Vail Banks Reports First Quarter Earnings Up 14% Over First Quarter 2000

Apr 20, 2001, 01:00 ET from Vail Banks, Inc.

    VAIL, Colo., April 20 /PRNewswire Interactive News Release/ -- Vail Banks,
 Inc. (Nasdaq:   VAIL) today reported net income for the first quarter of 2001
 of $1.35 million compared to $1.18 million in the first quarter of 2000, a
 14% increase.  Results for the quarter represented a 54% increase over the
 fourth quarter of 2000, when the company took a charge of $274,000, net of
 tax, for the termination of certain employee related agreements and for the
 correction of the recording of certain correspondent bank account
 transactions.  Not considering such charges, results of the first quarter of
 2001 represent a 17% increase over fourth quarter 2000 core earnings.
     Diluted net income per share for the quarter was $0.21 compared to
 $0.19 in the first quarter of 2000, and $0.14 in the fourth quarter of 2000,
 increases of 11% and 50% respectively.  Not considering the fourth quarter
 2000 charges for employee agreements and correspondent bank transactions,
 diluted net income per share of $0.21 for the first quarter of 2001 represents
 a 17% increase over fourth quarter 2000 core earnings per share.
     Diluted cash earnings per share, which excludes the amortization of
 intangible assets, was $0.27 for the quarter, versus $0.24 for the first
 quarter of 2000 and $0.20 for the fourth quarter of 2000, increases of 13% and
 35% respectively.  Not considering the fourth quarter 2000 charges for
 employee agreements and correspondent bank transactions, diluted cash earnings
 per share of $0.27 for the first quarter of 2001 represents a 13% increase
 over fourth quarter 2000 core earnings, excluding amortization of intangible
 assets.
     During the quarter, the Company determined certain correspondent bank
 account transactions were not properly recorded during the third quarter of
 1999.  As a result, the Company has taken a charge of $432,000, after tax, and
 is restating its 1999 financial statements to provide for the uncollectibility
 of these items.  In addition, the Company determined certain correspondent
 bank account transactions were not properly recorded in the fourth quarter of
 2000, and as a result, previously announced 2000 results were reduced by
 $88,000, after tax.  The Company detected the situation late in the first
 quarter of 2001 and has since corrected the controls that allowed the errors
 to remain previously undetected.  The impact of these changes on earnings per
 share was a decrease of $0.07 per diluted share in 1999, and $0.01 per diluted
 share in 2000.
 
                              Financial Highlights
 
     --  Earnings per share
           Diluted net income per share was $0.21 for first quarter
             Compared to $0.19 for first quarter 2000, an 11% increase
             Compared to $0.14 for fourth quarter 2000, a 50% increase
             Compared to $0.18 for fourth quarter 2000 (core), a 17% increase
           Diluted cash earnings per share was $0.27 for first quarter
             Compared to $0.24 for first quarter 2000, a 13% increase
             Compared to $0.20 for fourth quarter 2000, a 35% increase
             Compared to $0.24 for fourth quarter 2000 (core), a 13% increase
 
     --  Net Income
           Net income was $1,353,000 for first quarter
             Compared to $1,182,000 for first quarter 2000, a 14% increase
             Compared to $881,000 for fourth quarter 2000, a 54% increase
             Compared to $1,155,000 for fourth quarter 2000 (core), a
              17% increase
           Cash Earnings was $1,769,000 for first quarter
             Compared to $1,455,000 for first quarter 2000, a 22% increase
             Compared to $1,294,000 for fourth quarter 2000, a 37% increase
             Compared to $1,568,000 for fourth quarter 2000 (core), a 13%
              increase
 
     --  Return on assets
           Return on assets was 0.96% for first quarter
             Compared to 1.01% for first quarter 2000
             Compared to 0.62% for fourth quarter 2000
             Compared to 0.81% for fourth quarter 2000 (core)
           Return on tangible assets of 1.35% for first quarter
             Compared to 1.31% for first quarter 2000
             Compared to 0.98% for fourth quarter 2000
             Compared to 1.18% for fourth quarter 2000 (core)
 
     --  Return on equity
           Return on equity was 8.22% for first quarter
             Compared to 8.04% for first quarter 2000
             Compared to 5.33% for fourth quarter 2000
             Compared to 6.99% for fourth quarter 2000 (core)
           Return on tangible equity of 25.23% for first quarter
             Compared to 17.35% for first quarter 2000
             Compared to 18.80% for fourth quarter 2000
             Compared to 22.78% for fourth quarter 2000 (core)
 
     --  Net Interest Margin
           Net interest margin (fully tax equivalent) was 6.26% for first
            quarter
             Compared to 6.70% for first quarter 2000
             Compared to 6.26% for fourth quarter 2000
    --  Efficiency Ratio
           Efficiency ratio was 72% for first quarter
             Compared to 72% for first quarter 2000
             Compared to 79% for fourth quarter 2000
             Compared to 74% for fourth quarter 2000 (core)
 
           Efficiency ratio, on a cash basis, was 68% for first quarter
             Compared to 68% for first quarter 2000
             Compared to 75% for fourth quarter 2000
             Compared to 70% for fourth quarter 2000 (core)
 
                                    Overview
 
     The Company continued to grow earnings and strengthen its balance sheet in
 the first quarter.  Net interest income was $7.2 million for the quarter
 compared to $6.3 million in the first quarter 2000, and to $7.2 million in the
 fourth quarter 2000.  Net interest margin, on a fully tax-equivalent basis,
 declined to 6.26% of earning assets, compared to 6.70% in the first quarter
 2000, and to 6.26% in the fourth quarter 2000.  Average loans for the quarter
 declined $3.7 million, or 3% annualized, compared to the fourth quarter of
 2000.  Average deposits increased $12 million, or 11% annualized during the
 same period.
     Non-interest income grew 7% compared to the fourth quarter of 2000,
 primarily due to a 16% increase in deposit-related fee income.  The Company's
 efficiency ratio, on a cash basis, improved to 68% from 70% (core) in the
 fourth quarter 2000 as the Company continues to reduce expense levels.  The
 Company issued $24 million in trust preferred securities in two separate
 pooled transactions during the quarter.  The securities bear an average
 interest rate of 10.19%, have debt service that is tax deductible, and qualify
 as regulatory capital.
     "We are pleased our branches were able to retain and grow deposit balances
 given the extraordinary interest rate reductions we experienced during the
 quarter," said Chairman E.B. Chester.  "While our loan demand was lower
 compared to the previous quarter, volume was fairly close to our projections
 for the quarter.  Furthermore, we made significant progress in strengthening
 our capital position and improving our share value with the trust preferred
 securities and common stock repurchase program.  Our management team also
 continues to increase our balance sheet efficiency and reduce our overhead
 burden."
 
