<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q.-QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended September 30, 2000 or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from________________to_________________
COMMISSION FILE NUMBER 22-25144
FIRST STATE BANCORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW MEXICO 85-0366665
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
7900 JEFFERSON NE
ALBUQUERQUE, NEW MEXICO 87109
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(505) 241-7500
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
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 XX No
---- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 4,876,014 shares of common
stock, no par value, outstanding as of November 6, 2000.
<PAGE> 2
FIRST STATE BANCORPORATION
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Changes in Securities and Use of Proceeds None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 10
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST STATE BANCORPORATION AND SUBSIDIARY
Consolidated Condensed Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
Assets 2000 1999
------------- ------------
<S> <C> <C>
Cash and due from banks $ 26,704,616 $ 22,725,861
Federal funds sold -- --
------------- ------------
Total cash and cash equivalents 26,704,616 22,725,861
Investment securities:
Held to maturity (at amortized cost, market value of $33,827,017 at
September 30, 2000, and $22,490,690 at December 31, 1999) 33,779,454 22,590,081
Available for sale (at market, amortized cost of $98,332,691 at
September 30, 2000, and $74,227,391 at December 31, 1999) 96,950,394 72,211,289
------------- ------------
Total Investments 130,729,848 94,801,370
------------- ------------
Loans and leases net of unearned interest 439,295,435 428,637,703
Less allowance for loan and lease losses 5,973,204 5,386,622
------------- ------------
Net loans and leases 433,322,231 423,251,081
Premises and equipment 12,526,391 15,060,722
Accrued interest receivable 4,155,959 3,062,575
Other real estate owned 3,317,623 1,917,126
Goodwill, net 491,109 569,264
Other assets 6,457,393 5,495,565
------------- ------------
Total assets $ 617,705,170 $566,883,564
============= ============
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Non-interest-bearing $ 100,830,296 $ 89,303,965
Interest-bearing 398,591,078 374,231,608
------------- ------------
Total deposits 499,421,374 463,535,573
Securities sold under agreements to repurchase 62,313,003 38,927,736
Other liabilities 6,391,627 8,842,326
Long-term debt 1,114,718 11,150,902
------------- ------------
Total liabilities 569,240,722 522,456,537
Stockholders' equity:
Preferred stock, no par value, 1,000,000 shares authorized, none
issued or outstanding -- --
Common stock, no par value, 20,000,000 shares authorized, issued
5,182,564 at September 30, 2000 and 5,158,846 at December 31, 1999 29,738,059 29,459,807
Treasury stock, at cost (309,550 shares at September 30, 2000 and 228,750 at
December 31, 1999) (4,076,662) (3,012,031)
Retained earnings 23,715,366 19,309,878
Unrealized losses on investment securities available for sale (912,315) (1,330,627)
------------- ------------
Total stockholders' equity 48,464,448 44,427,027
------------- ------------
Total liabilities and stockholders' equity $ 617,705,170 $566,883,564
============= ============
Book value per share $ 9.95 $ 9.03
============= ============
Tangible book value per share $ 9.84 $ 8.91
============= ============
</TABLE>
See accompanying notes to consolidate condensed financial statements.
