UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission File Number 000-22283
VIRGINIA FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-1829288
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
24 South Augusta Street, Staunton, Virginia 24401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (540) 885-1232
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered:
None None
Securities registered pursuant to section 12 (b) of the Act:
Common Stock, $5.00 par value per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of February 5, 1997, there were 2,000,000 shares of common stock, $5.00
par value, outstanding and the aggregate market value of common stock of
Virginia Financial Corporation held by nonaffiliates was approximately
$90,000,000.
DOCUMENTS INCORPORATED BY REFERENCE 1996 Annual Report to Shareholders - Parts I
and II
===============================================================================
<PAGE>
PART I
Item 1. Business
The Company
On November 14, 1996 the shareholders approved an Agreement and Plan of
Reorganization and related Plan of Share Exchange, relating to the adoption of a
bank holding company, Virginia Financial Corporation (hereinafter referred to as
"the Company") which will serve as the holding company of the Bank. This
transaction was consummated on January 2, 1997.
The Company was not operational in 1996; therefore, the financial
statements and discussions related thereto included in this annual report relate
to operations of Planters Bank & Trust Company of Virginia and its subsidiary.
Planters Bank & Trust Company of Virginia is the sole bank subsidiary of the
Company. The Company has no material operations other than the ownership of the
Bank. Items 10, 11 and 13 regarding management of the Company relate to the
Company's directors and officers.
The Bank
Planters Bank & Trust Company of Virginia (hereinafter referred to as
"the Bank") was incorporated under the laws of the Commonwealth of Virginia on
October 29, 1971. It opened for business on September 1, 1972, with its main
office located at U.S. Route 250 and State Route 640 in Augusta County,
Virginia. The name Augusta Bank & Trust Company was changed to Planters Bank &
Trust Company of Virginia as part of a merger of Planters Bank & Trust Company,
Staunton, Virginia, a bank organized under the laws of the Commonwealth of
Virginia, into Augusta Bank & Trust Company as of October 1, 1977.
Planters Bank & Trust Company, Staunton, Virginia, (Planters Bank) had
been incorporated under the laws of the Commonwealth of Virginia on September
13, 1911. It opened for business on November 21, 1911, with its main office
located at 24 South Augusta Street, Staunton, Virginia.
The Bank's main office is located at 24 South Augusta Street, Staunton,
Virginia. Branch offices are located in Staunton, Virginia, at (1) 2307 West
Beverley Street, (2) 2201 North Augusta Street, and (3) 1135 Richmond Road.
Branches are located in Augusta County at (1) 132 Greenville Road, Stuarts
Draft, (2) U.S. Route 11 in Verona, (3) 1480 Greenville Avenue, Staunton and (4)
the intersection of U. S. Route 250 and State Route 640 in Fishersville. A
branch is located in Waynesboro, Virginia, at the intersection of North Poplar
and Ohio Streets. A branch is located in Rockingham County at 106 Sixth Street,
Grottoes, Virginia. The Bank employs one hundred and fifty-three (153) full-time
employees and nineteen (19) part-time employees.
The Bank's trade area includes 100% of Augusta County, Virginia, and
encompasses the independent cities of Staunton, Waynesboro and the Grottoes,
Virginia area in Rockingham County. The population of the trade area is
estimated to be 105,000.
During the preceding five years, the Bank increased in total assets and
in the number of customers served. On April 1, 1984, Planters Bank & Trust
Company of Virginia purchased the Verona office of Bank of Virginia located on
U.S. Route 11, Verona, Virginia, and operates this facility as a branch of the
Bank.
The Bank, on November 10, 1987, was authorized to establish a branch at
1480 Greenville Avenue, Staunton, Virginia. The Bank opened the branch at this
location May 8, 1989.
<PAGE>
The Bank, on April 15, 1994, purchased the Grottoes, Virginia office of
First Union National Bank of Virginia and operates this facility as a branch of
the Bank.
The Bank, on September 1, 1994, leased office space consisting of
263.556 square feet located at 2262 Bluestone Hills Drive, Harrisonburg,
Virginia 22801. This facility was used for the sole purpose of generating
secondary mortgage market real estate loans. This office was closed effective
April 30, 1996.
The Bank, in January 1996, formed Planters Insurance Agency, Inc., a
wholly-owned subsidiary of the Bank and is licensed to sell title insurance.
<PAGE>
Services
Principal services offered and rendered by the Bank include the
following:
Savings Accounts
Statement Savings:
Personal
Business
Passbook Savings:
Personal
Business
Individual Retirement
Accounts
Certificates of Deposit:
7-31 Days
90 Days
182 Days
1 Year
1 1/2 Years
2 1/2 Years
4 Years
Christmas Clubs
Save-O-Matic
Checking Accounts
Personal
Negotiable Order of Withdrawal
Money Market
Zero Balance Checking
Business
Organizations and Clubs
Estate
Student
Personalized Checks
Quarterly or Monthly
Statements
Visa Check Card
Investment Products
Discount Brokerage
Full Service:
Money Market Accounts
Stocks
Bonds
Mutual Funds
Annuities
Loans
Personal
Home Improvement
Automobile or Trailer
Business
Student
Mortgage
Agriculture
Vacation
Visa and MasterCard
Accounts
Home Equity
Customer Support
Department
Stop Payments
Statements on Demand
Photocopies of Checks and Records
Assistance in Balancing
Checkbooks
Computation of Interest
International Banking
Letters of Credit
Foreign Collection
Bank Transfer Wire Service
Foreign Currency Available
Trust Department
Executor or Administrator of Estates
Testamentary Trustee
Inter Vivos Trustee
Guardian
Agent Under Agreement
Escrow Agreement
Power of Attorney
Trustee Under Employee Benefit
Agreements
Additional Services
Bank Transfer Wire Service
Bank by Mail
Drive-in Banking, all locations
Night Depositories
Bank Money Orders
Travelers Checks
Safe Deposit Boxes
Bank Drafts
Cashier's Checks
Savings Bonds
Utility Bill Payments
Applications for Visa and MasterCard
Notary Public
Certified Checks
Federal Tax Deposits
Electronic Direct Deposit and Payment of Funds
Automatic Transfers of Funds Between Accounts
Retail Repurchase Agreements
Automated Teller Machines
<PAGE>
In rendering these services, the Bank serves general retail businesses in the
cities of Staunton and Waynesboro, Augusta County and in Grottoes, Virginia.
Lumbering operations, paving facilities and quarrying concerns are
serviced as well as dairy and beef cattle operations and some sheep operations.
Also served are various manufacturing concerns employing from 10 to 2,000
persons.
Competition
NationsBank, First Virginia Bank-Blue Ridge, Jefferson National Bank,
First Union National Bank of Virginia, Crestar Bank, Shenandoah National Bank,
F&M Bank-Massanutten and Bank of Rockbridge maintain offices within the trade
area of the Bank. These banks offer full banking services with the exception of
the Bank of Rockbridge and Shenandoah National Bank which do not offer trust
services.
One savings bank has three offices within the Bank's trade area. It is
highly competitive with commercial banks in their quest for deposits and loans,
individual retirement accounts and time accounts.
In the area of real estate loans it is also a formidable competitor.
Other institutions compete effectively and aggressively for various
types of business within the Bank's trade area. The several credit unions in the
Bank's trade area aggressively offer commercial bank products. Automobile sales
finance companies compete for automobile financing and dealership floor plans.
Sales finance companies finance small appliances and furniture and personal loan
companies compete effectively. Direct lending by governmental agencies is done
primarily through Staunton Farm Credit, A.C.A. which maintains an office outside
the Staunton city limits. Farmers Home Administration operates within the Bank's
trade area also. Deposits and loans from medium-sized and larger business
organizations are successfully solicited by financial institutions located
outside the Bank's service area. There is also competition from the numerous
insurance companies represented in the area. In offering trust services there is
competition with attorneys as well as other banks.
No material part of the business of the Bank is dependent upon a single
or a few customers and the loss of one or more customers would not have a
materially adverse effect upon the business of the Bank. Management is not aware
of any indications that the business of the Bank or material portion thereof is,
or may be, seasonal.
Item 2. Properties
The Bank owns ten (10) parcels of property. Nine (9) of these
properties are land and buildings used by the Bank in its operation and one (1)
property is held for future bank use. The properties are more fully described as
follows:
1. The Bank owns the land and building at its main office located
at 24 South Augusta Street, Staunton, Virginia. The land with
buildings was purchased from various owners at various dates.
The Bank has completed an expansion and renovation program at
this location whereby 18 on-site parking spaces were provided,
along with entry and exit from Augusta Street, entry from
Johnson Street and exit onto Central Avenue. Also provided are
appropriate entry lanes for three drive-up windows. The
renovated building has a basement area of 6,415 sq. ft., a
commercial and trust banking area of 11,827 sq. ft., and a
second floor was developed into a customer service area and
offices. The Bank purchased a piece of property, December
1985, located at the corner of Central Avenue and Johnson
Streets. This parcel joins property presently owned by the
Bank. The building, which was gutted by fire, was torn down
and the lot is presently leased to the City of Staunton. The
Bank purchased a piece of property, May 12, 1989, located at 11
West Johnson Street. During 1993, the building was removed and
a new building was incorporated into the present Bank building.
<PAGE>
This addition consisting of three floors contain 3,476 square
feet. This building and location are considered ample to
accommodate the Bank's needs for the immediate future.
2. The Bank owns a 1-3/4 acre parcel of property at 1135 Richmond
Road, Staunton, Virginia. This property fronts 158 feet on U.
S. Route 250. The land was purchased in March 1964, and in
March 1966, a 1,650 sq. ft. one story brick bank building was
completed. During 1987, the drive-up facilities were expanded
and the entrance was rerouted for drive-in traffic. A
portion of land on the northeast side consisting of 0.165
acres was sold in December 1981. The topography of this small
parcel was such as it would have been of no value for future
expansion. This building and location are considered ample to
accommodate the Bank's needs for the immediate future.
3. The Bank owns a parcel of land in Staunton, Virginia, with
175 feet of frontage on West Beverley Street known as 2307
West Beverley. This parcel contains approximately 42,800 sq.
ft. and was purchased in 1966, and in 1968 a 2,112 sq. ft.
one-story brick bank building with full basement was
constructed. The Bank purchased an adjoining piece of property
known as 2301 West Beverley Street on June 25, 1987, which
contains 0.914 acres and a one story brick and block building
containing approximately 1,200 sq. ft. at a cost of $115,000. A
portion of this property is used for a new and expanded drive-in
entrance which was completed at the end of 1987. The building on
the remaining portion of this property is rented on a 5 year
lease. The present branch site with the adjoining property is
considered ample to accommodate the Bank's needs for the
immediate future.
4. The Bank owns a parcel of property at 250 North Poplar Avenue,
Waynesboro, Virginia. This property fronts 202 feet on North
Poplar Avenue and 200 feet on Ohio Street. The land was purchased
October 1977, and in November 1978 a one-story brick bank building
consisting of 3,832 sq. ft. was occupied. This building and
location are considered ample to accommodate the Bank's needs for
the foreseeable future.
5. In Augusta County, the Bank owns a parcel of land at the northeast
corner of the intersection of U. S. Route 250 and Virginia State
Route 640 approximately 1.4 miles west of Waynesboro city limits.
This location consists of 3.47 acres of land, improved with a
single-story 3,825 sq. ft. building designed for commercial
banking functions with ample ingress, egress and parking. The land
was purchased July 18, 1972, and the building completed in
December 1973. This building and location are considered ample to
accommodate the Bank's needs for the foreseeable future.
6. The Bank purchased a parcel of land fronting on State Route 340,
Stuarts Draft, Virginia, in December 1981. This parcel of
land is 225 feet by 225 feet. A used preconstructed building
containing 1,440 sq. ft. was placed on the land in April
1982. The construction of a new building consisting of 3,130
sq. ft. on the ground floor and a basement consisting of 1,080
sq. ft. was completed in August of 1988 at a cost of
approximately $350,000. This building and location are
considered ample to accommodate the Bank's needs for the immediate
future.
7. The Bank purchased a piece of property located on the west
side of U.S. Route 11 in Verona, Virginia, from the Bank of
Virginia on April 1, 1984. It contains 36,024 sq. ft. or
0.827 acres of land and has 120 feet frontage on Route 11.
Located on the property is a two-story brick building
containing 2,416 sq. ft. on the first floor and 1,794 sq. ft.
on the second floor. Due to the widening of U.S. Route 11, it
was necessary to relocate the drive-up windows and the
automated teller machine. An addition was added to the rear of
the building consisting of 441 square ft. for the drive-up
facility. This facility now has three drive-up lanes. This
addition was completed in August 1991 at a cost of $135,000.
8. The Bank purchased a parcel of land October 20, 1987, at 1480
Greenville Avenue in Augusta County, just south of the city of
Staunton at a cost of $259,337. The construction of a new
<PAGE>
building consisting of 3,130 sq. ft. on the ground floor and a
basement consisting of 1,080 sq. ft. was completed and
opened May 8, 1989 at a cost of approximately $400,000. This
property contains 1.269 acres with a 200 foot road frontage on
Greenville Avenue.
