U. S. SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549


                                 FORM 10-QSB

                 QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
                   OF THE SECURITIES EXCHANGE ACT OF 1934
                  FOR QUARTERLY PERIOD ENDED March 31, 1999

                      Commission File Number 000-25081


                              VAIL BANKS, INC.
      (Exact name of small business issuer as specified in its charter)

              Colorado                               84-1250561
    ---------------------------------------------------------------------
    (State or other jurisdiction of       (I.R.S. Employer Identification
     incorporation or organization)                   Number)


             108 South Frontage Road West, Vail, Colorado  81657
          ---------------------------------------------------------
          (Address of principal executive offices)       (Zip Code)


Issuer's telephone number, including area code: (970) 476-2002
                                                --------------

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes /X/    No  / /

 State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:

As of April 30, 1999 there were 6,040,608 shares of common stock ($1.00 par
value per share) outstanding.

<PAGE>
<PAGE>
                              VAIL BANKS, INC.


                                    INDEX

 

PART I    FINANCIAL INFORMATION

Item 1.   Financial Statements

          Consolidated Balance Sheet at March 31, 1999                        3

          Consolidated Statements of Income for the Three Months Ended
          March 31, 1999 and 1998                                             4

          Consolidated Statements of Cash Flows for the Three Months
          Ended March 31, 1999 and 1998                                       5

          Notes to Unaudited Consolidated Financial Statements                6

Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                           8

PART II   OTHER INFORMATION

Item 2.   Changes in Securities and Use of Proceeds                           14

Item 6.   Exhibits and Reports on Form 8-K                                    14



                                   2
<PAGE>
<PAGE>
                           PART I     FINANCIAL INFORMATION

Item 1.   FINANCIAL STATEMENTS

                                 VAIL BANKS, INC.
                                 AND SUBSIDIARIES

                             CONSOLIDATED BALANCE SHEET
                                  (in thousands)
<TABLE>
<CAPTION>
                                       ASSETS                                       March 31, 1999
                                                                                 -------------------
                                                                                      (unaudited)
<S>                                                                                  <C>
Cash and due from banks$                                                             $     22,021
Federal Funds sold                                                                         54,860
Investment securities:
    Available for sale, at market value                                                    30,446
    Held to maturity, at amortized cost                                                     5,591

Gross Loans                                                                               265,903
    Less allowance for loan losses                                                         (2,444)
                                                                                      -----------
         Net Loans                                                                        263,459
                                                                                      -----------
Bank premises and equipment, net of accumulated depreciation
    and amortization                                                                       33,141
Accrued interest receivable                                                                 2,255
Deferred income taxes                                                                         763
Intangible assets, net                                                                     22,772
Other assets                                                                                1,303
                                                                                      -----------
                                                                                     $    436,611
                                                                                      ===========
                     LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
    Deposits:
      Demand, non-interest bearing                                                   $     84,694
      Demand, interest bearing                                                            171,901
      Savings                                                                              45,435
      Time deposits of $100,000 and over                                                   27,868
      Time deposits under $100,000                                                         47,602
                                                                                      -----------
                                                                                          377,500
Deferred compensation                                                                         493
Accrued interest payable and other liabilities                                              2,894
                                                                                      -----------
         Total liabilities                                                                380,887
                                                                                      -----------
Minority interest                                                                             628
                                                                                      -----------
Stockholders' equity:
    Common stock                                                                            6,041
    Additional paid-in capital                                                             46,772
    Retained earnings                                                                       2,238
    Accumulated other comprehensive income                                                     45
                                                                                      -----------
         Total stockholders' equity                                                        55,096
                                                                                      -----------
                                                                                     $    436,611
                                                                                      ===========
See accompanying notes to consolidated financial statements.
</TABLE>
                                   3<PAGE>
<PAGE>
                                    VAIL BANKS, INC.
                                    AND SUBSIDIARIES

                             CONSOLIDATED STATEMENTS OF INCOME
                             (in thousands, except share data)
<TABLE>
<CAPTION>
                                                                               Three months ended March 31,
                                                                           ------------------------------------
                                                                                  1999               1998
                                                                           -----------------    ---------------
                                                                               (unaudited)        (unaudited)
<S>                                                                             <C>             <C>
Interest income:
    Interest and fees on loans                                                  $     6,897          3,974
    Interest on investment securities                                                   493            286
    Interest on federal funds sold and deposits in banks                                524            385
                                                                                 ----------     ----------
             Total interest income                                                    7,914          4,645
                                                                                 ----------     ----------
Interest expense:
    Demand deposits                                                                   1,236            929
    Savings deposits                                                                    310            102
    Time deposits                                                                     1,076            649
    Notes payable                                                                        14             29
    Mandatorily convertible debentures                                                  ---             38
    Interest on federal funds purchased and other borrowed funds                        ---              2
                                                                                 ----------     ----------
             Total interest expense                                                   2,636          1,749
                                                                                 ----------     ----------
             Net interest income                                                      5,278          2,896

