VAIL Vail Banks (MM)

Vail Banks Announces First Quarter Results AVON, Colo., April 18 /PRNewswire-FirstCall/ -- Vail Banks, Inc. (NASDAQ:VAIL) today reported diluted net income per share of $0.16 for the first quarter 2005 compared to $0.08 for first quarter 2004, excluding the gain on the sale of fixed assets of $1.7 million. Net income for the quarter was $885,000 versus $419,000 in the first quarter 2004 excluding the gain. Including the gain on the sale of fixed assets, the company earned $1.2 million or $0.22 per share in the first quarter of 2004. "Highlights of the quarter were strong core deposit growth, continued high credit quality, and new loan originations," commented Gary Judd, CEO of Vail Banks, Inc. "Our core deposit balances improved $51.3 million or 12 percent since the last quarter. This core growth has significantly contributed to keeping our cost of funds to a low 1.35 percent during the first quarter 2005. We are pleased with having only a 12 basis point increase in our funding costs since December 31, 2004 given the 50 basis point increase in short-term rates by the Federal Reserve in the past 90 days. We believe this core funding is an important component of our future growth and profitability. As a result of this, our net interest margin has improved to 5.11 percent during the quarter, up from 4.95 percent during the fourth quarter 2004." "Loans have increased $87.7 million since the first quarter of last year or 28 percent. Average earning assets are up 11 percent since the first quarter 2004, or $55.5 million, while total average assets have increased 10 percent or $58.9 million over the same period. Our asset quality continues to be strong with a $29,000 net recovery for the quarter compared to net charge-offs of $300,000 for the same period last year. The allowance for loan losses to loans stood at .99 percent compared to .96 percent for the previous quarter," stated Mr. Judd. "Interest income and fees on loans are up 26 percent or $1.6 million since the first quarter of 2004. This increase, coupled with the improved margin resulting from strong core deposit growth, increased net interest income 36 percent or $1.8 million from the first quarter 2005 compared to the first quarter of 2004. This reflects the hard work of our lending officers and retail office associates in delivering and executing our plan to provide customers with the financial solutions they need," commented Mr. Judd. Deposit growth during the quarter contributed to an improved liquidity position at March 31, 2005. We have invested a portion of this excess liquidity in short-term investment securities with maturities of 90 days or less. Investment securities increased 24 percent or $25.9 million during the quarter while fed funds sold have increased $33.8 million. The yield on investment securities increased to 5.13 percent during the quarter as a result of reduced amortization of premiums on securities that had been accelerated in previous quarters in expectation of probable prepayments. Earlier this month we paid-off over $6 million of our higher rate borrowings with the Federal Home Loan Bank to further improve our net interest margin. We anticipate that future loan growth will absorb a substantial portion of the remaining excess liquidity in the coming months. Total non-interest income decreased $454,000, or 22 percent from the first quarter 2005 compared to the fourth quarter for 2004. $418,000 of this decrease represents lower mortgage fees from reduced origination volumes caused by increasing interest rates. However, given the variable overhead of this business line, this reduced volume does not have a proportional impact on the net income of the Company. Non-interest expenses declined $513,000 during the past quarter. During the fourth quarter of 2004 the Company had a $311,000 loss on sale of securities. In addition, $180,000 of this change reflects reduced salary and benefit costs, largely because of