                                Top Line Revenue
 
     Total revenue (net interest income and non-interest income) grew
 $1.5 million in the quarter, or 19%, over the first quarter of 2000, and
 $158,000, or 2%, over the fourth quarter 2000, due to increases in
 non-interest income as well as income from branches purchased in the United
 Valley Bank acquisition in July 2000.
     Non-interest income increased 38%, or $657,000, in the quarter as compared
 to the first quarter of 2000.  Service charges on deposits increased 44%, or
 $291,000, over the first quarter 2000, and 16%, or $129,000 over the fourth
 quarter 2000, as a result of the increased emphasis by management on
 collecting deposit-related fees as well as fee income from the former United
 Valley branches.  Revenue per diluted share for the first quarter increased to
 $1.47 in 2001 compared to $1.32 in 2000, an 11% increase.
 
                        Control of Non-interest Expenses
 
     During the first quarter 2001, the Company filed notice with the Federal
 Reserve Bank that it would close one branch in Grand Lake, Colorado, and one
 branch in Cedaredge, Colorado, and consolidate customer accounts from those
 branches into nearby banking facilities.  The branches are scheduled to close
 by May 15.
 
                         Interest Rate Risk Management
 
     The net interest margin of 6.26% for the first quarter compared to 6.26%
 in the fourth quarter 2000 and 6.70% in the first quarter 2000.  The 150 basis
 point reduction in short term rates by the Federal Reserve Bank during the
 quarter effectively repriced approximately half of the Company's loan
 portfolio, but it also produced an opportunity to reduce funding costs.
     Earning assets yielded 9.80% for the first quarter, a 42 basis point
 decrease over the fourth quarter 2000 yield of 10.22% and a 25 basis point
 decrease over the first quarter 2000 yield of 10.05%.  These decreases compare
 favorably in light of the Fed's reduction in short term interest rates during
 the quarter.  The cost of interest bearing liabilities decreased to 4.15%
 in the first quarter from 4.60% in the fourth quarter 2000, a decrease of
 45 basis points, and increased from 3.96% in the first quarter 2000, an
 increase of 19 basis points.
     "Management has been aggressive in positioning deposit rates relative to
 the changing interest rate environment," stated Dan Godec, President of
 WestStar Bank.  "We have also been pleased our branch management has been able
 to maintain our deposit base given the dramatic decline in rates.  Our
 customers are staying with us in these extraordinary times."
 
                             Credit Risk Management
 
     Net charge-offs, on an annualized basis, were 0.15% of average loans for
 the first quarter, compared to 0.08% in the fourth quarter 2000 and 0.06% in
 the first quarter 2000.  At March 31, 2001, the allowance for loan losses was
 1.10% of loans and 208% of non-performing loans.  Overall, non-performing
 assets comprised 0.55% of loan-related assets at the end of the quarter
 compared to 0.42% at the end of 2000.
     "Our credit quality continues to be strong," said Lisa Dillon, President
 of Vail Banks.  "While our non-performing assets increased to $2.3 million
 during the quarter, we do not anticipate significant credit problems in our
 loan portfolio.  Nevertheless, we are building our loan loss allowance to
 cover any probable losses."
 
             Trust Preferred Securities and Common Stock Repurchase
 
     In February 2001, Vail Banks issued $16.5 million of trust preferred
 securities due 2031 and bearing an interest rate of 10.2%.  These securities
 were issued through a pooled transaction with First Tennessee Capital Markets.
 In March 2001, the Company issued another $7.5 million in trust preferred
 securities due 2031 and bearing a rate of 10.18%.  These securities were
 issued through a pooled transaction with Sandler O'Neill & Partners, L.P.
 Subsequent to such issuance, the Company contributed $7.4 million in
 additional capital into WestStar Bank and extinguished $2 million in debt.
     In February 2001, the Company's Board of Directors approved a stock
 repurchase program authorizing the purchase of up to $10 million in common
 shares in the ensuing twelve-month period.  During March 2001, the Company
 repurchased 274,600 common shares in market and block trades at an average
 price of $10.87 per share.
 
                                Dividend Payment
 
     At its meeting on April 16, the Board of Directors of Vail Banks declared
 a regular quarterly dividend of $0.04 per share payable on May 11 to
 shareholders of record on April 27.
 
                                   Franchise
 
     Vail Banks, through its subsidiary WestStar Bank, has 27 banking offices
 and 26 ATMs in twenty communities in Colorado, including Aspen, Avon,
 Breckenridge, Cedaredge, Delta, Denver, Dillon, Eagle, Edwards, Estes Park,
 Frisco, Glenwood Springs, Granby, Grand Lake, Gypsum, Montrose, New Castle,
 Norwood, Telluride and Vail.  It gathers 68% of its deposits from the eleven
 communities where it has number one or two market share.
 
     Vail Banks warns that 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 Form 10-KSB for the year ended December 31, 2000, 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.      Dec.      Sept.         June        Mar.
                            31,       31,        30,          30,         31,
                           2001      2000       2000         2000        2000
                                                (as         (as          (as
                                             restated)   restated)   restated)
     Earnings and
      Performance
      Based on GAAP (1)
       Net income       $1,353         881      1,388         1,505     1,182
       Diluted net
        income per share   .21         .14        .22           .25       .19
       Return on assets    .96%        .62       1.00          1.26      1.01
       Return on equity   8.22        5.33       8.63         10.08      8.04
       Net interest
        margin (FTE)      6.26        6.26       6.68          6.77      6.70
       Efficiency ratio     72          79         74            68        72
 
     Earnings and
      Performance
      Based on Core
      Earnings (2)
       Net income       $1,353       1,155      1,659         1,505     1,182
       Diluted net
        income per
        share              .21         .18        .26           .25       .19
       Return on assets    .96%        .81       1.20          1.26      1.01
       Return on equity   8.22        6.99      10.31         10.08      8.04
       Net interest
        margin (FTE)      6.26        6.26       6.71          6.77      6.70
       Efficiency ratio     72          74         70            68        72
 
     Earnings and
      Performance
      Based on Cash
      Earnings (3)
       Net income       $1,769       1,294       1,753        1,779     1,455
       Diluted net
        income per
        share              .27         .20         .27          .29       .24
       Return on
        tangible
        assets            1.35%        .98        1.36         1.57      1.31
       Return on
        tangible
        equity           25.23       18.80       25.61        20.53     17.35
       Efficiency
        ratio               68          75          71           65        68
 