1
<PAGE> 4
FIRST STATE BANCORPORATION AND SUBSIDIARY
Consolidated Condensed Statements of Operations
For the three and nine months ended September 30, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
Three Three Nine Nine
months months months months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans and leases $ 11,157,766 $ 9,827,464 $ 31,909,386 $ 26,990,764
Interest on investment securities:
Taxable 2,176,477 1,371,896 5,662,534 4,163,503
Nontaxable 46,317 57,910 149,889 174,829
Federal funds sold 60,739 46,404 264,384 158,371
------------- ------------- ------------- -------------
Total interest income 13,441,299 11,303,674 37,986,193 31,487,467
------------- ------------- ------------- -------------
Interest expense:
Deposits 4,424,895 3,218,413 11,975,571 8,979,579
Short-term borrowings 903,775 429,621 2,091,892 1,351,936
Long-term debt and capital lease 26,208 165,636 344,127 270,522
------------- ------------- ------------- -------------
Total interest expense 5,354,878 3,813,670 14,411,590 10,602,037
------------- ------------- ------------- -------------
Net interest income before provision for
loan and lease losses 8,086,421 7,490,004 23,574,603 20,885,430
Provision for loan losses 625,002 903,400 1,850,006 2,335,592
------------- ------------- ------------- -------------
Net interest income after provision for
loan and lease losses 7,461,419 6,586,604 21,724,597 18,549,838
------------- ------------- ------------- -------------
Other Income:
Service charges on deposit accounts 625,851 546,834 1,781,542 1,525,417
Other banking service fees 112,379 111,387 325,644 303,810
Credit card transaction fees 681,757 537,648 1,781,514 1,234,252
Operating lease income 9,046 104,422 123,868 378,343
Loss on sale of investment securities -- -- (333,142) --
Gain on sale of Leasing Division -- -- 879,078 --
Other 413,422 299,116 1,073,623 757,103
------------- ------------- ------------- -------------
Total other income 1,842,455 1,599,407 5,632,127 4,198,925
------------- ------------- ------------- -------------
Other expense:
Salaries and employee benefits 2,946,331 2,855,714 8,747,906 7,972,086
Occupancy 774,263 668,764 2,314,335 1,888,979
Data processing 308,597 246,668 882,609 740,225
Credit card interchange 356,441 306,493 918,265 697,147
Equipment 471,586 396,115 1,409,716 1,173,536
Leased equipment depreciation -- 81,139 70,241 336,126
Legal, accounting, and consulting 193,882 165,527 600,590 477,419
Marketing 316,040 285,126 956,108 756,763
Other real estate owned expenses 12,229 38,452 59,011 191,584
Amortization of intangibles 26,051 26,051 78,154 78,154
Other 1,230,026 954,627 3,488,026 2,680,712
------------- ------------- ------------- -------------
Total other expenses 6,635,446 6,024,676 19,524,961 16,992,731
------------- ------------- ------------- -------------
Income before income taxes 2,668,428 2,161,335 7,831,763 5,756,032
Income tax expense 876,872 734,723 2,658,316 2,005,096
------------- ------------- ------------- -------------
Net income $ 1,791,556 $ 1,426,612 $ 5,173,447 $ 3,750,936
============= ============= ============= =============
Basic earnings per share $ 0.37 $ 0.29 $ 1.06 $ 0.75
============= ============= ============= =============
Diluted earnings per share $ 0.36 $ 0.28 $ 1.04 $ 0.73
============= ============= ============= =============
Dividends per common share $ 0.07 $ 0.06 $ 0.20 $ 0.17
============= ============= ============= =============
</TABLE>
See accompanying notes to consolidate condensed financial statements.
2
<PAGE> 5
FIRST STATE BANCORPORATION AND SUBSIDIARY
Consolidated Condensed Statements of Comprehensive Income
For the three and nine months ended September 30, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
Ended Ended Ended Ended
September September September September
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net income $ 1,791,556 $ 1,426,612 $ 5,173,447 $ 3,750,936
Other comprehensive income net of tax-
unrealized holding (losses) gains on securities
available for sale arising during period 364,900 (112,543) 198,439 (1,033,825)
Less: reclassification adjustment for losses
included in net income -- -- 219,873 --
------------- ------------- ------------- -------------
Total comprehensive income $ 2,156,456 $ 1,314,069 $ 5,591,759 $ 2,717,111
============= ============= ============= =============
</TABLE>
See accompanying notes to consolidated condensed financial statements
3
<PAGE> 6
FIRST STATE BANCORPORATION AND SUBSIDIARY
Consolidated Condensed Statements of Cash Flows
For the three and nine months ended September 30, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operating activities:
Net income $ 1,791,556 $ 1,426,612 $ 5,173,447 $ 3,750,936
------------- ------------- ------------- -------------
Adjustments to reconcile net income to cash provided by operations:
Provisions for loan and lease losses 625,002 903,400 1,850,006 2,335,592
Provisions for decline in value of other real estate owned -- -- 17,599 29,349
Depreciation and amortization 185,603 450,893 615,368 1,416,639
Loss on sale of Investment Securities available for sale -- -- 333,142 --
Gain on sale of Leasing Division -- -- (879,078) --
Increase in accrued interest receivable (130,694) (282,751) (1,093,384) (705,111)
Increase in other assets, net 124,610 (516,363) (1,177,322) (1,868,805)
Increase (decrease) in other liabilities, net (79,635) 352,313 484,473 526,061
------------- ------------- ------------- -------------
Total adjustments 724,886 907,492 150,804 1,733,725
------------- ------------- ------------- -------------
Net cash provided by operating activities 2,516,442 2,334,104 5,324,251 5,484,661
------------- ------------- ------------- -------------
Cash flows from investing activities:
Net increase in loans (22,806,307) (31,141,253) (75,336,046) (86,004,748)
Proceeds from the sale of leases -- -- 64,427,001 --
Early payoff of Operating leases -- 15,110 -- 711,935
Purchases of investment securities available for sale (5,531,470) (4,091,687) (37,433,405) (33,120,571)
Maturates of investment securities available for sale 1,031,266 1,031,481 1,083,154 12,991,881
Sale of investment securities available for sale -- -- 11,936,858 --
Purchases of investment securities held to maturity (30,817,767) (79,000,000) (146,923,365) (259,386,000)
Maturities of investment securities held to maturity 33,475,939 95,405,000 136,498,153 305,061,000
Purchases of premises and equipment (54,246) (600,364) (973,557) (1,397,473)
Sales of premises and equipment -- -- 125,038 543,177
Sales of other real estate owned -- 227,691 -- 766,926
Payments received on loans classified as other real estate owned 188,859 -- 505,298 --
------------- ------------- ------------- -------------
Net cash used in investing activities (24,513,726) (18,154,022) (46,090,871) (59,833,873)
------------- ------------- ------------- -------------
Cash flows from financing activities:
Net increase in interest-bearing deposits 6,025,100 15,780,233 24,359,470 34,167,412
Net increase in non-interest-bearing deposits 2,037,914 (5,774,258) 11,526,331 3,044,385
Net increase in securities sold under
repurchase agreements 10,410,624 368,279 23,385,267 8,372,241
Federal Home Loan Bank borrowings -- -- -- 20,000,000
Federal Home Loan Bank repayments -- (10,000,000) (10,000,000) (10,000,000)
Payments on long-term debt and capital lease obligations (12,328) (11,287) (36,184) (33,128)
Federal Funds purchased 2,150,000 6,800,000 (2,750,000) 6,800,000
Common stock issued 107,984 72,038 278,252 215,343
Dividends paid (340,577) (305,645) (953,130) (852,322)
Purchase of treasury stock -- -- (1,064,631) (3,012,031)
------------- ------------- ------------- -------------
Net cash provided by financing activities 20,378,717 6,929,360 44,745,375 58,701,900
------------- ------------- ------------- -------------
Increase (decrease) in cash and cash equivalents (1,618,567) (8,890,558) 3,978,755 4,352,688
Cash and cash equivalents at beginning of period 28,323,183 31,336,931 22,725,861 18,093,685
------------- ------------- ------------- -------------
Cash and cash equivalents at end of period $ 26,704,616 $ 22,446,373 $ 26,704,616 $ 22,446,373
============= ============= ============= =============
Supplemental disclosure of noncash investing and financing activities:
Additions to other real estate owned in settlement of loans $ 1,726,794 $ 613,096 $ 1,923,394 $ 2,151,434
============= ============= ============= =============
</TABLE>
See accompanying notes to consolidate condensed financial statements.
4
<PAGE> 7
First State Bancorporation and Subsidiary
Notes to Consolidated Condensed Financial Statements
(unaudited)
1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The accompanying consolidated condensed financial statements are unaudited and
include the accounts of First State Bancorporation (the "Company") and its
subsidiary, First State Bank of Taos (100% owned).
All significant intercompany accounts and transactions have been eliminated.
Information contained in the consolidated condensed financial statements and
notes thereto of the Company should be read in conjunction with the Company's
consolidated financial statements and notes thereto contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 1999.
The consolidated condensed financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and in accordance with the instructions to Form 10-Q. 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 (consisting only of normally recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and nine month periods ended September 30, 2000, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000.
