Vail Banks (NASDAQ:VAIL)
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Vail Banks Reports Second Quarter Earnings of $0.11
AVON, Colo., July 19 /PRNewswire-FirstCall/ -- Vail Banks, Inc. (NASDAQ:VAIL)
today reported diluted net income per share of $0.11 for the second quarter
2004 compared to $0.27 in the first quarter 2004 and $0.20 for second quarter
2003. Net income for the quarter was $574,000 versus $1.473 million in first
quarter 2004 and $1.137 million in second quarter 2003. First quarter 2004
results included a gain on the sale of the Company's Vail bank building of
$1.678 million ($1.061 million, or $0.20 per diluted share, after tax).
"Our loan and deposit volumes continued to increase during the quarter,"
commented E. B. Chester, Chairman of Vail Banks. "Our offices are experiencing
improved activity, and we are beginning to see the bottom-line results of this
growth. The focus on credit quality over the past two and a half years has
also paid off as our non-performing assets have declined to their lowest level
in ten quarters."
Gary Judd, President and CEO of Vail Banks, commented, "Net charge-offs of
0.04% and coverage of non-performing loans of 217% are evidence of a very
strong balance sheet. Loans past due 30 days or more and accruing dropped to
0.24% of total loans. This benchmark, often a harbinger for problem loans, is
at its lowest level since December 2000. This credit quality gives us a
platform to grow the Company and our associates have definitely accepted the
challenge. We are very encouraged by the 12% increase in loan outstandings
since the end of 2003, and we are pleased with the level of sales activity our
credit officers are producing."
Financial Highlights
* Earnings per share
Diluted net income per share was $0.11 for second quarter
Compared to $0.20 for second quarter 2003, a 45% decrease
Compared to $0.27 for first quarter 2004, a 59% decrease
including the building sale gain, and $0.07, a 57% increase
excluding the gain
* Net Income
Net income was $574,000 for second quarter
Compared to $1,137,000 for second quarter 2003, a 50% decrease
Compared to $1,473,000 for first quarter 2004, a 61% decrease
including the gain and $412,000, a 39% increase excluding
the gain
* Return on assets
Return on assets was 0.39% for second quarter
Compared to 0.76% for second quarter 2003
Compared to 1.00% for first quarter 2004
* Return on equity
Return on equity was 3.93% for second quarter
Compared to 7.08% for second quarter 2003
Compared to 10.13% for first quarter 2004
* Net Interest Margin
Net interest margin (fully tax equivalent) was 4.38% for
second quarter
Compared to 4.77% for second quarter 2003
Compared to 4.17% for first quarter 2004
* Efficiency Ratio
Efficiency ratio was 89% for second quarter
Compared to 80% for second quarter 2003
Compared to 73% for first quarter 2004
Top Line Revenue
Total revenue (net interest income and non-interest income), decreased $1.230
million, or 14%, from the second quarter of 2003, due primarily to lower
interest income on loans and lower fee income from mortgage brokerage
activities. Revenues increased $223,000, or 3%, from the first quarter 2004,
excluding the building sale gain, due primarily to higher interest income on
securities.
Net interest income was $5.334 million for the quarter compared to $5.811
million in the second quarter 2003, and to $5.037 million in the first quarter
2004. Average loans for the quarter increased $15 million, or 19% annualized,
compared to the first quarter 2004. Average deposits increased $3 million, or
2% annualized, during the quarter compared to the first quarter 2004. Average
core deposits (total deposits less CDs) grew $6 million, or 7% annualized,
compared to the first quarter 2004, and have increased $35 million, or 44%
annualized, from the second quarter 2003.
Non-interest income, decreased 26%, or $753,000, as compared to the second
quarter of 2003, and decreased 3%, or $74,000, excluding the building sale
gain, as compared to the first quarter 2004. Mortgage broker fees were
$775,000 as the Company's mortgage subsidiary experienced soft activity after
the refinancing boom of 2002 and 2003. This represents a decrease of 42%, or
$559,000, from the second quarter of 2003, and a decrease of 3%, or $28,000,
from the first quarter 2004.
Interest Rate Risk Management
The net interest margin, on a fully tax-equivalent basis, was 4.38% for the
quarter compared to 4.17% in the first quarter 2004 and 4.77% in the second
quarter 2003. Earning assets yielded 5.97% for the second quarter, a 61 basis
point decrease from the second quarter 2003 yield of 6.58%, and a 17 basis
point increase from the first quarter 2004 yield of 5.80%. Interest expense as
a percentage of earning assets decreased to 1.59% in the first quarter from
1.81% in the second quarter 2003, a decrease of 22 basis points, and decreased
4 basis points from 1.63% in the first quarter 2004.