reduced commissions paid to mortgage originators due to lower origination volumes. In addition, occupancy costs, professional fees, and supplies and printing costs were down for the quarter. This was offset slightly by higher costs associated with depreciation on furniture and equipment. "During 2005, the Company will continue to review closely all of its operating expenses in an effort to be more efficient in its overall processing and delivery of value added services to our customers," stated Mr. Judd. On April 5, 2005, the Company launched a new customer-driven brand initiative for each of its 23 banking offices in 18 Colorado communities. Extensive research with current and prospective customers identified that professional associates providing personal attention, exceptional service delivery, and strong, long-term banking relationships separate the Company from other choices in Colorado. To further align these identified strengths, we modified the brand of our wholly-owned subsidiary, WestStar Bank, to WestStar Bank. Expect Action. "We are very excited about our new brand launch and believe that it will continue to strengthen our relationship with existing customers and WestStar's awareness with prospective customers in the future. Additionally, WestStar Bank has upgraded its web site consistent with the new brand identity, featuring greater interaction and improved, simple navigation. I encourage you to visit it at weststarbank.com," commented Mr. Judd. At its meeting on April 18, the Board of Directors of Vail Banks declared a regular quarterly dividend of $0.07 per share payable May 13 to shareholders of record on April 29. 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. This news release contains forward-looking statements, as defined by federal securities laws, including statements about financial outlook and business environment. These statements are provided to assist in the understanding of future financial performances and such performance involves risks and uncertainties that may cause actual results to differ materially from those in such statements. Any such statements are based on current expectations and involve a number of risks and uncertainties. For a discussion of factors that may cause such forward-looking statements to differ materially from actual results, please refer to the section entitled "Certain Factors Affecting Forward Looking Statements" of Vail Banks, Inc.'s annual report filed on Form 10-K with the Securities and Exchange Commission. Vail Banks, Inc. Financial Highlights (in thousands, except share data) (unaudited) Three Months Ended Mar. 31, Dec 31, Sept. 30, June 30, Mar. 31, 2005 2004 2004 2004 2004 Earnings and Performance Net income $885 $643 $559 $574 $1,180 Diluted net income per share 0.16 0.12 0.10 0.11 0.22 Return on assets 0.55 % 0.41 % 0.37 % 0.39 % 0.80 % Return on equity 5.95 4.30 3.79 3.95 8.13 Net interest margin (FTE) 5.11 4.95 4.68 4.38 4.17 Efficiency ratio 84 89 87 89 73 Return on tangible equity 14.86 10.93 9.87 10.32 21.84 Asset Quality Ratios Net charge-offs (recoveries) to average loans (0.03) % 0.03 % (0.05) % 0.04 % 0.38 % Allowance for loan losses to loans 0.99 0.96 0.97 0.97 1.05 Allowance for loan losses to non-performing loans 287 1,657 460 217 205 Non-performing assets to loan-related assets 0.54 0.25 0.37 0.67 0.72 Risk assets to loan-related assets (1) 0.80 0.25 0.37 0.67 0.73 Capital Ratios Equity to assets at period end 8.81 % 9.44 % 9.50 % 9.82 % 9.77 % Tangible equity to assets at period end 3.55 3.75 3.72 3.70 3.81 Leverage ratio 8.05 8.06 8.28 7.93 7.80 Tier 1 capital ratio 10.19 10.52 10.88 11.35 11.91 Total capital ratio 11.67 12.02 12.47 13.22 13.96 Other Information at Period End Book value per share $10.84 $11.25 $11.19 $10.89 $11.20 Tangible book value per share 4.37 4.46 4.38 4.10 4.37 Closing market price 13.13 13.18 13.08 12.44 12.32 Shares outstanding 5,578,824 5,326,504 5,310,754 5,326,330 5,298,093 Full time