     Asset Quality
      Ratios
       Net charge-offs
        to average
        loans              .15%        .08         .15          .10       .06
       Allowance for
        loan losses
        to loans          1.10        1.04        1.00          .90       .85
       Allowance for
        loan losses to
        non-performing
        loans              208         264         314          225       241
       Non-performing
        assets to
        loan-related
        assets             .55         .42         .38          .51       .46
       Risk assets to
        loan-related
        assets (4)         .55         .42         .38          .51       .46
 
     Capital Ratios
      Equity to
       assets at
       period end        11.15%      11.79       11.61        12.82     12.54
      Tangible equity
       to assets at
       period end         4.59        4.96        4.76         7.53      7.19
      Leverage ratio      9.25        5.45        5.43         8.10      7.90
      Risk-based
       capital ratios
       at period end
 
        Tier 1 capital   12.11        7.14        6.96        10.81     10.31
        Total capital    13.78        8.25        8.01        11.74     11.18
 
     Other Information
      at Period End
       Book value
        per share       $10.44       10.29       10.08         9.99      9.77
       Tangible book
        value per
        share             4.30        4.32        4.14         5.87      5.60
       Closing market
        price           12.703      10.375       9.625         9.50      9.00
       Shares
        outstanding  6,202,758   6,456,400   6,470,347    6,081,180 6,081,180
       Full time
        equivalent
        associates         270         287         300          260       251
       Banking offices     27          27           27           23        23
 
 
     (1) Generally accepted accounting principles
     (2) Fourth quarter 2000 excludes the effect of one-time charges of $274,
         net of tax, for the cancellation of certain employee-related
         agreements and for the correction of the recording of certain
         correspondent bank account transactions.  Third quarter of 2000
         excludes the effect of one-time charges of $271, net of tax,
         associated with reorganization, expansion costs, and acquisition
         expenses related to the United Valley Bank merger.
     (3) Excludes amortization of intangible assets.
     (4) 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,   March 31,     Percent
                    Assets                   2001         2000       Change
                                                     (as restated)
 
     Cash and due from banks                $20,109      23,640          (15)%
     Federal funds sold                      34,705          --          n.m.
     Investment securities
       Available for sale                    24,483      29,639          (17)
       Held to maturity                       1,176       5,329          (78)
 
     Loans held for sale                      3,232         180        1,696
 
     Gross loans                            417,467     352,210           19
       Less allowance for loan losses        (4,583)     (2,984)          54
 
         Net loans                          412,884     349,226           18
 
     Premises and equipment                  40,136      35,015           15
     Intangible assets                       38,105      25,340           50
     Other assets                             5,981       5,507            9
 
                                           $580,811     473,876           23%
 
       Liabilities and Shareholders' Equity
 
     Liabilities
 
       Deposits                            $487,713     380,477           28%
       Notes payable                             --      21,000         (100)
       Federal funds purchased and
        other short-term borrowings              --       8,410         (100)
       Other liabilities                      3,629       3,933           (8)
 
         Total liabilities                  491,342     413,820           19
 
     Minority interest                          711         667            7
 
     Trust Preferred                         24,000          --          n.m.
 
     Shareholders' equity
 
       Common equity                         64,718      59,953            8
       Accumulated other comprehensive
        income (loss)                            40        (564)        (107)
 
         Total shareholders' equity          64,758      59,389            9
 
                                           $580,811     473,876           23%
 
     Loan Mix at Period End
 
       Commercial and industrial           $201,112     167,592           20%
       Real estate -- construction          118,708      84,226           41
       Real estate -- mortgage               72,613      69,985            4
       Consumer                              25,034      30,407          (18)
 
         Total loans                       $417,467     352,210           19%
 
     Deposit Mix at Period End
 
       Interest bearing checking            $76,195      67,579           13%
       Savings                               32,947      31,191            6
       Money market                         185,133     116,273           59
       CDs under $100,000                    63,602      57,877           10
       CDs $100,000 and over                 31,245      29,155            7
 
         Interest bearing deposits          389,122     302,075           29
 
       Non-interest bearing checking         98,591      78,402           26
 
         Total deposits                    $487,713     380,477           28%
 
     Shares Outstanding at Period End     6,202,758   6,081,180            2%
 
 
                                  Vail Banks, Inc.
 
                                Statement of Income
                         (in thousands, except share data)
 
                                       Three months ended March 31,   Percent
                                             2001         2000        Change
                                                     (as restated)
     Interest income
       Interest on loans                    $10,107       8,293           22%
       Fees on loans                            567         735          (23)
       Interest on investment securities        395         505          (22)
       Interest on federal funds sold
        and short-term investments              220           7        3,043
 
         Total interest income               11,289       9,540           18
 
     Interest expense
       Deposits                               3,870       2,724           42
       Borrowings                                38         474          (92)
       Trust preferred                          186          --          n.m.
 
         Total interest expense               4,094       3,198           28
 
     Net interest income                      7,195       6,342           13
 
     Provision for loan losses                  300         300           --
 
     Net interest income after provision      6,895       6,042           14
 
     Non-interest income                      2,388       1,731           38
     Non-interest expense                     6,923       5,788           20
 
     Income before taxes                      2,360       1,985           19
     Income taxes                             1,007         803           25
     Net Income                              $1,353       1,182           14%
 
     Diluted net income per share              $.21         .19           11%
     Weighted average shares
      outstanding - diluted               6,502,996   6,107,869           --
 
     Profitability Ratios
 
       Return on assets                        .96%        1.01
       Return on equity                        8.22        8.04
       Net interest margin (FTE)               6.26        6.70
       Net chargeoffs                           .15         .06
       Efficiency ratio                          72          72
 
     Performance Based on Cash Earnings (1)
 
       Net income
         GAAP (2)                            $1,353       1,182           14%
         Amortization of intangibles            416         273           52
           Based on cash earnings             1,769       1,455           22
 
       Diluted net income per share             .27         .24           13
       Return on tangible assets              1.35%        1.31
       Return on tangible equity              25.23       17.35
       Efficiency ratio                          68          68
 
     Average Balances
 
       Assets                              $569,338     472,098           21%
       Earning assets                       468,095     383,216           22
       Loans                                422,194     346,900           22
       Deposits                             489,334     376,834           30
       Shareholders' equity                  66,742      59,157           13
 
      (1) Excludes amortization of intangible assets.
      (2) Generally accepted accounting principles.
 
