Vail Banks (NASDAQ:VAIL)
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Vail Banks Reports First Quarter 2004 Earnings
AVON, Colo., April 19 /PRNewswire-FirstCall/ -- Vail Banks, Inc. today
reported diluted net income per share of $0.27 for the first quarter 2004
compared to $0.17 for first quarter 2003. The 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). Net income for the quarter was $1.473
million including the building sale gain versus $975,000 in first quarter 2003.
Net income was $412,000 excluding the gain, a 58% decrease from first quarter
2003. Results for the quarter are not comparable to fourth quarter 2003 due to
a net loss in the previous quarter resulting from one-time charges to earnings.
"We began to see an increase in business activity in our markets," commented E.
B. Chester, Chairman of Vail Banks. "Our officers are taking advantage of this
market improvement by expanding our loan and deposit activities. This effort
will take some time to generate meaningful bottom- line results, but the
direction and momentum of our activity are encouraging. The Vail building sale
was a unique opportunity to redeploy non-earning assets to invest in our
strategic plan of expanding our presence in the Front Range of Colorado and the
Grand Junction markets. We will continue to identify and exploit situations
where we can capitalize on appreciating asset values to provide additional
capital and funding for growth."
Gary Judd, President and CEO of Vail Banks, commented, "We are clearly
experiencing a positive shift in activity. We see excellent opportunities
ahead and are executing the plan we developed last year. Our associates have a
renewed enthusiasm and have accepted the challenge of growing the Company and
generating improved earnings."
Financial Highlights
* Earnings per share
Diluted net income per share was $0.27 for first quarter, $0.07
excluding building sale gain
Compared to $0.17 for first quarter 2003, a 59% increase
including the gain, and a 59% decrease excluding the gain
Compared to ($0.35) for fourth quarter 2003
* Net Income
Net income was $1,473,000 for first quarter, $412,000 excluding
building sale gain
Compared to $975,000 for first quarter 2003, a 51% increase
including the gain, and a 58% decrease excluding the gain
Compared to ($1,761,000) for fourth quarter 2003
* Return on assets
Return on assets was 1.00% for first quarter
Compared to 0.69% for first quarter 2003
Compared to (1.18%) for fourth quarter 2003
* Return on equity
Return on equity was 10.13% for first quarter
Compared to 5.99% for first quarter 2003
Compared to (11.77%) for fourth quarter 2003
* Net Interest Margin
Net interest margin (fully tax equivalent) was 4.17% for first
quarter
Compared to 4.89% for first quarter 2003
Compared to 4.05% for fourth quarter 2003
* Efficiency Ratio
Efficiency ratio was 73% for first quarter
Compared to 82% for first quarter 2003
Compared to 130% for fourth quarter 2003
Top Line Revenue
Total revenue (net interest income and non-interest income), excluding the
building sale gain, decreased $1.337 million, or 16%, from the first quarter of
2003, due primarily to lower interest income on loans and securities, and lower
fee income from mortgage brokerage activities. Revenues decreased $357,000, or
5%, from the fourth quarter 2003, which included a $358,000 gain on sale of a
single foreclosed property.
Net interest income was $5.037 million for the quarter compared to $5.657
million in the first quarter 2003, and to $4.894 million in the fourth quarter
2003. Average loans for the quarter increased $4 million, or 5% annualized,
compared to the fourth quarter of 2003. Average deposits increased $9 million,
or 8% annualized, during the quarter compared to the fourth quarter 2003.
Non-interest income, excluding the building sale gain, decreased 25%, or
$717,000, as compared to the first quarter of 2003, and decreased 19%, or
$500,000, as compared to the fourth quarter 2003, which included a $358,000
gain on sale of a single foreclosed property. Mortgage broker fees were
$803,000 as the Company's mortgage subsidiary experienced soft activity after
the refinancing boom of 2002 and 2003. This represents a decrease of 45%, or
$647,000, from the first quarter of 2003, and a decrease of 6%, or $50,000,
from the fourth quarter 2003.
Interest Rate Risk Management
The net interest margin, on a fully tax-equivalent basis, was 4.17% for the
quarter compared to 4.05% in the fourth quarter 2003 and 4.89% in the first
quarter 2003. Earning assets yielded 5.80% for the first quarter, an 87 basis
point decrease from the first quarter 2003 yield of 6.67%, and a 5 basis point
increase from the fourth quarter 2003 yield of 5.75%. Interest expense as a
percentage of earning assets decreased to 1.63% in the first quarter from 1.78%
in the first quarter 2003, a decrease of 15 basis points, and decreased 7 basis
points from 1.70% in the fourth quarter 2003.