9. The Bank purchased a piece of property located at 106 Sixth
Street, Grottoes, Virginia from First Union National Bank of
Virginia on April 15, 1994. It contains 52,000 square feet of land
with twenty parking spaces with ample ingress and egress from
Sixth Street and from Seventh Street as the property extends
through the block. Located on the property is a two-story brick
building containing 6,000 square feet. This facility has one
drive-up lane. This building and location are considered ample to
accommodate the Bank's needs for the foreseeable future.
10. The Bank owns a piece of property consisting of land and a
two-story building fronting 23 feet on Johnson Street, Staunton,
Virginia. This property is presently under lease and is held for
future expansion.
Leased Properties
The Bank leases its Northside banking facility located in the Terry
Court Shopping Center on North Augusta Street, Staunton, Virginia. In 1986, the
Bank renegotiated its lease with Highway Properties, Inc. to expand the banking
facilities. The facilities at this location now consist of banking quarters of
approximately 1,800 sq. ft. and a two-window drive-up facility with ingress,
egress and right-of-way to and from these premises. The renegotiated lease was
for an initial term of five years, expiring April 30, 1991 with three 5-year
options to renew the lease. The Bank exercised the first and second option April
30, 1991 and April 30, 1996 to renew the lease for an additional five year
period expiring April 30, 2001. The base rental for the first year is $19,190
with an increase of 2 1/2% of the monthly rent each year for the remaining four
years. Lease expense for 1996 was $20,244. The Terry Court Shopping Center was
sold, subject to the lease, to W. J. Perry Corporation, trading as Terry Court
Properties, and subsequently sold to W. Thomas Eavers doing business as Terry
Court Properties.
Item 3. Legal Proceedings
The Bank is party to various legal proceedings originating from the
ordinary course of business. Management and counsel are of the opinion that
settlement of these items should not have a material effect on the financial
position of the Bank.
Item 4. Submission of Matters To a Vote of Security Holders
On October 18, 1996 a notification of a Special Meeting of Shareholders
of the Bank and proxy materials were mailed to all holders of record at the
close of business on October 7, 1996. This notice set the special meeting for
November 14, 1996 at 7:30 p.m. at the Main Office of the Bank in Staunton,
Virginia. The purpose of the meeting was to consider the adoption of a bank
holding company, Virginia Financial Corporation, to serve as the holding company
of the Bank. A copy of the Proxy Statement related to this meeting was filed as
Exhibit 99.1 of the Company's Form 8-B, Successor Registration on March 24,
1997.
At the special meeting, the shareholders approved an Agreement and Plan
of Reorganization dated July 30, 1996 and a related Plan of Share Exchange. The
vote was 1,573,749 shares cast for the proposals, 5,745 shares against, with
1,540 shares abstaining. The proposals were approved.
This concluded the business of the meeting. There were no other matter
submitted for a vote of the shareholders and no directors were elected.
<PAGE>
PART II
Item 5. Market For The Registrant's Common Equity And Related Security Holder
Matters
See the 1996 Annual Report to Shareholders (Annual Report), "Comments
by Management," page 6, for market and dividend information.
Management knows of no restrictions on the Bank's ability to pay future
dividends and management expects to continue to pay quarterly dividends in the
future.
The number of holders of the Bank's Common Stock (the only class of
equity security of the Bank) of record was 1,081 as of the end of the Bank's
fiscal year, December 31, 1996.
Item 6. Selected Financial Data
See Annual Report, page 5, item titled "Selected Financial Data" and
Table 1 of Item 7 of "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on Page 8 hereof.
Item 7. Management's Discussion And Analysis Of Financial Condition And
Results Of Operations
See also Annual Report, Pages 7 through 12, "Management's Discussion
and Analysis of Operations" and year-end balances.
Earnings Performance:
Net income for 1996 was $5,541,801 compared to $5,034,607 for 1995 for an
increase of 10.07%. On a per share basis, 1996 earnings were $2.77 per share.
Net income for 1995 was $5,034,607 compared to $4,753,161 for 1994 for an
increase of 5.92%. On a per share basis, 1995 earnings were $2.52 per share.
<PAGE>
Table 1 - Selected Consolidated Financial Data
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994 1993 1992
(in thousands, except ratios and per share amounts)
<S> <C>
Income Statement Data:
Interest Income $ 27,321 $ 26,073 $ 22,902 $ 21,436 $ 21,310
Interest Expense 12,684 12,343 9,748 9,209 10,547
Net Interest Income 14,637 13,730 13,154 12,227 10,763
Provision for Loan Losses 450 309 421 217 168
Net Interest Income After
Provision for Loan Losses 14,187 13,421 12,733 12,010 10,595
Non-interest Income 2,542 2,126 2,206 2,191 2,167
Security Gains (Losses) 6 1 1 44 3
Non-interest Expense 8,679 8,235 8,082 7,511 7,251
Income Before Income Taxes 8,056 7,313 6,858 6,734 5,514
Income Taxes 2,514 2,278 2,105 2,097 1,685
Net Income $ 5,542 $ 5,035 $ 4,753 $ 4,637 $ 3,829
Per Share Data:
Net Income* 2.77 2.52 2.38 2.32 1.91
Cash Dividends* 0.96 0.83 0.71 0.60 0.54
Book Value at Period End* 18.79 17.08 15.02 13.67 11.95
Balance Sheet Data:
Assets $377,113 $356,068 $344,473 $308,243 $297,189
Loans, Net of Unearned Income 235,952 212,327 196,579 171,068 167,325
Securities 118,800 125,398 129,332 122,229 113,750
Deposits 330,375 319,578 297,006 279,290 269,355
Stockholders' Equity 37,574 34,154 30,046 27,335 23,898
Average Shares Outstanding 2,000 2,000 2,000 2,000 2,000
Performance Ratios:
Return on Average Assets 1.51% 1.45% 1.43% 1.53% 1.41%
Return on Average Equity 15.34% 15.48% 16.30% 18.30% 17.00%
Dividend Payout* 34.65% 32.97% 29.87% 25.88% 28.21%
Capital and Liquidity Ratios
Leverage 9.98% 9.53% 8.91% 8.83% 8.20%
Risk-based Capital Ratios:
Tier 1 Capital 17.20% 16.74% 16.10% 16.45% 14.61%
Total Capital 18.45% 17.99% 17.35% 17.70% 15.92%
*Adjusted for 100 percent stock dividend, December 1993
<PAGE>
Interest Income:
Interest income in 1996 increased $1,266,000 compared to 1995, on a tax
equivalent basis, for an increase of 4.78%. This increase was due to average
earning assets increasing by $17,890,000. The tax-equivalent yield decreased
from 8.02% in 1995 to 7.97% in 1996.
Interest income in 1995 increased $3,162,000 compared to 1994, on a
tax-equivalent basis, for an increase of 13.55%. This increase was due to
average earning assets increasing by $15,579,000 and the tax-equivalent yield
increasing from 7.41% in 1994 to 8.02% in 1995.
Interest income in 1994 increased $1,544,000, on a tax equivalent yield,
compared to 1993 due to an increase in average earning assets as the
tax-equivalent yield on average earning assets decreased to 7.41% during 1994.
Interest Expense:
Interest expense increased during 1996 by $341,000 compared to 1995. This
represents an increase of 2.76%. The increase was due to average
interest-bearing liabilities increasing by $10,242,000 as the average rate paid
on these liabilities decreased from 4.51% in 1995 to 4.47% in 1996.
Interest expense during 1995 increased $2,596,000 compared to 1994. This
represents an increase of 26.63%. This increase was due to interest-bearing
liabilities increasing by $10,058,000 and the average rate paid during 1995
increasing to 4.51% compared to 3.70% in 1994.
Interest expense increased $538,000 in 1994 compared to 1993 due to
increased interest-bearing liabilities in 1994 compared to 1993. The average
cost of interest-bearing liabilities decreased to 3.70% in 1994 compared to
3.77% in 1993.
Net interest income and the net interest margin along with the average
yield of the individual categories for the years 1994 through 1996 is shown on
Table 2. Table 3 summarizes the effect on net interest income of changes in
interest rates earned and paid as well as changes in volume.
The presentation appears on a fully tax-equivalent basis to adjust for
the tax exempt status of income earned on certain loans and investment
securities using statutory rates of 34% in 1996, 1995 and 1994.
Noninterest income:
Noninterest income increased during 1996 compared to 1995 by $417,108 or
19.63%. Trust Department income increased by $163,283 or 19.87% during 1996
compared to 1995. This increase was due to the number and asset size of estates
closed and under administration and the overall volume of fee generating
activity during the year. Income from the secondary mortgage market area
increased $110,523 or 32.75%. The increase in this area was the result of a
greater number of loans being closed and the dollar amount of these loans.
During 1996 the Bank began offering non-FDIC insured investment products which
produced income of $86,648. Also during 1996, the Bank began operating Planters
Insurance Agency, Inc., a wholly-owned subsidiary of the Bank, which markets
title insurance, provided income of $17,408. Service charges on deposit
accounts, safe deposit box rent and other non-interest income experienced a very
modest increase due to the volume of business only, as the pricing of these
services and fees have not changed.
Noninterest income decreased by $81,149 or 3.68% during 1995 compared to
1994. Trust Department income decreased $119,440 or 12.69% during 1995 compared
to 1994. This decrease was due to the number of estates being closed and
declining interest rates. As interest rates decline the Trust Department income
is impacted due to a segment of the income earned being based on income
collected in the individual accounts. Service charges on deposit accounts
experienced a modest increase due to the volume of business.
<PAGE>
Noninterest income during 1994 compared to 1993 increased $13,937 or
0.64%. Trust Department income increased by $150,768 or 19.08% compared to 1993
primarily due to estate settlement fees. Service charges on deposit accounts
increased by $36,486 or 6.49% due to an increase in account numbers. Other
noninterest income decreased by $173,317 or 20.64% due primarily to decreased
fixed-rate real estate mortgage origination fees generated by the Secondary
Mortgage Department.
Noninterest Expense:
Noninterest expense increased during 1996 compared to 1995 by $444,218 or
5.39%. Salaries and employee benefits increased by $579,717 or 12.34%. This
increase was due to increases of individual salaries, employee benefits and the
expansion of the officer staff. These additions are in preparation of pending
retirements of executive and other officers. Most other operating expenses
continue to increase due to increased prices and the increase in volume of
business. Technological changes taking place in the financial industry at a
rapid pace must be dealt with, and though over a period of time result in
savings, have impact on other operating expenses, i.e. research, installation,
educational training and equipment costs. Two areas of non-interest expenses had
a rather significant decrease which are advertising and FDIC insurance.
Advertising decreased about $61,000 and FDIC Insurance decreased about $345,000
due to premium decreases.
Noninterest expense increased $151,787 or 1.88% during 1995 compared to
1994. Salaries and employee benefits increased $319,377 or 7.29%. This increase
was due to increases in individual salaries, an increase in personnel and
increases in the cost of employee benefits. An educational department was
created during 1995 increasing educational expenses about $32,000. Other
operating expenses continue to increase due to increased prices and increases in
the total volume of business. Federal deposit insurance expense decreased
comparing 1995 to 1994 by about $300,000 due to premium decreases.
Noninterest expense increased $571,542 or 7.61% during 1994 compared to
1993. Salaries and employee benefits increased by $213,470 or 5.13%. This
increase was due to increases in individual salaries and the addition of the
staff at the Grottoes office which was purchased in April of 1994. Premise and
fixed asset expense increased $77,214 or 9.23% due to the purchase of the
Grottoes office and the installation expense of a network system linking all
branches to the main office for data input purposes. An additional $62,000 was
expensed in 1994 for Capital Stock Taxes due to an adjustment for the years 1992
through 1994.
<PAGE>
Table 2 - Planters Bank & Trust Company of Virginia and Subsidiary
Average Balances, Income and Expense, Yields and Rates (1)
Twelve Months Ended December 31, 1996, 1995 and 1994
</TABLE>
<TABLE>
<CAPTION>
1996 1995
--------------------------------------- ----------------------------------------
Annual Annual
Assets Average Income/ Yield Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
-------------- ------------- --------- -------------- ------------- ---------
(Dollars In Thousands) (Dollars in Thousands)
<S> <C>
Securities:
Taxable $ 106,059 $ 6,152 5.80% $ 107,996 $ 6,066 5.62%
Tax exempt (1) 17,625 1,254 7.11% 16,108 1,184 7.35%
-------------- ------------- ------------- -------------
Total securities $ 123,684 $ 7,406 5.99% $ 124,104 $ 7,250 5.84%
Loans (net of unearned income):
Taxable 222,348 20,223 9.10% 203,654 19,081 9.37%
Tax exempt (1) 679 41 6.04% 910 57 6.26%
-------------- ------------- ------------- -------------
Total loans $ 223,027 $ 20,264 9.09% $ 204,564 $ 19,138 9.36%
Federal funds sold and repurchase
agreements 1,713 91 5.31% 1,866 107 5.73%
-------------- ------------- ------------- -------------
Total earning assets $ 348,424 $ 27,761 7.97% $ 330,534 $ 26,495 8.02%
Less: allowance for loan losses (2,881) (2,655)
Total nonearning assets 21,262 19,782
-------------- --------------
Total assets $ 366,805 $ 347,661
============== ==============
Liabilities and Shareholder's Equity
Interest-bearing deposits:
Checking $ 99,981 3,436 3.44% $ 106,571 $ 3,949 3.71%
Regular savings 38,562 1,154 2.99% 38,698 1,344 3.47%
Certificates of deposit:
Less than $100,000 119,745 6,565 5.48% 103,356 5,613 5.43%
$100,000 and more 20,457 1,251 6.12% 17,842 995 5.58%
-------------- ------------- -------------- -------------
Total interest-bearing deposits $ 278,745 12,406 4.45% $ 266,467 $ 11,901 4.47%
Short-term borrowings 5,305 278 5.24% 7,341 442 6.02%
-------------- ------------- -------------- -------------
Total interest-bearing
liabilities $ 284,050 12,684 4.47% $ 273,808 $ 12,343 4.51%
Noninterest-bearing liabilities:
Demand deposits 44,711 39,633
Other liabilities 1,907 1,696
-------------- --------------
Total liabilities $ 330,668 $ 315,137
Stockholders' equity 36,137 32,524
-------------- --------------
Total liabilities and
shareholders' equity $ 366,805 $ 347,661
============== ==============
Net interest income $ 15,077 $ 14,152
Interest rate spread 3.50% 3.51%
Interest expense as a percent
of average earning assets 3.64% 3.73%
Net interest margin 4.33% 4.28%
</TABLE>
(1) Income and yields are reported on a taxable-equivalent basis.
