VAIL Vail Banks (MM)

AVON, Colo., April 19 /PRNewswire-FirstCall/ -- Vail Banks, Inc. (NASDAQ:VAIL) today reported diluted net income per share of $0.24 for the first quarter 2006 compared to $0.16 for first quarter 2005. Net income for the quarter was $1,313,000 versus $885,000 in the first quarter 2005. Average loan balances increased $96.3 million, or 24 percent, compared to the first quarter of 2005. Average loan balances increased $40.5 million during the first quarter. Core deposit balances plus deposit balances tied to repurchase agreements improved $23.1 million, or 5 percent, since December 31, 2005. "Continued growth in our loan portfolio and increases in core deposit balances were the highlights of the quarter," commented Gary Judd, CEO of Vail Banks, Inc. "Marketing and sales efforts were focused on growth in our core deposit products and deposit balances tied to repurchase agreements, which leverage our commitment to relationship banking," Mr. Judd continued. Average earning assets increased $46.6 million, or 8 percent, since the first quarter of 2005, while total average assets increased $43.8 million, or 7 percent, over the same period. Asset quality remains solid with only $3,000 in net charge-offs for the quarter compared to net charge-offs of $27,000 for the previous quarter. "The allowance for loan losses to total loans is at 0.93 percent compared to 0.92 percent for the previous quarter. Reflecting the strong loan growth during the quarter, we increased the loan loss provision to $215,000 during the quarter compared to $65,000 during the first quarter 2005," stated Mr. Judd. The growth in interest income on loans was 49 percent, or $3.3 million, compared to the first quarter of 2005. This increase, combined with a relatively low cost of funds, contributed to an increase in net interest income of 17 percent, or $1.2 million, for the first quarter of 2006 compared to the first quarter of 2005. Net interest margin, on a fully tax equivalent basis, was 5.49 percent for the quarter, compared to 5.11% for the same quarter in 2005. Non-interest income remained stable for the quarter, compared to the first quarter 2005, increasing $79,000, or 6 percent. Service charges and other deposit related fees increased $27,000 from the first quarter of 2005. Mortgage broker fees realized a slight increase from the first quarter 2005. The other increases were in merchant fees and official check sales. Non-interest expenses increased $495,000, or 7 percent, this quarter compared to the first quarter of 2005. Salaries and benefits contributed $383,000 to this increase, as the number of associates in direct customer contact positions increased over the past year supporting our strong loan and deposit growth, new branch openings, and the expansion of our cash management services. Occupancy expenses increased $112,000. The most significant factors contributing to this increase were increased energy costs and $60,000 related to increases in rent expenses. These increases were partially offset by decreases in furniture and equipment and maintenance contract expenses. The efficiency ratio for this quarter improved to 78 percent, from 84 percent for the first quarter 2005. "Driving improved efficiency for the Company while generating revenue growth is a continued focus of the Company in 2006. We will continue to review all operating expenses in an effort to improve efficiency while delivering on our commitment to provide service that exceeds the expectations of our customers," stated Mr. Judd. We have now completed the first year of our new brand, "WestStar Bank. Expect Action," which was launched on April 5, 2005. "The benefits of this marketing campaign and a true shift to a customer-first mentality are evident in our results," commented Mr. Judd. At its meeting on April 17, the Board of Directors of Vail Banks declared a regular