Exhibit 99.1

Vail Banks, Inc.

News Release

Vail Banks Reports First Quarter 2004 Earnings

Vail Banks, Inc. (Nasdaq: VAIL) today reported diluted net income per share of $0.27 for the first quarter 2004 compared to $0.17 for first quarter 2003.  The results included a gain on the sale of the Company’s Vail bank building of $1.678 million ($1.061 million, or $0.20 per diluted share, after tax).  Net income for the quarter was $1.473 million including the building sale gain versus $975,000 in first quarter 2003.  Net income was $412,000 excluding the gain, a 58% decrease from first quarter 2003.    Results for the quarter are not comparable to fourth quarter 2003 due to a net loss in the previous quarter resulting from one-time charges to earnings.

“We began to see an increase in business activity in our markets,” commented E. B. Chester, Chairman of Vail Banks.  “Our officers are taking advantage of this market improvement by expanding our loan and deposit activities.   This effort will take some time to generate meaningful bottom-line results, but the direction and momentum of our activity are encouraging.  The Vail building sale was a unique opportunity to redeploy non-earning assets to invest in our strategic plan of expanding our presence in the Front Range of Colorado and the Grand Junction markets.  We will continue to identify and exploit situations where we can capitalize on appreciating asset values to provide additional capital and funding for growth.”

Gary Judd, President and CEO of Vail Banks, commented, “We are clearly experiencing a positive shift in activity.  We see excellent opportunities ahead and are executing the plan we developed last year.  Our associates have a renewed enthusiasm and have accepted the challenge of growing the Company and generating improved earnings.”

Financial Highlights

• Earnings per share
            Diluted net income per share was $0.27 for first quarter, $0.07 excluding building sale gain
                      Compared to $0.17 for first quarter 2003, a 59% increase including the gain,
                                 and a 59% decrease excluding the gain
                      Compared to ($0.35) for fourth quarter 2003

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• Net Income
            Net income was $1,473,000 for first quarter, $412,000 excluding building sale gain
                      Compared to $975,000 for first quarter 2003, a 51% increase including the gain,
                                and a 58% decrease excluding the gain
                      Compared to ($1,761,000) for fourth quarter 2003

• Return on assets 
            Return on assets was 1.00% for first quarter
                      Compared to 0.69% for first quarter 2003
                      Compared to (1.18%) for fourth quarter 2003

• Return on equity 
            Return on equity was 10.13% for first quarter
                      Compared to 5.99% for first quarter 2003
                      Compared to (11.77%) for fourth quarter 2003

• Net Interest Margin
            Net interest margin (fully tax equivalent) was 4.17% for first quarter
                      Compared to 4.89% for first quarter 2003
                      Compared to 4.05% for fourth quarter 2003

• Efficiency Ratio
            Efficiency ratio was 73% for first quarter
                      Compared to 82% for first quarter 2003
                      Compared to 130% for fourth quarter 2003

Top Line Revenue

Total revenue (net interest income and non-interest income), excluding the building sale gain, decreased $1.337 million, or 16%, from the first quarter of 2003, due primarily to lower interest income on loans and securities, and lower fee income from mortgage brokerage activities.  Revenues decreased $357,000, or 5%, from the fourth quarter 2003, which included a $358,000 gain on sale of a single foreclosed property. 

Net interest income was $5.037 million for the quarter compared to $5.657 million in the first quarter 2003, and to $4.894 million in the fourth quarter 2003.  Average loans for the quarter increased $4 million, or 5% annualized, compared to the fourth quarter of 2003.  Average deposits increased $9 million, or 8% annualized, during the quarter compared to the fourth quarter 2003. 