 
                               Vail Banks, Inc.
 
                        Statement of Income by Quarter
                      (in thousands, except share data)
 
 
 
                                    Mar.    Dec.    Sept.    June    Mar.
                                     31,     31,     30,      30,     31,
                                    2001    2000    2000     2000    2000
 
     Interest income
       Interest on loans          $10,107  10,885  10,401   8,932  8,293
       Fees on loans                  567     395     876     748    735
       Interest on investment
        securities                    395     468     487     506    505
       Interest on federal funds
        sold and short-term
        investments                   220       2       6      --      7
 
            Total interest income  11,289  11,750  11,770  10,186  9,540
     Interest expense
       Deposits                     3,870   4,249   3,821   2,898  2,724
       Borrowings                      38     318     516     693    474
       Trust preferred                186      --      --      --     --
 
            Total interest expense  4,094   4,567   4,337   3,591  3,198
     Net interest income            7,195   7,183   7,433   6,595  6,342
 
     Provision for loan losses        300     300     147     300    300
 
     Net interest income after
      provision                     6,895   6,883   7,286   6,295  6,042
 
     Non-interest income
       Deposit related                950     821     717     682    659
       Mortgage broker fees           673     731     845     544    475
       Other                          765     690     739     595    597
                                    2,388   2,242   2,301   1,821  1,731
     Non-interest expense
       Salaries and employee
        benefits                    3,660   3,912   3,831   3,067  3,038
       Occupancy                      736     732     756     573    650
       Furniture and equipment        704     746     784     648    670
       Amortization of intangible
        assets                        416     413     365     274    273
       Write-off of correspondent
        bank account transactions      --     139      --      --     --
       Other                        1,407   1,507   1,508   1,182  1,157
                                    6,923   7,449   7,244   5,744  5,788
 
     Income before taxes            2,360   1,676   2,343   2,372  1,985
     Income taxes                   1,007     795     955     867    803
     Net Income                     $1,353     881   1,388   1,505  1,182
 
 
 
     Diluted net income per
      share                          $.21     .14     .22     .25    .19
 
     Diluted core income per
      share (1)                      $.21     .18     .26     .25    .19
 
     (1) Fourth quarter 2000 excludes the effect of one-time charges of $274,
     net of tax, for the cancellation of certain employee-related agreements
     and for the correction of the recording of certain correspondent bank
     account transactions.  Third quarter 2000 excludes the effect of one-time
     charges of $271, net of tax, associated with reorganization, expansion
     costs, and acquisition expenses related to the United Valley Bank merger.
 
 
                                  Vail Banks, Inc.
 
                              Supplemental Information
                                   (in thousands)
 
                                              Three Months Ended
 
                                Mar.      Dec.      Sept.    June       Mar.
                                31,        31,       30,      30,       31,
                               2001       2000      2000     2000      2000
                                                    (as      (as      (as
                                                     re-      re-      re-
                                                   stated)  stated)  stated)
     Average Balances
       Assets                 $569,338   565,402   550,640  479,961  472,098
       Earning assets          468,095   458,846   445,043  393,883  383,216
       Loans                   422,194   425,854   410,153  359,068  346,900
       Deposits                489,334   476,952   452,263  372,792  376,834
       Interest bearing
        liabilities            400,212   395,309   385,185  337,693  325,083
       Shareholders' equity     66,742    65,777    64,012   60,067   59,157
 
     Average Deposit Mix
       Interest bearing
        checking                77,701    79,242    81,185   65,796   65,755
       Savings                  32,719    32,196    34,571   28,797   30,660
       Money market            184,215   164,276   142,083  115,871  110,706
       CDs under $100,000       65,137    68,180    66,091   55,816   58,107
       CDs $100,000 and over    31,618    33,558    31,481   28,708   28,120
 
         Interest bearing
          deposits             391,390   377,452   355,411  294,988  293,348
 
       Non-interest bearing
        checking                97,944    99,500    96,852   77,804   83,486
 
         Total deposits        489,334   476,952   452,263  372,792  376,834
 
     Net Interest Margin
      Analysis
       Net interest income      $7,195     7,183     7,433    6,595    6,342
       Fully taxable equivalent
        adjustment                  26        33        38       39       38
 
         Net interest income
          (FTE)                  7,221     7,216     7,471    6,634    6,380
 
       Yields (FTE)
         Loans                   10.25%    10.54     10.94    10.83    10.46
         Investment securities    6.20      6.29      6.24     6.37     6.12
         Other earning assets     5.36      5.85      5.49      --      5.36
           Total earning assets   9.80     10.22     10.56    10.44    10.05
 
       Cost of funds
         Interest bearing
          deposits                4.01      4.48      4.28     3.95     3.73
         Other interest bearing
          liabilities            10.30      7.08      6.89     6.53     6.01
           Total interest
            bearing liabilities   4.15      4.60      4.48     4.28     3.96
           Total interest
            expense to earning
            assets                3.54      3.96      3.88     3.67     3.35
 
       Net interest margin
        (FTE)                     6.26      6.26      6.68     6.77     6.70
 
 
                                 Vail Banks, Inc.
 
                                   Asset Quality
                                  (in thousands)
 
                                                  Three Months Ended
 
                                          Mar.    Dec.   Sept.   June    Mar.
                                           31,     31,    30,     30,     31,
                                          2001    2000   2000    2000    2000
 
     Asset Quality
         Nonaccrual loans               $2,205   1,685   1,347   1,420  1,236
         Restructured loans                 --      --      --      --     --
           Total non-performing loans    2,205   1,685   1,347   1,420  1,236
         Foreclosed properties              84     129     282     391    386
           Total non-performing assets   2,289   1,814   1,629   1,811  1,622
         90+ days past due and accruing     --      --      --       6     --
           Total risk assets            $2,289   1,814   1,629   1,817  1,622
 
     Allowance for Loan Losses
     Beginning Balance                  $4,440   4,223   3,192   2,984  2,739
         Provision for loan losses         300     300     147     300    300
         Reserve Acquired                   --      --   1,040      --     --
           Loan charge-offs                193      89     164      98     67
           Loan recoveries                  36       6       8       6     12
         Net charge-offs                   157      83     156      92     55
     Ending Balance                     $4,583   4,440   4,223   3,192  2,984
 
     Net Charge-Offs to Average Loans      .15%    .08     .15     .10    .06
 
     Loans Past Due 30 Days or More and
      Accruing                             .56     .12     .20     .11    .21
 