quarterly dividend of $0.07 per share payable May 12 to shareholders of record on April 28. Vail Banks, Inc., through its subsidiary WestStar Bank, has 24 banking offices in 19 communities in Colorado, including Aspen, Avon, Breckenridge, Cedaredge, Delta, Denver, Dillon, Edwards, Estes Park, Frisco, Fruita, Glenwood Springs, Granby, Grand Junction, Gypsum, Montrose, Norwood, Telluride and Vail. This news release contains forward-looking statements, including, without limitation, statements regarding certain of the Company's goals and expectations with respect to net income, net income per share, revenue, expenses and the growth rate in such items, as well as other measures of economic performance, including statements relating to estimates of credit quality trends, and statements preceded by, followed by or that include the words "may", "could", "should", "would", "believe", "anticipate", "estimate", "expect", "intend", "plan", "projects", "outlook" or similar expressions. Actual results may differ from those set forth in the forward-looking statements. Factors that may cause actual results or earnings to differ materially from such forward-looking statements include, among others, the following: (1) the projected growth and profitability of the Company following the new branding and other business initiatives are lower than expected; (2) the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations may be different than expected resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on the Company's loan portfolio and allowance for loan losses; (3) the effects of, and changes in, inflation, interest rate, market and monetary fluctuations; (4) the development of competitive new products and services by the Company and its competitors; (5) the impact of changes in financial services' laws and regulations or other unanticipated regulatory or judicial proceedings or ruling; (6) changes in consumer spending and saving habits; (7) adverse changes in financial performance and/or condition of the Company's borrowers which could impact repayment of such borrowers' outstanding loans; (8) the impact of changes in accounting principles; and (9) decision to downsize, sell or close branches or otherwise change the business mix of the Company. The foregoing list of factors is not exclusive and you should refer to the section entitled "Certain Factors Affecting Forward-Looking Statement in the Company's annual report filed in Form 10-K with the Securities and Exchange Commission. The Company does not undertake any obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed in this news release. Vail Banks, Inc. Financial Highlights (in thousands, except share data) (unaudited) Three Months Ended Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, 2006 2005 2005 2005 2005 Earnings and Performance Net income $1,313 $1,290 $1,343 $971 $885 Diluted net income per share 0.24 0.24 0.25 0.18 0.16 Return on assets 0.77% 0.75% 0.79% 0.60% 0.55% Return on equity 8.29 8.03 8.59 6.39 5.95 Net interest margin (FTE) 5.49 5.53 5.07 5.00 5.11 Efficiency ratio 78 76 79 84 84 Return on tangible equity 18.92 18.51 20.57 15.69 14.86 Asset Quality Ratios Net recoveries (charge-offs) to average loans 0.00% (0.02)% 0.00% 0.05% 0.03% Allowance for loan losses to loans 0.93 0.92 0.95 0.95 0.99 Non-performing assets to loan-related assets 0.25 0.13 0.14 0.14 0.54 Risk assets to loan-related assets (1) 0.30 0.14 0.47 0.18 0.80 Capital Ratios Equity to assets at period end 9.18% 9.29% 9.33% 9.44% 8.81% Tangible equity to assets at period end 4.06 4.03 3.96 3.93 3.55 Leverage ratio 8.14 8.24 8.13 8.12 8.01 Tier 1 capital ratio 9.87 10.00 10.61 10.70 10.14 Total capital ratio 11.18 11.13 11.84 12.05 11.62 Other Information at Period End Book value per share $11.54 $11.37 $11.19 $11.05 $10.84 Tangible book value per share 5.11 4.93 4.75 4.61 4.37 Closing market price 16.11 