<PAGE>
Table 2 - (Continued)
Average Balances, Income and Expense,
Yields and Rates (1)
<TABLE>
<CAPTION>
1994
---------------------------------------
Annual
Assets Average Income/ Yield
Balance Expense Rate
-------------- ------------- ---------
(Dollars in Thousands)
<S> <C>
Securities:
Taxable $ 115,729 $ 6,545 5.66%
Tax exempt (1) 16,452 1,234 7.50%
-------------- -------------
Total securities $ 132,181 $ 7,779 5.89%
Loans (net of earned income):
Taxable $ 181,177 $ 15,479 8.54%
Tax exempt (1) 507 34 6.71%
-------------- -------------
Total loans $ 181,684 $ 15,513 8.54%
Federal funds sold and repurchase agreements 1,090 41 3.76%
-------------- -------------
Total earning assets $ 314,955 $ 23,333 7.41%
Less: allowance for loan losses (2,371)
Total nonearning assets 19,813
--------------
Total assets $ 332,397
==============
Liabilities and Shareholder's Equity
Interest-bearing deposits:
Checking $ 142,994 $ 4,955 3.46%
Regular savings 41,281 1,439 3.49%
Certificates of deposit:
Less than $100,000 66,647 2,796 4.20%
$100,000 and more 7,246 309 4.27%
-------------- -------------
Total interest-bearing deposits $ 258,168 $ 9,499 3.68%
Short-term borrowings 5,582 248 4.44%
-------------- -------------
Total interest-bearing
liabilities $ 263,750 $ 9,747 3.70%
Noninterest-bearing liabilities:
Demand deposits 38,201
Other liabilities 1,287
--------------
Total liabilities $ 303,238
Stockholders' equity 29,159
--------------
Total liabilities and
shareholders' equity $ 332,397
==============
Net interest income $ 13,586
Interest rate spread 3.71%
Interest expense as a percent of
average earning assets 3.09%
Net interest margin 4.31%
</TABLE>
(1) Income and yields are reported on a taxable-equivalent basis.
The following table describes the impact on the interest income of the
Corporation resulting from changes in average balances and average rates for
the periods indicated. The change in interest due to both volume and rate has
been allocated to volume and rate changes in proportion to the relationship of
the absolute dollar amounts of the change in each.
Table 3 - Volume and Rate Analysis
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------------
1996 compared to 1995 1995 compared to 1994
Change Due To: Change Due To:
-------------- --------------
Increase Increase
Volume Rate (Decrease) Volume Rate (Decrease)
---------- ---------- ------------ -------- -------- ------------
(Dollars in thousands) (Dollars in thousands)
<S> <C>
Assets:
Securities:
Taxable $ (109) $ 195 $ 86 $ (433) $ (46) $ (479)
Nontaxable 107 (37) 70 (26) (24) (50)
------- ------- ------- ------- ------- -------
Total securities (2) 158 156 (459) (70) (529)
Loans:
Taxable 1,665 (523) 1,142 2,020 1,582 3,602
Nontaxable (14) (2) (16) 25 (2) 23
------- ------- ------- ------- ------- -------
Total Loans 1,651 (525) 1,126 2,045 1,580 3,625
Federal funds sold (8) (8) (16) 38 28 66
------- ------- ------- ------- ------- -------
Total earning assets $ 1,641 $ (375) $ 1,266 $ 1,624 $1,538 $ 3,162
------- ------- ------- ------- ------- -------
Liabilities and Stockholder's Equity:
Interest bearing deposits:
Interest checking $ (236) $ (277) $ (513) (1,404) $ 398 $(1,006)
Savings (5) (185) (190) (87) (8) (95)
Certificates of deposit:
$100,000 and over 154 102 256 1,839 978 2,817
Under $100,000 900 52 952 567 119 686
------- ------- ------- ------- ------- -------
Total interest-bearing
deposits 813 (308) 505 915 1,487 2,402
Short-term borrowings (112) (52) (164) 91 103 194
------- ------- ------- ------- ------- -------
Total interest-bearing
liabilities $ 701 $ (360) $ 341 $ 1,006 $1,590 $ 2,596
------- ------- ------- ------- ------- -------
Change in net
interest income $ 940 $ (15) $ 925 $ 618 $ (52) $ 566
======= ======= ======= ======= ======= =======
</TABLE>
<PAGE>
Table 4 - Loan Portfolio
<TABLE>
<CAPTION>
Loans at December 31
(book value rounded to thousands)
1996 1995 1994 1993 1992
----------- --------- --------- ---------- --------
<S> <C>
Real Estate Loans:
Construction $ 14,205 $ 12,924 $ 8,993 $ 7,387 $ 7,043
Secured by Farm Land 933 1,056 649 785 1,288
Secured by 1-4 Family
Residential 106,693 91,125 86,487 78,335 74,942
Other Real Estate Loans 38,965 40,022 37,394 29,582 28,275
Loans to Farmers 2,879 2,988 3,116 2,824 2,966
Commercial and Industrial 34,313 34,626 33,930 32,329 31,768
Loans to Individuals for
Household, Family and
other Consumer Expenses 37,542 29,056 25,221 19,988 19,276
All Other Loans 774 908 1,205 264 2,207
--------- ---------- ------------ ---------- ---------
Total Loans $ 236,304 $ 212,705 $ 196,995 $ 171,494 $ 167,765
Less Unearned Income 352 378 416 426 440
--------- ---------- ------------ ---------- ---------
Net Loans $ 235,952 $ 212,327 $ 196,579 $ 171,068 $ 167,325
========= ========== ============ ========== =========
</TABLE>
Table 5 - Maturity Schedule of Selected Loans
<TABLE>
<CAPTION>
December 31, 1996
Over One
One Year Through Over
or Less Five Yrs Five Yrs Total
----------------- ----------------- ------------------ -------------
(Dollars in Thousands)
<S> <C>
Commercial, Financial
and Agricultural $33,721 $3,447 $24 $37,192
Real Estate-
Construction 14,205 0 0 14,205
----------------- ----------------- ------------------ -------------
Total $47,926 $3,447 $24 $51,397
================= ================= ================== =============
Fixed Rates $19,596
Variable Rates 31,801
------------
Total $51,397
============
</TABLE>
<PAGE>
Allowance for Loan Losses:
The allowance for loan losses is an estimate of an amount, by
management, to provide for potential losses in the loan portfolio.
Various factors, including charge-off experience, change in the
mix and volume of loans, the level of underperforming loans, the ratio of
outstanding loan balances to total loans and the perceived economic conditions
in the Bank's trade area are taken into consideration in determining the amount
of the provision for loan losses and the total amount of the loan loss reserve.
The allowance for loan losses was 1.29% of outstanding loans as of
December 31, 1996, 1.31% as of December 31, 1995 and 1.28% as of December 31,
1994. Net charge-offs were $196,833 during 1996, $47,518 during 1995 and
$113,753 during 1994. The percentage of net charge-offs to year-end loans was
0.08% for 1996, 0.02% for 1995 and 0.06% for 1994. The balance of the loan loss
reserve was $3,038,958 as of December 31, 1996, $2,785,791 [GRAPHIC OMITTED],
1995 and $2,524,309 as of December 31, 1994.
<PAGE>
Table 6 - Allowance for Loan Losses
<TABLE>
<CAPTION>
(in thousands of dollars)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C>
Balance, Beginning of Period 2,786 2,524 2,217 2,143 2,103
Loans Charged Off
Real Estate:
Construction - 5 - - -
Secured by Farm Land - - - - -
Secured by 1-4 Family 42 - - 36 16
Residential - - 13 - -
Other Real Estate - - - - -
Loans to Farmers - 19 - 102 -
Commercial and Industrial 14 - 24 - 102
Consumer Loans 212 119 102 29 83
All Other Loans - - - - -
--------------------------------------------------------
Total Loans Charged Off 268 143 139 167 201
--------------------------------------------------------
Recoveries
Real Estate: - - - - -
Construction - - - - -
Secured Farm Land - - - - -
Secured by 1-4 Family - - - - 3
Residential - - - - -
Other Real Estate - - - - -
Loans to Farmers 14 70 - - -
Commercial and Industrial 34 - 6 9 43
Consumer Loans 23 22 19 15 27
All Other Loans - 4 - - -
--------------------------------------------------------
Total Recoveries 71 96 25 24 73
--------------------------------------------------------
Net Charge-Offs 197 47 114 143 128
Provision for Loan Losses 450 309 421 217 168
--------------------------------------------------------
Balance, End of Period 3,039 2,786 2,524 2,217 2,143
========================================================
Ratio of net charge-offs
during the period to average loans
outstanding during the period 0.09% 0.02% 0.06% 0.08% 0.08%
</TABLE>
<PAGE>
Table 7 - Allocation of Allowance for Loan Losses
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Percent of Percent of Percent of
Loans in Each Loans in Each Loans in Each
Category to Category to Category to
Allowance Total Loans Allowance Total Loans Allowance Total Loans
--------- -------------- --------- -------------- ---------- -------------
(Dollars in Thousands)
<S> <C>
Real Estate:
Construction $ 100 6.01% $ 100 6.08% $ 100 4.57%
Secured by Farm Land 75 0.39% 56 0.50% 50 0.33%
Secured by 1-4 Family
Residential 650 45.15% 400 42.84% 400 43.90%
Other Real Estate 550 16.49% 300 18.81% 324 18.98%
Loans to Farmers 275 1.22% 200 1.40% 200 1.58%
Commercial and Industrial 450 14.52% 750 16.28% 500 17.23%
Consumer Loans 500 15.89% 525 13.66% 500 12.80%
All Other Loans 25 0.33% 30 0.43% 50 0.61%
Unallocated 414 - 425 - 400 -
---------- ------------- --------- -------------- --------- --------------
$ 3,039 100.00% $ 2,786 100.00% $ 2,524 100.00%
========== ============= ========= ============== ========= ==============
</TABLE>
<TABLE>
<CAPTION>
1993 1992
---- ----
Percent of Percent of
Loans in Each Loans in Each
Category to Category to
Allowance Total Loans Allowance Total Loans
--------- -------------- --------- --------------
<S> <C>
Real Estate:
Construction $ 100 4.31% $ 100 4.20%
Secured by Farm Land 50 0.46% 50 0.77%
Secured by 1-4 Family
Residential 400 45.68% 400 44.67%
Other Real Estate 300 17.25% 300 16.85%
Loans to Farmers 200 1.65% 150 1.77%
Commercial and Industrial 400 18.85% 450 18.94%
Consumer Loans 450 11.65% 400 11.49%
All Other Loans 50 0.15% 50 1.31%
Unallocated 267 - 243 -
---------- ------------- --------- --------------
$ 2,217 100.00% $ 2,143 100.00%
========== ============= ========= ==============
</TABLE>
<PAGE>
Table 8 - Nonperforming Assets and Loans
Contractually Past Due
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994 1993 1992
------------ ------------ ------------- ------------ -------------
(Dollars in Thousands)
<S> <C>
Nonperforming Assets:
Other Real Estate $ 0 $ 0 $ 0 $ 44 $ 0
Nonperforming Loans:
Loans Past Due as to
Principal or Interest
for 90 Days or More 248 147 489 186 114
Loans on Which Accrual of
Interest Has Been
Discontinued 194 140 219 170 112
------------ ------------ ------------- ------------ -------------
Total Nonperforming Assets $ 442 $ 287 $ 708 $ 400 $ 226
============ ============ ============= ============ =============
Nonperforming Assets to:
Total Assets 0.12% 0.08% 0.21% 0.13% 0.08%
</TABLE>
Potential Problem Loans:
At December 31, 1996 Management is not aware of any significant problem
loans not included in Table 8.
