Vail Banks (NASDAQ:VAIL)
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Vail Banks Announces Third Quarter Results
AVON, Colo., Oct. 25 /PRNewswire-FirstCall/ -- Vail Banks, Inc. (NASDAQ:VAIL)
today reported diluted net income per share of $0.10 for the third quarter 2004
compared to $0.07 for third quarter 2003. Net income for the quarter was
$559,000 versus $363,000 in third quarter 2003.
"Loan and deposit volumes continued to show healthy gains during the quarter,"
commented Gary Judd, CEO of Vail Banks, Inc. "Loans are up $73 million or 31
percent annualized while deposits have increased $52 million or 15 percent
annualized since year end. The hard work of improving our credit processes has
also paid off with our loan loss reserve to non-performing assets ratio
improving 193 percent from the third quarter 2003 to 460 percent. Total risk
assets (non-performing assets plus loans 90 days or more past due and accruing)
are down $3.3 million to $1.4 million since the same time last year."
Mr. Judd further commented, "Our balance sheet continues to show improved
strength. We have an improved mix of deposits that has helped our net interest
margin to increase to 4.68 percent. This is a 16 percent improvement over the
margin at December 31, 2003 and the highest level since the second quarter
2003. Our core deposits have grown at a 21 percent annualized rate. Core
deposit growth has lowered our cost of funds to its lowest level in the
Company's history."
The asset quality of the Bank is at an all-time high. Non-accrual loans stood
at $814,000 at September 30, 2004 compared with $2.1 million on the same date a
year earlier, down 61 percent. Foreclosed properties were at $606,000 at the
end of the third quarter compared to $2.5 million at the same time the previous
year, a 76 percent reduction. Loans 90+ days past due and accruing were only
$3,000 at September 30, 2004 compared to $163,000 on the same date in the prior
year, a 98 percent reduction. Finally, total risk assets compared to
loan-related assets has declined 76 percent since the prior year quarter end to
0.37 percent.
Mr. Judd stated, "The significant improvement in asset quality is the result of
relentless work in improving our credit processes and standards and in
performing a thorough review of our problem credits over the past few years.
With the addition of several experienced credit officers in the past year, the
strength of our lending team has increased significantly."
Throughout this significant loan growth, the Bank has maintained a strong loan
loss reserve of 0.97 percent of total loans. The Bank has added $524,000 to
the reserve for the nine months ended September 30, 2004 compared to $414,000
for the same period last year. The Bank had its second net recovery quarter
during the past year with annualized net recoveries at 0.05 percent of average
loans for the third quarter. For the nine months ended September 30, 2004, net
charge-offs were 0.11 percent versus 0.35 percent of average loans for the same
time period the prior year, a 69 percent reduction.
Total revenue (net interest income and non-interest income) increased $239,000,
or 3 percent, from the third quarter of 2003. This increase came even though
there was a $543,000 decrease in mortgage brokerage fees compared to the same
period the previous year. There was a 6 percent increase in interest and fees
on loans from the third quarter 2003. This increase was the result of improved
loan volumes, partially offset by a 7 percent reduction in loan yields.
During the quarter, the Bank merged its wholly owned subsidiary, First Western
Mortgage Services, into the Bank and changed its name to WestStar Mortgage to
capitalize on our brand name. The Bank also opened an additional office in the
Front Range to further its development in the growing Denver marketplace and
moved its Glenwood Springs main office into a premier new building and
location.
"We continue to invest significantly in our associates' development in order to
better service our customers' needs," stated Mr. Judd. "We believe that this
investment will provide us with the tools and skills needed to achieve the
Company's profitability goals. Our overall salary and benefits have been
managed conservatively showing a 7 percent reduction year-to-date as compared
to the same period a year ago."
At its meeting on October 18, the Board of Directors of Vail Banks declared a
regular quarterly dividend of $0.07 per share payable November 12 to
shareholders of record on October 29.
The Company has restated first quarter 2004 earnings to reflect a tax
accounting reconciliation in calculating the tax on the gain on sale of the
Vail Bank building. Vail Banks has increased its tax liability and tax expense
associated with this complex financial transaction by $293,000. The Company's
outside accounting firm recently identified this adjustment. This adjustment
does not impact the core earnings or operations of our business. In addition,
it has not impacted our customers or the future growth of the Bank. The
Company has restated its quarterly filings with the Securities and Exchange
Commission for both the first and second quarters to reflect this revised tax
calculation.
Vail Banks, Inc., through its subsidiary WestStar Bank, has 23 banking offices
in 18 communities in Colorado, including Aspen, Avon, Breckenridge, Cedaredge,
Delta, Denver, Dillon, Edwards, Estes Park, Frisco, Glenwood Springs, Granby,
Grand Junction, Gypsum, Montrose, Norwood, Telluride and Vail.