15.00 14.00 14.64 13.13 Shares out- standing 5,606,235 5,606,235 5,604,235 5,604,235 5,578,824 Associates 261 256 256 254 243 Banking offices 24 24 24 23 23 (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 2006 2005 Change (unaudited) (unaudited) Cash and due from banks $18,854 $20,728 (9)% Federal funds sold 13,520 10,630 27 Investment securities Available for sale 83,852 87,265 (4) Held to maturity 166 175 (5) Investments in Trust I and Trust II 743 743 0 Gross loans 507,461 487,101 4 Allowance for loan losses (4,685) (4,473) 5 Net deferred loan fee income (1,074) (1,117) (4) Investment in bank stocks 4,583 4,558 1 Premises and equipment, net 38,383 38,686 (1) Goodwill, net 35,970 35,970 0 Other intangible assets, net 109 119 (8) Other assets 7,088 5,934 19 $704,970 $686,319 3% Liabilities and Shareholders' Equity Liabilities Deposits $557,475 $552,508 1% Securities sold under agreements to repurchase 28,021 12,470 125 Federal Home Loan Bank advances 23,967 25,759 (7) Subordinated notes to Trust I and Trust II 24,743 24,743 0 Other liabilities 3,535 4,606 (23) Total liabilities 637,741 620,086 3 Minority interest 2,523 2,500 1 Shareholders' equity Common equity 65,858 64,770 2 Accumulated other comprehensive loss (1,152) (1,037) 11 Total shareholders' equity 64,706 63,733 2 $704,970 $686,319 3% Loan Mix at Period End Commercial, industrial, and agricultural $172,585 $168,110 3% Real estate -- construction 229,472 222,857 3 Real estate -- mortgage 99,404 88,679 12 Consumer 6,000 7,455 (20) Total gross loans $507,461 $487,101 4% Deposit Mix at Period End Interest bearing checking $95,640 $97,058 (1)% Savings 30,012 30,860 (3) Money market 220,427 201,329 9 CDs under $100,000 41,479 42,516 (2) CDs $100,000 and over 45,907 47,495 (3) Interest bearing deposits 433,465 419,258 3 Non-interest bearing checking 124,010 133,250 (7) Total deposits $557,475 $552,508 1% Shares Outstanding at Period End 5,606,235 5,606,235 0 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, 2006 2005 2005 2005 2005 Interest income Interest on loans $10,023 $9,179 $8,042 $7,410 $6,705 Fees on loans 840 1,149 874 833 909 Interest on investment securities 845 846 852 1,028 1,371 Interest on federal funds sold 79 273 499 219 192 Investments in Trust I and Trust II 19 19 19 19 19 Total interest income 11,806 11,466 10,286 9,509 9,196 Interest expense Deposits 2,667 2,342 1,962 1,623 1,329 Borrowings 255 275 279 241 364 Securities sold under agreements to repurchase 221 133 122 98 25 Federal funds purchased 7 -- -- -- -- Subordinated notes to Trust I and Trust II 631 631 631 630 631 Total interest expense 3,781 3,381 2,994 2,592 2,349 Net interest income 8,025 8,085 7,292 6,917 6,847 Provision for loan losses 215 450 50 (36) 65 Net interest income after provision 7,810 7,635 7,242 6,953 6,782 Non-interest income Deposit related 647 689 648 645 620 Mortgage broker fees 403 585 588 459 394 Gain (loss) on sale of fixed assets -- (28) -- 11 (8) Other 464 494 887 426 429 Total non-interest income 1,514 1,740 2,123 1,541 1,435 Non-interest expense Salaries and employee benefits 4,578 4,368 4,596 4,109 4,195 Occupancy 976 881 837 909 864 Furniture and equipment 616 639 646 650 683 Amortization of intangible assets 10 10 10 10 10 Other 1,281 1,582 1,285 1,397 1,214 Total non-interest expense 7,461 7,480 7,374 7,075 6,966 Income before taxes 1,863 1,895 1,991 1,419 1,251 Income tax expense 550 605 648 448 366 Net Income $1,313 $1,290 $1,343 $971 $885 Diluted net income per share $0.24 $0.24 $0.25 $0.18 $0.16 Vail Banks, Inc. Statement of Income (in thousands, except share data) (unaudited) Three months ended March 31, Percent 2006 2005 Change Interest income Interest on loans $10,023 $6,705 49% Fees on loans 840 909 (8) Interest on investment securities 845 1,371 (38) Interest on federal funds sold 79 192 (59) Investments in Trust I and Trust II 19 19 0 Total