2. EARNINGS PER COMMON SHARE
Statement of Financial Accounting Standards No. 128, "Earnings per Share" (FAS
128). FAS 128 requires the computation of basic earnings per share and diluted
earnings per share. Basic earnings per share is computed by dividing income
available to common stockholders (the numerator) by the weighted-average number
of common shares outstanding during the period (the denominator). Diluted
earnings per share is calculated by increasing the basic earning per share
denominator by the number of additional common shares that would have been
outstanding if dilutive potential common shares for options had been issued.
The following is a reconciliation of the numerators and denominators of
basic and diluted earnings per share for the three and nine months ended
September 30:
<TABLE>
<CAPTION>
Quarter Ended September 30,
-------------------------------
2000 1999
--------------------------------------- ---------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net income available to
common stockholders $ 1,791,556 4,865,030 $ 0.37 $ 1,426,612 4,916,621 $ 0.29
========= =========
Effect of dilutive securities:
Options -- 114,094 -- 148,480
----------- ------------- ----------- -------------
Diluted EPS:
Net income available to
common stockholders $ 1,791,556 4,979,124 $ 0.36 $ 1,426,612 5,065,101 $ 0.28
=========== ============= ========= =========== ============= =========
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
2000 1999
--------------------------------------- ---------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net income available to
common stockholders $ 5,173,447 4,883,525 $ 1.06 $ 3,750,936 5,036,436 $ 0.74
========= =========
Effect of dilutive securities:
Options 114,787 132,294
----------- ------------- ----------- -------------
Diluted EPS:
Net income available to
common stockholders $ 5,173,447 4,998,312 $ 1.04 $ 3,750,936 5,168,730 $ 0.73
=========== ============= ========= =========== ============= =========
</TABLE>
3. SALE OF LEASING DIVISION
On March 1, 2000, the Company closed the sale of its subsidiary bank's
commercial leasing division. The sale resulted in $63.7 million of leases being
sold. The gain on the sale amounted to approximately $879,000, net of
transaction costs. The proceeds from the sale were used to purchase investment
securities, fund loan demand, and reduce short-term borrowings.
4. TREASURY STOCK
The Company's Board of Directors has authorized management to purchase up to
525,000 shares of its common stock. To date, management has purchased 309,550
shares including 80,800 shares totaling $1,064,631 during the first nine months
of 2000. Management intends to purchase additional shares, the amount of which
will be determined by cash available for dividends from the subsidiary bank.
5. ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities (Statement 133), was issued by the Financial
Accounting Standards Board in June 1998. Statement 133 standardizes the
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts.
The Company will adopt Statement 133 on January 1, 2001. The Company is
assessing the impact that Statement 133 will have on its financial statements
but anticipates that the adoption of Statement 133 will not have a material
impact in the Company's financial statements.
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CONSOLIDATED CONDENSED BALANCE SHEETS
On March 1, 2000, the Company closed the sale of its subsidiary bank's
commercial leasing division. The sale resulted in $63.7 million of leases being
sold. The gain on the sale amounted to approximately $879,000, net of
transaction costs. The proceeds from the sale were used to purchase investment
securities, fund loan demand, and reduce short-term borrowings.
The Company's total assets increased by $50.8 million from $566.9 million as of
December 31, 1999, to $617.7 million as of September 30, 2000, due to internal
growth. For the first nine months of 2000, net loans increased by $10.0 million
from $423.3 million to $433.3 million. Excluding the sale of the leasing
division, total commercial loans increased by approximately $73.7 million.
Investment securities increased by $35.9 million from $94.8 million to $130.7
million. For the first nine months of 2000, premises and equipment decreased
$2.6 million from $15.1 million to $12.5 million principally as a result of the
sale of leasing. Other assets increased $1.0 million from $5.5 million to $6.5
million.
The following table presents the amounts of loans and leases of the Company, by
category, at the dates indicated.