Vail Banks warns caution should be taken in relying upon any forward-looking
statements in this release, as they involve a number of risks and uncertainties
that could cause actual results to differ materially from any such statements,
including the risks and uncertainties discussed in the Company's Annual Report
on Form 10-K for the year ended December 31, 2003, under the caption "Certain
Factors Affecting Forward Looking Statements," which discussion is incorporated
herein by reference.
Vail Banks, Inc.
Financial Highlights
(in thousands, except share data)
Three Months Ended
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
2004 (2) 2004 (2) 2004 (2) 2003 2003
Earnings and
Performance
Net income (loss) $559 574 1,180 (1,761) 363
Diluted net
income (loss)
per share 0.10 0.11 0.22 (0.35) 0.07
Return on assets 0.37% 0.39 0.80 (1.18) 0.24
Return on equity 3.79 3.95 8.13 (11.77) 2.39
Net interest
margin (FTE) 4.68 4.38 4.17 4.05 4.15
Efficiency ratio 87 89 73 130 93
Asset Quality
Ratios
Net charge-offs
(recoveries) to
average loans (0.05)% 0.04 0.38 (0.05) 0.00
Allowance for
loan losses to
loans 0.97 0.97 1.05 1.12 1.06
Allowance for
loan losses to
non-performing
loans 460 217 205 201 157
Non-performing
assets to
loan-related
assets 0.37 0.67 0.72 0.68 1.46
Risk assets to
loan-related
assets (1) 0.37 0.67 0.73 0.73 1.52
Capital Ratios
Equity to assets
at period end 9.50% 9.82 9.77 10.05 10.04
Tangible equity
to assets at
period end 3.72 3.70 3.81 3.63 3.88
Leverage ratio 8.41 7.93 7.80 7.45 7.86
Tier 1 capital
ratio 10.97 11.35 11.91 11.50 12.17
Total capital
ratio 12.58 13.22 13.96 13.72 14.09
Other Information
at Period End
Book value per
share $11.19 10.89 11.20 10.95 11.26
Tangible book
value per share 4.38 4.10 4.37 3.96 4.35
Closing market
price 13.08 12.44 12.32 11.94 14.72
Shares
outstanding 5,310,754 5,326,330 5,298,093 5,283,264 5,311,512
Full time
equivalent
associates 252 238 238 244 241
Banking offices 23 22 22 22 23
(1) Risk assets are non-performing assets plus loans 90 days or more
past due and accruing.
(2) Reflects the adoption of Financial Interpretation Number 46 on
January 1, 2004. Prior quarter information has not been restated.
Vail Banks, Inc.
Balance Sheet
(in thousands, except share data)
September 30, December 31, Percent
Assets 2004 2003 Change
Cash and due from banks $15,082 21,628 (30)%
Federal funds sold 6,230 79,280 (92)
Interest-bearing deposits in banks 2,000 2,000 0
Investment securities
Available for sale 132,615 76,554 73
Held to maturity 283 370 (24)
Bank stocks 4,411 4,371 1
Investments in Trust I and
Trust II (1) 743 0 0
Loans held for sale 2,295 2,515 (9)
Gross loans 385,470 312,544 23
Allowance for loan losses (3,742) (3,503) 7
Net deferred loan fee income (1,198) (770) 56
Premises and equipment, net 38,367 38,147 1
Goodwill, net 35,969 36,758 (2)
Other intangible assets, net 169 199 (15)
Other assets 6,288 5,517 14
$624,982 575,610 9%
Liabilities and Shareholders'
Equity
Liabilities
Deposits $500,297 448,515 12%
Federal funds purchased and
securities sold under agreements
to repurchase 751 907 0
Federal Home Loan Bank advances 33,603 39,461 (15)
Trust preferred (1) 0 24,000 (100)
Subordinated notes to Trust I
and Trust II (1) 24,743 0 0
Other liabilities 3,641 4,165 (13)
Total liabilities 563,035 517,048 9
Minority interest 2,546 703 262
Shareholders' equity
Common equity 60,012 57,979 4
Accumulated other comprehensive
loss (611) (120) 409
Total shareholders' equity 59,401 57,859 3
$624,982 575,610 9%
Loan Mix at Period End
Commercial, industrial, and land $227,337 185,158 23%
Real estate -- construction 82,436 63,844 29
Real estate -- mortgage 69,935 57,602 21
Consumer 5,762 5,940 (3)
Total gross loans $385,470 312,544 23%
Deposit Mix at Period End
Interest bearing checking $97,692 88,191 11%
Savings 33,218 29,873 11
Money market 134,139 103,969 29
CDs under $100,000 51,857 55,978 (7)
CDs $100,000 and over 75,159 69,199 9
Interest bearing deposits 392,065 347,210 13
Non-interest bearing checking 108,232 101,305 7
Total deposits $500,297 448,515 12%
Shares Outstanding at Period End 5,310,754 5,283,264 1%
(1) Reflects the adoption of Financial Interpretation Number 46 on
January 1, 2004. Prior year information has not been restated.