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SOURCE Vail Banks, Inc.
    VAIL, Colo., April 20 /PRNewswire Interactive News Release/ -- Vail Banks,
 Inc. (Nasdaq:   VAIL) today reported net income for the first quarter of 2001
 of $1.35 million compared to $1.18 million in the first quarter of 2000, a
 14% increase.  Results for the quarter represented a 54% increase over the
 fourth quarter of 2000, when the company took a charge of $274,000, net of
 tax, for the termination of certain employee related agreements and for the
 correction of the recording of certain correspondent bank account
 transactions.  Not considering such charges, results of the first quarter of
 2001 represent a 17% increase over fourth quarter 2000 core earnings.
     Diluted net income per share for the quarter was $0.21 compared to
 $0.19 in the first quarter of 2000, and $0.14 in the fourth quarter of 2000,
 increases of 11% and 50% respectively.  Not considering the fourth quarter
 2000 charges for employee agreements and correspondent bank transactions,
 diluted net income per share of $0.21 for the first quarter of 2001 represents
 a 17% increase over fourth quarter 2000 core earnings per share.
     Diluted cash earnings per share, which excludes the amortization of
 intangible assets, was $0.27 for the quarter, versus $0.24 for the first
 quarter of 2000 and $0.20 for the fourth quarter of 2000, increases of 13% and
 35% respectively.  Not considering the fourth quarter 2000 charges for
 employee agreements and correspondent bank transactions, diluted cash earnings
 per share of $0.27 for the first quarter of 2001 represents a 13% increase
 over fourth quarter 2000 core earnings, excluding amortization of intangible
 assets.
     During the quarter, the Company determined certain correspondent bank
 account transactions were not properly recorded during the third quarter of
 1999.  As a result, the Company has taken a charge of $432,000, after tax, and
 is restating its 1999 financial statements to provide for the uncollectibility
 of these items.  In addition, the Company determined certain correspondent
 bank account transactions were not properly recorded in the fourth quarter of
 2000, and as a result, previously announced 2000 results were reduced by
 $88,000, after tax.  The Company detected the situation late in the first
 quarter of 2001 and has since corrected the controls that allowed the errors
 to remain previously undetected.  The impact of these changes on earnings per
 share was a decrease of $0.07 per diluted share in 1999, and $0.01 per diluted
 share in 2000.
 
                              Financial Highlights
 
     --  Earnings per share
           Diluted net income per share was $0.21 for first quarter
             Compared to $0.19 for first quarter 2000, an 11% increase
             Compared to $0.14 for fourth quarter 2000, a 50% increase
             Compared to $0.18 for fourth quarter 2000 (core), a 17% increase
           Diluted cash earnings per share was $0.27 for first quarter
             Compared to $0.24 for first quarter 2000, a 13% increase
             Compared to $0.20 for fourth quarter 2000, a 35% increase
             Compared to $0.24 for fourth quarter 2000 (core), a 13% increase
 
     --  Net Income
           Net income was $1,353,000 for first quarter
             Compared to $1,182,000 for first quarter 2000, a 14% increase
             Compared to $881,000 for fourth quarter 2000, a 54% increase
             Compared to $1,155,000 for fourth quarter 2000 (core), a
              17% increase
           Cash Earnings was $1,769,000 for first quarter
             Compared to $1,455,000 for first quarter 2000, a 22% increase
             Compared to $1,294,000 for fourth quarter 2000, a 37% increase
             Compared to $1,568,000 for fourth quarter 2000 (core), a 13%
              increase
 
     --  Return on assets
           Return on assets was 0.96% for first quarter
             Compared to 1.01% for first quarter 2000
             Compared to 0.62% for fourth quarter 2000
             Compared to 0.81% for fourth quarter 2000 (core)
           Return on tangible assets of 1.35% for first quarter
             Compared to 1.31% for first quarter 2000
             Compared to 0.98% for fourth quarter 2000
             Compared to 1.18% for fourth quarter 2000 (core)
 
     --  Return on equity
           Return on equity was 8.22% for first quarter
             Compared to 8.04% for first quarter 2000
             Compared to 5.33% for fourth quarter 2000
             Compared to 6.99% for fourth quarter 2000 (core)
           Return on tangible equity of 25.23% for first quarter
             Compared to 17.35% for first quarter 2000
             Compared to 18.80% for fourth quarter 2000
             Compared to 22.78% for fourth quarter 2000 (core)
 
     --  Net Interest Margin
           Net interest margin (fully tax equivalent) was 6.26% for first
            quarter
             Compared to 6.70% for first quarter 2000
             Compared to 6.26% for fourth quarter 2000
    --  Efficiency Ratio
           Efficiency ratio was 72% for first quarter
             Compared to 72% for first quarter 2000
             Compared to 79% for fourth quarter 2000
             Compared to 74% for fourth quarter 2000 (core)
 
           Efficiency ratio, on a cash basis, was 68% for first quarter
             Compared to 68% for first quarter 2000
             Compared to 75% for fourth quarter 2000
             Compared to 70% for fourth quarter 2000 (core)
 
                                    Overview
 
     The Company continued to grow earnings and strengthen its balance sheet in
 the first quarter.  Net interest income was $7.2 million for the quarter
 compared to $6.3 million in the first quarter 2000, and to $7.2 million in the
 fourth quarter 2000.  Net interest margin, on a fully tax-equivalent basis,
 declined to 6.26% of earning assets, compared to 6.70% in the first quarter
 2000, and to 6.26% in the fourth quarter 2000.  Average loans for the quarter
 declined $3.7 million, or 3% annualized, compared to the fourth quarter of
 2000.  Average deposits increased $12 million, or 11% annualized during the
 same period.
     Non-interest income grew 7% compared to the fourth quarter of 2000,
 primarily due to a 16% increase in deposit-related fee income.  The Company's
 efficiency ratio, on a cash basis, improved to 68% from 70% (core) in the
 fourth quarter 2000 as the Company continues to reduce expense levels.  The
 Company issued $24 million in trust preferred securities in two separate
 pooled transactions during the quarter.  The securities bear an average
 interest rate of 10.19%, have debt service that is tax deductible, and qualify
 as regulatory capital.
     "We are pleased our branches were able to retain and grow deposit balances
 given the extraordinary interest rate reductions we experienced during the
 quarter," said Chairman E.B. Chester.  "While our loan demand was lower
 compared to the previous quarter, volume was fairly close to our projections
 for the quarter.  Furthermore, we made significant progress in strengthening
 our capital position and improving our share value with the trust preferred
 securities and common stock repurchase program.  Our management team also
 continues to increase our balance sheet efficiency and reduce our overhead
 burden."
 