"The increase in loans and the further investment of excess liquidity have
improved our net interest margin," said Dan Godec, President of WestStar Bank.
"Our credit officers are finding new opportunities for growing our business. We
also are deploying our increasing deposit funding into short term investments
until loan volume increases significantly."
Credit Risk Management
Net charge-offs, on an annualized basis, were 0.38% of average loans for the
quarter, compared to net charge-offs of 0.59% in the first quarter 2003 and net
recoveries of 0.05% in the fourth quarter 2003. At March 31, the allowance for
loan losses was 1.05% of total loans and 205% of non-performing loans.
Overall, non-performing assets comprised 0.72% of loan-related assets at the
end of the quarter compared to 0.68% at the end of the fourth quarter 2003.
"Our efforts over the past two years to improve credit quality continue to pay
off," said Lisa Dillon, Vice Chairman of Vail Banks. "Nonaccrual loan levels
continue to decline and charge-offs remain at very reasonable levels."
Control of Non-interest Expenses
Non-interest expense was $6.516 million for the quarter versus $7.024 million
in first quarter 2003, and $9.825 million in fourth quarter 2003. The fourth
quarter 2003 included one-time charges to earnings of $3.189 million associated
primarily with fixed assets no longer used and core deposit intangibles
determined to be impaired. Lower expenses in the first quarter 2004 resulted
from lower mortgage origination costs due to reduced loan origination volumes,
as well as lower fixed asset related costs due to the retiring of certain
assets in 2003. Operationally, Vail Bank's management has begun an intense
focus on monitoring and evaluating operating unit contribution. Unit
management responsibility and accountability have become the cornerstones to
managing growth and profitability as management implements our strategic plan.
Dividend Payment
At its meeting on April 19, the Board of Directors of Vail Banks declared a
regular quarterly dividend of $0.07 per share payable May 14 to shareholders of
record on April 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
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
2004 (2) 2003 2003 2003 2003
Earnings and
Performance
Net income (loss) $1,473 (1,761) 363 1,137 975
Diluted net
income (loss)
per share 0.27 (0.35) 0.07 0.20 0.17
Return on assets 1.00% (1.18) 0.24 0.76 0.69
Return on equity 10.13 (11.77) 2.39 7.08 5.99
Net interest
margin (FTE) 4.17 4.05 4.15 4.77 4.89
Efficiency ratio 73 130 93 80 82
Asset Quality Ratios
Net charge-offs
(recoveries) to
average loans 0.38% (0.05) 0.00 0.44 0.59
Allowance for loan
losses to loans 1.05 1.12 1.06 0.98 1.02
Allowance for
loan losses to
non-performing
loans 205 201 157 182 109
Non-performing
assets to
loan-related
assets 0.72 0.68 1.46 0.71 1.17
Risk assets to
loan-related
assets (1) 0.74 0.73 1.52 1.43 1.19
Capital Ratios
Equity to assets
at period end 9.81% 10.05 10.04 10.59 11.04
Tangible equity
to assets at
period end 3.86 3.63 3.88 4.41 4.84
Leverage ratio 7.88 7.45 7.86 8.47 9.59
Tier 1 capital
ratio 12.04 11.50 12.17 12.95 13.57
Total capital
ratio 14.07 13.72 14.09 14.60 14.99
Other Information
at Period End
Book value
per share $11.25 10.95 11.26 11.57 11.48
Tangible book
value per share 4.43 3.96 4.35 4.81 5.03
Closing market
price 12.32 11.94 14.72 13.55 11.90
Shares
outstanding 5,298,093 5,283,264 5,311,512 5,441,639 5,706,808
Full time
equivalent
associates 238 244 241 248 245