Vail Banks, Inc.
Statement of Income
(in thousands, except share data)
Three months ended Nine Months ended
September 30, September 30,
Percent Percent
2004 2003 Change 2004 2003 Change
Interest income
Interest on
loans $5,829 5,702 2% 16,342 18,058 (10)
Fees on loans 875 616 42 2,592 1,802 44
Interest on
investment
securities 1,134 850 33 2,952 2,847 4
Interest on
federal funds
sold and
short-term
investments 25 191 (87) 314 480 (35)
Investments in
Trust I and
Trust II (1) 19 0 0 57 0 0
Total interest
income 7,882 7,359 7 22,257 23,187 (4)
Interest expense
Deposits 1,028 1,172 (12) 3,052 3,576 (15)
Borrowings 340 439 (23) 1,057 1,172 (10)
Federal funds
purchased and
securities
sold under
agreements to
repurchase 3 0 0 5 0 0
Trust
preferred 0 612 (100) 0 1,835 (100)
Subordinated
notes to
Trust I and
Trust II (1) 631 0 0 1,892 0 0
Total
interest
expense 2,002 2,223 (10) 6,006 6,583 (9)
Net interest
income 5,880 5,136 14 16,251 16,604 (2)
Provision for
loan losses 323 164 97 524 414 27
Net interest
income after
provision 5,557 4,972 12 15,727 16,190 (3)
Non-interest
income 2,243 2,748 (18) 8,179 8,476 (4)
Non-interest
expense 7,052 7,294 (3) 20,187 21,213 (5)
Income before
taxes 748 426 76 3,719 3,453 8
Income taxes 189 63 200 1,406 978 44
Net Income $559 363 54% 2,313 2,475 (7)
Diluted net
income per
share $0.10 0.07 43% 0.43 0.44 (2)
Weighted
average shares
outstanding
- diluted 5,426,283 5,498,653 (1) 5,415,405 5,689,159 (5)
Profitability
Ratios
Return on
assets 0.37% 0.24 0.52 0.56
Return on
equity 3.79 2.39 5.28 5.21
Net interest
margin (FTE) 4.68 4.15 4.41 4.60
Net
(recoveries)
chargeoffs (0.05) 0.00 0.11 0.35
Efficiency
ratio 87 93 83 85
Average
Balances
Assets $604,689 600,424 1% 596,429 589,691 1
Earning
assets 511,363 504,361 1 504,023 494,619 2
Loans 362,585 315,602 15 335,685 328,497 2
Deposits 480,902 466,356 3 471,912 456,709 3
Shareholders'
equity 58,621 60,244 (3) 58,487 63,508 (8)
(1) Reflects the adoption of Financial Interpretation Number 46 on
January 1, 2004. Prior quarter information has not been restated.
Vail Banks, Inc.
Statement of Income by Quarter
(in thousands, except share data)
Three Months Ended
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
2004 2004 2004 2003 2003
Interest income
Interest on loans $5,829 5,223 5,290 5,437 5,702
Fees on loans 875 943 774 801 616
Interest on investment
securities 1,134 1,045 773 557 850
Interest on federal
funds sold and
short-term investments 25 85 204 210 191
Investments in Trust I
and Trust II (1) 19 19 19 0 0
Total interest income 7,882 7,315 7,060 7,005 7,359
Interest expense
Deposits 1,028 1,005 1,019 1,068 1,172
Borrowings 340 345 372 430 439
Federal funds purchased
and securities sold
under agreements to
repurchase 3 1 1 1 0
Trust preferred (1) 0 0 0 612 612
Subordinated notes to
Trust I and Trust II (1) 631 630 631 0 0
Total interest expense 2,002 1,981 2,023 2,111 2,223
Net interest income 5,880 5,334 5,037 4,894 5,136
Provision for loan losses 323 43 158 164 164
Net interest income
after provision 5,557 5,291 4,879 4,730 4,972
Non-interest income
Deposit related 717 692 685 757 747
Mortgage broker fees 756 775 803 853 1,299
Gain (loss) on sale
of fixed assets (11) 103 1,678 0 0
Other 781 522 678 1,056 702
2,243 2,092 3,844 2,666 2,748
Non-interest expense
Salaries and employee
benefits 4,096 3,994 4,019 4,578 4,403
Occupancy 1,000 846 845 1,259 850
Furniture and equipment 608 611 562 673 696
Amortization of
intangible assets 10 10 10 561 19
Other 1,338 1,158 1,080 2,754 1,326
7,052 6,619 6,516 9,825 7,294
Income (loss) before
taxes 748 764 2,207 (2,429) 426
Income tax expense
(benefit) 189 190 1,027 (668) 63
Net Income (Loss) $559 574 1,180 (1,761) 363
Diluted net income
(loss) per share $0.10 0.11 0.22 (0.35) 0.07
(1) Reflects the adoption of Financial Interpretation Number 46 on
January 1, 2004. Prior year information has not been restated.