Provision for loan losses                                                               ---            ---
                                                                                 ----------     ----------
             Net interest income after provision for loan losses                      5,278          2,896
Other income:
    Service charges on deposit accounts                                                 539            297
    Other income                                                                        247            161
                                                                                 ----------     ----------
                                                                                        786            458

Other expenses:
    Salaries and employee benefits                                                    2,613          1,606
    Occupancy expense                                                                   430            268
    Furniture and equipment expense                                                     439            263
    Amortization of intangible assets                                                   234             45
    Other operating expenses                                                          1,142            650
                                                                                 ----------     ----------
                                                                                      4,858          2,832
                                                                                 ----------     ----------

             Income before income taxes                                               1,206            522

Income tax expense                                                                      490            182
                                                                                 ----------     ----------
             Net income                                                         $       716            340
                                                                                 ==========     ==========
Other comprehensive income                                                      $         3             15
                                                                                 ==========     ==========
Net income                                                                      $       716            340
Preferred stock dividends                                                               ---             59
                                                                                 ----------     ----------
Net income available to common stockholders                                     $       716            281
                                                                                 ==========     ==========

Weighted average common shares                                                    6,040,608      2,285,820
                                                                                 ==========     ==========

Net income per common share (basic)                                             $      0.12           0.12
                                                                                 ==========     ==========

Net income per common share (diluted)                                           $      0.12           0.12
                                                                                 ==========     ==========
See accompanying notes to consolidated financial statements.
</TABLE>

                                   4
<PAGE>
<PAGE>
                              VAIL BANKS, INC.
                              AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (in thousands)
<TABLE>
<CAPTION>
                                                                                            Three months ended March 31,
                                                                                        -----------------------------------
                                                                                             1999                 1998
                                                                                        -------------        --------------
                                                                                         (unaudited)           (unaudited)
<S>                                                                                      <C>                    <C>
Cash flows from operating activities:
   Net income                                                                            $       716                    340
   Adjustments to reconcile net income to net cash provided from
     operating activities:
        Amortization of intangible assets                                                        234                     45
        Depreciation and amortization                                                            496                    294
        Net amortization of premiums (accretion of discounts) on
        investment securities                                                                     33                     (4)
        Net change in unrealized gain/loss on available for sale securities                        3                     15
        Deferred income tax expense                                                              208                    171
        Changes in operating assets and liabilities:
          Decrease in accrued interest receivable                                                170                     58
          Decrease (increase) in tangible and other assets                                       861                   (427)
          Decrease in accrued interest payable and other liabilities                          (2,043)                (3,280)
                                                                                           ---------              ---------
               Net cash provided (used) by operating activities                                  678                 (2,788)
                                                                                           ---------              ---------

Cash flows from investing activities: 
   Net increase in federal funds sold                                                        (11,755)               (29,113)
   Purchase of investment securities available for sale                                       (4,534)                  (154)
   Proceeds from maturities of investment securities held to maturity                          2,128                  2,000
   Proceeds from maturities of investment securities available for sale                        7,068                    494
   Net decrease in loans                                                                       3,142                  6,121
   Purchase of bank premises and equipment                                                    (1,989)                (1,224)
                                                                                           ---------              ---------
               Net cash used by investing activities                                          (5,940)               (21,876)
                                                                                           ---------              ---------

Cash flows from financing activities:
   Net increase (decrease) in deposits                                                           (72)                20,980
   Net increase in repurchase agreements                                                         ---                    358
   Dividends paid                                                                                ---                    (20)
   Repayments of notes payable                                                                (1,114)                   (50)
                                                                                           ---------              ---------
               Net cash provided (used) by financing activities                               (1,186)                21,268
                                                                                           ---------              ---------
               Net decrease in cash and due from banks                                        (6,448)                (3,396)

Cash and due from banks at beginning of period                                                28,469                 16,680
                                                                                           --------------------------------

Cash and due from banks at end of period                                                 $    22,021                 13,284
                                                                                           ================================