"The growth in loans and securities has improved our net interest margin from
the fourth quarter of 2003," said Dan Godec, President of WestStar Bank. "We
have a strong loan pipeline and our credit officers continue to find new
opportunities for growing our business. Further, our unfunded loan commitments
have increased 43% since December 31, as our construction loan business
increases. We also are beginning to see growth in the number of relationships
we service."
Credit Risk Management
Net charge-offs, on an annualized basis, were 0.04% of average loans for the
quarter, compared to net charge-offs of 0.44% in the second quarter 2003 and
0.38% in the first quarter 2004. At June 30, the allowance for loan losses was
0.97% of total loans and 217% of non-performing loans. Overall, non-performing
assets comprised 0.67% of loan-related assets at the end of the quarter
compared to 0.72% at the end of the first quarter 2004.
"Our credit quality is excellent," said Lisa Dillon, Vice Chairman of Vail
Banks. "Non-accrual loan levels continue to decline and charge-offs are
extremely low. Our detailed analysis of impaired loans and the improvement in
the economic environment indicate that our reserve is adequate."
Control of Non-interest Expenses
Non-interest expense was $6.619 million for the quarter versus $6.895 million
in second quarter 2003, and $6.516 million in first quarter 2004. Lower
expenses in the second quarter 2004 primarily reflect the lower mortgage
origination costs due to reduced loan origination volumes as compared to 2003.
Dividend Payment
At its meeting on July 19, the Board of Directors of Vail Banks declared a
regular quarterly dividend of $0.07 per share payable August 13 to shareholders
of record on July 30.
Franchise
Vail Banks, through its subsidiary WestStar Bank, has 22 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
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
2004 (2) 2004 (2) 2003 2003 2003
Earnings and
Performance
Net income (loss) $574 1,473 (1,761) 363 1,137
Diluted net income
(loss) per share 0.11 0.27 (0.35) 0.07 0.20
Return on assets 0.39 % 1.00 (1.18) 0.24 0.76
Return on equity 3.93 10.13 (11.77) 2.39 7.08
Net interest
margin (FTE) 4.38 4.17 4.05 4.15 4.77
Efficiency ratio 89 73 130 93 80
Asset Quality Ratios
Net charge-offs
(recoveries) to
average loans 0.04 % 0.38 (0.05) 0.00 0.44
Allowance for
loan losses to
loans 0.97 1.05 1.12 1.06 0.98
Allowance for
loan losses to
non-performing
loans 217 205 201 157 182
Non-performing
assets to
loan-related
assets 0.67 0.72 0.68 1.46 0.71
Risk assets to
loan-related
assets (1) 0.67 0.73 0.73 1.52 1.43
Capital Ratios
Equity to assets
at period end 9.87 % 9.81 10.05 10.04 10.59
Tangible equity
to assets at
period end 3.75 3.86 3.63 3.88 4.41
Leverage ratio 8.00 7.88 7.45 7.86 8.47
Tier 1 capital
ratio 11.45 12.02 11.50 12.17 12.95
Total capital
ratio 13.30 14.04 13.72 14.09 14.60
Other Information
at Period End
Book value
per share $ 10.95 11.25 10.95 11.26 11.57
Tangible book
value per share 4.16 4.43 3.96 4.35 4.81
Closing market
price 12.44 12.32 11.94 14.72 13.55
Shares
outstanding 5,326,330 5,298,093 5,283,264 5,311,512 5,441,639
Full time
equivalent
associates 238 238 244 241 248
Banking offices 22 22 22 23 22
(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)
June 30, December 31, Percent
Assets 2004 2003 Change
Cash and due from banks $18,871 21,628 (13)%
Federal funds sold 0 79,280 (100)
Interest-bearing deposits in banks 2,000 2,000 0
Investment securities
Available for sale 137,877 76,554 80
Held to maturity 323 370 (13)
Bank stocks 4,372 4,371 0
Investments in Trust I and
Trust II(1) 743 0 0
Loans held for sale 2,028 2,515 (19)
Gross loans 349,872 312,544 12
Allowance for loan losses (3,369) (3,503) (4)
Net deferred loan fee income (991) (770) 29
Premises and equipment, net 34,901 38,147 (9)
Goodwill, net 35,969 36,758 (2)
Other intangible assets, net 179 199 (10)
Other assets 7,652 5,517 39
$590,427 575,610 3%
Liabilities and Shareholders' Equity
Liabilities
Deposits $466,935 448,515 4%
Federal funds purchased and