Vail Banks, Inc.
Supplemental Information
(in thousands)
Three Months Ended
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
2004 (1) 2004 (1) 2004 (1) 2003 2003
Average Balances
Assets $604,689 592,343 592,263 589,586 600,424
Earning assets 511,363 501,982 498,642 492,696 504,361
Loans 362,585 329,508 314,667 311,001 315,602
Deposits 480,902 468,618 466,117 457,108 466,356
Interest bearing
liabilities 436,601 430,525 428,143 427,518 439,842
Shareholders'
equity 58,621 58,453 58,385 59,340 60,244
Average Deposit
Mix
Interest bearing
checking 99,279 95,259 92,413 89,817 88,494
Savings 31,893 30,300 30,708 30,019 30,125
Money market 124,130 126,845 119,881 108,637 109,159
CDs under
$100,000 51,943 53,141 55,109 58,357 60,940
CDs $100,000 and
over 69,965 64,829 66,746 71,979 81,565
Interest bearing
deposits 377,210 370,374 364,857 358,809 370,283
Non-interest
bearing
checking 103,692 98,244 101,260 98,299 96,073
Total deposits 480,902 468,618 466,117 457,108 466,356
Net Interest
Margin Analysis
Net interest
income $5,880 5,334 5,037 4,894 5,136
Fully taxable
equivalent
adjustment 132 134 132 133 146
Net interest
income (FTE) 6,012 5,468 5,169 5,027 5,282
Yields (FTE)
Loans 7.36% 7.53 7.75 7.96 7.94
Investment
securities 3.59 3.53 4.05 3.28 4.01
Other earning
assets 2.39 1.16 0.99 0.90 0.94
Total earning
assets 6.23 5.97 5.80 5.75 5.90
Cost of funds
Interest bearing
deposits 1.08 1.09 1.12 1.18 1.26
Other interest
bearing
liabilities 6.52 6.53 6.38 6.02 5.99
Total interest
bearing
liabilities 1.82 1.85 1.90 1.96 2.01
Total interest
expense to
earning assets 1.55 1.59 1.63 1.70 1.75
Net interest
margin (FTE) 4.68 4.38 4.17 4.05 4.15
(1) Reflects the adoption of Financial Interpretation Number 46 on
January 1, 2004. Prior year information has not been restated.
Vail Banks, Inc.
Asset Quality
(in thousands)
Three Months Ended
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
2004 2004 2004 2003 2003
Asset Quality
Nonaccrual loans $814 1,555 1,636 1,747 2,105
Restructured loans 0 0 0 0 0
Total non-performing
loans 814 1,555 1,636 1,747 2,105
Foreclosed properties 606 788 674 362 2,496
Total non-performing
assets 1,420 2,343 2,310 2,109 4,601
90+ days past due and
accruing 3 8 15 164 163
Total risk assets $1,423 2,351 2,325 2,273 4,764
Allowance for Loan
Losses
Beginning Balance $3,369 3,361 3,503 3,299 3,138
Provision for loan
losses 323 43 158 164 164
Loan charge-offs 149 120 338 78 73
Loan recoveries 199 85 38 118 70
Net charge-offs
(recoveries) (50) 35 300 (40) 3
Ending Balance $3,742 3,369 3,361 3,503 3,299
Net Charge-Offs
(Recoveries) to
Average Loans (0.05)% 0.04 0.38 (0.05) 0.00
Loans Past Due 30 Days
or More and Accruing 0.15 0.24 2.46 0.47 2.18
DATASOURCE: Vail Banks, Inc.
CONTACT: Lisa M. Dillon, Vice Chairman, +1-970-476-2002,
, or Raymond E. Verlinde, Sr. EVP/Chief Administrative
Officer, +1-970-328-9710, , both of Vail Banks,
Inc.