interest income 11,806 9,196 28 Interest expense Deposits 2,667 1,329 101 Borrowings 255 364 (30) Securities sold under agreements to repurchase 221 25 784 Federal funds purchased 7 0 0 Subordinated notes to Trust I and Trust II 631 631 0 Total interest expense 3,781 2,349 61 Net interest income 8,025 6,847 17 Provision for loan losses 215 65 231 Net interest income after provision 7,810 6,782 15 Non-interest income 1,514 1,435 6 Non-interest expense 7,461 6,966 7 Income before taxes 1,863 1,251 49 Income taxes 550 366 50 Net Income $1,313 $885 48% Diluted net income per share $0.24 $0.16 50% Weighted average shares outstanding - diluted 5,467,889 5,471,918 0 Profitability Ratios Return on assets 0.77% 0.55% Return on equity 8.29 5.95 Net interest margin (FTE) 5.49 5.11 Net (charge-offs) / recoveries -- (0.03) Efficiency ratio 78 84 Average Balances Assets $694,934 $651,133 7% Earning assets 600,777 554,155 8 Loans 498,619 402,340 24 Deposits 550,701 517,286 6 Shareholders' equity 64,235 60,282 7 Vail Banks, Inc. Supplemental Information (in thousands) (unaudited) Three Months Ended Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, 2006 2005 2005 2005 2005 Average Balances Assets $694,934 $682,827 $673,080 $654,444 $651,133 Earning assets 600,777 588,081 580,370 561,978 554,155 Loans 498,619 458,128 421,678 411,495 402,340 Deposits 550,701 545,361 536,756 523,298 517,286 Interest bearing liabilities 497,516 483,324 477,432 468,261 465,834 Shareholders' equity 64,235 63,748 62,001 60,937 60,282 Average Deposit Mix Interest bearing checking 96,058 94,426 91,277 93,380 93,637 Savings 30,587 31,336 31,778 31,787 31,560 Money market 210,410 197,545 181,233 162,355 147,308 CDs under $100,000 41,996 43,205 45,736 48,993 50,663 CDs $100,000 and over 46,109 49,919 59,049 67,114 74,850 Interest bearing deposits 425,160 416,431 409,073 403,629 398,018 Non-interest bearing checking 125,541 128,930 127,683 119,669 119,268 Total deposits $550,701 $545,361 $536,756 $523,298 $517,286 Net Interest Margin Analysis Net interest income $8,025 $8,085 $7,292 $6,917 $6,847 Fully taxable equivalent adjustment 110 116 111 76 140 Net interest income (FTE) 8,135 8,201 7,403 6,993 6,987 Yields (FTE) Loans 8.84% 8.94% 8.39% 8.04% 7.67% Investment securities 4.50 4.05 3.87 3.75 5.15 Other earning assets 3.10 3.98 3.59 3.09 2.77 Total earning assets 8.04 7.81 7.11 6.84 6.83 Cost of funds Interest bearing deposits 2.54 2.23 1.90 1.61 1.35 Other interest bearing liabilities 6.26 6.16 5.99 6.01 6.10 Total interest bearing liabilities 3.09 2.78 2.49 2.22 2.05 Total interest expense to earning assets 2.55 2.28 2.04 1.84 1.72 Net interest margin (FTE) 5.49% 5.53% 5.07% 5.00% 5.11% Vail Banks, Inc. Asset Quality (in thousands) (unaudited) Three Months Ended Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, 2006 2005 2005 2005 2005 Asset Quality Nonaccrual loans $188 $41 $0 $0 $1,391 Restructured loans 0 0 0 0 0 Total non-performing loans 188 41 0 0 1,391 Foreclosed properties 1,093 572 617 589 802 Total non-performing assets 1,281 613 617 589 2,193 90+ days past due and accruing 247 83 1,399 181 1,053 Total risk assets $1,528 $696 $2,016 $770 $3,246 Allowance for Loan Losses Beginning Balance $4,473 $4,050 $4,003 $3,989 $3,895 Provision (credit) for loan losses 215 450 50 (36) 65 Loan charge-offs (4) (28) (7) (1) (24) Loan recoveries 1 1 4 51 53 Net (charge-offs) recoveries (3) (27) (3) 50 29 Ending Balance $4,685 $4,473 $4,050 $4,003 $3,989 Net Recoveries (Charge-Offs) to Average Loans 0.00% (0.02)% 0.00% 0.05% 0.03% Loans Past Due 30 Days or More and Accruing to Total Loans 0.78 0.43 0.43 0.07 0.31 DATASOURCE: Vail Banks, Inc. CONTACT: Raymond E. Verlinde, Sr. EVP/Chief Administrative Officer, +1-970-328-9710, , or Brady T. Burt, EVP/Chief Financial Officer, +1-970-328-9711, , both of Vail Banks, Inc.

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