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, 1996
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ___________ to ____________
Commission File Number: 0-22116
MOUNTAIN PARKS FINANCIAL CORP.
(Exact name of small business issuer as specified in its charter)
Delaware 41-1517690
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
6565 East Evans Avenue
Denver, CO 80224
(Address of principal executive offices)
(303) 758-5509
(Issuer's telephone number)
Not Applicable
--------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (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 ___
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of October 31,1996: 3,910,351
Transitional Small Business Disclosure Format: _____ Yes _X_ No
<PAGE>
TABLE OF CONTENTS
Page
Part I FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis or Plan of Operation 11
Part II OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Set forth below are the consolidated financial statements of
Mountain Parks Financial Corp.
* Condensed Consolidated Statements of Financial Condition as of
September 30, 1996 and December 31, 1995.
* Condensed Consolidated Statements of Income for the three and
nine month periods ended September 30, 1996 and 1995.
* Condensed Consolidated Statements of Cash Flows for the nine month
periods ended September 30, 1996 and 1995.
* Condensed Consolidated Statement of Changes in Stockholders' Equity
for the nine month period ended September 30, 1996.
* Notes to Condensed Consolidated Financial Statements.
<PAGE>
MOUNTAIN PARKS FINANCIAL CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
(In Thousands, Except Share and Per Share Data)
September December
30, 31,
1996 1995
------ ---------
(Unaudited)
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS ............................... $ 36,151 $ 30,817
FEDERAL FUNDS SOLD .................................... -- 15,745
SECURITIES HELD TO MATURITY (market value of .......... 8,171 5,849
$7,940 and $5,923)
SECURITIES AVAILABLE FOR SALE ......................... 90,917 81,395
OTHER SECURITIES ...................................... 9,753 3,554
LOANS, net of allowance for loan losses of $4,712 ..... 382,050 268,580
and $3,163
BANK PREMISES AND EQUIPMENT, net ...................... 21,686 15,797
ACCRUED INTEREST RECEIVABLE ........................... 4,913 2,822
OTHER ASSETS .......................................... 10,325 7,499
COST IN EXCESS OF NET ASSETS ACQUIRED, net ............ 17,831 11,131
------ ------
$581,797 $443,189
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS:
Noninterest-bearing ................................... $137,930 $118,022
Interest-bearing-
Savings and NOW accounts .............................. 206,265 180,818
Time accounts over $100,000 ........................... 44,238 22,793
Other time accounts ................................... 57,274 48,142
------ ------
Total deposits .................... 445,707 369,775
------- -------
SHORT TERM BORROWED FUNDS ............................. 59,860 7,170
EXCHANGEABLE SUBORDINATED NOTES ....................... 11,500 11,500
OTHER LIABILITIES ..................................... 7,621 6,799
----- -----
Total liabilities ..................................... 524,688 395,244
------- -------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 5,000,000 shares
authorized; 3,910,351 and 3,668,351 shares
issued and outstanding at September 30, 1996 ......... 4 4
and December 31, 1995, respectively ...................
Preferred stock, $.001 par value, 1,000,000 shares
authorized, no
shares issued or outstanding at September ...... -- --
30, 1996 and December 31, 1995
Capital surplus ....................................... 27,810 22,642
Retained earnings ..................................... 30,016 24,624
Net unrealized gain (loss) on securities available (721) 675
---- ---
for sale (net of tax)
Total stockholders' equity ............................ 57,109 47,945
------ ------
$581,797 $443,189
======== ========
</TABLE>
<PAGE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
MOUNTAIN PARKS FINANCIAL CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
(In Thousands, Except September 30, September 30,
Per Share Data)
1996 1995 1996 1995
-------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees ....... $ 10,677 $ 7,218 $ 27,223 $ 17,998
Investment securities ....... 1,888 1,396 5,526 3,641
Federal funds sold
Total interest income ....... 12,565 8,614 32,749 21,639
INTEREST EXPENSE:
Deposits .................... 2,824 2,210 7,501 4,901
Short-term borrowings ....... 856 377 2,100 1,304
Total interest expense ...... 3,680 2,587 9,601 6,205
Net interest income ......... 8,885 6,027 23,148 15,434
PROVISION FOR LOAN LOSSES ... 1,038 111 1,254 243
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 7,847 5,916 21,894 15,191
NONINTEREST INCOME:
Service charges ............. 848 694 2,264 1,842
Net gain (loss) on sales of . -- 14 1 (134)
securities
Other ....................... 596 601 2,157 1,293
Total noninterest income .... 1,444 1,309 4,422 3,001
NONINTEREST EXPENSE:
Salaries and wages .......... 4,137 2,182 10,006 5,395
Occupancy ................... 683 382 1,552 925
Depreciation and amortization 438 442 1,565 971
Other ....................... 1,780 1,092 4,497 2,834
Total noninterest expense ... 7,038 4,098 17,620 10,125
INCOME BEFORE INCOME TAXES .. 2,253 3,127 8,696 8,067
INCOME TAXES ................ 922 1,226 3,304 2,942
Net income .................. $ 1,331 $ 1,901 5,392 $ 5,125
NET INCOME PER SHARE
Primary ..................... $ .34 $ .53 $ 1.40 $ 1.71
Fully diluted ....... $ .34 $ .53 $ 1.40 $ 1.63
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
<PAGE>
MOUNTAIN PARKS FINANCIAL CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Nine
(In Thousands) Months Ended
September 30,
--------------
1996 1995
------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ................................. $ 5,392 $ 5,125
Adjustments to reconcile net income to net
cash provided by operating activities-
Provision for loan losses .................. 1,254 243
Depreciation and amortization .............. 1,565 971
Change in accrued interest receivable ...... (995) (39)
Change in other assets, net ................ (3,857) (779)
Change in other liabilities, net ........... (510) 1,334
Net cash provided by operating activities .. 2,849 6,855
----- -----
INVESTING ACTIVITIES:
Proceeds of scheduled principal payments and 18,174 2,611
maturities of securities
Proceeds from sales of securities .......... 1,050 20,600
Purchases of securities available for sale . (19,914) (17,260)
Purchases of other securities .............. (1,989) --
Net change in loans ........................ (64,386) (7,800)
Purchases of bank premises and equipment ... (4,266) (4,457)
Subsidiary acquisitions(net) ............... 12,449 853
------ ---
Net cash used in investing activities ...... (58,882) (5,453)
------- ------
FINANCING ACTIVITIES:
Net change in noninterest-bearing, savings . (8,616) (41,346)
and NOW accounts
Net change in time accounts ................ 13,115 35,584
Net change in short-term borrowings ........ 41,307 (5,966)
Increase in long term borrowings ........... -- 10,000
Repayment of long term borrowings .......... -- (10,000)
Net proceeds from sale of common stock ..... -- 11,576
Net proceeds from issuance of debentures ... -- 10,802
Proceeds from options exercised ............ 165 142
Retirement of common stock ................. (349) --
----
Net cash provided by (used in) financing ... 45,622 10,792
------ ------
activities
NET INCREASE (DECREASE) IN CASH AND CASH ... (10,411) 12,194
EQUIVALENTS
CASH AND CASH EQUIVALENTS, beginning of .... 46,562 19,648
------ ------
period
CASH AND CASH EQUIVALENTS, end of period ... $ 36,151 $ 31,842
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid .............................. $ 8,948 5,405
======== =====
Income taxes paid .......................... $ 4,342 2,425
======== =====
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements
<PAGE>
MOUNTAIN PARKS FINANCIAL CORP. AND SUBSIDIARIES
Condensed Consolidated Statement of Changes in Stockholders' Equity
For the Nine Months Ended September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Unrealized
Gain (Loss)
Common Stock Capital Retained on
(In Thousands) Securities
Shares Amount Surplus Earnings Available for Sale Total
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 3,668 $ 4 $ 22,642 $ 24,624 $ 675 $ 47,945
31, 1995
Net income .......... -- -- -- 5,392 -- 5,392
Issuance of common
stock for acquisition 238 -- 5,352 -- -- 5,352
Issuance of common
stock for options ... 19 -- 165 -- -- 165
exercised
Retirement of common (15) -- (349) -- -- (349)
stock
Change in unrealized
gain (loss) on
securities available -- -- -- -- (1,396) (1,396)
------ ------
for sale (net of tax)
BALANCE, September 3,910 $ 4 $ 27,810 $ 30,016 $ (721) $ 57,109
===== ======== ======== ======== ======== ========
30, 1996
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of this statement.
<PAGE>
MOUNTAIN PARKS FINANCIAL CORP. AND SUBSIDIARIES
Notes To Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1 -- Basis of Presentation
The accompanying condensed consolidated financial statements include the
accounts of Mountain Parks Financial Corp. and its wholly-owned subsidiaries
(the "Company"). They have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission ("SEC") and do not include
all information and footnotes required by generally accepted accounting
principles for complete financial statements. All significant intercompany
balances and transactions have been eliminated. In the opinion of management,
the consolidated financial statements contain the adjustments (all of which are
normal and recurring in nature) necessary to present fairly the financial
position and results of operations for the periods presented. Results of
operations for the interim periods presented are not necessarily indicative of
results which may be expected for any other interim period or for the year as a
whole. These statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-KSB for the year
ended December 31, 1995.