<PAGE>
Table 9 - Investment Securities
Maturity Distribution and Average Yield
<TABLE>
<CAPTION>
December 31, 1996
(Dollars in Thousands)
Weighted
Average Weighted
Book Market Maturity Average
Value Value In Yrs Mos TE Yield
------- --------- ----------- ---------
<S><C>
U.S. Treasury Securities
Within One Year $ 2,994 $ 3,000 0 5.5 5.88%
After One But Within Five Years 10,519 10,561 2 2.5 6.07%
After Five But Within Ten Years 0 0 0 0.0 0.00%
After Ten Years 0 0 0 0.0 0.00%
-------- --------
Total U.S. Treasury Securities $13,513 $ 13,561 1 9.8 6.03%
-------- --------
Federal Agencies:
Within One Year $ 8,650 $ 8,626 0 4.6 5.56%
After One But Within Five Years 77,418 76,937 2 9.6 5.92%
After Five But Within Ten Years 499 487 5 1.8 6.05%
After Ten Years 0 0 0 0.0 0.00%
-------- --------
Total Federal Agencies $86,567 $ 86,050 2 6.9 5.89%
-------- --------
Obligations of State and Political
Subdivisions:
Within One Year $ 2,866 $ 2,877 0 4.2 7.39%
After One But Within Five Years 11,844 11,864 3 4.0 6.44%
After Five But Within Ten Years 3,898 3,872 6 4.3 6.79%
After Ten Years 0 0 0 0.0 0.00%
-------- --------
Total State and Political
Subdivisions $18,608 $ 18,613 3 7.8 6.66%
-------- --------
Other Securities:
Within One Year $ 250 $ 251 0 6.5 5.95%
After One But Within Five Years 0 0 0 0.0 0.00%
After Five But Within Ten Years 0 0 0 0.0 0.00%
After Ten Years 0 0 0 0.0 0.00%
-------- --------
Total Other Securities $ 250 $ 251 0 6.5 5.95%
-------- --------
Total Securities $118,938 $118,475 2 7.8 6.02%
======== =========
</TABLE>
<PAGE>
Liquidity and Interest Sensitivity:
Liquidity is the ability to satisfy demands for withdrawal of deposits,
lending obligations and other corporate needs. Liquidity is provided from
sources such as readily marketable investments, principal and interest payments
on loans and through increases in deposits and borrowed funds. Planters' deposit
base has become more rate sensitive since deregulation; however, there remains a
strong base of core deposits. The investment portfolio of which 96.1% matures
within five years and the opportunity to purchase Federal Funds provides a basic
source of liquidity along with the principal and interest payments on the loan
portfolio. In the management of interest rate risk, all loans except consumer
and mortgage are made with the opportunity to reprice the interest on a one or
three year basis. The Bank strives to maintain a relationship between rate
sensitive assets and rate sensitive liabilities which will maximize profits
under foreseeable or projected economic and competitive conditions. Additional
data regarding liquidity and interest sensitivity is presented in Tables 10
through 12.
Table 10 - December 31, 1996
<TABLE>
<CAPTION>
Months
------
Over Over Over
One Three Six
Within Through Through Through Over
One Three Six Twelve Twelve Total
-------------- ------------- ------------- ------------- -------------- --------------
<S> <C>
Earning Assets:
Loans $ 86,517 $ 15,634 $ 24,655 $ 39,497 $ 69,649 $ 235,952
Securities 1,994 3,049 3,489 6,209 104,059 118,800
Interest Earning Bank Dep 0 0 0 0 0 0
Short Term 0 0 0 0 0 0
-------------- ------------- ------------- ------------- -------------- --------------
Total Earning Assets $ 88,511 $ 18,683 $ 28,144 $ 45,706 $ 173,708 $ 354,752
Interest-Bearing Liabilities:
N.O.W. Accounts 39,653 0 0 0 0 39,653
Money Market Checking 55,480 0 0 0 0 55,480
Savings 36,267 0 0 0 0 36,267
Christmas Club 355 0 0 0 0 355
C/D's - IRA 13,870 1,917 1,078 1,760 4,475 23,100
Reg 3,765 11,490 14,408 21,691 72,907 124,261
Short-Term Repo's 3,110 0 0 0 0 3,110
Federal Funds 5,000 0 0 0 0 5,000
-------------- ------------- ------------- ------------- -------------- --------------
Total Interest-Bearing
Liabilities $ 157,500 $ 13,407 $ 15,486 $ 23,451 $ 77,382 $ 287,226
-------------- ------------- ------------- ------------- -------------- --------------
Assets Less Liabilities $ (68,989) $ 5,276 $ 12,658 $ 22,255 $ 96,326 $ 67,526
-------------- ------------- ------------- ------------- -------------- --------------
Cumulative Gap $ (68,989) $ (63,713) $ (51,055) $ (28,800) $ 67,526
-------------- ------------- ------------- ------------- --------------
</TABLE>
<PAGE>
Table 11 - Average Deposits and Rates Paid
<TABLE>
<CAPTION>
December 31,
1996 1995 1994
---- ---- ----
(Dollars in Thousands)
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
<S> <C>
Noninterest Bearing Deposits $ 44,711 - $ 39,633 - $ 38,201 -
--------------- ---------------- -------------
Interest Bearing Deposits
Interest Checking 99,981 3.44% 106,571 3.71% 142,994 3.46%
Regular Savings 38,562 2.99% 38,698 3.47% 41,281 3.49%
Time Deposits
Less than $100,000 119,745 5.48% 103,356 5.43% 66,647 4.20%
$100,000 and more 20,457 6.12% 17,842 5.58% 7,246 4.27%
--------------- ---------------- -------------
Total Interest- Bearing Deposits $ 278,745 4.45% 266,467 4.47% 258,168 3.68%
--------------- ---------------- -------------
Total $ 323,456 $ 306,100 $ 296,369
=============== ================ =============
</TABLE>
Table 12 - Remaining Maturities of CD's of $100,000 or More
December 31, 1996
-----------------
(In Thousands)
Three Months or Less $ 3,801
Over Three Through Six Months 1,379
Over Six Through Twelve Months 4,829
Over Twelve Months 11,545
-------------
Total $ 21,554
=============
<PAGE>
Stockholders' Equity:
Stockholders' equity, during 1996, increased $3,420,220 or 10.01%. This
increase reflects $201,581 unrealized net loss on securities in the available
for sale category. Stockholders' equity, during 1995, increased $4,107,185 or
13.67%. This increase reflects $732,578 unrealized net gain on securities placed
in the available for sale category. During 1994, stockholders' equity increased
$2,711,051 or 9.92% which reflects $622,110 unrealized net loss on securities
placed in the available for sales category. These increases represent retention
of net income after the payment of dividends. Cash dividends paid increased by
15.66% in 1996, 16.90% in 1995 and 18.33% in 1994. Book value per share as of
December 31, 1996 was $18.79, $17.08 as of December 31, 1995 and $15.02 as of
December 31, 1994.
Table 13 - Return on Equity and Assets
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(dollars in thousands except per share data)
<S> <C>
Total Dividends Paid as a
Percent of Net Income 34.65% 32.97% 29.87% 25.88% 28.21%
Return on Averge Assets 1.51 1.45 1.43 1.53 1.41
Return on Average Equity 15.34 15.48 16.30 18.30 17.00
Average Equity to Average Assets 9.85 9.36 8.77 8.46 8.28
</TABLE>
Accounting Rule Changes:
FASB Statement No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities", was issued in June 1996
and establishes, among other things, new criteria for determining whether a
transfer of financial assets in exchange for cash or other consideration should
be accounted for as a sale or as a pledge of collateral in a secured borrowing.
Statement 125 also establishes new accounting requirements for pledged
collateral. As issued, Statement 125 is effective for all transfers and
servicing of financial assets and extinguishments of liabilities occurring after
December 1996.
FASB Statement No. 127 "Deferral of the Effective Date of Certain
Provisions of FASB Statement No. 125", defers for one year the effective date
(a) paragraph 15 of Statement 125 and (b) for repurchase agreement, dollar-roll,
securities lending, or similar transactions, of paragraph 9-12 and 237(b) of
Statement 125.
The effects of these Statements on the Company's consolidated financial
statements are not expected to be material.
Item 8. Financial Statements And Supplementary Data
See Item 14 titled "Exhibits, Financial Statement Schedules and Reports
on 8-K" and Annual Report, pages 13-32.
Item 9. Changes In And Disagreements With Accountants On Accounting
And Financial Disclosure
None
<PAGE>
PART III
Item 10. Directors And Executive Officers Of The Registrant
A. Directors of the Company
In accordance with the Company's Bylaws, the Board of Directors has the
power to fix the number of directors of the Company at not less than five (5)
nor more than fifteen (15). The Board has adopted a resolution setting the
number of directors to be elected at six (6).
<TABLE>
<CAPTION>
Common Ownership as a
Director Shares of a Percentage
of Company of Common
Principal Occupation Company Beneficiall Stock
Name (Age) Last Five Years(1) Since (2) Owned (3)(4) Outstanding
- ---------- ------------------ ----------- --------------- --------------
<S> <C>
Lee S. Baker, 46 Owner - Manager 1984 7,428(5) *
Staunton Tractor, Inc.
Benham Black, 62 Chairman of the Board, 1969 18,514(6) *
Virginia Financial Corporation and
Planters Bank & Trust Company of
Virginia;
Attorney-at-Law,
Black, Noland & Read, P.L.C.
Harry V. Boney, Jr., 63 Vice Chairman of the Board and 1975 12,700(7) *
President,
Virginia Financial Corporation and
Planters Bank & Trust Company of
Virginia
Jan S. Hoover, 40 Vice President and Treasurer, 1995 400 *
Arehart Associates, Ltd.
Martin F. Lightsey, 54 President and CEO, 1995 400 *
Specialty Blades, Inc.
James S. Quarforth, 42 President, CEO and Director, 1995 400 *
CFW Communications, Co.;
Director of U.S.T.N., Inc. and
American Telecasting, Inc.; and
Chairman, Virginia PCS Alliance,
L.C.
All directors and executive 44,634 2.23%
officers as a group (8 persons)
</TABLE>
- ----------------
* Less than 1.0%; based on total outstanding shares of 2,000,000 shares
as of date of this Statement.
<PAGE>
(1) Mr. Black has been Chairman of the Board of Planters Bank & Trust
Company of Virginia since April 13, 1994 and was Vice Chairman of
Planters Bank & Trust Company of Virginia from April 1984 to April 12,
1994; Mr. Boney was the President of Planters Bank & Trust Company of
Virginia from January 14, 1976 to December 31, 1996.
(2) Dates reference when individual became a director of Planters Bank &
Trust Bank Company of Virginia, except that Mr. Black became a director
of Augusta Bank and Trust Company, a predecessor of Planters Bank &
Trust Company of Virginia in 1971.
(3) For purposes of this table, beneficial ownership has been determined in
accordance with the provision of Rule 13d-3 of the Securities Exchange
Act of 1934 under which, in general, a person is deemed to be the
beneficial owner of a security if he has or shares the power to vote or
direct the voting of the security or the power to dispose of or direct
the disposition of the security, or if he has the right to acquire
beneficial ownership of the security within sixty days.
(4) Includes shares held by affiliated corporations, close relatives, and
children, and shares held jointly with spouses or as custodians or
trustees for children.
(5) 6,596 shares shown are registered in the names of corporations. (6) 50
shares are registered in spouse's name, 292 shares are registered in
the name of children and 8,416 shares are registered in the name of
trustees; the reporting of such shares is not to be construed as an
admission of beneficial ownership; in addition, Mr. Black is a trustee
for Mocomp, Inc., which owns 146,836 shares of Virginia Financial
Corporation common stock. The reporting of such shares is not to be
construed as an admission of beneficial ownership by the listed
trustees, and none of these shares are reflected in this table.
(7) 11,000 shares are registered in the name of trustees;. the
reporting of such shares is not to be construed as an admission of
beneficial ownership
B. Executive Officers of the Company and the Bank
The names and ages of all principal officers of the Company and the
Bank and of all persons chosen to become principal officers, the nature of any
family relationship between them, their positions and offices with the Bank and
terms of office and any arrangements or understandings between officers and any
other person pursuant to which that person was selected as an officer is as
follows:
Harry V. Boney, Jr., Age 63, President and Vice Chairman of the Board, Virginia
Financial Corporation and Vice Chairman of the Board and Director of Planters
Bank & Trust Company of Virginia.
Mr. Boney was employed by Planters Bank & Trust Company, Staunton,
Virginia, on April 28, 1975, as Executive Vice President. In January 1976,
he became President and has served in that position until December 31,
1996. Mr. Boney became Vice Chairman of the Board of Directors of the Bank
on April 10, 1996 and became President of the Company on September 27, 1996.
William P. Heath, Jr., Age 52, Vice President of Virginia Financial Corporation
and President of Planters Bank & Trust Company of Virginia.
Mr. Heath was employed by Planters Bank & Trust Company of Virginia
in January 1996 as Executive Vice President and served in that capacity
through December 31, 1996. Mr. Heath became Vice President of the Company on
September 27,1996 and President of the Bank on January 1, 1997. Mr. Heath
has thirty-one years experience in banking, having served as Executive Vice
President and area President in a statewide banking organization.
<PAGE>
Fred D. Bowers, Age 60, Secretary/Treasurer, Virginia Financial Corporation, and
Senior Vice President and Cashier, Planters Bank & Trust Company of Virginia.
Mr. Bowers was employed as an Assistant Vice President of Planters Bank
& Trust Company, Staunton, Virginia, October 19, 1968, and was elected Cashier
on December 31, 1972, Vice President and Cashier January 1, 1974, Senior Vice
President and Cashier December 4, 1984, and has served in that position to the
present time. Mr. Bowers was elected Secretary Treasurer of the Company on
September 27, 1996.
Joseph Shomo, Age 62, Senior Vice President, Planters Bank & Trust Company of
Virginia.