Banking offices 22 22 23 22 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)
March 31, December 31, Percent
Assets 2004 2003 Change
Cash and due from banks $14,514 21,628 (33)%
Federal funds sold 81,260 79,280 2
Interest-bearing deposits in banks 2,000 2,000 0
Investment securities
Available for sale 110,219 76,554 44
Held to maturity 350 370 (5)
Bank stocks 4,391 4,371 0
Investments in Trust I and Trust II (1) 743 0 0
Loans held for sale 560 2,515 (78)
Gross loans 320,668 312,544 3
Allowance for loan losses (3,361) (3,503) (4)
Net deferred loan fee income (786) (770) 2
Premises and equipment, net 34,201 38,147 (10)
Goodwill, net 35,969 36,758 (2)
Other intangible assets, net 189 199 (5)
Other assets 6,440 5,517 17
$607,357 575,610 6%
Liabilities and Shareholders' Equity
Liabilities
Deposits $482,240 448,515 8%
Federal funds purchased and
securities sold under agreements
to repurchase 583 907 0
Federal Home Loan Bank advances 34,770 39,461 (12)
Trust preferred (1) 0 24,000 (100)
Subordinated notes to Trust I and
Trust II (1) 24,743 0 0
Other liabilities 4,717 4,165 13
Total liabilities 547,053 517,048 6
Minority interest 696 703 (1)
Shareholders' equity
Common equity 59,324 57,979 2
Accumulated other comprehensive
income 284 (120) (337)
Total shareholders' equity 59,608 57,859 3
$607,357 575,610 6%
Loan Mix at Period End
Commercial, industrial, and land $195,567 185,158 6%
Real estate--construction 60,326 63,844 (6)
Real estate--mortgage 59,020 57,602 2
Consumer 5,755 5,940 (3)
Total gross loans $320,668 312,544 3%
Deposit Mix at Period End
Interest bearing checking $93,716 88,191 6%
Savings 30,561 29,873 2
Money market 133,968 103,969 29
CDs under $100,000 54,385 55,978 (3)
CDs $100,000 and over 67,501 69,199 (2)
Interest bearing deposits 380,131 347,210 9
Non-interest bearing checking 102,109 101,305 1
Total deposits $482,240 448,515 8%
Shares Outstanding at Period End 5,298,093 5,283,264 0%
(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 March 31, Percent
2004 2003 Change
Interest income
Interest on loans $5,290 6,202 (15)%
Fees on loans 774 547 41
Interest on investment securities 773 869 (11)
Interest on federal funds sold
and short-term investments 204 132 55
Investments in Trust I and Trust II
(1) 19 0 0
Total interest income 7,060 7,750 (9)
Interest expense
Deposits 1,019 1,172 (13)
Borrowings 372 309 20
Federal funds purchased and
securities sold under agreements to
repurchase 1 0 0
Trust preferred (1) 0 612 (100)
Subordinated notes to Trust I and
Trust II (1) 631 0 0
Total interest expense 2,023 2,093 (3)
Net interest income 5,037 5,657 (11)
Provision for loan losses 158 125 26
Net interest income after provision 4,879 5,532 (12)
Non-interest income
Gain on sale of building 1,678 0 0
Other non-interest income 2,166 2,883 (25)
Total non-interest income 3,844 2,883 33
Non-interest expense 6,516 7,024 (7)
Income before taxes 2,207 1,391 59
Income taxes 734 416 76
Net Income $1,473 975 51 %
Diluted net income per share $0.27 0.17 59 %
Weighted average shares outstanding -
diluted 5,401,988 5,833,830 (7)
Profitability Ratios
Return on assets 1.00 % 0.69
Return on equity 10.13 5.99
Net interest margin (FTE) 4.17 4.89
Net chargeoffs 0.38 0.59
Efficiency ratio 73 82
Average Balances
Assets $592,350 570,783 4 %
Earning assets 498,642 476,666 5
Loans 314,667 338,411 (7)
Deposits 466,117 442,859 5
Shareholders' equity 58,472 65,969 (11)
(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 by Quarter
(in thousands, except share data)
Three Months Ended
Mar. Dec. Sept. June Mar.