Certain 1995 amounts have been reclassified to conform to the 1996
presentation. These reclassifications had no effect on the Company's financial
position or result of operations.
NOTE 2 -- Earnings per Common Share
Earnings per common share are computed by dividing net income by the
weighted average number of shares of common stock outstanding during the period
plus the equivalent number of shares pertaining to common stock options,
warrants and convertible debentures if dilutive using the Treasury Stock method.
See Exhibit 11 for the calculation of Earnings Per Share.
NOTE 3 -- Allowance for Loan Losses
The Company follows Statement of Financial Accounting Standards ("SFAS")
No. 114, "Accounting by Creditors for Impairment of a Loan", and SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures". SFAS No. 114 requires that certain impaired loans be measured
based on the present value of expected future cash flows discounted at the
loan's original effective interest rate. As a practical expedient, impairment
may be measured based on the loan's observable market price or the fair value of
the collateral if the loan is collateral dependent. When the measure of the
impaired loan is less than the recorded investment in the loan, the impairment
is recorded through a valuation allowance.
As of September 30, 1996, the Company's recorded investment in impaired
loans was $7.2 million and the related valuation allowance was $780,000. This
valuation allowance is included in the allowance for loan losses on the balance
sheet. The average recorded investment in impaired loans for the nine months
ended September 30, 1996 was $5.4 million. The following table sets forth
information regarding changes in the Company's allowance for loan losses for the
three and nine months ended September 30, 1996.
<TABLE>
<CAPTION>
Three Months Nine Months
(In Thousands) Ended Ended
September 30, September
1996 30,1996
------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
BALANCE, BEGINNING OF PERIOD $ 3,374 $ 3,163
Balance from acquired
company .................... 505 544
Provision charged to
operations ................. 1,038 1,254
Loans charged off
(235) (335)
Recoveries of loans
previously charged
off ........................ 30 86
-- --
BALANCE, END OF PERIOD ..... $ 4,712 $ 4,712
========= =========
Ending loan portfolio ...... $ 386,762
=========
Allowance for loans as a
percentage of ending ....... 1.21%
portfolio
</TABLE>
The Company maintains its allowance for loan losses at a level considered
by management to be adequate to cover the risk of loss in the loan portfolio at
a particular point in time.
NOTE 4 -- Business Combinations
On July 7, 1995, the Company completed its acquisition of Financial
Holdings, Inc. ("FHI"), an unaffiliated company which owned Boulder Valley Bank
& Trust, Boulder, Colorado ("Boulder"), and The Bank of Louisville, Louisville,
Colorado ("Louisville"). The purchase price was $12.5 million cash and was
accounted for using purchase accounting.
On September 15, 1995, the Company through its wholly-owned subsidiary,
Mountain Parks Bank - East ("MPB-East"), completed the acquisition of Midway
Investment Company ("Midway"), an unaffiliated company which owned Peoples Bank
& Trust Co., Aurora, Colorado ("Peoples"). The purchase price was $5.4 million
cash and was accounted for using purchase accounting.
Effective January 1, 1996, MPB-East acquired an 80% interest in Equity
Lending, Inc. ("ELI"), a residential, sub -prime mortgage lender operating
primarily in the Minneapolis-St. Paul, Minnesota and Milwaukee, Wisconsin,
metropolitan areas. This acquisition was completed with the Company issuing
56,000 shares of its stock for the 80% interest in ELI. ELI operates as a "loan
production office" of MPB-East and makes asset-based, single family residential
mortgage loans to individuals who do not have access to credit from traditional
lending sources but who have substantial equity in their homes. The risk profile
associated with this type of lending is different than traditional commercial or
mortgage banking. This acquisition was accounted for as a purchase.
In February, 1996, the Company formed Mountain Parks Financial Services,
Inc. ("Financial Services") as a wholly-owned subsidiary of MPB-East. Financial
Services is a specialized consumer finance company that indirectly finances the
purchase of used automobiles and other products by customers who possess an
overall sub-prime credit profile. Financial Services' customers generally fall
into two main categories; (i) persons who have a very limited credit background
and need to establish their credit and (ii) persons who have had credit problems
in the past and need to re-establish their credit. The risk profile associated
with this type of lending is different than traditional commercial banking.
Management of Financial Services is experienced in this type of lending and has
adopted policies and procedures intended to address this higher risk.
On December 29, 1995, the Company entered into an agreement to acquire,
through the issuance of 182,000 shares of the Company's common stock and
$519,000 in cash, Charter Bancorporation, a bank holding company which in turn
owns Charter Bank & Trust, Englewood, Colorado ("Charter"). In addition to its
commercial banking business, Charter is one of the largest independent
originators of single family residential mortgages in the Denver area. This
transaction was completed on July 3, 1996 and was accounted for as a purchase.