Non-interest income, excluding the building sale gain, decreased 25%, or $717,000, as compared to the first quarter of 2003, and decreased 19%, or $500,000, as compared to the fourth quarter 2003, which included a $358,000 gain on sale of a single foreclosed property.  Mortgage broker fees were $803,000 as the Company’s mortgage subsidiary experienced soft activity after the refinancing boom of 2002 and 2003.  This represents a decrease of 45%, or $647,000, from the first quarter of 2003, and a decrease of 6%, or $50,000, from the fourth quarter 2003. 

Interest Rate Risk Management

The net interest margin, on a fully tax-equivalent basis, was 4.17% for the quarter compared to 4.05% in the fourth quarter 2003 and 4.89% in the first quarter 2003.  Earning assets yielded 5.80% for the first quarter, an 87 basis point decrease from the first quarter 2003 yield of 6.67%, and a 5 basis point increase from the fourth quarter 2003 yield of 5.75%.  Interest expense as a percentage of earning assets decreased to 1.63% in the first quarter from 1.78% in the first quarter 2003, a decrease of 15 basis points, and decreased 7 basis points from 1.70% in the fourth quarter 2003. 

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“The increase in loans and the further investment of excess liquidity have improved our net interest margin,” said Dan Godec, President of WestStar Bank.  “Our credit officers are finding new opportunities for growing our business.  We also are deploying our increasing deposit funding into short term investments until loan volume increases significantly.”  

Credit Risk Management

Net charge-offs, on an annualized basis, were 0.38% of average loans for the quarter, compared to net charge-offs of 0.59% in the first quarter 2003 and net recoveries of 0.05% in the fourth quarter 2003.  At March 31, the allowance for loan losses was 1.05% of total loans and 205% of non-performing loans.  Overall, non-performing assets comprised 0.72% of loan-related assets at the end of the quarter compared to 0.68% at the end of the fourth quarter 2003.

“Our efforts over the past two years to improve credit quality continue to pay off,” said Lisa Dillon, Vice Chairman of Vail Banks.  “Nonaccrual loan levels continue to decline and charge-offs remain at very reasonable levels.”

Control of Non-interest Expenses

Non-interest expense was $6.516 million for the quarter versus $7.024 million in first quarter 2003, and $9.825 million in fourth quarter 2003.  The fourth quarter 2003 included one-time charges to earnings of $3.189 million associated primarily with fixed assets no longer used and core deposit intangibles determined to be impaired.  Lower expenses in the first quarter 2004 resulted from lower mortgage origination costs due to reduced loan origination volumes, as well as lower fixed asset related costs due to the retiring of certain assets in 2003.  Operationally, Vail Bank’s management has begun an intense focus on monitoring and evaluating operating unit contribution.  Unit management responsibility and accountability have become the cornerstones to managing growth and profitability as management implements our strategic plan.

Dividend Payment

At its meeting on April 19, the Board of Directors of Vail Banks declared a regular quarterly dividend of $0.07 per share payable May 14 to shareholders of record on April 30.

Franchise

Vail Banks, through its subsidiary WestStar Bank, has 22 banking offices in 18 communities in Colorado, including Aspen, Avon, Breckenridge, Cedaredge, Delta, Denver, Dillon, Edwards, Estes Park, Frisco, Glenwood Springs, Granby, Grand Junction, Gypsum, Montrose, Norwood, Telluride and Vail. 

 Vail Banks warns caution should be taken in relying upon any forward-looking statements in this release, as they involve a number of risks and uncertainties that could cause actual results to differ materially from any such statements,  including the risks and uncertainties discussed in the Company’s  Annual Report on  Form 10-K for the year ended December 31, 2003, under the caption “Certain Factors Affecting Forward Looking Statements,” which discussion is incorporated herein by reference.

