Analysts cut earnings estimates on Vail Banks Inc. last week after the Colorado company reported a delay in merging two banks it bought late last year into its original WestStar Bank.

Last summer's bank stock swoon was indirectly to blame, Vail said.

In January the $430 million-asset company announced optimistic plans to consolidate Western Colorado Bank and Bank of Telluride into WestStar during the first quarter. The three banks operate 23 branches around Colorado's famed ski towns.

But on the last day of the quarter Vail announced that it would not start to realize the expected savings-estimated at $1 million a year-until the second quarter.

Vail said a delay in buying Telluride Bancorp, which owned Bank of Telluride and Western Colorado Bank, had in turn delayed the consolidation. Vail had planned a third-quarter public offering to fund that purchase, but when stock prices slumped the $19.2 million offering and the purchase were postponed until December.

Last week's announcement surprised analysts.

A.G. Edwards & Sons Inc. quickly reduced its first-quarter profit estimates for Vail by 33%, to 12 cents share, and trimmed full-year estimates by 5%, to 80 cents.

San Francisco-based Hoefer & Arnett shaved its first-quarter estimate from 21 cents to 12 cents and its fiscal 1999 estimate from 87 cents to 79 cents.

However, both firms reiterated their "buy" rating on Vail, noting its fast-growing market and potential for loan growth.

"Nobody is happy about cutting estimates," said Timothy Willi, an analyst at A.G. Edwards. "While the bank didn't achieve the cost savings in January, at least they did in March."

"Fundamentally it is a good bank," said Olaf Vlieks, an analyst at Hoefer & Arnett, "but I would like to see some performance in the second quarter and throughout the rest of the year."

Bank officials said they are moving quickly to reduce staff by about 15%. Fifty administrative and teller positions have been eliminated, and 20 more cuts are projected companywide, they said.

Two badly performing grocery store branches will close in the second quarter, they added.

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