As of the acquisition date, Charter had total assets of approximately $19.3
million and equity capital of approximately $1.9 million resulting in a purchase
cost in excess of net assets acquired of $2.7 million. In connection with this
acquisition, the Company also acquired the building occupied by Charter for a
cost of $1.9 million.
During March, 1996, the Company entered into an agreement to acquire High
Plains Bank Corp., the parent holding company of Kiowa State Bank ("Kiowa") for
approximately $7.1 million cash. Kiowa has offices located in Kiowa, Elizabeth
and Parker, Colorado. The areas served by Kiowa are the rural communities of
Elizabeth, Kiowa and the southeast Denver suburb of Parker. To differing
extents, each of these areas are "bedroom" communities for persons working in
and around Denver. The acquisition was completed on July 31, 1996 and was
accounted for as a purchase. As of the acquisition date, Kiowa had total assets
of approximately $58.1 million and equity capital of $3.4 million resulting in
purchase costs in excess of net assets acquired of $3.7 million.
On June 25, 1996, the Company signed an agreement and plan of
reorganization to merge with Community First Bankshares, Inc. ("Community
First"), a multi-bank holding company headquartered in Fargo, North Dakota, with
banking offices in seven states. Community First would be the surviving
corporation in the merger. Terms of the merger agreement provide that Community
First will issue 1.275 shares of it's common stock for each share of common
stock outstanding of the Company. As of June 30, 1996, Community First had total
assets of approximately $2.3 billion. The completion of the transaction is
subject to the approval of the stockholders of the Company, the stockholders of
Community First, regulatory authorities and other conditions. This transaction
is expected to be completed in the fourth quarter of 1996.
NOTE 5 -- Change in Accounting Principles
The Company adopted Financial Accounting Standards Board SFAS No. 121
"Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of" on January 1, 1996. This standard requires impairment losses on
long-lived assets to be recognized when an asset's book value exceeds its
expected future cash flows (discounted). The adoption of SFAS No. 121 did not
have a material impact on the financial position or results of operations.
Financial Accounting Standards Board - Statement No. 123, "Accounting for
Stock-Based Compensation" ("Statement No. 123"), and effective for fiscal years
beginning after December 15, 1995, encourages, but does not require, a fair
value based method of accounting for employee stock options or similar equity
instruments. It also allows an entity to elect to continue to measure
compensation cost under Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" ("APB No. 25"), but requires pro forma
disclosures of net income and earnings per share as if the fair value based
method of accounting had been applied. The Company has elected to continue to
measure compensation cost under APB No. 25 and comply with the pro forma
disclosure requirements. Consequently, this statement will have no impact on the
Company's results of operations or financial position. Item 2. Management's
Discussion and Analysis or Plan of Operation
GENERAL
The Company has been actively involved in acquisitions of various financial
institutions. The highlights of these activities are contained in Note 4 of the
Notes to Condensed Consolidated Financial Statements. The Company completed the
acquisition of Charter Bank & Trust on July 3, 1996, and Kiowa State Bank on
July 31, 1996.
On June 25, 1996, the Company announced that it would merge into Community
First Bankshares, Inc. ("Community First"), a multi-bank holding company
headquartered in Fargo, North Dakota. Community First operates banking offices
in seven states and had total assets of $2.3 billion as of June 30, 1996. Terms
of the merger agreement provide that Community First will issue 1.275 shares of
its common stock for each share of common stock outstanding of the Company. The
completion of the transaction is subject to the approval of the stockholders of
the Company, the stockholders of Community First, regulatory authorities and
other conditions. The transaction is expected to be completed in the fourth
quarter of 1996.
Effective as of July 31, 1996, the Company merged the four existing
subsidiary banks (Mountain Parks Bank - West, Mountain Parks Bank - East,
Boulder Valley Bank & Trust, and The Bank of Louisville) into one bank charter
with the name of Mountain Parks Bank. This consolidation allows all existing
bank customers to utilize all 22 banking offices operated by the Company. The
Company also believes that merging the affiliate banks will provide some
additional operating efficiencies.
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Form 10QSB and other materials filed or to be filed by the Company with the SEC
(as well as information in oral statements or other written statements made or
to be made by the Company) contains statements that are forward-looking, such as
statements relating to plans for future expansion and other business development
activities, as well as other capital spending, financial sources and the effects
of regulation and competition. Such forward-looking information involves
important risks and uncertainties that could significantly affect future results
and, accordingly, such results may differ from those expressed in any
forward-looking statement made by or on behalf of the Company. These risks and
uncertainties include, but are not limited to, those relating to dependence on
existing management, domestic and global economic conditions, changes in federal
or state laws or the administration of such laws, as well as all other risks and
uncertainties described in the Company's filings.