Supplemental disclosures of cash flow information:
   Cash paid during the period for:
     Interest expense                                                                    $     2,748                  1,733
                                                                                           ================================

     Income taxes                                                                        $        25                     12
                                                                                           ================================
See accompanying notes to consolidated financial statements.
</TABLE>




                                   5
<PAGE>
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                   Vail Banks, Inc. and Subsidiaries
         Notes to Unaudited Consolidated Financial Statements
               For the Three Months Ended March 31, 1999



(1)  Organization and Basis of Presentation

The accompanying unaudited consolidated financial statements include
the accounts of Vail Banks, Inc. (VBI) and its wholly owned
subsidiaries, WestStar Bank (WestStar), the Bank of Telluride (BOT)
and Western Colorado Bank (WCB).  WestStar and VBI own a 54.04%
interest in Avon 56 Limited which is also included in the accompanying
consolidated financial statements.  All entities are collectively
referred to as "Vail Banks".  All significant intercompany accounts
and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements, which
are for interim periods, do not include all disclosures provided in
the consolidated financial statements as of December 31, 1998.  These
interim consolidated financial statements and the notes thereto should
be read in conjunction with the annual consolidated financial
statements for the year ended December 31, 1998 for Vail Banks.

In the opinion of management all adjustments necessary, consisting of
only normal recurring items, have been included for a fair
presentation of the accompanying consolidated financial statements. 
Operating results for the three months ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the
full year.

(2)  Earnings Per Share

In March 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings
Per Share (SFAS 128) which replaced APB Opinion No. 15 related to
standards for computing and presenting earnings per share (EPS) and
applies to entities with publicly held common stock or potential
common stock.  SFAS 128 requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with
complex capital structures.  Also, SFAS 128 requires a reconciliation
of the numerator and denominator of the basic EPS computation to the
numerator and denominator of the diluted EPS computation.  SFAS 128 is
effective for financial statements issued for periods ending after
December 15, 1997, including interim periods.  SFAS 128 also requires
restatement of all prior period EPS data presented.

(3)  Comprehensive Income

Vail Banks adopted SFAS No. 130, Reporting Comprehensive Income (SFAS
No. 130), effective January 1, 1998. SFAS No. 130 establishes
standards for reporting comprehensive income and its components
(revenues, expenses, gains, and losses). Components of comprehensive
income are net income and all other non-owner changes in equity. The
statement requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in
the equity section of a statement of financial position.
Reclassification of financial statements for earlier periods provided
for comparative purposes is required.  The only component of
comprehensive income consists of net unrealized holding gains on
securities, net of related tax effects. 

(4)  Operating Segments

Vail Banks adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information (SFAS No. 131) effective January 1,
1998. This statement establishes standards for reporting information
about segments in annual and interim financial statements. SFAS No.
131 introduces a new model for segment reporting called the
"management approach". The management approach is based on the way the
chief operating decision-maker organizes segments within the company
for making operating decisions and assessing performance. Reportable
segments are based on products and services, geography, legal
structure, management structure and any other in which management


                                   6
<PAGE>
<PAGE>
disaggregates a company. Based on the "management approach" model,
Vail Banks has determined that its business is comprised of a single
operating segment and that SFAS No. 131 therefore has no impact on its
financial statements. 

(5)  Accounting for Derivative Instruments and Hedging Activities

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which is effective for years
beginning after June 15, 1999.  Vail Banks has not engaged in the use
of derivatives and does not conduct hedging activities; thus
management does not anticipate that the adoption of the new statement
will have a significant effect on earnings or the financial position
of Vail Banks. 

(6)  Investment Securities

Vail Banks accounts for investment securities according to SFAS No.
115, Accounting for Certain Investments in Debt and Equity Securities.
At the date of purchase, Vail Banks is required to classify debt and
equity securities into one of three categories: held to maturity,
trading or available for sale. Investments in debt securities are
classified as held to maturity and measured at amortized cost in the
financial statements only if management has the positive intent and
ability to hold those securities to maturity. Securities that are
bought and held principally for the purpose of selling them in the
near term are classified as trading and measured at fair value in the
statements with unrealized gains and losses included in earnings.
Investments not classified as either held to maturity or trading are
classified as available for sale and measured at fair value in the
financial statements with unrealized gains and losses reported, net of
tax, in a separate component of other comprehensive income until
realized.

(7)  Income Taxes

Income taxes are accounted for under the asset and liability method. 
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the book values and
tax bases of existing assets and liabilities.  Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled.