31, 31, 30, 30, 31,
2004 2003 2003 2003 2003
Interest income
Interest on loans $5,290 5,437 5,702 6,154 6,202
Fees on loans 774 801 616 639 547
Interest on investment securities 773 557 850 1,128 869
Interest on federal funds sold
and short-term investments 204 210 191 157 132
Investments in Trust I and Trust
II (1) 19 0 0 0 0
Total interest income 7,060 7,005 7,359 8,078 7,750
Interest expense
Deposits 1,019 1,068 1,172 1,232 1,172
Borrowings 372 430 439 424 309
Federal funds purchased and
securities sold under agreements
to repurchase 1 1 0 0 0
Trust preferred (1) 0 612 612 611 612
Subordinated notes to Trust I and
Trust II (1) 631 0 0 0 0
Total interest expense 2,023 2,111 2,223 2,267 2,093
Net interest income 5,037 4,894 5,136 5,811 5,657
Provision for loan losses 158 164 164 125 125
Net interest income after provision 4,879 4,730 4,972 5,686 5,532
Non-interest income
Deposit related 685 757 747 824 752
Mortgage broker fees 803 853 1,299 1,334 1,450
Gain on sale of building 1,678 0 0 0 0
Other 678 1,056 702 687 681
3,844 2,666 2,748 2,845 2,883
Non-interest expense
Salaries and employee benefits 4,019 4,578 4,403 4,287 4,325
Occupancy 845 1,259 850 808 820
Furniture and equipment 562 673 696 691 708
Amortization of intangible assets 10 561 19 18 19
Other 1,080 2,754 1,326 1,091 1,152
6,516 9,825 7,294 6,895 7,024
Income (loss) before taxes 2,207 (2,429) 426 1,636 1,391
Income tax expense (benefit) 734 (668) 63 499 416
Net Income (Loss) $1,473 (1,761) 363 1,137 975
Diluted net income (loss) per share $0.27 (0.35) 0.07 0.20 0.17
(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
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
2004 (1) 2003 2003 2003 2003
Average Balances
Assets $592,350 589,586 600,424 597,540 570,783
Earning assets 498,642 492,696 504,361 502,526 476,666
Loans 314,667 311,001 315,602 331,727 338,411
Deposits 466,117 457,108 466,356 460,655 442,859
Interest bearing
liabilities 428,143 427,518 439,842 439,295 406,379
Shareholders' equity 58,472 59,340 60,244 64,374 65,969
Average Deposit Mix
Interest bearing
checking 92,413 89,817 88,494 86,478 79,400
Savings 30,708 30,019 30,125 30,053 29,846
Money market 119,881 108,637 109,159 109,791 110,554
CDs under $100,000 55,109 58,357 60,940 59,942 58,513
CDs $100,000 and
over 66,746 71,979 81,565 84,742 70,585
Interest bearing
deposits 364,857 358,809 370,283 371,006 348,898
Non-interest
bearing checking 101,260 98,299 96,073 89,649 93,961
Total deposits 466,117 457,108 466,356 460,655 442,859
Net Interest Margin
Analysis
Net interest income $5,037 4,894 5,136 5,811 5,657
Fully taxable
equivalent
adjustment 132 133 146 167 89
Net interest
income (FTE) 5,169 5,027 5,282 5,978 5,746
Yields (FTE)
Loans 7.75% 7.96 7.94 8.21 8.09
Investment securities 4.05 3.28 4.01 4.63 4.64
Other earning assets 0.99 0.90 0.94 1.16 1.19
Total earning
assets 5.80 5.75 5.90 6.58 6.67
Cost of funds
Interest bearing
deposits 1.12 1.18 1.26 1.33 1.36
Other interest
bearing
liabilities 6.38 6.02 5.99 6.08 6.50
Total interest
bearing
liabilities 1.90 1.96 2.01 2.07 2.09
Total interest
expense to
earning assets 1.63 1.70 1.75 1.81 1.78
Net interest margin
(FTE) 4.17 4.05 4.15 4.77 4.89
(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
Mar. Dec. Sept. June Mar.
31, 31, 30, 30, 31,
2004 2003 2003 2003 2003
Asset Quality
Nonaccrual loans $1,636 1,747 2,105 1,722 3,089
Restructured loans 0 0 0 0 0
Total non-performing loans 1,636 1,747 2,105 1,722 3,089
Foreclosed properties 674 362 2,496 542 796
Total non-performing assets 2,310 2,109 4,601 2,264 3,885
90+ days past due and accruing 64 164 163 2,323 83
Total risk assets $2,374 2,273 4,764 4,587 3,968
Allowance for Loan Losses
Beginning Balance $3,503 3,299 3,138 3,381 3,747
Provision for loan losses 158 164 164 125 125
Loan charge-offs 338 78 73 416 534
Loan recoveries 38 118 70 48 43
Net charge-offs (recoveries) 300 (40) 3 368 491
Ending Balance $3,361 3,503 3,299 3,138 3,381
Net Charge-Offs (Recoveries) to
Average Loans 0.38 % (0.05) 0.00 0.44 0.59
Loans Past Due 30 Days or More and
Accruing 2.48 0.47 2.18 2.47 1.59
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.