COMPARISON OF FINANCIAL CONDITION AT
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
ASSETS. The total assets of the Company increased $138.6 million, or 31.3%,
from $443.2 million at December 31, 1995 to $581.8 million at September 30,
1996. Net loans outstanding increased by $113.5 million or 42.2% as of September
30, 1996. This increase was primarily attributable to the real estate loans
generated by ELI, the Charter and Kiowa acquisitions and an increase in
construction lending. Investment securities increased $18.0 million or 19.9%.
This increase was principally the result of the Kiowa and Charter acquisitions.
ALLOWANCE FOR LOAN LOSSES.
The Company maintains its allowance for loan losses at a level considered
by management to be adequate to cover the risk of loss in the loan portfolio at
a particular point in time. Management's judgment as to the adequacy of the
allowance for loan losses takes into consideration a number of factors,
including loss experience in relation to outstanding loans and the existing
level of the allowance for loan losses, a continuing review of problem loans and
overall portfolio quality, regular examinations of loan portfolios conducted by
the Company's staff and by State and Federal supervisory authorities and
economic conditions. Management believes that the Company's allowance for loan
losses is adequate to cover anticipated losses. There can be no assurance,
however, that the allowance for loan losses will not be increased in the future;
this could adversely affect the Company's earnings. Further, there can be no
assurance that the Company's actual loan losses will not exceed its allowance
for loan losses. NONPERFORMING ASSETS. The following table sets forth
information concerning the Company's nonperforming assets as of the dates
indicated:
<TABLE>
<CAPTION>
September 30, December 31,
(In Thousands) 1996 1995
- -------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
NONPERFORMING LOANS:
Nonaccrual loans ............. $ 354 $ 512
Restructured loans ........... -- 2
-
TOTAL NONPERFORMING LOANS ......... 354 514
OTHER REAL ESTATE OWNED ........... 630 --
---
TOTAL NONPERFORMING ASSETS ........ $ 984 $ 514
====== ======
ALLOWANCE FOR LOAN LOSSES ......... $4,712 $3,163
RATIO OF TOTAL NONPERFORMING ASSETS
TO TOTAL ASSETS .............. 0.17% 0.12%
RATIO OF TOTAL NONPERFORMING LOANS
TO TOTAL LOANS ............... 0.09% 0.19%
RATIO OF ALLOWANCE FOR LOAN LOSSES
TO TOTAL NONPERFORMING LOANS . 1,331.07 615.37%
</TABLE>
Nonperforming loans consist of loans on a nonaccrual basis (which includes
loans contractually past due 90 days or more) and loans on which the original
terms have been restructured. This definition is applied to the commercial bank
subsidiaries. However, due to the nature of lending in the non-bank
subsidiaries, this definition is not applied to identify nonperforming loans
made by such subsidiaries. Consequently, total nonperforming loans do not
include any material amounts of loans from the non-bank subsidiaries.
Restructured loans are those for which concessions, including the reduction
of interest rates below a rate otherwise available to that borrower or the
deferral of interest or principal, have been granted due to the borrower's
weakened financial condition.
The other real estate owned in the amount of $630,000 at September 30, 1996
consisted of $518,000 associated with ELI with the balance from the commercial
banking operations.
LIABILITIES. Total deposits increased by $75.9 million or 20.5% from $369.8
million at December 31, 1995, to $445.7 million at September 30, 1996. Of this
increase, approximately $71.4 million resulted from the Charter and Kiowa
acquisitions and approximately $4.5 million resulted from internal growth within
the existing banks. The overall change in deposits is the result of a net
increase of $56.0 million in interest-bearing deposits and $19.9 million in
noninterest-bearing accounts. At September 30, 1996 and December 31, 1995,
noninterest- bearing deposits represented 30.9% and 31.9% respectively of total
deposits. Borrowed funds increased by $52.7 million from December 31, 1995 to
September 30, 1996. This increase is primarily associated with the funding of
the ELI and Financial Services loan portfolios.
STOCKHOLDERS' EQUITY. The Company's total equity capital increased $9.2
million during the first nine months of 1996. This consisted of $5.4 million
from net earnings of the Company. Capital surplus increased $5.2 million
primarily from the issuance of 56,000 shares of common stock for the 80%
interest in ELI and 182,000 shares of common stock for the acquisition of
Charter, less the repurchase of 15,000 shares issued to the former majority
owners of ELI. Also included in the change in capital surplus was the issuance
of 19,001 shares of stock under the employee stock option plan. These increases
were partially offset by a decline in the market value of securities available
for sale which changed from a net gain of $675,000 at December 31, 1995, to a
net loss of $721,000 at September 30, 1996. At September 30, 1996, the Company
had 3,910,351 shares of common stock outstanding compared with 3,668,351 at
December 31, 1995.