(8)  Acquisition

On March 9, 1999, Vail Banks' Board of Directors approved an agreement
to acquire the branch office and approximately $41 million in deposits
of World Savings' Glenwood Springs, Colorado branch.  The acquisition
is expected to close during the second quarter of 1999.




                                   7
<PAGE>
<PAGE>


Item 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION


BASIS OF PRESENTATION

    The following discussion and analysis provides information
regarding Vail Banks' historical results of operations and financial
condition as of and for the three months ended March 31, 1999 and in
comparison to the three months ended March 31, 1998. The following
discussion should be read in conjunction with the consolidated
financial statements and related notes included elsewhere in this
Quarterly Report on Form 10-QSB.

    The following significant acquisitions occurred which
significantly impacted financial results during the time period
between March 31, 1998 and 1999:

    Effective December 1, 1997, Vail Banks consummated the merger with
Cedaredge Financial Services, Inc. ("Cedaredge") by paying cash of
$3.25 million, and assuming certain obligations of $458,000 and Series
I and Series II Convertible Notes (the "Mandatorily Convertible
Debentures") totaling approximately $1.6 million. As of the date of
the merger, Cedaredge had total assets of $45.5 million, net loans of
$33.9 million, total deposits of $42.0 million and equity capital of
$3.0 million. The Mandatorily Convertible Debentures were converted to
Vail Banks Common Stock subsequent to Vail Banks' initial public
offering of shares of its common stock ("IPO") completed in December
1998.

    Effective July 31, 1998, Vail Banks consummated the merger with
Independent Bankshares, Inc. ("Independent") by paying cash of $3.8
million and issuing 318,770 shares of Vail Banks Common Stock. As of
the merger date, Independent had total assets of $30.3 million, net
loans of $17.0 million, total deposits of $27.4 million and equity
capital of $2.6 million.

    Effective December 15, 1998, Vail Banks consummated the merger
with Telluride Bancorp Ltd. ("Telluride") by paying cash of $13.3
million and issuing 908,913 shares of Vail Banks Common Stock.  The
cash consideration was paid using a portion of the proceeds from the
IPO.  As of the merger date, Telluride had total assets of $132.9
million, net loans of $80.6 million, total deposits of $119.9 million
and equity capital of $10.8 million.

    The mergers with Cedaredge, Independent, and Telluride have been
accounted for under the purchase method of accounting, and
accordingly, the purchase prices for each have been allocated to the
assets acquired and the liabilities assumed based on their estimated
fair values at the date of the respective merger. The consolidated
statements of income include only the income and expenses of each of
Cedaredge, Independent, and Telluride since the date of the respective
merger. The excess of purchase price over net assets acquired has been
recorded as an intangible asset, which is being amortized over 25
years.  With respect to the merger with Cedaredge, the effect on
results of operations for the first eleven months of 1997, had the
purchase transaction occurred at the beginning of the year, would have
been material.  With respect to the merger with Independent, the
effect on results of operations for the first seven months of 1998,
had the purchase transaction occurred at the beginning of the year,
would have been material.  With respect to the merger with Telluride,
the effect on income and average balances for the year 1998, was
generally minimal as the transaction closed with only 16 days
remaining in 1998. However, the effect on results of operations for
the first eleven months of 1998, had the purchase transaction occurred
at the beginning of the year, would have been material.

OVERVIEW 

    Vail Banks' net income for the three months ended March 31, 1999
increased $376,000, or 110.6%, to $716,000 from $340,000 for the same
period in 1998. Earnings per share, which were impacted by Vail Banks'
issuance of 1,680,000 shares of common stock in the company's IPO, was
$0.12 per share for each three month period ending March 31, 1998 and
1999.

    Total assets at March 31, 1999 increased $186.9 million, or 75.0%,
to $436.6 million from $249.7 million at March 31, 1998. During the
three month period ended March 31, 1999 total assets followed a
historic seasonal trend slightly downward from $439.1 million at the


                                   8
<PAGE>
<PAGE>
beginning of the quarter to $436.6 million at the end of the quarter.
This historic trend is driven by a decrease in loan demand and an
increase in loan paydowns by customers in resort-oriented locations
experiencing the peak of their tourism season.

    The return on average assets was 0.67% for the three months ended
March 31, 1999 compared to 0.57% for same period in 1998. The return
on average equity was 5.30% for the three months ended March 31, 1999
compared to 8.29% for the same period in 1998. This decrease in return
on average equity is primarily due to the dilutive effect of the
additional common shares issued in the IPO.