securities sold under agreements
to repurchase 2,816 907 0
Federal Home Loan Bank advances 33,615 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 3,331 4,165 (20)
Total liabilities 531,440 517,048 3
Minority interest 689 703 (2)
Shareholders' equity
Common equity 59,896 57,979 3
Accumulated other comprehensive
loss (1,598) (120) 1,232
Total shareholders' equity 58,298 57,859 1
$590,427 575,610 3%
Loan Mix at Period End
Commercial, industrial, and land $215,361 185,158 16%
Real estate -- construction 58,855 63,844 (8)
Real estate -- mortgage 69,704 57,602 21
Consumer 5,952 5,940 0
Total gross loans $349,872 312,544 12%
Deposit Mix at Period End
Interest bearing checking $97,287 88,191 10%
Savings 30,586 29,873 2
Money market 120,292 103,969 16
CDs under $100,000 51,915 55,978 (7)
CDs $100,000 and over 60,972 69,199 (12)
Interest bearing deposits 361,052 347,210 4
Non-interest bearing checking 105,883 101,305 5
Total deposits $466,935 448,515 4%
Shares Outstanding at Period End 5,326,330 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 June 30, Percent
2004 2003 Change
Interest income
Interest on loans $5,223 6,154 (15)%
Fees on loans 943 639 48
Interest on investment securities 1,045 1,128 (7)
Interest on federal funds sold
and short-term investments 85 157 (46)
Investments in Trust I and
Trust II (1) 19 0 0
Total interest income 7,315 8,078 (9)
Interest expense
Deposits 1,005 1,232 (18)
Borrowings 345 424 (19)
Federal funds purchased and
securities sold under agreements
to repurchase 1 0 0
Trust preferred 0 611 (100)
Subordinated notes to Trust I and
Trust II(1) 630 0 0
Total interest expense 1,981 2,267 (13)
Net interest income 5,334 5,811 (8)
Provision for loan losses 43 125 (66)
Net interest income after provision 5,291 5,686 (7)
Non-interest income 2,092 2,845 (26)
Non-interest expense 6,619 6,895 (4)
Income before taxes 764 1,636 (53)
Income taxes 190 499 (62)
Net Income $574 1,137 (50)%
Diluted net income per share $0.11 0.20 (45)%
Weighted average shares
outstanding - diluted 5,417,827 5,706,629 (5)
Profitability Ratios
Return on assets 0.39% 0.76
Return on equity 3.93 7.08
Net interest margin (FTE) 4.38 4.77
Net chargeoffs 0.04 0.44
Efficiency ratio 89 80
Average Balances
Assets $592,343 597,540 (1)%
Earning assets 501,982 502,526 (0)
Loans 329,508 331,727 (1)
Deposits 468,618 460,655 2
Shareholders' equity 58,746 64,374 (9)
(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
(in thousands, except share data)
Six Months ended June 30, Percent
2004 2003 Change
Interest income
Interest on loans 10,513 12,356 (15)
Fees on loans 1,717 1,186 45
Interest on investment securities 1,818 1,997 (9)
Interest on federal funds sold
and short-term investments 289 289 0
Investments in Trust I and
Trust II (1) 38 0 0
Total interest income 14,375 15,828 (9)
Interest expense
Deposits 2,024 2,404 (16)
Borrowings 717 733 (2)
Federal funds purchased and
securities sold under agreements
to repurchase 2 0 0
Trust preferred 0 1,223 (100)
Subordinated notes to Trust I and
Trust II(1) 1,261 0 0
Total interest expense 4,004 4,360 (8)
Net interest income 10,371 11,468 (10)
Provision for loan losses 201 250 (20)
Net interest income after provision 10,170 11,218 (9)
Non-interest income 5,936 5,728 4
Non-interest expense 13,135 13,919 (6)
Income before taxes 2,971 3,027 (2)
Income taxes 924 915 1
Net Income 2,047 2,112 (3)
Diluted net income per share 0.38 0.37 3
Weighted average shares
outstanding - diluted 5,409,908 5,769,878 (6)
Profitability Ratios
Return on assets 0.70 0.73
Return on equity 7.02 6.54
Net interest margin (FTE) 4.28 4.83
Net chargeoffs 0.21 0.52
Efficiency ratio 81 81
Average Balances
Assets 592,254 584,235 1
Earning assets 500,313 489,668 2
Loans 322,088 335,051 (4)
Deposits 467,368 451,806 3
Shareholders' equity 58,609 65,167 (10)
(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
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
2004 2004 2003 2003 2003
Interest income
Interest on loans $5,223 5,290 5,437 5,702 6,154
Fees on loans 943 774 801 616 639
Interest on
investment
securities 1,045 773 557 850 1,128