<PAGE>
RESULTS OF OPERATIONS FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
GENERAL. Net income decreased $570,000, or 30.0%, from $1,901,000 for the
third quarter of 1995 to $1,331,000 for the same period of 1996. Primary and
fully diluted earnings per share decreased from $0.53 to $0.34 for the
respective periods of 1995 and 1996. The third quarter 1995 return on average
equity was 22.42% and the return on average assets was 2.00% compared with 9.24%
and 0.97%, respectively, for the same period of 1996.
NET INTEREST INCOME. Net interest income increased $2,858,000, or 47.4%,
from $6,027,000 during the third quarter of 1995 to $8,885,000 during the same
quarter of 1996. This increase was due primarily to an increase in overall
interest income of $3,951,000, of which $3,459,000 (87.5%) relates to increased
interest and fees on loans. Net interest margin on a fully tax equivalent basis
increased from 7.25% in the third quarter of 1995 to 7.71% in the comparable
quarter of 1996. The yield on earning assets increased from 10.35% in the third
quarter of 1995 to 10.88% in the same period of 1996. This increase was due
primarily to an increase in the yield on investments acquired in the Charter and
Kiowa acquisitions.
Total interest expense increased $1,093,000 from $2,587,000 during the
quarter ended September 30, 1995 to $3,680,000 during the same quarter of the
current year. The overall cost of interest-bearing liabilities decreased from
4.34% in the third quarter of 1995 to 4.17% in the same quarter of 1996. This
decrease resulted from a decrease in the cost of interest-bearing deposits
(3.97% in 1995 compared with 3.78% in 1996) and a decrease in the cost of other
borrowed funds (8.60% in 1995 versus 6.35% in 1996). Management believes that
the reliance on borrowed funds will remain high during the remainder of 1996 as
this is the source of funding loans for ELI and for Financial Services.
PROVISION FOR LOAN LOSSES. During the third quarter of 1996 a provision for
loan losses of $1,038,000 was recorded by the subsidiary banks and ELI. This
compares with a provision for loan losses of $111,000 during the same period of
1995. The 1996 provision for loan losses is intended to reflect general growth
in the overall loan portfolio, the completed acquisitions and the intention of
management to increase the overall reserve for loan losses to a level more
consistent with that of other similar sized bank holding companies and is not
indicative of decreased loan quality in any subsidiary bank or in any type of
market served by the Company.
NONINTEREST INCOME. Noninterest income increased $135,000, or 10.3%, from
$1,309,000 in the third quarter of 1995 to $1,444,000 in the same quarter of
1996. This increase was primarily the result of an increase in service charges
on deposit accounts relating to the acquisition growth that occurred during the
1996 quarter. During the third quarter of 1995, the Company reported a $14,000
gain on the sale of securities. No security gains or losses were recorded during
the same period of 1996.
NONINTEREST EXPENSE. Noninterest expense increased $2,940,000, or 71.7%,
from $4,098,000 for the three months ended September 30, 1995 to $7,038,000 for
the three months ended September 30, 1996. This increase was due primarily to
personnel costs rising $1,955,000 or 89.60%. Included in the increase in
personnel costs were pretax charges of $447,000 relating to changes in the
Company's policy for employee vacations, severance packages for individuals who
have ceased employment with the Company and an adjustment to a deferred
compensation agreement. Occupancy expense increased $301,000 or 78.8% from
$382,000 in the third quarter of 1995 to $683,000 in the same quarter of 1996.
These increases are principally related to the acquisitions described in Note 4
of Notes to Condensed Consolidated Financial Statements and the opening of two
new offices by the existing banks. In addition, other expenses increased
$688,000 or 63.0% for the three months ended September 30, 1996 as compared to
the period ending September 30, 1995. The average balance of assets increased
$166 million or 44.04% in comparing the third quarter of 1996 to the third
quarter 1995. During the current quarter the Company also incurred expenses in
the startup of Financial Services and the opening of additional offices of ELI.