RESULTS OF OPERATIONS 

    NET INTEREST INCOME.  Net interest income, on a nontax-equivalent
basis, was $5.3 million for the three months ended March 31, 1999, an
increase of $2.4 million, or 79.9%, from $2.9 million for the same
period in 1998. The $2.3 million increase is primarily due to a 74.3%
increase in average loans to $268.0 million for the 1999 period from
$153.8 million for the 1998 period.  The average yield on interest-
earning assets decreased to 9.19% for the three months ended March 31,
1999, from 9.40% during the same period in 1998.

    Interest expense increased $925,000, or 54.1%, to $2.6 million for
the three months ended March 31, 1999, from $1.7 million for the same
period in 1998. Increases in the volume of interest-bearing demand
deposits and certificates of deposit accounted for the majority of the
increase in interest expense. The average cost of interest-bearing
liabilities decreased to 3.72% for the three months ended March 31,
1999, from 4.19% in the same period of 1998. This reduction in rate is
primarily attributable to Vail Banks' ability to react quickly to the
reductions in the market interest rates which occurred late in 1998,
by not renewing high cost certificates of deposit, specifically public
funds.

    The net interest margin and net interest spread for the three
months ended March 31, 1999 were 6.13% and 5.45%, respectively,
compared to 5.94% and 5.17%, respectively for the same period in 1998.
The combination of relatively stable loan yields and a decrease in the
cost of interest-bearing liabilities caused the increase in the net
interest margin, when comparing the periods of 1999 and 1998. Also,
the net interest spread widened due to reductions in the cost of
interest-bearing liabilities outpacing reductions in the yield on
interest-earning assets.

    PROVISION FOR LOAN LOSSES.  Vail Banks recorded no provision for
loan losses for the three months ended March 31, 1999. Vail Banks
assessed its loan quality monthly during the first quarter of 1999 and
determined that no provisions were necessary during the quarter to
maintain an adequate allowance for loan losses. 

    NONINTEREST INCOME. During the three months ended March 31, 1999,
total noninterest income increased $328,000, or 71.6%, to $786,000
from $458,000 for the comparable period in 1998 due in combination to
increases in the number of fee generating accounts open, favorable
adjustments in the fee structures and minimization of fee refunding. 
Approximately $282,000 or 86% of the increase is attributable to
branches acquired in the mergers with Telluride and Independent.

    NONINTEREST EXPENSES. During the three months ended March 31,
1999, noninterest expenses increased $2.1 million, or 71.5%, to $4.9
million from $2.8 million for the comparable period in 1998. This
increase is primarily due to salaries and employee benefits increasing
$1.0 million as a result of the addition of eight retail offices, one
through expansion, four from the merger with Telluride, and three from
the merger with Independent.  Occupancy and furniture and equipment
expense increased $338,000, or 60.6%, due to the expansion and
acquisition of operating facilities. Service and professional fees,
included in other operating expenses,  increased $274,000, or 150.5%,
due in combination to courier services required to move documents to
and from the new facilities and fees associated with public company
related operating requirements. However, these increases were offset
by growth in earnings, which yields an improvement in the operating
efficiency ratio to 76.25% for the three months ended March 31, 1999
from 83.09% for the comparable period in 1998. Vail Banks completed
the first phase of a restructuring and expense reduction program
towards the end of the first quarter of 1999, with ongoing cost
savings expected to commence in the second quarter of 1999.


                                   9
<PAGE>
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    FEDERAL INCOME TAX. For approximately five years, Vail Banks has
utilized a net operating loss ("NOL") carryforward obtained from a
1993 merger. Under GAAP requirements, net income includes an
equivalent expense that would be paid for taxation. A federal taxation
rate of 34% is used for this purpose.

FINANCIAL CONDITION 

     LOAN PORTFOLIO COMPOSITION.  Vail Banks continues to manage the
mix of its loan portfolio consistent with its identity as a commercial
bank serving the needs of business customers. At March 31, 1999, real
estate   construction loans have grown to 20.20% of the loan portfolio
for the three months ended March 31, 1999 from 15.5% of the loan
portfolio for the comparable period in 1998.  The other loan
categories have correspondingly experienced slight decreases as a
percent of the portfolio as compared to March 31, 1998. The loan
portfolio, specifically commercial loans, are down at March 31, 1999
when compared to December 31, 1998. This reduction in the loan levels
during the first quarter of the year is consistent with historic
seasonal trends.