                                Top Line Revenue
 
     Total revenue (net interest income and non-interest income) grew
 $1.5 million in the quarter, or 19%, over the first quarter of 2000, and
 $158,000, or 2%, over the fourth quarter 2000, due to increases in
 non-interest income as well as income from branches purchased in the United
 Valley Bank acquisition in July 2000.
     Non-interest income increased 38%, or $657,000, in the quarter as compared
 to the first quarter of 2000.  Service charges on deposits increased 44%, or
 $291,000, over the first quarter 2000, and 16%, or $129,000 over the fourth
 quarter 2000, as a result of the increased emphasis by management on
 collecting deposit-related fees as well as fee income from the former United
 Valley branches.  Revenue per diluted share for the first quarter increased to
 $1.47 in 2001 compared to $1.32 in 2000, an 11% increase.
 
                        Control of Non-interest Expenses
 
     During the first quarter 2001, the Company filed notice with the Federal
 Reserve Bank that it would close one branch in Grand Lake, Colorado, and one
 branch in Cedaredge, Colorado, and consolidate customer accounts from those
 branches into nearby banking facilities.  The branches are scheduled to close
 by May 15.
 
                         Interest Rate Risk Management
 
     The net interest margin of 6.26% for the first quarter compared to 6.26%
 in the fourth quarter 2000 and 6.70% in the first quarter 2000.  The 150 basis
 point reduction in short term rates by the Federal Reserve Bank during the
 quarter effectively repriced approximately half of the Company's loan
 portfolio, but it also produced an opportunity to reduce funding costs.
     Earning assets yielded 9.80% for the first quarter, a 42 basis point
 decrease over the fourth quarter 2000 yield of 10.22% and a 25 basis point
 decrease over the first quarter 2000 yield of 10.05%.  These decreases compare
 favorably in light of the Fed's reduction in short term interest rates during
 the quarter.  The cost of interest bearing liabilities decreased to 4.15%
 in the first quarter from 4.60% in the fourth quarter 2000, a decrease of
 45 basis points, and increased from 3.96% in the first quarter 2000, an
 increase of 19 basis points.
     "Management has been aggressive in positioning deposit rates relative to
 the changing interest rate environment," stated Dan Godec, President of
 WestStar Bank.  "We have also been pleased our branch management has been able
 to maintain our deposit base given the dramatic decline in rates.  Our
 customers are staying with us in these extraordinary times."
 
                             Credit Risk Management
 
     Net charge-offs, on an annualized basis, were 0.15% of average loans for
 the first quarter, compared to 0.08% in the fourth quarter 2000 and 0.06% in
 the first quarter 2000.  At March 31, 2001, the allowance for loan losses was
 1.10% of loans and 208% of non-performing loans.  Overall, non-performing
 assets comprised 0.55% of loan-related assets at the end of the quarter
 compared to 0.42% at the end of 2000.
     "Our credit quality continues to be strong," said Lisa Dillon, President
 of Vail Banks.  "While our non-performing assets increased to $2.3 million
 during the quarter, we do not anticipate significant credit problems in our
 loan portfolio.  Nevertheless, we are building our loan loss allowance to
 cover any probable losses."
 
             Trust Preferred Securities and Common Stock Repurchase
 
     In February 2001, Vail Banks issued $16.5 million of trust preferred
 securities due 2031 and bearing an interest rate of 10.2%.  These securities
 were issued through a pooled transaction with First Tennessee Capital Markets.
 In March 2001, the Company issued another $7.5 million in trust preferred
 securities due 2031 and bearing a rate of 10.18%.  These securities were
 issued through a pooled transaction with Sandler O'Neill & Partners, L.P.
 Subsequent to such issuance, the Company contributed $7.4 million in
 additional capital into WestStar Bank and extinguished $2 million in debt.
     In February 2001, the Company's Board of Directors approved a stock
 repurchase program authorizing the purchase of up to $10 million in common
 shares in the ensuing twelve-month period.  During March 2001, the Company
 repurchased 274,600 common shares in market and block trades at an average
 price of $10.87 per share.
 
                                Dividend Payment
 
     At its meeting on April 16, the Board of Directors of Vail Banks declared
 a regular quarterly dividend of $0.04 per share payable on May 11 to
 shareholders of record on April 27.
 
                                   Franchise
 
     Vail Banks, through its subsidiary WestStar Bank, has 27 banking offices
 and 26 ATMs in twenty communities in Colorado, including Aspen, Avon,
 Breckenridge, Cedaredge, Delta, Denver, Dillon, Eagle, Edwards, Estes Park,
 Frisco, Glenwood Springs, Granby, Grand Lake, Gypsum, Montrose, New Castle,
 Norwood, Telluride and Vail.  It gathers 68% of its deposits from the eleven
 communities where it has number one or two market share.
 
     Vail Banks warns that 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 Form 10-KSB for the year ended December 31, 2000, 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.      Dec.      Sept.         June        Mar.
                            31,       31,        30,          30,         31,
                           2001      2000       2000         2000        2000
                                                (as         (as          (as
                                             restated)   restated)   restated)
     Earnings and
      Performance
      Based on GAAP (1)
       Net income       $1,353         881      1,388         1,505     1,182
       Diluted net
        income per share   .21         .14        .22           .25       .19
       Return on assets    .96%        .62       1.00          1.26      1.01
       Return on equity   8.22        5.33       8.63         10.08      8.04
       Net interest
        margin (FTE)      6.26        6.26       6.68          6.77      6.70
       Efficiency ratio     72          79         74            68        72
 
     Earnings and
      Performance
      Based on Core
      Earnings (2)
       Net income       $1,353       1,155      1,659         1,505     1,182
       Diluted net
        income per
        share              .21         .18        .26           .25       .19
       Return on assets    .96%        .81       1.20          1.26      1.01
       Return on equity   8.22        6.99      10.31         10.08      8.04
       Net interest
        margin (FTE)      6.26        6.26       6.71          6.77      6.70
       Efficiency ratio     72          74         70            68        72
 
     Earnings and
      Performance
      Based on Cash
      Earnings (3)
       Net income       $1,769       1,294       1,753        1,779     1,455
       Diluted net
        income per
        share              .27         .20         .27          .29       .24
       Return on
        tangible
        assets            1.35%        .98        1.36         1.57      1.31
       Return on
        tangible
        equity           25.23       18.80       25.61        20.53     17.35
       Efficiency
        ratio               68          75          71           65        68
 