INCOME TAX EXPENSE. Federal and state income taxes decreased by $304,000,
or 24.80%, from $1,226,000 for the three months ended September 30, 1995 to
$922,000 for the three months ended September 30, 1996. This decrease was
primarily the result of the reduction in the pre-tax income, offset by a slight
change in the mix of earning assets and an increase in state income taxes paid.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
GENERAL. Net income increased $267,000, or 5.21%, from $5,125,000 for the
first nine months of 1995 to $5,392,000 for the same period of 1996. Primary and
fully diluted earnings per share decreased from $1.71 and $1.63 respectively, to
$1.40 and $1.40 for the comparable periods of 1995 and 1996. The year to date
September 30, 1995 annualized return on average equity was 23.8% and the return
on average assets was 2.23% compared with 13.77% and 1.46%, respectively, for
the same period of 1996.
NET INTEREST INCOME. Net interest income increased $7,714,000, or 50.0%,
from $15,434,000 during the first nine months of 1995 to $23,148,000 during the
same period of 1996. This increase was primarily due to an increase in overall
interest income of $11,110,000, with $9,225,000 (83.0%) relating to increased
interest and fees on loans. Net interest margin on a fully tax equivalent basis
decreased from 7.63% in the first nine months of 1995 to 7.55% in the comparable
period of 1996. The yield on earning assets decreased insignificantly from
10.68% in the first nine months of 1995 to 10.66% in the same period of 1996.
Total interest expense increased $3,396,000 from $6,205,000 during the
period ended September 30, 1995 to $9,601,000 during the same period of the
current year. The overall cost of interest-bearing liabilities decreased from
4.26% in the first nine months of 1995 to 4.04% in the same period of 1996. Cost
of other borrowed funds increased from 6.71% in the first three quarters of 1995
to 6.85% in 1996. Management believes that the reliance on borrowed funds will
remain high during the remainder of 1996 as this is the source of funding loans
for ELI and for Financial Services. The cost of average deposits decreased from
3.63% during the first nine months of 1995 to 3.63% during the same period of
1995.
PROVISION FOR LOAN LOSSES. During the first nine months of 1996 a provision
for loan losses of $1,254,000 was recorded by the subsidiary banks and ELI. This
compares with a provision for loan losses of $243,000 which was recorded during
the same period of 1995. The 1996 provision for loan loss is intended to reflect
general growth in the overall loan portfolio, the Charter and Kiowa acquisitions
and the intention of management to increase the overall reserve for loan losses
to a level more consistent with that of other similar sized bank holding
companies and is not indicative of decreased loan quality in any subsidiary bank
or in any type of market served by the Company.
NONINTEREST INCOME. Noninterest income increased $1,421,000, or 47.4%, from
$3,001,000 in the period ended September 30, 1995 to $4,422,000 in the same
period of 1996. This increase was partially the result of an increase in service
charges on deposit accounts relating to the acquisition growth that occurred in
the period. Other income increased from $1,293,000 during the first nine months
of 1995 to $2,157,000 in the same period of 1996. This increase was due
partially to a $192,000 gain on the sale of the guaranteed portion of SBA loans
during the second quarter of 1996. Additionally, other income has grown
primarily in the area of trust service fees, credit card fees and other fee
producing activities that exist in the acquired locations. During the first
three quarters of 1996, the Company reported a $1,000 gain on the sale of
securities compared to a loss of $134,000 in the same period of 1995.
NONINTEREST EXPENSE. Noninterest expense increased $7,495,000, or 74.0%,
from $10,125,000 for the nine months ended September 30, 1995 to $17,620,000 for
the nine months ended September 30, 1996. This increase was due to personnel
costs rising $4,611,000 or 85.5%. Occupancy expense increased $627,000 or 67.8%
from $925,000 in the first three quarters of 1995 to $1,552,000 in the same
period of 1996. These increases are principally related to the acquisitions
described in Note 4 of Notes to Condensed Consolidated Financial Statements.
Depreciation and amortization climbed from $971,000 to $1,565,000 or 61.2%. In
addition, other expenses increased $1,663,000 or 58.7% for the nine months ended
September 30, 1996 as compared to the period ending September 30, 1995. The
average balance of assets increased $184 million or 60.0% in comparing the first
three quarters of 1996 to the same period of 1995. During the first nine months
of 1996 the Company also incurred expenses in the startup of Financial Services
and the opening of additional offices of ELI.
INCOME TAX EXPENSE. Federal and state income taxes increased by $362,000,
or 12.3%, from $2,942,000 for the nine months ended September 30, 1995 to
$3,304,000 for the nine months ended September 30, 1996. This increase was
primarily the result of an increase in pre-tax income, a slight change in the
mix of earning assets and an increase in state income taxes paid. PART II -
OTHER INFORMATION
Item 1. Legal Proceedings.