Mr. Shomo was employed by Planters Bank & Trust Company, Staunton,
Virginia, in July 1957. He was elected Assistant Cashier in 1963 and Vice
President in 1967. Mr. Shomo has been serving as Senior Vice President since
1974.
Thomas A. Davis, Age 52, Senior Trust Officer, Planters Bank & Trust Company of
Virginia.
Mr. Davis was employed by Planters Bank & Trust Company of Virginia in
May of 1978 as Senior Trust Officer and head of the Trust Department. He
continues to serve in this capacity.
There is no family relationship among the principal officers of the
Bank. To the knowledge of the management of the Bank, there are no arrangements
or understandings between officers and any other person or persons pursuant to
which any person was selected as an officer of the Bank other than the usual
fiduciary relationship existing between the officers and stockholders and
depositors of the Bank.
Item 11. Executive Compensation
The table below sets forth information concerning the annual compensation earned
by the executive officers of the Bank. Since the Company was only formed as the
Bank's holding company effective January 2, 1997, the amounts reflected below
related to compensation earned as an officer of the Bank for each of the three
years listed. However, the individuals' current positions are reflected in the
principal positions listed.
<PAGE>
SUMMARY COMPENSATION TABLE
Annual Compensation
------------------------------------------
<TABLE>
<CAPTION>
All Other
Compensation
Name and Principal Position Year Salary($) Bonus($) ($)(1)
---- --------- -------- ------------
- -----------------------------------------
<S> <C>
Harry V. Boney, Jr. 1996 155,000 14,043 25,686
President of the Company, 1995 145,000 14,882 25,548
Vice Chairman of the Board of 1994 138,000 14,770 26,257
Planters Bank & Trust Company of
Virginia
William P. Heath, Jr. 1996 115,000 10,419 20,772
Vice President of the Company, 1995 - - -
and President of the Bank 1994 - - -
Joseph Shomo 1996 90,600 8,209 17,650
Senior Vice President of 1995 86,100 8,837 17,035
the Bank 1994 82,000 8,776 17,093
Fred D. Bowers 1996 84,000 7,611 18,640
Secretary/Treasurer of the Company 1995 79,800 8,190 18,060
and Senior Vice President/Cashier of 1994 76,000 8,134 18,162
the Bank
</TABLE>
- ---------------------
(1) This amount represents the cost of the following benefits for the named
officer. Medical insurance, disability insurance, life insurance and
retirement are provided for all full-time employees. Amounts of life
insurance are based on individual salary levels for all employees except
officers with the title of vice president or above and trust officer or
above. These officers receive part term life and part whole life based on
individual salary levels. All full-time employees who meet the minimum age
requirement of 20 1/2 years of age participate in a defined contribution
retirement plan based on total compensation.
Human Resources Committee Report On Executive Compensation
The Personnel and Salary Committee of the Board of Directors of the Bank
has furnished the following report on executive compensation.
The committee has developed and implemented compensation policies and
plans which seek to enhance the profitability of the Company and maximize
shareholder value by aligning closely the financial interests of its Senior
Officers with those of its Shareholders. The policies are designed to provide
competitive levels of compensation to attract and retain corporate officers and
key employees with outstanding abilities and to motivate them to perform to the
full extent of their abilities. The policies provide for both annual salaries
and participation in an incentive compensation plan with all other employees of
the Company.
The committee sets base salaries at levels competitive with amounts paid
to senior executives with comparable qualifications, experience and
responsibilities after comparing salary ranges of similar sized banks. The
<PAGE>
annual and incentive compensation is also closely tied to the Company's success
in achieving significant financial performance goals.
The committee reviews and sets the Chief Executive Officer's annual salary
based on the compensation data from selected peer banks, their assessment of
past performance and its expectation as to future contributions in leading the
Company. In addition to the internal measures above, the committee also reviews
the financial performance of the Company in relation to peer group averages and
predetermined goals set by the Board of Directors. The committee uses a
subjective approach in its evaluation of these factors and therefore does not
rely on a formula or weights of specific factors.
The incentive compensation plan, which includes all employees of the
Company, stresses rewards for achievement of financial goals set each year. This
program rewards employees for producing higher income, reducing costs and
providing customers with excellent service. The formula for 1996 as adopted by
the Board of Directors calls for an incentive of an increasing percentage of net
income based on achievement of specified levels of return on beginning equity.
The levels of incentive compensation range from $0 for a 10% or less return on
beginning equity to 7.00% of net income for a 17.50% or higher return on
beginning equity. This formula defines the incentive fund available for
distribution for the year. The incentive funds are allocated prorata to all
employees based on their earnings.
<PAGE>
Shareholder Return
Management provides below a line graph which compares the Company's
shareholder return with the return of the NASDAQ stock index and to the returns
of The Carson Medlin Company's Independent Bank Index (IBI), an index of 18
financial institutions located in Florida, Georgia, North Carolina, Tennessee
and Virginia, as calculated by The Carson Medlin Company, Investment Bankers.
The total five year return was calculated for each of the institutions in the
peer group taking into consideration changes in stock price, cash dividends,
stock dividends, and stock splits since December 31, 1991. The individual
results were then weighted by the market capitalization of each institution in
the survey relative to the entire peer group.
PLANTERS BANK & TRUST COMPANY OF VIRGINIA
Five Year Performance Index
[Graph]
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
Planters Bank & Trust Company of Virginia 100 117 164 209 245 305
Independent Bank Index 100 130 163 197 268 313
NASDAQ Index 100 116 134 131 185 227
Specifically, this graph was created by comparing the percentage change in
stock prices for the Company and both indices on a year to year basis, looking
only at the closing price of the stock as of December 31 of each year surveyed.
Accordingly, this graph may be affected by unusually high or low prices at
December 31, 1991 or by temporary swings in stock price at December 31 of a
given year.
<PAGE>
Item 12. Security Ownership Of Certain Beneficial Owners
To the best of management's knowledge, the following own either
beneficially or of record more than 5% of the Company's outstanding shares of
common stock.
<TABLE>
<CAPTION>
Title of Name and Address of Amount and Nature of Percent of
Class Beneficial Owner Beneficial Ownership Class
<S> <C>
Common Carlyle Van D. Cochran 138,128 Direct 6.91
8205 Kerry Road
Chevy Chase, Maryland
Common Mocomp, Inc. 146,836 Direct (1) 7.34
P.O. Box 920
Verona, Virginia 24482
Common John M. Moore 101,054 Direct (2) 5.05
Route 4, Bells Lane
Staunton, Virginia 24401
</TABLE>
- ---------------
(1) One hundred percent (100%) of Mocomp, Inc. common stock is owned by
a Trust Under Agreement dated January 10, 1992; P. W. Moore,
Trustor and P. W. Moore, Jr., Dorothy B. Moore and Benham M. Black,
Trustees; Mocomp, Inc. owns 146,836 shares of Virginia Financial
Corporation common stock. The reporting of such shares is not to be
construed as an admission of beneficial ownership by the listed
trustees.
(2) Shares shown include 4,678 shares registered in spouse's name; the
reporting of such shares is not to be construed as an admission of
beneficial ownership by Mr. Moore.
Incorporated herein by reference information set forth in Item 10-A
above.
Item 13. Certain Relationships And Related Transactions
The Company has had, and expects to have in the future, transactions in
the ordinary course of business with a number of its directors, officers,
principal shareholders and their associates on substantially the same terms,
including interest rates and collateral on loans, as those prevailing at the
same time for comparable transactions with others and do not involve more than
the normal risk of collectibility or present other unfavorable features.
During 1996, the highest aggregate extension of credit to directors,
officers, principal shareholders and their associates as a group amounted to
$757,549 which is 2.02% of the equity capital of the Company, and the
outstanding balances of these credits as of December 31, 1996 amounted to
$690,591 which is 1.57% of the equity capital of the Company.
During 1996, there were no extensions of credit to a director, officer,
principal shareholder and/or their associates which exceeded 10% of the
Company's capital.
<PAGE>
Directors' Fees And Attendance
During 1996, directors were paid $1,960 annual compensation plus fees at
the rate of $410 for attendance at each monthly meeting of the Board of
Directors. The members of the Trust Committee received $105 for each regular
monthly meeting and $105 for each special meeting not immediately preceding or
following a regular Board of Directors meeting. The Investment Review
Subcommittee of the Trust Committee is composed of the Vice Chairman of the
Board, the Senior Trust Officer and one member of the Trust Committee. The Trust
Committee member rotates on a monthly basis with every member of the Trust
Committee participating in the rotation. The Vice Chairman received no
compensation and committee member received $105 for each meeting. Members of the
Examination Committee received $135 for each regular quarterly meeting, $105 for
each special meeting not immediately preceding or following a regular Board of
Directors meeting. The Loan Committee is composed of the Chairman of the Board,
the President of the Company and three other members of the Board of Directors.
The Directors rotate every four months, with every member of the Board of
Directors participating in the rotation. The Chairman and committee members
received $110 for each meeting. Directors were paid at the rate of $105 for
attendance at all other committee meetings which were not immediately preceding
or following a regular Board of Directors meeting. The total directors' fees
paid for 1996 were $105,020. Full-time, salaried officers were not paid for
attendance at any Board or committee meetings.
During 1996, there were 13 meetings of the Board of Directors and each
nominee attended more than 75% of the meetings of the Board and of the
committees of which each was a member.
The average attendance of all nominees at Board and committees of which
he/she was a member was 92.37%.
Transactions In Which Directors Have An Interest
During the year 1996, the Company paid $44,651 for legal services to the
firm of Black, Noland and Read, of which Mr. Black is a member, and the Company
proposes to retain this firm to perform legal services for the Company during
1997.
During 1996, the Company paid $75,302 to Staunton Insurance
Agency, Incorporated, for various insurance coverages. H. C. Stuart
Cochran, a director of the Company, is Vice President and Treasurer of
Staunton Insurance Agency, Incorporated.
Also see Annual Report Page 27 "Note 8-Related Party Transactions".
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules And Reports On 8-K
Listed below are all financial statements and exhibits filed as part of
this annual report.
(a) (1) Financial Statements
Report of Independent Auditors (See Annual Report, page 13)
Consolidated Balance Sheets as of December 31, 1996, and
December 31, 1995 (See Annual Report, page 14)
Consolidated Statements of Income for Years Ended December 31, 1996,
December 31, 1995, and December 31, 1994 (See Annual Report, page
15 and 16)
Consolidated Statements of Cash Flows for Years Ended
December 31,1996, December 31, 1995, and December 31, 1994
(See Annual Report, pages 17 and 18)
Consolidated Statements of Changes in Stockholders' Equity for Years
EndeD December 31, 1996, December 31, 1995, and December 31, 1994
(See Annual Report, page 19)
Notes to Consolidated Financial Statements for Years Ended
December 31, 1996, December 31, 1995 and December 31, 1994
(See Annual Report, pages 20-32)
(a) (2) Financial Statement Schedules
All schedules are omitted because of the absence of conditions under
which they are required or because the required information is given in
the financial statements or notes thereto.
(a) (3) Exhibits
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
December 31,1996
(c) Exhibits required by Item 601 of Regulation S-K
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2 Plan of Reorganization Incorporated by
reference to Appendix
A of Exhibit 99.1 of
the Company's Form 8-B
successor registration
statement filed March
24, 1997.
3(i) Articles of Incorporation Incorporated by
reference to Exhibit
3.1 of the Company's
Form 8-B successor
registration statement
filed March 24, 1997.
3(ii) Bylaws Incorporated by
reference to Exhibit
3.2 of the Company's
Form 8-B successor
registration statement
filed March 24, 1997.
10 Material Contracts None.
13 Annual Report Attached hereto
21 Subsidiaries Planters Bank & Trust
Company of Virginia,
sole subsidiary
27 Financial Data Schedule Attached.
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized:
Virginia Financial Corporation Virginia Financial Corporation
Staunton, Virginia Staunton, Virginia
by /s/ HARRY V. BONEY, JR. /s/ FRED D. BOWERS, SR.
__________________________________ ________________________________________
Harry V. Boney, Jr., President Fred D. Bowers, Sr., Secretary/Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
____ _____ ____
<S> <C>
/s/ BENHAM M. BLACK Chairman of the Board March 25,1997
- ------------------------------------ Director --------------
Benham M. Black
/s/ HARRY V. BONEY, JR. President March 25, 1997
- ------------------------------------ --------------
Harry V. Boney, Jr. Director
/s/ LEE S. BAKER Director March 25, 1997
- ------------------------------------ --------------
Lee S. Baker
/s/ JAN S. HOOVER Director March 25, 1997
- ------------------------------------ --------------
Jan S. Hoover
/s/ MARTIN F. LIGHTSEY Director March 25, 1997
- ------------------------------------ --------------
Martin F. Lightsey
/s/ JAMES S. QUARFORTH Director March 25, 1997
- ------------------------------------ --------------
James S. Quarforth
</TABLE>
Exhibit 13
Planters Bank & Trust
Company of Virginia
===============================================================================
1996 Annual Report
<PAGE>
Contents
Selected Financial Data
Letter to Stockholders 3
Comments by Management 6
Report of Independent Auditors 13
Balance Sheets 14
Statements of Income 15
Statements of Cash Flows 17
Statements of Changes in Stockholders' Equity 19
Notes to Financial Statements 20
Management 33
<PAGE>
To Our Stockholders
March 13, 1997
Dear Stockholders:
Management is pleased to report on several topics for the year 1996 which
include not only the performance of the Bank but also the formation of Virginia
Financial Corporation, the offering of new financial products and a view of our
future growth.