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Vail Banks, Inc.
Financial Highlights
(in thousands, except share data)
			Three Months Ended
			Mar. 31,		Dec. 31,		Sept. 30,		June 30,		Mar. 31,
			2004 (2)		2003		2003		2003		2003
Earnings and Performance
	Net income (loss)	$	1,473		(1,761)		363		1,137		975
	Diluted net income (loss) per share		0.27		(0.35)		0.07		0.20		0.17
	Return on assets		1.00	%	(1.18)		0.24		0.76		0.69
	Return on equity		10.13		(11.77)		2.39		7.08		5.99
	Net interest margin (FTE)		4.17		4.05		4.15		4.77		4.89
	Efficiency ratio		73		130		93		80		82
Asset Quality Ratios
	Net charge-offs (recoveries) to average loans		0.38	%	(0.05)		0.00		0.44		0.59
	Allowance for loan losses to loans		1.05		1.12		1.06		0.98		1.02
	Allowance for loan losses to non-performing loans		205		201		157		182		109
	Non-performing assets to loan-related assets		0.72		0.68		1.46		0.71		1.17
	Risk assets to loan-related assets (1)		0.74		0.73		1.52		1.43		1.19
Capital Ratios
	Equity to assets at period end		9.81	%	10.05		10.04		10.59		11.04
	Tangible equity to assets at period end		3.86		3.63		3.88		4.41		4.84
	Leverage ratio		7.88		7.45		7.86		8.47		9.59
	Tier 1 capital ratio		12.04		11.50		12.17		12.95		13.57
	Total capital ratio		14.07		13.72		14.09		14.60		14.99
Other Information at Period End
	Book value per share	$	11.25		10.95		11.26		11.57		11.48
	Tangible book value per share		4.43		3.96		4.35		4.81		5.03
	Closing market price		12.32		11.94		14.72		13.55		11.90
	Shares outstanding		5,298,093		5,283,264		5,311,512		5,441,639		5,706,808
	Full time equivalent associates		238		244		241		248		245
	Banking offices		22		22		23		22		22
(1)   Risk assets are non-performing assets plus loans 90 days or more past due and accruing.
(2)   Reflects the adoption of Financial Interpretation Number 46 on January 1, 2004.  Prior quarter information has not been         restated.

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Vail Banks, Inc.
Statement of Income
(in thousands, except share data)
					Three months ended March 31,				Percent
					2004		2003		Change
Interest income
	Interest on loans			$	5,290		6,202		(15)	%
	Fees on loans				774		547		41
	Interest on investment securities				773		869		(11)
	Interest on federal funds sold
	and short-term investments				204		132		55
	Investments in Trust I and Trust II (1)				19		0		0
		Total interest income			7,060		7,750		(9)
Interest expense
	Deposits				1,019		1,172		(13)
	Borrowings				372		309		20
	Federal funds purchased and securities sold under agreements to repurchase				1		0		0
	Trust preferred (1)				0		612		(100)
	Subordinated notes to Trust I and Trust II (1)				631		0		0
		Total interest expense			2,023		2,093		(3)
Net interest income					5,037		5,657		(11)
Provision for loan losses					158		125		26
Net interest income after provision					4,879		5,532		(12)
Non-interest income
	Gain on sale of building				1,678		0		0
	Other non-interest income				2,166		2,883		(25)
		Total non-interest income			3,844		2,883		33
Non-interest expense					6,516		7,024		(7)
Income before taxes					2,207		1,391		59
Income taxes					734		416		76
Net Income				$	1,473		975		51	%
Diluted net income per share				$	0.27		0.17		59	%
Weighted average shares outstanding - diluted					5,401,988		5,833,830		(7)
Profitability Ratios
	Return on assets				1.00	%	0.69
	Return on equity				10.13		5.99
	Net interest margin (FTE)				4.17		4.89
	Net chargeoffs				0.38		0.59
	Efficiency ratio				73		82
Average Balances
	Assets			$	592,350		570,783		4	%
	Earning assets				498,642		476,666		5
	Loans				314,667		338,411		(7)
	Deposits				466,117		442,859		5
	Shareholders' equity				58,472		65,969		(11)
	(1)	Reflects the adoption of Financial Interpretation Number 46 on January 1, 2004.  Prior year information has not been restated.