At the present time, neither the Company nor any of the subsidiaries is
engaged in any legal proceedings of a material nature. From time to time, the
subsidiaries are parties to legal proceedings wherein they enforce their rights
with respect to loans.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
On June 25, 1996, the Company signed an agreement and plan of
reorganization with Community First Bankshares, Inc. ("Community First"), a
multi-bank holding company headquartered in Fargo, North Dakota, with
banking offices in seven states. Community First would be the surviving
corporation in the merger. Terms of the merger agreement provide that
Community First will issue 1.275 shares of it's common stock for each share
of common stock outstanding of the Company. As of June 30, 1996, Community
First had total assets of approximately $2.3 billion. The completion of the
transaction is subject to the approval of the stockholders of the Company,
the stockholders of Community First, regulatory authorities and other
conditions. This transaction is expected to be completed in the fourth
quarter of 1996.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits The Exhibit Index on page 20 of this Form 10-QSB
lists the exhibits that are filed as a part of this report.
(b) Reports on Form 8-K There were no reports on Form 8-K filed
during the quarter ended September 30, 1996.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MOUNTAIN PARKS FINANCIAL CORP.
(Registrant)
Date: November 12, 1996
By /s/ James R. Krumm
----------------------
James R. Krumm
Chief Operating Officer
(Authorized officer and
principal financial officer of the
Registrant)
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
<PAGE>
Exhibit 11
Statement Regarding Computation of Per Share Earnings.
MOUNTAIN PARKS FINANCIAL CORP. AND SUBSIDIARIES
Statement Regarding Computation Of Per Share Earnings
(Unaudited)
<TABLE>
<CAPTION>
For the Three For the Nine
(In Thousands, Except Months Ended Months Ended
Per Share Data) September 30, September 30,
1996 1995 1996 1995
------ -------- --------- ------
<S> <C> <C> <C> <C>
Primary earnings per share -
Weighted average number of
shares outstanding ........... 3,904 3,509 3,792 2,937
Computed shares outstanding
under the Company's Stock
Option Plans utilizing the ... 65 50 56 53
treasury stock method
Computed shares outstanding
for the Company's Warrant
utilizing the treasury stock . -- 12 -- 12
method
Shares outstanding used to
compute primary earnings per . 3,969 3,571 3,848 3,002
share
Net Income ................... $1,331 $1,901 $5,392 $5,125
Primary earnings per share ... $ 0.34 $ 0.53 $ 1.40 $ 1.71
Fully diluted earnings per
share -
Weighted average number of
shares outstanding ........... 3,904 3,509 3,792 2,937
Computed shares outstanding
under the Company's Stock
Option Plans utilizing the ... 67 56 62 57
treasury stock method
Computed shares outstanding
for the Company's Warrant
utilizing the treasury stock . -- 14 -- 13
method
Computed shares outstanding
for the Company's 7.375%
Convertible Debentures
utilizing the if converted ... -- -- -- 189
method
Shares outstanding used to
compute fully diluted earnings 3,971 3,579 3,854 3,166
per share
Net income ................... $1,331 $1,901 $5,392 $5,125
Interest expense on 7.375%
Convertible Debentures, net of -- -- -- 86
tax effect
Net income, as adjusted ...... $1,331 $1,901 $5,391 $5,211
Fully diluted earnings
per share ................... $ 0.34 $ 0.53 $ 1.40 $ 1.63
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> dec-31-1996
<PERIOD-START> jul-01-1996
<PERIOD-END> sep-30-1996
<EXCHANGE-RATE> 1
<CASH> 36,151
<INT-BEARING-DEPOSITS> 307,777
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 90,917
<INVESTMENTS-CARRYING> 108,841
<INVESTMENTS-MARKET> 108,610
<LOANS> 386,762
<ALLOWANCE> 4,712
<TOTAL-ASSETS> 581,797
<DEPOSITS> 445,707
<SHORT-TERM> 59,860
<LIABILITIES-OTHER> 7,621
<LONG-TERM> 11,500
0
0
<COMMON> 4
<OTHER-SE> 57,105
<TOTAL-LIABILITIES-AND-EQUITY> 581,797
<INTEREST-LOAN> 27,223
<INTEREST-INVEST> 5,526
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 32,749
<INTEREST-DEPOSIT> 7,501
<INTEREST-EXPENSE> 2,100
<INTEREST-INCOME-NET> 23,148
<LOAN-LOSSES> 1,254
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 17,620
<INCOME-PRETAX> 8,696
<INCOME-PRE-EXTRAORDINARY> 8,696
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,392
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 1.40
<YIELD-ACTUAL> 7.55
<LOANS-NON> 354
<LOANS-PAST> 10,308
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,374
<CHARGE-OFFS> 235
<RECOVERIES> 30
<ALLOWANCE-CLOSE> 4,712
<ALLOWANCE-DOMESTIC> 4,712
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