The numbers contained herein reflect the hard work and dedication of our
employees who strive to provide excellent service to our customers. Without
their positive attitude and commitment we would be viewed as just another
community bank. Next to our customers, our employees are the most valuable asset
we have.
The Bank's growth in earnings, deposits, and loans continues to be a reflection
of the local economy. Net income for the year was $5,541,801 or $2.77 per share
representing an increase of 10.07% over 1995. Cash dividends increased to $.96
per share from $.83 in 1995 for an increase of 15.69%.
As of December 31, 1996, outstanding loans amounted to $235,952,130 which is
$23,625,085 more than December 1995. In addition to an active year in our loan
portfolio, we also closed $35,348,289 in mortgage loans. These loans were
ultimately sold to the secondary market. On the deposit side of the balance
sheet, we experienced a $10,797,178 increase over 1995. A 3.38% growth rate
brings our total deposits to $330,374,965.
The formal employee training program which began in 1995 has sharpened our
employees' skills for providing excellent service to our present customers and
for making a conscious effort to attract new customers.
During the year Davis Miers joined the Bank to sell non-insured financial
products such as mutual funds and annuities. With Davis' 11 years of experience
selling these products we can provide the most competitive full-service
brokerage services in our market.
George Doome retired during the year, after over five decades in banking, the
last 19 years with Planters. While we will miss George's contribution, we wish
him a long and happy retirement.
In 1996 we also began to see the results of the investment we made in Planters
Insurance Agency in 1995. The agency is a wholly owned subsidiary of Planters
Bank and is licensed to sell title insurance.
Last, and certainly not least, you approved the formation of Virginia Financial
Corporation, the holding company of which Planters is a wholly owned subsidiary.
This decision will enable the Corporation to grow as we look for merger and/or
acquistion partners.
The Bank had a good year. The holding company is formed; and the future looks
bright. We appreciate the attitude of our stockholders and we will strive to
enhance your investment in this company. We appreciate your support and solicit
your thought as we continue to grow the franchise, deliver excellent customer
service and conform to all rules and regulations which govern the financial
services industry.
/s/ HARRY V. BONEY, JR. /s/ WILLIAM P. HEATH, JR.
- ----------------------- -------------------------
Harry V. Boney, Jr. William P. Heath, Jr.
Vice Chairman of the Board President & CEO
<PAGE>
Planters Bank & Trust Company of Virginia
and Subsidiary
provides a full range of banking services with ten offices in Staunton,
Waynesboro, Grottoes and Augusta County.
Selected Financial Data
(000's Omitted on Dollar Items, Except for Per Share Amounts)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Deposits.............................$ 330 375.........$319 578........$297 006.........$279 290.........$269 355
Loans, Net...........................$ 232 913.........$209 541........$194 054.........$168 850.........$165 182
Assets...............................$ 377 113.........$356 068........$344 473.........$308 243.........$297 189
Stockholders' Equity.................$ 37 574.........$ 34 154........$ 30 046.........$ 27 335.........$ 23 898
Interest Income......................$ 27 321.........$ 26 073........$ 22 902.........$ 21 436.........$ 21 310
Net Interest Income..................$ 14 637.........$ 13 730........$ 13 154.........$ 12 227.........$ 10 763
Provision for Loan Losses............$ 450.........$ 309........$ 421.........$ 217.........$ 168
Other Expenses Net of
Other Income......................$ 6 131.........$ 6 108........$ 5 875.........$ 5 276.........$ 5 081
Income Taxes.........................$ 2 514.........$ 2 278........$ 2 105.........$ 2 097.........$ 1 685
Net Income...........................$ 5 542.........$ 5 035........$ 4 753.........$ 4 637.........$ 3 829
Return on
Average Assets (%)................ 1.51......... 1.45......... 1.43.......... 1.53.......... 1.41
Return on
Average Equity (%)................ 15.34......... 15.48......... 16.30.......... 18.03.......... 17.00
Earnings Per Share*..................$ 2.77.........$ 2.52........$ 2.38.........$ 2.32.........$ 1.91
Book Value Per Share*................$ 18.79.........$ 17.08........$ 15.02.........$ 13.67.........$ 11.95
Cash Dividends
Per Share*........................$ 0.96.........$ 0.83........$ 0.71.........$ 0.60.........$ 0.54
Average Shares
Outstanding*...................... 2 000 000........2 000 000.......2 000 000........2 000 000........2 000 000
</TABLE>
* Adjusted for 100% stock dividends, December 1993
<PAGE>
Comments By Management
Nature and Scope of Business
At a special meeting of Shareholders held November 14, 1996, the Loans:
shareholders approved the agreement and plan of reorganization dated July 30,
1996 between the Bank and Virginia Financial Corporation. The agreement
provided for the reorganization of the Bank into a wholly-owned subsidiary of
Virginia Financial Corporation, organized to serve as the holding company for
the Bank. This reorganization became effective January 2, 1997.
Loans:
- ----------------------------------------
Real estate.......................68.05%
Farmers............................1.22%
Commercial........................14.52%
Consumer..........................15.89%
Other..............................0.32%
Planters Bank & Trust Company of Virginia, a registered state bank with
its main office and executive offices located at 24 South Augusta Street,
Staunton, Virginia, was formed in 1977 by merger of Planters Bank & Trust
Company, Staunton, Deposits: Virginia, organized in 1911, and Augusta Bank &
Trust Company, organized in 1972. The Bank has ten offices, in Staunton,
Waynesboro, Grottoes and Augusta County. Commercial banking and trust
activities account for 100% of the Bank's business. Planters provides a full
range of banking services, and as of December 31, 1996, had 153 full-time
employees and 19 part-time employees. The composition of the Bank's business
is reflected by the breakdown of current loans and deposits as shown.
Deposits:
Demand Deposits...................15.52%
NOW...............................12.00%
Money Market......................16.79%
Savings...........................10.98%
Time Deposits.....................44.71%
The Bank, effective December 12, 1995, formed Planters Insurance Agency,
Inc., a wholly-owned subsidiary of Planters Bank & Trust Company of Virginia.
During January 1996 the agency began marketing title insurance, its only
product, to the general public.
Stock
The Bank issues one class of stock, Common, which is not listed for
trading on a registered exchange or quoted on the National Association of
Securities Dealers Automated Quotation System (NASDAQ), and so far as the
Bank is aware, there are no active market makers in the Bank's stock. Trades
in the Bank's stock occur sporadically on a local basis. Local brokerage
offices will "match" or "pair" buy and sell orders. Accordingly, there is no
established public trade High Low market for shares of the Bank's stock, and
quotations do not necessarily reflect the price that would be paid in an active
and liquid market.
On December 31, 1996, there were 1,081 stockholders. Cash dividends
per share for 1996 were $0.96 and 1995 were $0.83. Management expects to
pay approximately $1.10 per share dividends in 1997.
Based upon sales prices furnished to the Bank by the Staunton, Virginia,
office of a Virginia headquartered brokerage firm, the high and low sales prices
of Bank stock during 1994, 1995 and 1996 were as shown on the chart.
1992 1993 1994 1995 1996
0.54 0.60 0.71 0.83 0.96
Dividends per Share ($) *
1992 1993 1994 1995 1996
19.00 26.00 32.25 37.00 45.00
Stock Price per Share Year-End ($) *
Per Share Sales Prices*
High Low
- -----------------------------------
1994...............$32.25....$26.00
1995...............$37.00....$31.00
1996...............$45.00....$37.00
*Adjusted for 100% stock dividends, December 1993.
Page 6
<PAGE>
Managements Discussion and Analysis of Operations
During 1996, the Bank's net income was $5,541,801 compared to $5,034,607
for 1995 and $4,753,161 for 1994. The increase in net income comparing1996 to
1995 was $507,194 or 10.07%, comparing 1995 to 1994 was $281,446 or 5.92%, and
comparing 1994 to 1993 was $115,732 or 2.50%.
Net interest income is the principal source of income for the Bank. The
changes in volume, interest rates and the mix of interest-earning assets and
interest-bearing liabilities has a significant impact on net interest income.
Net interest income was $14.6 million for 1996 compared to $13.7 million
for 1995 and $13.2 million for 1994. This represents increases of 6.6% in 1996,
4.4% in 1995, and 7.6% in 1994.
1994 1995 1996 1994 1995 1996
4.753 5.035 5.542 2.38 2.52 2.77
Net Income ($ in Millions) Net Income per Share ($)
Investment Securities
1994 1995 1996
129.3 125.4 118.8
Investment Securities ($ in Millions)
The average maturity of the Bank's investment portfolio was 1.9 years, 2.4
years, and 2.7 years as of December 31, 1996, 1995 and 1994, respectively.
Securities maturing in one year or less were $14.7 million or 12.4% of the
portfolio as of December 31, 1996, $34.9 million or 27.8% of the portfolio as of
December 31, 1995 and $19.0 million or 14.7% of the portfolio as of December 31,
1994.
During 1996, the portfolio was reduced by about $6.6 million and these
funds were used to fund loan growth during 1996. During 1995 the portfolio was
reduced by about $3.9 million and was used to reduce securities sold under
agreement to repurchase and to fund loan growth. During 1994 the portfolio
increased by $7.1 million and this growth was funded by deposits received from
the purchase of the Grottoes office of First Union National Bank of Virginia.
U.S. Treasury Securities were 11.4% of the portfolio as of December 31,
1996, 11.2% as of December 31, 1995 and 9.7% as of December 31, 1994. U.S.
Government Agencies were 72.7% of the portfolio as of December 31, 1996, 75.1%
as of December 31, 1995 and 77.2% as of December 31, 1994. Obligations of states
and political subdivisions were 15.7% of the portfolio as of December 31, 1996,
13.2% as of December 31, 1995 and 12.7% as of December 31, 1994.
During 1994 the Bank revised its accounting policy, adopting FASB 115,
"Accounting for Certain Investments in Debt and Equity Securities" resulting in
a reclassification of $23.6 million of investment securities as of January 1,
1994 to securities available for sale. As of December 31, 1996 investment
securities classified as available for sale were $50.7 million and as of
December 31, 1995 were $36.5 million. Securities classified as available for
sale are reported at fair value and as of December 31, 1996 had an unrealized
loss of $138,052, and as of December 31, 1995 an unrealized gain of $167,378 and
as of December 31, 1994 an unrealized loss of $942,891 which is shown net of
deferred taxes as a separate component of stockholders' equity.
Page 7
<PAGE>
Loans
1994 1995 1996
194.1 209.5 232.9
Total Net Loans ($ in Millions)
The loan portfolio increased $23.4 million during 1996, $15.5 million
during 1995, and $25.4 million during 1994. The percentage of net loans to total
assets as of December 31, 1996 was 61.8%, as of December 31, 1995 was 58.8% and
as of December 31, 1994 was 56.3%. During 1997 approximately $139.2 million of
the $232.9 million loan portfolio is due to mature or be repriced. During 1996
approximately $120.7 million of the $209.5 million portfolio was due to mature
or be repriced. During 1995 approximately $107.2 million of the $194.1 million
loan portfolio was due to mature or be repriced. Mortgage loans, commercial
loans and consumer loans all experienced growth during the three year period.
The Bank offers mortgage loan financing through the secondary mortgage market
which provides other sources of financing for the Bank's customers. During 1996
the Bank placed about $35.3 million, during 1995 about $28.5 million and during
1994 about $24.7 million through the secondary mortgage market.
Most mortgage loans placed in the Bank's loan portfolio are made with the
provision to reprice on a one, three or five year basis. A significant number of
commercial loans are represented by demand notes which provide the ability to
reprice.
The demand for loans remained relatively strong during 1996 when comparing
the growth of the portfolio to the growth in 1995. During 1994 loan demand was
very strong in the Bank's primary trade area. The Bank's primary trade area
continues to provide both diversity and relative stability in the employment and
economic activity.
Management believes the general quality of the loan portfolio remains
good. Total non-earning loans which represent loans which the accrual of
interest has been discontinued were $194,000 as of December 31, 1996, $140,000
as of December 31, 1995, and $219,000 as of December 31, 1994.
Allowance for Loan Losses
The allowance for loan losses is an estimate of an amount, by management,
to provide for potential losses in the loan portfolio.
Various factors, including charge-off experience, change in the mix and
volume of loans, the level of underperforming loans, the ratio of outstanding
loan balances to total loans and the perceived economic conditions in the Bank's
trade area are taken into consideration in determining the amount of the
provision for loan losses and the total amount of the loan loss reserve.
The allowance for loan losses was 1.29% of outstanding loans as of
December 31, 1996, 1.31% as of December 31, 1995 and 1.28% as of December 31,
1994. Net charge-offs were $196,833 during 1996, $47,518 during 1995 and
$113,753 during 1994. The percentage of net charge-offs to year-end loans was
0.08% for 1996, 0.02% for 1995 and 0.06% for 1994. The balance of the loan loss
reserve was $3,038,958 as of December 31, 1996, $2,785,791 as of December 31,
1995 and $2,524,309 as of December 31, 1994.