     Asset Quality
      Ratios
       Net charge-offs
        to average
        loans              .15%        .08         .15          .10       .06
       Allowance for
        loan losses
        to loans          1.10        1.04        1.00          .90       .85
       Allowance for
        loan losses to
        non-performing
        loans              208         264         314          225       241
       Non-performing
        assets to
        loan-related
        assets             .55         .42         .38          .51       .46
       Risk assets to
        loan-related
        assets (4)         .55         .42         .38          .51       .46
 
     Capital Ratios
      Equity to
       assets at
       period end        11.15%      11.79       11.61        12.82     12.54
      Tangible equity
       to assets at
       period end         4.59        4.96        4.76         7.53      7.19
      Leverage ratio      9.25        5.45        5.43         8.10      7.90
      Risk-based
       capital ratios
       at period end
 
        Tier 1 capital   12.11        7.14        6.96        10.81     10.31
        Total capital    13.78        8.25        8.01        11.74     11.18
 
     Other Information
      at Period End
       Book value
        per share       $10.44       10.29       10.08         9.99      9.77
       Tangible book
        value per
        share             4.30        4.32        4.14         5.87      5.60
       Closing market
        price           12.703      10.375       9.625         9.50      9.00
       Shares
        outstanding  6,202,758   6,456,400   6,470,347    6,081,180 6,081,180
       Full time
        equivalent
        associates         270         287         300          260       251
       Banking offices     27          27           27           23        23
 
 
     (1) Generally accepted accounting principles
     (2) Fourth quarter 2000 excludes the effect of one-time charges of $274,
         net of tax, for the cancellation of certain employee-related
         agreements and for the correction of the recording of certain
         correspondent bank account transactions.  Third quarter of 2000
         excludes the effect of one-time charges of $271, net of tax,
         associated with reorganization, expansion costs, and acquisition
         expenses related to the United Valley Bank merger.
     (3) Excludes amortization of intangible assets.
     (4) 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,   March 31,     Percent
                    Assets                   2001         2000       Change
                                                     (as restated)
 
     Cash and due from banks                $20,109      23,640          (15)%
     Federal funds sold                      34,705          --          n.m.
     Investment securities
       Available for sale                    24,483      29,639          (17)
       Held to maturity                       1,176       5,329          (78)
 
     Loans held for sale                      3,232         180        1,696
 
     Gross loans                            417,467     352,210           19
       Less allowance for loan losses        (4,583)     (2,984)          54
 
         Net loans                          412,884     349,226           18
 
     Premises and equipment                  40,136      35,015           15
     Intangible assets                       38,105      25,340           50
     Other assets                             5,981       5,507            9
 
                                           $580,811     473,876           23%
 
       Liabilities and Shareholders' Equity
 
     Liabilities
 
       Deposits                            $487,713     380,477           28%
       Notes payable                             --      21,000         (100)
       Federal funds purchased and
        other short-term borrowings              --       8,410         (100)
       Other liabilities                      3,629       3,933           (8)
 
         Total liabilities                  491,342     413,820           19
 
     Minority interest                          711         667            7
 
     Trust Preferred                         24,000          --          n.m.
 
     Shareholders' equity
 
       Common equity                         64,718      59,953            8
       Accumulated other comprehensive
        income (loss)                            40        (564)        (107)
 
         Total shareholders' equity          64,758      59,389            9
 
                                           $580,811     473,876           23%
 
     Loan Mix at Period End
 
       Commercial and industrial           $201,112     167,592           20%
       Real estate -- construction          118,708      84,226           41
       Real estate -- mortgage               72,613      69,985            4
       Consumer                              25,034      30,407          (18)
 
         Total loans                       $417,467     352,210           19%
 
     Deposit Mix at Period End
 
       Interest bearing checking            $76,195      67,579           13%
       Savings                               32,947      31,191            6
       Money market                         185,133     116,273           59
       CDs under $100,000                    63,602      57,877           10
       CDs $100,000 and over                 31,245      29,155            7
 
         Interest bearing deposits          389,122     302,075           29
 
       Non-interest bearing checking         98,591      78,402           26
 
         Total deposits                    $487,713     380,477           28%
 
     Shares Outstanding at Period End     6,202,758   6,081,180            2%
 
 
                                  Vail Banks, Inc.
 
                                Statement of Income
                         (in thousands, except share data)
 
                                       Three months ended March 31,   Percent
                                             2001         2000        Change
                                                     (as restated)
     Interest income
       Interest on loans                    $10,107       8,293           22%
       Fees on loans                            567         735          (23)
       Interest on investment securities        395         505          (22)
       Interest on federal funds sold
        and short-term investments              220           7        3,043
 
         Total interest income               11,289       9,540           18
 
     Interest expense
       Deposits                               3,870       2,724           42
       Borrowings                                38         474          (92)
       Trust preferred                          186          --          n.m.
 
         Total interest expense               4,094       3,198           28
 
     Net interest income                      7,195       6,342           13
 
     Provision for loan losses                  300         300           --
 
     Net interest income after provision      6,895       6,042           14
 
     Non-interest income                      2,388       1,731           38
     Non-interest expense                     6,923       5,788           20
 
     Income before taxes                      2,360       1,985           19
     Income taxes                             1,007         803           25
     Net Income                              $1,353       1,182           14%
 
     Diluted net income per share              $.21         .19           11%
     Weighted average shares
      outstanding - diluted               6,502,996   6,107,869           --
 
     Profitability Ratios
 
       Return on assets                        .96%        1.01
       Return on equity                        8.22        8.04
       Net interest margin (FTE)               6.26        6.70
       Net chargeoffs                           .15         .06
       Efficiency ratio                          72          72
 
     Performance Based on Cash Earnings (1)
 
       Net income
         GAAP (2)                            $1,353       1,182           14%
         Amortization of intangibles            416         273           52
           Based on cash earnings             1,769       1,455           22
 
       Diluted net income per share             .27         .24           13
       Return on tangible assets              1.35%        1.31
       Return on tangible equity              25.23       17.35
       Efficiency ratio                          68          68
 
     Average Balances
 
       Assets                              $569,338     472,098           21%
       Earning assets                       468,095     383,216           22
       Loans                                422,194     346,900           22
       Deposits                             489,334     376,834           30
       Shareholders' equity                  66,742      59,157           13
 
      (1) Excludes amortization of intangible assets.
      (2) Generally accepted accounting principles.
 