Interest on federal
funds sold and
short-term
investments 85 204 210 191 157
Investments in Trust I
and Trust II(1) 19 19 0 0 0
Total interest
income 7,315 7,060 7,005 7,359 8,078
Interest expense
Deposits 1,005 1,019 1,068 1,172 1,232
Borrowings 345 372 430 439 424
Federal funds
purchased and
securities sold
under agreements
to repurchase 1 1 1 0 0
Trust preferred(1) 0 0 612 612 611
Subordinated notes to
Trust I and
Trust II(1) 630 631 0 0 0
Total interest
expense 1,981 2,023 2,111 2,223 2,267
Net interest income 5,334 5,037 4,894 5,136 5,811
Provision for loan
losses 43 158 164 164 125
Net interest income
after provision 5,291 4,879 4,730 4,972 5,686
Non-interest income
Deposit related 692 685 757 747 824
Mortgage broker fees 775 803 853 1,299 1,334
Gain on sale of fixed
assets 103 1,678 0 0 0
Other 522 678 1,056 702 687
2,092 3,844 2,666 2,748 2,845
Non-interest expense
Salaries and employee
benefits 3,994 4,019 4,578 4,403 4,287
Occupancy 846 845 1,259 850 808
Furniture and
equipment 611 562 673 696 691
Amortization of
intangible assets 10 10 561 19 18
Other 1,158 1,080 2,754 1,326 1,091
6,619 6,516 9,825 7,294 6,895
Income (loss) before
taxes 764 2,207 (2,429) 426 1,636
Income tax expense
(benefit) 190 734 (668) 63 499
Net Income (Loss) $574 1,473 (1,761) 363 1,137
Diluted net income
(loss) per share $0.11 0.27 (0.35) 0.07 0.20
(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
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
2004(1) 2004(1) 2003 2003 2003
Average Balances
Assets $592,343 592,350 589,586 600,424 597,540
Earning assets 501,982 498,642 492,696 504,361 502,526
Loans 329,508 314,667 311,001 315,602 331,727
Deposits 468,618 466,117 457,108 466,356 460,655
Interest bearing
liabilities 430,525 428,143 427,518 439,842 439,295
Shareholders'
equity 58,746 58,472 59,340 60,244 64,374
Average Deposit Mix
Interest bearing
checking 95,259 92,413 89,817 88,494 86,478
Savings 30,300 30,708 30,019 30,125 30,053
Money market 126,845 119,881 108,637 109,159 109,791
CDs under $100,000 53,141 55,109 58,357 60,940 59,942
CDs $100,000
and over 64,829 66,746 71,979 81,565 84,742
Interest bearing
deposits 370,374 364,857 358,809 370,283 371,006
Non-interest
bearing checking 98,244 101,260 98,299 96,073 89,649
Total deposits 468,618 466,117 457,108 466,356 460,655
Net Interest Margin
Analysis
Net interest income $5,334 5,037 4,894 5,136 5,811
Fully taxable
equivalent adjustment 134 132 133 146 167
Net interest
income (FTE) 5,468 5,169 5,027 5,282 5,978
Yields (FTE)
Loans 7.53% 7.75 7.96 7.94 8.21
Investment
securities 3.53 4.05 3.28 4.01 4.63
Other earning
assets 1.16 0.99 0.90 0.94 1.16
Total earning
assets 5.97 5.80 5.75 5.90 6.58
Cost of funds
Interest bearing
deposits 1.09 1.12 1.18 1.26 1.33
Other interest
bearing
liabilities 6.53 6.38 6.02 5.99 6.08
Total interest
bearing
liabilities 1.85 1.90 1.96 2.01 2.07
Total interest
expense to
earning assets 1.59 1.63 1.70 1.75 1.81
Net interest
margin (FTE) 4.38 4.17 4.05 4.15 4.77
(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
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
2004 2004 2003 2003 2003
Asset Quality
Nonaccrual loans $1,555 1,636 1,747 2,105 1,722
Restructured loans 0 0 0 0 0
Total non-performing
loans 1,555 1,636 1,747 2,105 1,722
Foreclosed properties 788 674 362 2,496 542
Total non-performing
assets 2,343 2,310 2,109 4,601 2,264
90+ days past due and
accruing 8 15 164 163 2,323
Total risk assets $2,351 2,325 2,273 4,764 4,587
Allowance for Loan Losses
Beginning Balance $3,361 3,503 3,299 3,138 3,381
Provision for loan
losses 43 158 164 164 125
Loan charge-offs 120 338 78 73 416
Loan recoveries 85 38 118 70 48
Net charge-offs
(recoveries) 35 300 (40) 3 368
Ending Balance $3,369 3,361 3,503 3,299 3,138
Net Charge-Offs
(Recoveries) to
Average Loans 0.04% 0.38 (0.05) 0.00 0.44
Loans Past Due 30 Days
or More and Accruing 0.24 2.46 0.47 2.18 2.47
DATASOURCE: Vail Banks, Inc.
CONTACT: Lisa M. Dillon, Vice Chairman, +1-970-476-2002,
, or Peter G. Williston, Sr. Executive Vice
President/CFO, +1-970-328-9711, , both of Vail
Banks, Inc.