     NONPERFORMING ASSETS.  Nonperforming loans as a percent of total
loans were 0.07% as of March 31, 1999 down from 0.09% as of March 31,
1998 and 0.51% as of December 31, 1998. The improvement since December
31, 1998 is largely due to the workout of several loans categorized in
the over 90 days past due. Nonperforming assets as a percent of total
assets were 0.14% as of March 31, 1999 compared to 0.05% as of March
31, 1998. The increase since March 31, 1998 was primarily due to two
property foreclosures which resulted in an increase in other real
estate owned.

    ANALYSIS OF ALLOWANCE FOR LOAN LOSSES.  Net charge-offs during the
three months ended March 31, 1999 totaled $146,000, or 0.05% of
average loans, compared to $6,000, or 0.00% of average loans in the
comparable period on 1998.  Charge-offs during the first quarter of
1999 were higher than usual as the result of resolution of problem
consumer loans acquired in the recent merger with Telluride.

    INVESTMENT SECURITIES.  Total investments increased $20 million,
or 125%, to $36.0 million as of March 31, 1999 from $16.0 million at
March 31, 1998.  The increase is specifically due to the mergers with
Independent and Telluride.  The composition of the investment
portfolio, however, has remained relatively stable, with U.S. Treasury
securities and direct obligations of U.S. agencies representing over
60% of the portfolio.  Federal funds sold increased approximately $8.7
million over the same time period, which was also precipitated by the
recent mergers, and, to a lesser extent, by internal deposit growth.

    DEPOSITS.  Total deposits were $377.5 million as of March 31,
1999, an increase of $150.3 million, or 66.2%, from the March 31, 1998
balance of $227.2 million.  The increase was primarily due to the
mergers with Independent and Telluride.  The March 31, 1999 balance
reflects a decrease of $72,000 since December 31, 1998.  The decrease
since December 31, 1998 is primarily due to seasonality experienced by
Vail Bank's resort locations.

CAPITAL RESOURCES 

    Stockholders' equity as of March 31, 1999 increased $36.6 million,
or 197.8%, to $55.1 million from $18.5 million as of March 31, 1998.
This increase was due to the Common Stock issued in connection with
the merger with Independent and Telluride, the retention of current
period earnings, a private offering of $3.0 million in Common Stock,
and the stock issued in the IPO.  Stockholders' equity was reduced by
$467,000 in December 1998, due to a one-time early conversion payment
upon the required conversion of preferred stock to common stock in
connection with the IPO. 

    Vail Banks currently maintains Tier 1 capital, Total capital and
leverage (Tier 1 capital to average total assets) ratios in excess of
the minimum for a "well capitalized" designation.  The following table
sets forth Vail Banks' risk-based capital ratios and leverage ratios
as of the indicated dates. 


                                   10
<PAGE>
<PAGE>

                            RISK-BASED CAPITAL RATIOS

RISK-BASED CAPITAL RATIONS
<TABLE>
<CAPTION>
                                                    March 31,                               December 31, 
                                                       1999                                      1998
                                        ---------------------------------       -------------------------------------
                                            Amount              Ratio                Amount                Ratio
                                        --------------    ---------------       ------------------    ---------------
                                                                     (Dollars in thousands)
<S>                                     <C>                   <C>                <C>                    <C>
Tier 1 capital                          $     32,926            11.43%           $       31,996             11.42%
Tier 1 capital minimum requirement            11,520             4.00%                   11,207              4.00%
                                         -----------          -------                 ---------          --------
Excess                                  $     21,406             7.43%           $       20,789              7.42%
                                         ===========          =======              ============          ========

Total capital                           $     35,370            12.28%           $       34,586             12.34%
Total capital minimum requirement             23,039             8.00%                   22,414              8.00%
                                         ===========          =======              ============          ========
Excess                                  $     12,331             4.28%           $       12,172              4.34%
                                         ===========          =======              ============          ========

Total risk adjusted assets              $    287,990                             $      280,171
                                         ===========                               ============


                                                                      LEVERAGE RATIOS

                                                    March 31,                               December 31, 
                                                       1999                                      1998
                                        ---------------------------------       -------------------------------------
                                            Amount              Ratio                Amount                Ratio
                                        --------------    ---------------       ------------------    ---------------
                                                                     (Dollars in thousands)
Tier 1 capital                          $     32,926             8.02%           $       31,996              7.69%
Minimum requirement                           12,320             3.00%                   12,485              3.00%
                                         -----------          -------              ------------          --------
Excess                                  $     20,606             5.02%           $       19,511              4.69%
                                         ===========          =======              ============          ========