 
                               Vail Banks, Inc.
 
                        Statement of Income by Quarter
                      (in thousands, except share data)
 
 
 
                                    Mar.    Dec.    Sept.    June    Mar.
                                     31,     31,     30,      30,     31,
                                    2001    2000    2000     2000    2000
 
     Interest income
       Interest on loans          $10,107  10,885  10,401   8,932  8,293
       Fees on loans                  567     395     876     748    735
       Interest on investment
        securities                    395     468     487     506    505
       Interest on federal funds
        sold and short-term
        investments                   220       2       6      --      7
 
            Total interest income  11,289  11,750  11,770  10,186  9,540
     Interest expense
       Deposits                     3,870   4,249   3,821   2,898  2,724
       Borrowings                      38     318     516     693    474
       Trust preferred                186      --      --      --     --
 
            Total interest expense  4,094   4,567   4,337   3,591  3,198
     Net interest income            7,195   7,183   7,433   6,595  6,342
 
     Provision for loan losses        300     300     147     300    300
 
     Net interest income after
      provision                     6,895   6,883   7,286   6,295  6,042
 
     Non-interest income
       Deposit related                950     821     717     682    659
       Mortgage broker fees           673     731     845     544    475
       Other                          765     690     739     595    597
                                    2,388   2,242   2,301   1,821  1,731
     Non-interest expense
       Salaries and employee
        benefits                    3,660   3,912   3,831   3,067  3,038
       Occupancy                      736     732     756     573    650
       Furniture and equipment        704     746     784     648    670
       Amortization of intangible
        assets                        416     413     365     274    273
       Write-off of correspondent
        bank account transactions      --     139      --      --     --
       Other                        1,407   1,507   1,508   1,182  1,157
                                    6,923   7,449   7,244   5,744  5,788
 
     Income before taxes            2,360   1,676   2,343   2,372  1,985
     Income taxes                   1,007     795     955     867    803
     Net Income                     $1,353     881   1,388   1,505  1,182
 
 
 
     Diluted net income per
      share                          $.21     .14     .22     .25    .19
 
     Diluted core income per
      share (1)                      $.21     .18     .26     .25    .19
 
     (1) Fourth quarter 2000 excludes the effect of one-time charges of $274,
     net of tax, for the cancellation of certain employee-related agreements
     and for the correction of the recording of certain correspondent bank
     account transactions.  Third quarter 2000 excludes the effect of one-time
     charges of $271, net of tax, associated with reorganization, expansion
     costs, and acquisition expenses related to the United Valley Bank merger.
 
 
                                  Vail Banks, Inc.
 
                              Supplemental Information
                                   (in thousands)
 
                                              Three Months Ended
 
                                Mar.      Dec.      Sept.    June       Mar.
                                31,        31,       30,      30,       31,
                               2001       2000      2000     2000      2000
                                                    (as      (as      (as
                                                     re-      re-      re-
                                                   stated)  stated)  stated)
     Average Balances
       Assets                 $569,338   565,402   550,640  479,961  472,098
       Earning assets          468,095   458,846   445,043  393,883  383,216
       Loans                   422,194   425,854   410,153  359,068  346,900
       Deposits                489,334   476,952   452,263  372,792  376,834
       Interest bearing
        liabilities            400,212   395,309   385,185  337,693  325,083
       Shareholders' equity     66,742    65,777    64,012   60,067   59,157
 
     Average Deposit Mix
       Interest bearing
        checking                77,701    79,242    81,185   65,796   65,755
       Savings                  32,719    32,196    34,571   28,797   30,660
       Money market            184,215   164,276   142,083  115,871  110,706
       CDs under $100,000       65,137    68,180    66,091   55,816   58,107
       CDs $100,000 and over    31,618    33,558    31,481   28,708   28,120
 
         Interest bearing
          deposits             391,390   377,452   355,411  294,988  293,348
 
       Non-interest bearing
        checking                97,944    99,500    96,852   77,804   83,486
 
         Total deposits        489,334   476,952   452,263  372,792  376,834
 
     Net Interest Margin
      Analysis
       Net interest income      $7,195     7,183     7,433    6,595    6,342
       Fully taxable equivalent
        adjustment                  26        33        38       39       38
 
         Net interest income
          (FTE)                  7,221     7,216     7,471    6,634    6,380
 
       Yields (FTE)
         Loans                   10.25%    10.54     10.94    10.83    10.46
         Investment securities    6.20      6.29      6.24     6.37     6.12
         Other earning assets     5.36      5.85      5.49      --      5.36
           Total earning assets   9.80     10.22     10.56    10.44    10.05
 
       Cost of funds
         Interest bearing
          deposits                4.01      4.48      4.28     3.95     3.73
         Other interest bearing
          liabilities            10.30      7.08      6.89     6.53     6.01
           Total interest
            bearing liabilities   4.15      4.60      4.48     4.28     3.96
           Total interest
            expense to earning
            assets                3.54      3.96      3.88     3.67     3.35
 
       Net interest margin
        (FTE)                     6.26      6.26      6.68     6.77     6.70
 
 
                                 Vail Banks, Inc.
 
                                   Asset Quality
                                  (in thousands)
 
                                                  Three Months Ended
 
                                          Mar.    Dec.   Sept.   June    Mar.
                                           31,     31,    30,     30,     31,
                                          2001    2000   2000    2000    2000
 
     Asset Quality
         Nonaccrual loans               $2,205   1,685   1,347   1,420  1,236
         Restructured loans                 --      --      --      --     --
           Total non-performing loans    2,205   1,685   1,347   1,420  1,236
         Foreclosed properties              84     129     282     391    386
           Total non-performing assets   2,289   1,814   1,629   1,811  1,622
         90+ days past due and accruing     --      --      --       6     --
           Total risk assets            $2,289   1,814   1,629   1,817  1,622
 
     Allowance for Loan Losses
     Beginning Balance                  $4,440   4,223   3,192   2,984  2,739
         Provision for loan losses         300     300     147     300    300
         Reserve Acquired                   --      --   1,040      --     --
           Loan charge-offs                193      89     164      98     67
           Loan recoveries                  36       6       8       6     12
         Net charge-offs                   157      83     156      92     55
     Ending Balance                     $4,583   4,440   4,223   3,192  2,984
 
     Net Charge-Offs to Average Loans      .15%    .08     .15     .10    .06
 
     Loans Past Due 30 Days or More and
      Accruing                             .56     .12     .20     .11    .21
 
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 SOURCE  Vail Banks, Inc.