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999 September 30, 1999
------------------ ------------------ ------------------
(in thousands)
Amount % Amount % Amount %
-------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Commercial $ 79,556 18.1% $ 65,702 15.3% $ 64,472 15.4%
Real estate - mortgage 267,620 60.9% 215,839 50.4% 202,936 48.6%
Real estate - construction 68,186 15.5% 65,844 15.4% 66,852 16.0%
Consumer and other 23,924 5.5% 20,203 4.7% 20,197 4.9%
Leases 9 0.0% 61,050 14.2% 63,077 15.1%
-------- ------ -------- ------ -------- ------
$439,295 100.0% $428,638 100.0% $417,534 100.0%
======== ====== ======== ====== ======== ======
</TABLE>
Deposits, which are the Company's main source of funds for loans, investments
and federal funds sold, increased by $35.9 million from $463.5 million as of
December 31, 1999, to $499.4 million as of September 30, 2000. For the first
nine months of 2000, long-term debt decreased by $10 million due to the
repayment of a Federal Home Loan Bank advances. Securities sold under agreements
to repurchase increased $23.4 million from $38.9 million to $62.3 million as a
result of the Company's efforts to attract customers with large short-term cash
balances.
The following table presents customer deposits, by category, at the dates
indicated.
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999 September 30, 1999
---------------------- ---------------------- ----------------------
(in thousands)
Amount % Amount % Amount %
---------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Non-interest-bearing $ 100,830 20.19% $ 89,304 19.26% $ 90,291 20.23%
Interest-bearing demand 100,856 20.19% 107,059 23.10% 91,046 20.40%
Money market savings 48,010 9.61% 45,004 9.71% 46,861 10.50%
Regular savings 35,089 7.03% 33,177 7.16% 34,584 7.75%
Certificate of deposit less
than $100 101,232 20.27% 94,269 20.34% 92,125 20.65%
Certificate of deposit greater
than $100 113,404 22.71% 94,723 20.43% 91,326 20.47%
---------- -------- ---------- -------- ---------- --------
$ 499,421 100.0% $ 463,536 100.0% $ 446,233 100.0%
========== ======== ========== ======== ========== ========
</TABLE>
7
<PAGE> 10
CONSOLIDATED RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
2000.
Net income for the Company for the three months ended September 30, 2000, was
$1.8 million, an increase of $400,000 or 29% from $1.4 million for the same
period of 1999. The Company's annualized return on average assets was 1.17% for
the third quarter of 2000, compared to 1.03% for the same period of 1999.
Net interest income before provision for loan losses increased $600,000 to $8.1
million for the three months ended September 30, 2000, from $7.5 million for the
three months ended September 30, 1999, primarily due to increased loan and
investment security volume. The Company's net interest margin decreased to 5.73%
at September 30, 2000, from 5.91% at September 30, 1999. This decrease is
partially due to the increase in interest rates paid on certificates of deposit
and securities sold under agreements to repurchase due to the Federal Reserve
Board's interest rate increases over the past twelve months.
The provision for loan losses was $625,002 for the three months ended September
30, 2000, from $903,400 for the three months ended September 30, 1999. The
allowance for loan losses was 1.36% of total loans at September 30, 2000,
compared to 1.17% of total loans at September 30, 1999.
Total non-interest income increased by $200,000 to $1.8 million for the three
months ended September 30, 2000, compared to $1.6 million for the same period of
1999.
Total non-interest expense increased by $600,000 to $6.6 million for the third
quarter of 2000, from $6.0 million for the same period of 1999. Included on
non-interest expense for the quarter ended September 30, 2000, were write-offs
of approximately $213,000 related to unamortized internet banking and platform
software due to recent upgrades.
CONSOLIDATED RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000.
Net income for the Company for the nine months ended September 30, 2000, was
$5.2 million, an increase of $1.4 million or 37% from $3.8 million for the same
period of 1999. The Company's annualized return on average assets was 1.17% for
the first nine months of 2000, compared to 0.96% for the same period of 1999.
Included in net income for the first nine months of 2000 is the $879,000 gain on
the sale of the leasing division and a $333,000 loss on the sale of securities,
both occurring in the first quarter of 2000.
Net interest income before provision for loan losses increased $2.7 million to
$23.6 million for the nine months ended September 30, 2000, from $20.9 million
for the nine months ended September 30, 1999, primarily due to increased loan
and investment security volume. The Company's net interest margin was 5.80% at
September 30, 2000, and 5.81% at September 30, 1999.