equivalent associates 243 249 252 238 238 Banking offices 23 23 23 22 22 (1) Risk assets are non-performing assets plus loans 90 days or more past due and accruing. Vail Banks, Inc. Balance Sheet (in thousands, except share data) March 31, December 31, Percent Assets 2005 2004 Change (unaudited) Cash and due from banks $20,716 $18,360 13 % Federal funds sold 51,120 17,295 196 Investment securities Available for sale 129,620 103,779 25 Held to maturity 238 246 (3) Bank stocks 4,481 4,457 1 Investments in Trust I and Trust II 743 743 0 Loans held for sale 450 7,110 (94) Gross loans 403,883 407,629 (1) Allowance for loan losses (3,989) (3,895) 2 Net deferred loan fee income (1,120) (1,276) (12) Premises and equipment, net 38,473 38,721 (1) Goodwill, net 35,970 35,970 -- Other intangible assets, net 149 159 (6) Other assets 6,054 5,297 14 $686,788 $634,595 8 % Liabilities and Shareholders' Equity Liabilities Deposits $554,652 $500,444 11 % Securities sold under agreements to repurchase 11,522 894 1,189 Federal Home Loan Bank advances 29,738 42,444 (30) Subordinated notes to Trust I and Trust II 24,743 24,743 0 Other liabilities 3,090 3,605 (14) Total liabilities 623,745 572,130 9 Minority interest 2,542 2,563 (1) Shareholders' equity Common equity 61,590 60,520 2 Accumulated other comprehensive loss (1,089) (618) 76 Total shareholders' equity 60,501 59,902 1 $686,788 $634,595 8 % Loan Mix at Period End Commercial, industrial, and land $227,367 $239,946 (5) % Real estate--construction 100,594 92,705 9 Real estate--mortgage 70,920 69,164 3 Consumer 5,002 5,814 (14) Total gross loans $403,883 $407,629 (1) % Deposit Mix at Period End Interest bearing checking $94,646 $92,279 3 % Savings 31,942 31,261 2 Money market 182,147 132,388 38 CDs under $100,000 50,230 51,541 (3) CDs $100,000 and over 75,772 72,848 4 Interest bearing deposits 434,737 380,317 14 Non-interest bearing checking 119,915 120,127 (0) Total deposits $554,652 $500,444 11 % Shares Outstanding at Period End 5,578,824 5,326,504 5 % Vail Banks, Inc. Statement of Income (in thousands, except share data) (unaudited) Three months ended March 31, Percent 2005 2004 Change Interest income Interest on loans $6,705 $5,290 27 % Fees on loans 909 774 17 Interest on investment securities 1,371 773 77 Interest on federal funds sold and short-term investments 192 204 (6) Investments in Trust I and Trust II 19 19 0 Total interest income 9,196 7,060 30 Interest expense Deposits 1,329 1,019 30 Borrowings 364 372 (2) Federal funds purchased and securities sold under agreements to repurchase 25 1 2,400 Subordinated notes to Trust I and Trust II 631 631 0 Total interest expense 2,349 2,023 16 Net interest income 6,847 5,037 36 Provision for loan losses 65 158 (59) Net interest income after provision 6,782 4,879 39 Non-interest income 1,570 3,844 (59) Non-interest expense 7,101 6,516 9 Income before taxes 1,251 2,207 (43) Income taxes 366 1,027 (64) Net Income $885 $1,180 (25) % Diluted net income per share $0.16 $0.22 (27) % Weighted average shares outstanding - diluted 5,471,918 5,401,988 1 Profitability Ratios Return on assets 0.55 % 0.80 % Return on equity 5.95 8.13 Net interest margin (FTE) 5.11 4.17 Net (recoveries) chargeoffs (0.03) 0.38 Efficiency ratio 84 73 Average Balances Assets $651,133 $592,263 10 % Earning assets 554,155 498,642 11 Loans 402,340 314,667 28 Deposits 517,286 466,117 11 Shareholders' equity 60,282 58,385 3 Vail Banks, Inc. Statement of Income by Quarter (in thousands, except share data) (unaudited) Three Months Ended Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, 2005 2004 2004 2004 2004 Interest income Interest on loans $6,705 $6,623 $5,829 $5,223 $5,290 Fees on loans 909 1,028 875 943 774 Interest on investment securities 1,371 1,056 1,134 1,045 773 Interest on federal funds sold and short-term investments 192 21 25 85 204 Investments in Trust I and Trust II 19 19 19 19 19 Total interest income 9,196 8,747 7,882 7,315 7,060 Interest