COUNTRY BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
AND 1999
Net Income. The Company's net income for the three months ended September 30,
2000 and September 30 1999 was $260,000. Although net income was essentially
unchanged, for the three months ended September 30, 2000 higher net interest
income and noninterest income offset higher compensation and benefits expense,
occupancy expenses and other expenses.
Net Interest Income. Net interest income for the three months ended September
30, 2000 was $1.4 million compared to $1.2 million for the three months ended
September 30, 1999. The increase is attributed to increased interest earned on
interest earning assets due to loan growth less the increase in interest expense
due to the increase in interest bearing liabilities. The average yield on
interest earning assets increased from 8.08% for the three months ended
September 30, 1999 to 8.53% for the three months ended September 30, 2000. The
increase was due to short term loans repricing to higher rates and growth in
loans at higher average rates as compared to the loan portfolio. The average
cost of interest bearing liabilities also increased from 4.47% for the three
months ended September 30, 1999 to 4.92% for the three months ended September
30, 2000. The increase in costs was due to higher deposit rates implemented to
maintain and attract deposits and higher Federal Home Loan Advance rates on
maturing short term advances. The interest rate spread was 3.61% for each of the
three months ended September 30, 1999 and 2000.
Allowance for Loan Losses. The provision for loan losses was $60,000 for the
three months ended September 30, 2000 as compared to $45,000 for the three
months ended September 30, 1999. The increase reflects the mix of loans being
made and the need to maintain an adequate balance in the allowance for loan
losses.
Non-interest Income. Non-interest income was $212,000 for the three months ended
September 30, 2000 as compared to $125,000 for the three months ended September
30, 1999. Title and escrow fees from High Country Title and Escrow Company and
an increase in other loan fees offset a decline in loan sale income.
Non-interest Expenses. Non-interest expenses were $1.1 million for the three
months ended September 30, 2000 as compared to $866,000 for the three months
ended September 30, 1999. Increases occurred in compensation and benefit
expense, occupancy expense and other expenses. The increases are tied to
additional employees, the opening of the new home office, High Country Title and
Escrow Company expenses and other expenses due to growth
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds consist of deposits, repayment of loans
and mortgage-backed securities, maturities of investments and interest-bearing
deposits, and funds provided from operations. While scheduled repayments of
loans and mortgage-backed securities and maturities of investment securities are
predicable sources of funds, deposit flows and loan prepayments are greatly
influenced by the general level of interest rates, economic conditions and
competition. The Company uses its liquidity resources principally to fund
existing and future loan commitments, to fund maturing certificates of deposit
and demand deposit withdrawals, to invest in other interest-earning assets, to
maintain liquidity, and to meet operating expenses. Management believes that
proceeds from loan repayments and other sources of funds will be adequate to
meet the Company's liquidity needs for the immediate future.
The Bank is required to maintain minimum levels of liquid assets as defined by
OTS regulations. This requirement, which may be varied at the direction of the
OTS depending upon economic conditions
9
<PAGE>
HIGH COUNTRY BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
and deposit flows, is based upon a percentage of deposits and short-term
borrowings. The required minimum ratio was 5% until November 24, 1997 when the
requirement was lowered to 4%. The Bank has historically maintained a level of
liquid assets in excess of regulatory requirements. The Bank's liquidity ratios
at September 30, 2000 and 1999 were 5.44% and 5.07%, respectively.
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related data presented herein have been prepared in
accordance with generally accepted accounting principles, which require the
measurement of financial position and results of operations in terms of
historical dollars without considering changes in the relative purchasing power
of money over time because of inflation. Unlike most industrial companies,
virtually all of the assets and liabilities of the Company are monetary in
nature. As a result, interest rates have a more significant impact on the
Company's performance than the effects of general levels of inflation. Interest
rates do not necessarily move in same direction or in the same magnitude as the
prices of goods and services.
10
<PAGE>
HIGH COUNTRY BANCORP, INC.
PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings
None
ITEM 2: Changes in Securities
None
ITEM 3: Defaults Upon Senior Securities
Not Applicable
ITEM 4: Submission of Matters to a Vote of Security Holders.
None
ITEM 5: Other Information
On November 8, 2000, the registrant announced the commencement
of a stock repurchase program to acquire up to 10% of the
Company's outstanding common stock, or approximately 107,123
shares over a twelve month period. For more information, see
the Company's press release, which is attached hereto as
Exhibit 2001.1 and is incorporated by reference herein.
ITEM 6: Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
Exhibit 99.1 - Press Release dated November 8, 2000
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
High Country Bancorp, Inc.
Registrant
Date November 8, 2000 /s/ Larry D. Smith
---------------- --------------------------------------
Larry D. Smith, President
11