The provision for loan losses was $1.9 million for the nine months ended
September 30, 2000, from $2.3 million for the nine months ended September 30,
1999.
Total non-interest income increased by $1.4 million, partially due to the sale
of leasing, to $5.6 million for the nine months ended September 30, 2000,
compared to $4.2 million for the same period of 1999.
Total non-interest expense increased by $2.5 million to $19.5 million for the
first nine months of 2000, from $17.0 million for the same period of 1999.
8
<PAGE> 11
ALLOWANCE FOR LOAN AND LEASE LOSSES AND NON-PERFORMING ASSETS
The following tables set forth the Allowance for Loan and Lease Losses and
Non-Performing assets.
<TABLE>
<CAPTION>
ALLOWANCE FOR LOAN AND LEASE (Dollars in thousands)
LOSSES: September 30, 2000 December 31, 1999 September 30, 1999
------------------ ----------------- ------------------
<S> <C> <C> <C>
Balance beginning of period $ 5,387 $ 3,875 $ 3,875
Provision for loan and lease losses 1,850 3,075 2,335
Net charge-offs 1,264 1,563 1,338
------------------ ----------------- ------------------
Balance end of period $ 5,973 $ 5,387 $ 4,872
================== ================= ==================
Allowance for loan and lease losses to
non-performing loans and leases 1.36% 1.26% 1.17%
Allowance for loan and lease losses to
non-performing loans and leases 241% 192% 171%
</TABLE>
<TABLE>
<CAPTION>
NON-PERFORMING ASSETS: September 30, 2000 December 31, 1999 September 30, 1999
------------------ ----------------- ------------------
<S> <C> <C> <C>
Accruing loans - 90 days past due $ 35 $ 84 $ 104
Non-accrual loans 2,439 2,725 2,752
------------------ ----------------- ------------------
Total non-performing loans 2,474 2,809 2,856
Other real estate owned 3,317 1,917 2,052
------------------ ----------------- ------------------
Total non-performing assets $ 5,791 $ 4,726 $ 4,908
================== ================= ==================
Potential problem loans and leases $ 4,113 $ 5,133 $ 5,753
Total non-performing assets to total assets 0.94% 0.83% 0.88%
</TABLE>
On October 5, 2000, the Company completed the sale of an other real estate owned
property with a book value of $1.24 million at a pre-tax gain of approximately
$299,000.
LIQUIDITY AND CAPITAL EXPENDITURES
The Company's primary sources of funds are customer deposits, loan repayments,
and maturities of investment securities. The Company has additional sources of
liquidity in the form of borrowings. Borrowings include federal funds purchased,
securities sold under repurchase agreements and borrowings from the Federal Home
Loan Bank.
FORWARD-LOOKING STATEMENTS
Statements which are forward-looking are not historical facts, and involve risks
and uncertainties that could cause the Company's results to differ materially
from those in any forward-looking statements. These risks include the possible
loss of key personnel, need for additional capital should the Company experience
faster than anticipated growth, changes in economic conditions, interest rate
risk, factors which could affect the Company's ability to compete in its trade
areas, changes in regulations and governmental policies, and the risks described
in the Company's Securities and Exchange Commission filings.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change in the Company's market risk profile from the
information disclosed in the Company's Form 10-K for the year ended December 31,
1999.
9
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule.
(b) No reports on Form 8-K were filed by the Company during the quarter ended
September 30, 2000.
EXHIBIT 27 FINANCIAL DATA SCHEDULE
SIGNATURES
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.
FIRST STATE BANCORPORATION
Date: November 9, 2000 By: Michael R. Stanford
----------------------- ------------------------------------------------------
Michael R. Stanford, President & Chief
Executive Officer
Date: November 9, 2000 By: H. Patrick Dee
----------------------- ------------------------------------------------------
H. Patrick Dee, Executive Vice President & Chief
Operating Officer
Date: November 9, 2000 By: Brian C. Reinhardt
----------------------- ------------------------------------------------------
Brian C. Reinhardt, Executive Vice President &
Chief Financial Officer
10
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