expense Deposits 1,329 1,200 1,028 1,005 1,019 Borrowings 364 379 340 345 372 Federal funds purchased and securities sold under agreements to repurchase 25 19 3 1 1 Subordinated notes to Trust I and Trust II 631 631 631 630 631 Total interest expense 2,349 2,229 2,002 1,981 2,023 Net interest income 6,847 6,518 5,880 5,334 5,037 Provision for loan losses 65 180 323 43 158 Net interest income after provision 6,782 6,338 5,557 5,291 4,879 Non-interest income Deposit related 620 689 717 692 685 Mortgage broker fees 394 812 756 775 803 Gain (loss) on sale of fixed assets (8) (1) (11) 103 1,678 Other 564 524 781 522 678 1,570 2,024 2,243 2,092 3,844 Non-interest expense Salaries and employee benefits 4,195 4,375 4,096 3,994 4,019 Occupancy 999 1,050 1,000 846 845 Furniture and equipment 683 658 608 611 562 Amortization of intangible assets 10 10 10 10 10 Other 1,214 1,521 1,338 1,158 1,080 7,101 7,614 7,052 6,619 6,516 Income before taxes 1,251 748 748 764 2,207 Income tax expense 366 105 189 190 1,027 Net Income $885 $643 $559 $574 $1,180 Diluted net income per share $0.16 $0.12 $0.10 $0.11 $0.22 Vail Banks, Inc. Supplemental Information (in thousands) (unaudited) Three Months Ended Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, 2005 2004 2004 2004 2004 Average Balances Assets $651,133 $630,212 $604,689 $592,343 $592,263 Earning assets 554,155 534,933 511,363 501,982 498,642 Loans 402,340 394,763 362,585 329,508 314,667 Deposits 517,286 498,080 480,902 468,618 466,117 Interest bearing liabilities 465,834 455,340 436,601 430,525 428,143 Shareholders' equity 60,282 59,477 58,621 58,453 58,385 Average Deposit Mix Interest bearing checking 93,637 97,081 99,279 95,259 92,413 Savings 31,560 33,013 31,893 30,300 30,708 Money market 147,308 133,006 124,130 126,845 119,881 CDs under $100,000 50,663 52,144 51,943 53,141 55,109 CDs $100,000 and over 74,850 74,070 69,965 64,829 66,746 Interest bearing deposits 398,018 389,314 377,210 370,374 364,857 Non-interest bearing checking 119,268 108,766 103,692 98,244 101,260 Total deposits $517,286 $498,080 $480,902 $468,618 $466,117 Net Interest Margin Analysis Net interest income $6,847 $6,518 $5,880 $5,334 $5,037 Fully taxable equivalent adjustment 132 133 132 134 132 Net interest income (FTE) 6,979 6,651 6,012 5,468 5,169 Yields (FTE) Loans 7.67 % 7.71 % 7.36 % 7.53 % 7.75 % Investment securities 5.13 3.63 3.59 3.53 4.05 Other earning assets 2.77 3.26 2.39 1.16 0.99 Total earning assets 6.83 6.60 6.23 5.97 5.80 Cost of funds Interest bearing deposits 1.35 1.23 1.08 1.09 1.12 Other interest bearing liabilities 6.10 6.20 6.52 6.53 6.38 Total interest bearing liabilities 2.05 1.95 1.82 1.85 1.90 Total interest expense to earning assets 1.71 1.65 1.55 1.59 1.63 Net interest margin (FTE) 5.11 % 4.95 % 4.68 % 4.38 % 4.17 % Vail Banks, Inc. Asset Quality (in thousands) (unaudited) Three Months Ended Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, 2005 2004 2004 2004 2004 Asset Quality Nonaccrual loans $1,391 $235 $814 $1,555 $1,636 Restructured loans 0 0 0 0 0 Total non-performing loans 1,391 235 814 1,555 1,636 Foreclosed properties 802 785 606 788 674 Total non-performing assets 2,193 1,020 1,420 2,343 2,310 90+ days past due and accruing 1,053 17 3 8 15 Total risk assets $3,246 $1,037 $1,423 $2,351 $2,325 Allowance for Loan Losses Beginning Balance $3,895 $3,742 $3,369 $3,361 $3,503 Provision for loan losses 65 180 323 43 158 Loan charge-offs 24 63 149 120 338 53 Loan recoveries 53 36 199 85 38 Net charge-offs (recoveries) (29) 27 (50) 35 300 Ending Balance $3,989 $3,895 $3,742 $3,369 $3,361 Net Charge-Offs (Recoveries) to Average Loans (0.03) % 0.03 % (0.05) % 0.04 % 0.38 % Loans Past Due 30 Days or More and Accruing 0.31 0.32 0.15 0.24 2.46 DATASOURCE: Vail Banks, Inc. CONTACT: Raymond E. Verlinde, Sr. EVP/Chief Administrative Officer of Vail Banks, Inc., +1-970-328-9710, Web site: http://www.weststarbank.com/

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