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Vail Banks, Inc.

Statement of Income by Quarter
(in thousands, except share data)

				Three Months Ended
				Mar. 31,		Dec. 31,		Sept. 30,		June 30,		Mar. 31,
				2004		2003		2003		2003		2003
Interest income
	Interest on loans		$	5,290		5,437		5,702		6,154		6,202
	Fees on loans			774		801		616		639		547
	Interest on investment securities			773		557		850		1,128		869
	Interest on federal funds sold
	and short-term investments			204		210		191		157		132
	Investments in Trust I and Trust II (1)			19		0		0		0		0
		Total interest income		7,060		7,005		7,359		8,078		7,750
Interest expense
	Deposits			1,019		1,068		1,172		1,232		1,172
	Borrowings			372		430		439		424		309
	Federal funds purchased and    securities sold under agreements    to repurchase			1		1		0		0		0
	Trust preferred (1)			0		612		612		611		612
	Subordinated notes to Trust I    and Trust II (1)			631		0		0		0		0
		Total interest expense		2,023		2,111		2,223		2,267		2,093
Net interest income				5,037		4,894		5,136		5,811		5,657
Provision for loan losses				158		164		164		125		125
Net interest income after provision				4,879		4,730		4,972		5,686		5,532
Non-interest income
	Deposit related			685		757		747		824		752
	Mortgage broker fees			803		853		1,299		1,334		1,450
	Gain on sale of building			1,678		0		0		0		0
	Other			678		1,056		702		687		681
				3,844		2,666		2,748		2,845		2,883
Non-interest expense
	Salaries and employee benefits			4,019		4,578		4,403		4,287		4,325
	Occupancy			845		1,259		850		808		820
	Furniture and equipment			562		673		696		691		708
	Amortization of intangible assets			10		561		19		18		19
	Other			1,080		2,754		1,326		1,091		1,152
				6,516		9,825		7,294		6,895		7,024
Income (loss) before taxes				2,207		(2,429)		426		1,636		1,391
Income tax expense (benefit)				734		(668)		63		499		416
Net Income (Loss)			$	1,473		(1,761)		363		1,137		975
Diluted net income (loss) per share			$	0.27		(0.35)		0.07		0.20		0.17

(1)  Reflects the adoption of Financial Interpretation Number 46 on January 1, 2004.  Prior year information has not been restated.

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(1)  Reflects the adoption of Financial Interpretation Number 46 on January 1, 2004.  Prior year information has not been restated.

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Vail Banks, Inc.
Asset Quality
(in thousands)
							Three Months Ended
							Mar. 31,		Dec. 31,		Sept. 30,		June 30,		Mar. 31,
							2004		2003		2003		2003		2003
Asset Quality
	Nonaccrual loans					$	1,636		1,747		2,105		1,722		3,089
	Restructured loans						0		0		0		0		0
		Total non-performing loans					1,636		1,747		2,105		1,722		3,089
	Foreclosed properties						674		362		2,496		542		796
		Total non-performing assets					2,310		2,109		4,601		2,264		3,885
	90+ days past due and accruing						64		164		163		2,323		83
		Total risk assets				$	2,374		2,273		4,764		4,587		3,968
Allowance for Loan Losses
Beginning Balance						$	3,503		3,299		3,138		3,381		3,747
	Provision for loan losses						158		164		164		125		125
		Loan charge-offs					338		78		73		416		534
		Loan recoveries					38		118		70		48		43
	Net charge-offs (recoveries)						300		(40)		3		368		491
Ending Balance						$	3,361		3,503		3,299		3,138		3,381
Net Charge-Offs (Recoveries) to Average Loans							0.38	%	(0.05)		0.00		0.44		0.59
Loans Past Due 30 Days or More and Accruing							2.48		0.47		2.18		2.47		1.59

 

 

 

 

 

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