1994 1995 1996
421 114 309 48 450 197
Provision and Net Charge-Offs ($ in Thousands)
Page 8
<PAGE>
Deposits
1994 1995 1996
297.0 320.0 330.4
Total Deposits ($ in Millions)
During 1996 total deposits increased $10.8 million or 3.4% compared to
1995. Demand deposits and NOW accounts both experienced growth during 1996.
Money Market accounts and savings accounts decreased during the year due to the
movement of these deposits to Certificates of Deposit. Certificates of Deposit
continued to increase during 1996 due to interest rates on certificates compared
to other interest earning deposits offered by the Bank. Interest rates and the
versatility of financial instruments offered by other entities continue to
present strong competition in the growth of deposit balances and attracting new
deposit balances.
During 1995 total deposits increased $22.6 million or 7.6% compared to
1994. The movement of deposits from savings, NOW and Money Market accounts into
Certificates of Deposit which began in 1994 continued in 1995 due to the
interest rates paid on Certificates of Deposit. Non-interest checking increased
in 1995 due primarily to the increase in volume and customer base. Interest
rates and the versatility of financial instruments offered by other entities
continue to present strong competition in the growth of deposits and attracting
new deposit balances.
During 1994 total
deposits increased $17.7 million or 6.3%. Approximately $16.5 million in growth
was the deposits purchased with the Grottoes office of First Union National Bank
of Virginia in April 1994. During 1994 deposits moved from Money Market accounts
into Certificates of Deposit as interest rates through the year increased for
Certificates of Deposit. The level of interest rates paid in general on deposits
during 1994, compared to rates paid on U.S. Treasury and U.S. Government Agency
Securities and rates paid on financial instruments offered by other entities,
was not sufficient to attract new depositors.
Assets
Total assets increased during 1996 by approximately $21 million or 5.9%.
The two major categories of assets are the loan and investment portfolios.
Securities during 1996 decreased about $6.6 million and the loan portfolio
increased by about $23.4 million. The decrease in the investment portfolio, the
increase in deposits of about $10.8 million and federal funds purchased of $5.0
million funded the loan growth. At year-end 1996 loans were 61.8% of assets and
the investment portfolio was 31.5% of assets.
Total assets increased during 1995 by about $11.6 million or 3.36%. Loan
growth for 1995 was about $15.5 million and the security portfolio decreased
$3.9 million. The decrease in the security portfolio and deposit growth of $22.6
million was used to fund the increase in loans and fund the repayment of $1.0
million in purchased federal funds and $14.4 million in securities sold under
agreement to repurchase during 1995. At year end 1995 loans were 59% of assets,
and the security portfolio was 35% of assets.
Total assets increased during 1994 by about $36.2 million or 11.8%.
Approximately $16.5 million of this increase was funded by the purchase of
deposits with the Grottoes office of First Union National Bank of Virginia. At
year end 1994 loans were 56% of assets and the security portfolio was 38% of
assets.
1994 1995 1996
344.5 356.0 377.1
Total Assets ($ in Millions)
Page 9
<PAGE>
Stockholders' Equity
1994 1995 1996
0.71 0.83 0.96
Dividends per Share ($)
Stockholders' equity, during 1996, increased $3,420,220 or 10.01%. This
increase reflects $201,581 unrealized net loss on securities in the available
for sale category. Stockholders' equity, during 1995, increased $4,107,185 or
13.67%. This increase reflects $732,578 unrealized net gain on securities placed
in the available for sale category. During 1994, stockholders' equity increased
$2,711,051 or 9.92% which reflects $622,110 unrealized net loss on securities
placed in the available for sale category. These increases represent retention
of net income after the payment of dividends. Cash dividends paid increased by
15.66% in 1996, 16.90% in 1995 and 18.33% in 1994. Book value per share as of
December 31, 1996 was $18.79, $17.08 as of December 31, 1995, and $15.02 as of
December 31, 1994. Additional dividend information is provided under "Selected
Financial Data" and on page 3 under "Stock". The Bank's Tier I risk based
capital ratio as of December 31, 1996 was 17.20%, as of December 31, 1995 was
16.74%, and as of December 31, 1994 was 16.10%. The total risk based capital
ratio as of December 31, 1996, 1995 and 1994 was 18.45%, 17.99% and 17.35%,
respectively. Additional risk based capital information is provided under "Notes
to Consolidated Financial Statements, Note 11 Regulatory Matters".
1994 1995 1996
30.0 34.0 37.6
Year-End Stockholders' Equity ($ in Millions)
1994 1995 1996
16.3 15.5 15.3
Return on Average Equity ($)
Page 10
<PAGE>
Results of Operations
Net income for 1996 was $5,541,801 for an increase of $507,194 or 10.07%
compared to 1995. Net income for 1995 was $5,034,607 for an increase of $281,446
or 5.92% compared to 1994. Net income for 1994 was $4,753,161 for an increase of
$115,732 or 2.50%. Net income per share of common stock was $2.77 for 1996,
$2.52 for 1995 and $2.38 for 1994.
Net Interest Income:
Net interest income, represents the difference in interest received on
interest earning assets and interest paid on interest bearing liabilities.
Factors which have a significant impact on net interest income and the net
interest margin are changes in volume and mix and their respective yields or
rates on interest earning assets and interest bearing liabilities. Net interest
income for 1996 was $14,637,109 for an increase of $906,951 or 6.61% when
compared to 1995. Net interest income for 1995 was $13,730,158 for an increase
of $575,703 or 4.38% compared to 1994. Net interest income for 1994 was
$13,154,455 for an increase of $927,230 or 7.58% compared to 1993. The net
interest margins for 1996, 1995 and 1994 were 4.32%, 4.27% and 4.30%
respectively.
1994 1995 1996
13.2 13.7 14.6
Net Interest Income ($ in Millions)
Noninterest Income:
Noninterest income increased during 1996 compared to 1995 by $417,108 or
19.63%. Trust Department income increased by $163,283 or 19.87% during 1996
compared to 1995. This increase was due to the number and asset size of estates
closed and under administration and the overall volume of fee generating
activity during the year. Income from the secondary mortgage market area
increased $110,523 or 32.75%. The increase in this area was the result of a
greater number of loans being closed and the dollar amount of these loans.
During 1996 the Bank began offering non-FDIC insured investment products which
produced income of $86,648. Also during 1996, the Bank began operating Planters
Insurance Agency, Inc., a wholly-owned subsidiary of the Bank, which markets
title insurance, provided income of $17,408. Service charges on deposit
accounts, safe deposit box rent and other non-interest income experienced a very
modest increase due to the volume of business only, as the pricing of these
services and fees have not changed.
Noninterest income decreased by $81,149 or 3.68% during 1995 compared to
1994. Trust Department income decreased $119,440 or 12.69% during 1995 compared
to 1994. This decrease was due to the number of estates being closed and
declining interest rates. As interest rates decline the Trust Department income
is impacted due to a segment of the income earned being based on income
collected in the individual accounts. Service charges on deposit accounts and
other non-interest income both experienced a modest increase due to the volume
of business.
Noninterest income during 1994 compared to 1993 increased $13,937 or
0.64%. Trust Department income increased by $150,768 or 19.08% compared to 1993
primarily due to estate settlement fees. Service charges on deposit accounts
increased by $36,486 or 6.49% due to an increase in account numbers. Other
noninterest income decreased by $173,317 or 20.64% due primarily to decreased
fixed-rate real estate mortgage origination fees generated by the Secondary
Mortgage Department.
1994 1995 1996
2,206 2,125 2,542
Noninterest Income ($ in Thousands)
Page 11
<PAGE>
Noninterest Expense:
1994 1995 1996
8.1 8.2 8.7
Noninterest Expense ($ in Millions)
Noninterest expense increased during 1996 compared to 1995 by $444,218 or
5.39%. Salaries and employee benefits increased by $579,717 or 12.34%. This
increase was due to increases of individual salaries, employee benefits and the
expansion of the officer staff. These additions are in preparation of pending
retirements of executive and other officers. Most other operating expenses
continue to increase due to increased prices and the increase in volume of
business. Technological changes taking place in the financial industry at a
rapid pace must be dealt with, and though over a period of time result in
savings, have impact on other operating expenses, i.e. research, installation,
educational training and equipment costs. Two areas of non-interest expenses had
a rather significant decrease which are advertising and FDIC Insurance.
Advertising decreased about $61,000 and FDIC Insurance decreased about $347,000
due to premium decreases.
Noninterest expense increased $151,787 or 1.88% during 1995 compared to
1994. Salaries and employee benefits increased $319,377 or 7.29%. This increase
was due to increases in individual salaries, an increase in personnel and
increases in the cost of employee benefits. An educational department was
created during 1995 increasing educational expenses about $32,000. Other
operating expenses continue to increase due to increased prices and increases in
the total volume of business. Federal deposit insurance expense decreased
comparing 1995 to 1994 by about $300,000 due to premium decreases.
Noninterest expense increased $571,542 or 7.61% during 1994 compared to
1993. Salaries and employee benefits increased by $213,470 or 5.13%. This
increase was due to increases in individual salaries and the addition of the
staff at the Grottoes office which was purchased in April of 1994. Premise and
fixed asset expense increased $77,214 or 9.23% due to the purchase of the
Grottoes office and the installation expense of a network system linking all
branches to the main office for data input purposes. An additional $62,000 was
expensed in 1994 for Capital Stock Taxes due to an adjustment for the years 1992
through 1994.
Forecast
During 1996 the local economy saw slow-to-moderate growth. We expect to
see the same trend continue during 1997. With rates at relatively low levels
investors are looking for alternative products. Consequently, we have seen good
activity in our non-traditional bank products such as annuities and mutual
funds.
As in the past, we will be committed to providing our customers with the
products and services they have come to expect. The latest technology available
is being put to good use as we are now delivering "imaged statements" and the
future holds much promise for improved efficiency and productivity. With the
formation of Virginia Financial Corporation we are positioned to expand products
and geographic boundaries. So we look forward to the balance of 1997 with great
anticipation.
Page 12
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Directors
Planters Bank & Trust Company of Virginia
and Subsidiary
Staunton, Virginia
We have audited the accompanying consolidated balance sheets of
Planters Bank & Trust Company of Virginia and Subsidiary as of December 31, 1996
and 1995, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the years ended December 31, 1996, 1995,
and 1994. These financial statements are the responsibility of the Bank's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Planters Bank & Trust Company of Virginia and Subsidiary as of December 31, 1996
and 1995, and the results of its operations and cash flows for the years ended
December 31, 1996, 1995, and 1994, in conformity with generally accepted
accounting principles.
/s/ YOUNT, HYDE & BARBOUR, P.C.
Winchester, Virginia
January 7, 1997
Page 13
<PAGE>
PLANTERS BANK & TRUST COMPANY OF VIRGINIA
AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------- --------------
<S> <C>
Assets
Cash and due from banks (Note 2) $ 16 287 053 $ 12 574 772
Securities (fair value: 1996, $118,474,977;
1995, $125,461,851) (Note 3) 118 800 021 125 398 257
Loans, net (Notes 4, 5 and 8) 232 913 171 209 541 253
Bank premises and equipment, net (Note 6) 4 389 691 4 309 154
Accrued interest on loans and securities 2 987 949 3 083 104
Intangibles (Note 1) 289 813 313 465
Other assets (Note 7) 1 445 677 847 747
-------------- --------------
Total assets $ 377 113 375 $ 356 067 752
============== ==============
Liabilities and Stockholders' Equity
Demand deposits $ 51 260 387 $ 43 648 387
Negotiable orders of withdrawal 39 653 412 38 467 097
Money market deposit accounts 55 479 621 67 803 776
Regular savings 36 266 674 38 643 617
Time certificates of deposit of $100,000 or more 20 036 467 19 213 436
Time deposits 127 678 403 111 801 474
-------------- --------------
Total deposits $ 330 374 964 $ 319 577 787
Securities sold under agreements to repurchase 3 110 000 1 330 000
Federal funds purchased (Note 15) 5 000 000 - -
Other liabilities 1 054 602 1 006 376
-------------- --------------
Total liabilities $ 339 539 566 $ 321 914 163
-------------- --------------
Commitments and contingencies (Notes 9 and 10)
Stockholders' Equity
Common stock, $10 par value; authorized, 5,000,000 shares;
issued and outstanding, 2,000,000 shares $ 20 000 000 $ 20 000 000
Surplus 3 554 034 3 554 034
Retained earnings (Note 11) 14 110 888 10 489 087
Unrealized gain (loss) on securities available for sale, net (91 113) 110 468
-------------- --------------
Total stockholders' equity $ 37 573 809 $ 34 153 589
-------------- --------------
Total liabilities and stockholders' equity $ 377 113 375 $ 356 067 752
============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
Page 14
<PAGE>
PLANTERS BANK & TRUST COMPANY OF VIRGINIA
AND SUBSIDIARY
Consolidated Statements of Income
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- ----------------
<S> <C>
Interest Income
Interest and fee income on loans:
Loans secured by real estate $ 13 621 057 $ 12 541 809 $ 10 315 987
Loans to finance agricultural production
and other loans to farmers 290 222 289 841 223 669
Commercial and industrial loans 3 260 741 3 528 696 2 718 715
Loans to individuals for household, family
and other personal expenditures 3 051 222 2 721 136 2 220 570
Obligations of states and political subdivisions
in the U.S. 27 113 37 318 22 682
Interest on investment securities:
U.S. Treasury and U.S. Government
Agency securities 3 353 388 4 586 212 5 099 966
Corporate securities 34 616 37 906 82 457
Nontaxable interest income, state and municipal
securities 827 466 781 481 814 212
Interest on securities available for sale:
U.S. Treasury and U.S. Government
Agency securities 2 763 960 1 442 122 1 362 316
Interest income on federal funds sold and
securities purchased under agreements to resell 90 918 106 690 41 335
-------------- --------------- ----------------
Total interest income $ 27 320 703 $ 26 073 211 $ 22 901 909
-------------- --------------- ----------------
Interest Expense
Interest on time certificates of deposit of $100,000
or more $ 1 251 381 $ 995 031 $ 309 095
Interest on other deposits 11 154 523 10 905 851 9 190 483
Interest on federal funds purchased and securities
sold under agreements to repurchase 277 690 442 171 247 876
-------------- --------------- ----------------
Total interest expense $ 12 683 594 $ 12 343 053 $ 9 747 454
-------------- --------------- ----------------
Net interest income $ 14 637 109 $ 13 730 158 $ 13 154 455
Provision for loan losses (Note 5) 450 000 309 000 420 887
-------------- --------------- ----------------
Net interest income after provision for loan losses $ 14 187 109 $ 13 421 158 $ 12 733 568
-------------- --------------- ----------------
Noninterest Income
Trust department income $ 984 927 $ 821 644 $ 941 084
Service charge on deposit accounts 636 560 620 520 598 422
Fees on loans sold 423 105 315 477 266 044
Other noninterest income 497 231 367 074 400 314
-------------- --------------- ----------------
Total noninterest income $ 2 541 823 $ 2 124 715 $ 2 205 864
-------------- --------------- ----------------
Gains on securities $ 5 963 $ 1 250 $ 1 219
-------------- --------------- ----------------
</TABLE>
See Notes to Consolidated Financial Statements.