Average total assets                    $   410,653                              $      416,163
                                         ===========                               ============
</TABLE>


LIQUIDITY

    SOURCES OF LIQUIDITY. Vail Banks manages its liquidity to provide the
ability to generate funds to support asset growth, meet deposit withdrawals
(both anticipated and unanticipated), fund customers' borrowing needs,
satisfy maturities of short-term borrowings and maintain reserve
requirements. Vail Banks' liquidity needs can be managed using assets or
liabilities, or both. On the asset side, Vail Banks maintains an investment
portfolio containing U.S. government securities, agency securities and state
and municipal securities that are classified as available for sale. On the
liabilities side, liquidity needs are met through the discretionary
acquisition of funds on the basis of interest rate competition. These funds
may be obtained from customer deposits, credit available from third party
lenders or capital markets. 

    Customer deposits are the primary source of funds.  Deposits grew $150.3
million, or 66.2% from the March 31, 1998 balance of $227.2 million.  Those
funds are held in various forms with varying degrees of liquidity. Vail
Banks generally does not accept brokered deposits. Vail Banks' securities
portfolio, federal funds sold, and cash and due from banks serve as the
primary sources of liquidity, providing adequate funding for loans during
periods of high loan demand. During periods of decreased lending, funds
obtained from the maturing or sale of investments, loan payments, and new
deposits are invested in short-term earning assets, such as federal funds
sold, to serve as a source of funding for future loan growth. Management
believes that Vail Banks' available sources of funds, including short-term
borrowings, will provide adequate liquidity for its operations in the
foreseeable future. 

IMPACT OF THE YEAR 2000 ISSUE

     VAIL BANKS' STATE OF READINESS. Since 1995, Vail Banks has been
assessing its year 2000 readiness. It has formed a committee charged with
the task of identifying and remediating date recognition problems in both
information technology ("IT") and non-IT systems that include
microcontrollers and other embedded computer technology.  Guided by



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requirements of and examination by banking regulators, the committee has
developed a comprehensive plan to assess Vail Banks' year 2000 readiness
with respect to both IT and non-IT systems. Its inventory of such systems is
complete, and Vail Banks believes its IT systems are year 2000 compliant.
Primarily for operational reasons, Vail Banks replaced critical mainframe
and PC-based systems in 1996 and 1997, incurring a capital expenditure of
approximately $2 million. The systems vendor certified to Vail Banks that
the systems are year 2000 compliant, and Vail Banks is continuing this
process of validation.  Vail Banks' inventory of the year 2000 compliance of
its non-IT systems is also complete, and no mission critical systems were
found to be deficient.

     Vail Banks has completed the remediation or replacement of its systems.
Testing has occurred in 1998, and further testing will occur during 1999.
Vail Banks believes that it has identified all major internal business and
operational functions that will be impacted by the year 2000 date change.

     COSTS TO ADDRESS YEAR 2000 ISSUES. Vail Banks does not anticipate that
the year 2000 related costs (excluding the $2 million expenditure for the IT
system mentioned above) will be material to its financial condition or
results of operations. Excluding that $2 million expenditure, Vail Banks
estimates that its total costs for the evaluation, remediation and testing
of its IT and non-IT systems in connection with the year 2000 issue will be
approximately $200,000 of which $160,000 has been incurred to date. All of
the expected expenditures  are present in Vail Banks' 1999 internal budget.

     RISKS OF THIRD-PARTY YEAR 2000 ISSUES. The impact of year 2000 non-
compliance by outside parties with whom Vail Banks transacts business cannot
be accurately gauged. Vail Banks has surveyed its major business partners to
ascertain their year 2000 readiness. Although all are not year 2000
compliant at this date, Vail Banks has received certain assurances that such
third parties will be ready for the year 2000 date change by the end of
1999. Vail Banks relies upon the Federal Reserve for electronic funds
transfers and check clearing and understands that the Federal Reserve has
upgraded its systems to be year 2000 compliant.  Testing of the Federal
Reserve systems will be completed by the end of the third quarter of 1999. 
If the Federal Reserve does not successfully complete all modifications
required by the date change and is forced to interrupt automated services to
Vail Banks, Vail Banks could experience significant difficulties.

     Vail Banks has embarked upon a program to educate its depositors and
borrowers regarding year 2000 issues. Vail Banks' educational programs focus
on emphasizing the contractual obligations of its customers despite year
2000 issues.

     VAIL BANKS' CONTINGENCY PLANS. Vail Banks has finalized its contingency
planning with respect to the year 2000 date change and believes that should
its own systems fail, it could convert to a manual-entry system for a period
of approximately six months without significant risk.  Vail Banks believes
any mission critical systems could be recovered and operating within
approximately seven days.

     In addition, Vail Banks' preliminary contingency plan takes into
account the risk that the Federal Reserve will not make the necessary
modifications that will enable it to handle electronic funds transfers and
check clearing by the year 2000. So long as Vail Banks is able to obtain the
necessary information from the Federal Reserve in some manner, such as by
telephone or facsimile transmissions, and manually post transactions, Vail
Banks does not expect the resulting impact on its financial condition or
result of operations to be material, unless protracted.

CERTAIN FACTORS AFFECTING FORWARD-LOOKING STATEMENTS

   THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS (AS SUCH TERM IS DEFINED IN THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT")) CONCERNING VAIL BANKS' MERGERS, OPERATIONS,
PERFORMANCE AND FINANCIAL CONDITION, INCLUDING, IN PARTICULAR, THE
LIKELIHOOD OF VAIL BANKS' SUCCESS IN DEVELOPING AND EXPANDING ITS BUSINESS.
THESE STATEMENTS ARE BASED UPON A NUMBER OF ASSUMPTIONS AND ESTIMATES WHICH
ARE INHERENTLY SUBJECT TO SIGNIFICANT UNCERTAINTIES, MANY OF WHICH ARE
BEYOND THE CONTROL OF VAIL BANKS.  CONSEQUENTLY, ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
INCLUDE, BUT ARE NOT LIMITED TO, THOSE SET FORTH IN VAIL BANKS' FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1998 UNDER THE HEADING "CERTAIN FACTORS
AFFECTING FORWARD-LOOKING STATEMENTS," WHICH DISCUSSION IS INCORPORATED IN
THIS FORM 10-QSB.



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<PAGE>
<PAGE>

    VAIL BANKS DOES NOT UNDERTAKE, AND SPECIFICALLY DISCLAIMS, ANY
OBLIGATION TO PUBLICLY RELEASE THE RESULTS OF REVISIONS WHICH MAY BE MADE TO
FORWARD-LOOKING STATEMENTS TO REFLECT THE OCCURRENCE OF ANTICIPATED OR
UNANTICIPATED EVENTS OR CIRCUMSTANCES AFTER THE DATE OF SUCH STATEMENTS.




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<PAGE>
<PAGE>

                      PART II    OTHER INFORMATION

Item 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

     The Company sold 1,680,000 shares of common stock (which includes
shares sold upon exercise of the underwriters' over-allotment option)
pursuant to a Registration Statement on Form SB-2, declared effective by the
Securities and Exchange Commission on December 8, 1998 (File No. 333-60347),
through a firm commitment underwriting managed by A.G. Edwards & Sons, Inc.
and Hoefer & Arnett Incorporated.  The gross proceeds to the Company were
$20,160,000 ($12.00 per share).  The IPO was consummated on December 15,
1998, upon the sale of all the shares.

     In connection with the IPO, Vail Banks paid $1,545,600 in underwriting
discounts and commissions to the underwriters, and had other offering
expenses of $1,160,000, for cumulative expenses of $2,705,600.  The net
offering proceeds of $17,454,400 were used to fund the cash portion of the
purchase price for the merger with Telluride ($13,331,000) and the remainder
was used for general corporate purposes, including for working capital and
to finance growth.


Item 6.   EXHIBITS, LIST AND REPORTS ON FORM 8-K.

          (a)       Exhibits
                    --------

     The following exhibits are required to be filed with this Report on
10-QSB by Item 601 of Regulation S-B.

     Exhibit
       No.          Description of Exhibit
     -------        ----------------------

       27.1         Financial Data Schedule (for SEC use only)


          (b)       Reports on Form 8-K.
                    -------------------

     Vail Banks filed a report on Form 8-K on January 22, 1999 reporting a
matter under Item 4.



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<PAGE>
<PAGE>


                                 SIGNATURES


   In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report on Form 10-QSB to be signed
on its behalf by the undersigned, thereunto duly authorized.


                                        VAIL BANKS, INC.
                                        (Registrant)



Date:  5/14/99                             /s/ Lisa M. Dillon
     --------------------               -------------------------------------
                                        Lisa M. Dillon,
                                Title:  President and Chief Executive Officer



Date:  5/14/99                             /s/ Kirk S. Colburn
     --------------------               -------------------------------------
                                        Kirk S. Colburn,
                                Title:  Secretary
                                        (principal financial officer)




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