Page 15
<PAGE>
PLANTERS BANK & TRUST COMPANY OF VIRGINIA
AND SUBSIDIARY
Consolidated Statements of Income
(Continued)
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- ----------------
<S> <C>
Noninterest Expense
Salaries and employee benefits $ 5 277 526 $ 4 697 809 $ 4 378 432
Expense of premises and fixed assets 939 068 924 055 913 664
Computer services 557 035 528 252 501 967
FDIC insurance 2 000 347 206 647 002
Other noninterest expense 1 903 197 1 737 286 1 641 756
--------------- --------------- ----------------
Total noninterest expense $ 8 678 826 $ 8 234 608 $ 8 082 821
--------------- --------------- ----------------
Income before income taxes $ 8 056 069 $ 7 312 515 $ 6 857 830
Applicable income taxes (Note 7) 2 514 268 2 277 908 2 104 669
--------------- --------------- ----------------
Net income $ 5 541 801 $ 5 034 607 $ 4 753 161
=============== =============== ================
Earnings per share $ 2.77 $ 2.52 $ 2.38
Book value per share $ 18.79 $ 17.08 $ 15.02
Average shares outstanding 2 000 000 2 000 000 2 000 000
</TABLE>
See Notes to Consolidated Financial Statements.
Page 16
<PAGE>
PLANTERS BANK & TRUST COMPANY OF VIRGINIA
AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- ----------------
<S> <C>
Cash Flows from Operating Activities
Interest received $ 27 390 248 $ 25 946 155 $ 22 726 115
Fees and other noninterest income 2 534 371 2 124 715 2 205 864
Interest paid (12 648 063) (11 988 598) (9 715 955)
Cash paid to suppliers and employees (8 251 920) (7 904 943) (7 545 696)
Income taxes paid (2 580 651) (2 327 327) (2 200 129)
-------------- -------------- ---------------
Net cash provided by operating activities $ 6 443 985 $ 5 850 002 $ 5 470 199
-------------- -------------- ---------------
Cash Flows from Investing Activities
Proceeds from maturities of investment securities $ 30 079 930 $ 24 049 524 $ 18 970 849
Proceeds from calls of investment securities 217 150 251 250 - -
Proceeds from maturities of securities available
for sale 7 500 000 6 500 000 5 484 378
Proceeds from sales and calls of securities
available for sale 7 023 789 - - 2 006 960
Purchases of investment securities (9 764 647) (7 504 014) (26 130 220)
Purchases of securities available for sale (28 787 127) (18 246 520) (8 463 438)
Net (increase) in loans (22 824 368) (15 795 828) (25 624 888)
Origination of loans available for sale (11 504 489) - - - -
Proceeds from sale of loans available for sale 10 506 939 - - - -
Proceeds from sale of equipment - - - - 4 200
Capital expenditures (575 017) (320 551) (694 003)
Purchase of intangible assets - - - - (354 858)
Purchase of other assets (261 042) - - - -
Proceeds from sale of other real estate - - - - 63 000
-------------- -------------- ---------------
Net cash (used in) investing activities $ (18 388 882) $ (11 066 139) $ (34 738 020)
-------------- -------------- ---------------
Cash Flows from Financing Activities
Net increase in certificates of deposit $ 16 699 960 $ 43 609 040 $ 22 283 039
Net (decrease) in demand and savings deposits (5 902 782) (21 036 856) (4 567 039)
Net increase (decrease) in federal funds purchased 5 000 000 (1 000 000) 1 000 000
Net increase (decrease) in securities sold
under repurchase agreements 1 780 000 (14 365 000) 14 670 000
Cash dividends paid (1 920 000) (1 660 000) (1 420 000)
-------------- -------------- ---------------
Net cash provided by financing activities $ 15 657 178 $ 5 547 184 $ 31 966 000
-------------- -------------- ---------------
Net increase in cash and cash
equivalents $ 3 712 281 $ 331 047 $ 2 698 179
Cash and cash equivalents at beginning of year 12 574 772 12 243 725 9 545 546
-------------- -------------- ---------------
Cash and cash equivalents at end of year $ 16 287 053 $ 12 574 772 $ 12 243 725
============== ============== ===============
</TABLE>
See Notes to Consolidated Financial Statements.
Page 17
<PAGE>
PLANTERS BANK & TRUST COMPANY OF VIRGINIA
AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Continued)
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------------- --------------- ---------------
<S> <C>
Reconciliation of Net Income to Net Cash
Provided by Operating Activities
Net income $ 5 541 801 $ 5 034 607 $ 4 753 161
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 475 822 437 333 411 134
Provision for loan losses 450 000 309 000 420 887
Deferred tax (benefit) (77 777) (72 864) (73 077)
(Gain) on sale of securities (5 963) (1 250) (1 219)
(Gain) loss on sale of equipment 5 886 779 (3 997)
(Gain) on sale of other real estate - - - - (19 000)
Changes in assets and liabilities:
Increase in taxes payable 9 161 - - - -
(Increase) decrease in interest receivable 95 155 (185 542) (259 757)
Increase in interest payable 35 531 354 455 31 499
(Increase) decrease in prepaid expenses (34 244) 3 156 21 227
Increase (decrease) in accrued expenses 8 276 (88 158) 105 378
Premium amortization (discount accretion)
on securities, net (20 868) 44 514 87 483
Increase (decrease) in deferred income (38 795) 13 972 (3 520)
--------------- -------------- --------------
Net cash provided by operating activities $ 6 443 985 $ 5 850 002 $ 5 470 199
--------------- -------------- --------------
Supplemental Schedule of Noncash
Investing Activities
Unrealized gain (loss) on securities available for sale $ (305 430) $ 1 109 969 $ (942 591)
=============== ============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
Page 18
<PAGE>
PLANTERS BANK & TRUST COMPANY OF VIRGINIA
AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Unrealized
Gain
(Loss) On
Securities
Common Stock Available
----------------------------- Retained For Sale,
Shares Par Value Surplus Earnings Net
------------ -------------- ------------ -------------- ------------
<S> <C>
Balances, December 31, 1993 2 000 000 $ 20 000 000 $ 3 554 034 $ 3 781 319 $ - -
Cash dividends ($0.71 per share) - - - - - - (1 420 000) - -
Net income - - - - - - 4 753 161 - -
Net change in unrealized (loss) on
securities available for sale, net of
deferred income taxes of $320,481 - - - - - - - - (622 110)
------------ -------------- ------------ -------------- -----------
Balances, December 31, 1994 2 000 000 $ 20 000 000 $ 3 554 034 $ 7 114 480 $ (622 110)
Cash dividends ($0.83 per share) - - - - - - (1 660 000) - -
Net income - - - - - - 5 034 607 - -
Net change in unrealized gain (loss)
on securities available for sale, net
of deferred income taxes of $377,391 - - - - - - - - 732 578
------------ -------------- ------------ -------------- -----------
Balances, December 31, 1995 2 000 000 $ 20 000 000 $ 3 554 034 $ 10 489 087 $ 110 468
Cash dividends ($0.96 per share) - - - - - - (1 920 000) - -
Net income - - - - - - 5 541 801 - -
Net change in unrealized gain (loss)
on securities available for sale, net
of deferred income taxes of $103,849 - - - - - - - - (201 581)
------------ -------------- ------------- -------------- -----------
Balances, December 31, 1996 $ 2 000 000 $ 20 000 000 $ 3 554 034 $ 14 110 888 $ (91 113)
============ ============== ============= ============== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
Page 19
<PAGE>
PLANTERS BANK & TRUST COMPANY OF VIRGINIA
AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 1. Nature of Banking Activities and Significant Accounting Policies
Planters Bank & Trust Company of Virginia grants consumer,
agribusiness, commercial and real estate loans to customers
located primarily in the Augusta County and Rockingham County,
Virginia area. The loan portfolio is well diversified and is not
concentrated with any one business sector or industry.
The accounting and reporting policies of Planters Bank & Trust
Company of Virginia conform to generally accepted accounting
principles and predominant practices within the banking industry.
The following is a description of the more significant of these
policies:
Principles of Consolidation
The consolidated financial statements of Planters Bank & Trust
Company of Virginia and its wholly-owned subsidiary, Planters
Insurance Agency, Inc. include the accounts of both companies.
All material intercompany balances and transactions have been
eliminated in consolidation.
Cash and Due From Banks
For purposes of reporting cash flows, cash and due from banks
includes cash on hand, amounts due from banks and cash items in
process of collection. Cash flows from deposits, federal funds
purchased and renewals and extensions of loans are reported
net.
Securities
The Bank has adopted FASB No. 115, "Accounting for Certain
Investment in Debt and Equity Securities". This statement
addresses the accounting and reporting for investments in
equity securities that have readily determinable fair values
and for all investments in debt securities. Those investments
are classified in three categories and accounted for as
follows:
a. Securities Held to Maturity
Securities classified as held to maturity are those debt
securities the Bank has both the intent and ability to hold
to maturity regardless of changes in market conditions,
liquidity needs or changes in general economic conditions.
These securities are carried at cost adjusted for
amortization of premium and accretion of discount, computed
by the interest method over their contractual lives.
b. Securities Available for Sale
Securities classified as available for sale are those debt
and equity securities that the Bank intends to hold for an
indefinite period of time, but not necessarily to maturity.
Any decision to sell a security classified as available for
sale would be based on various factors, including
significant movements in interest rates, changes in the
maturity mix of the Bank's assets and liabilities, liquidity
needs, regulatory capital considerations, and other similar
factors. Securities available for sale are carried at fair
value. Unrealized gains or losses are reported as increases
or decreases in stockholders' equity, net of the related
deferred tax effect. Realized gains or losses, determined on
the basis of the cost of specific securities sold, are
included in earnings.
Page 20
<PAGE>
Notes to Consolidated Financial Statements
c. Trading Securities
Trading securities, which are generally held for the short
term in anticipation of market gains, are carried at fair
value. Realized and unrealized gains and losses on trading
account assets are included in interest income on trading
account securities. The Bank had no trading securities at
December 31, 1996 and 1995.
Loans
Loans are stated at the amount of unpaid principal, reduced by
unearned discount and fees and an allowance for loan losses.
Interest on all loans is accrued daily on the outstanding
balances. Mortgage loan origination and commitment fees and
certain direct costs are deferred and the net amount amortized,
generally over the contractual loan life, as an adjustment of
yield. Commitment fees related to standby letters of credit are
recognized over the commitment period.
On January 1, 1995, the Bank adopted FASB No. 114, "Accounting
by Creditors for Impairment of a Loan." This Statement has been
amended by FASB No. 118, "Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosures." Statement 114,
as amended, requires that the impairment of loans that have been
separately identified for evaluation is to be measured based on
the present value of expected future cash flows or,
alternatively, the observable market price of the loans or the
fair value of the collateral. However, for those loans that are
collateral dependent (that is, if repayment of those loans is
expected to be provided solely by the underlying collateral) and
for which management has determined foreclosure is probable, the
measure of impairment of those loans is to be based on the fair
value of the collateral. Statement 114, as amended, also
requires certain disclosures about investments in impaired loans
and the allowance for credit losses and interest income
recognized on loans. The Bank has no loans to which Statement
114 applies at December 31, 1996 and 1995.
Loans are placed on nonaccrual when a loan is specifically
determined to be impaired or when principal or interest is
delinquent for 90 days or more. Any unpaid interest previously
accrued on those loans is reversed from income. Interest income
generally is not recognized on specific impaired loans unless
the likelihood of further loss is remote. Interest payments
received on such loans are applied as a reduction of the loan
principal balance. Interest income on other nonaccrual loans is
recognized only to the extent of interest payments received.
Mortgage loans held for resale are stated at the lower of cost
or market on an individual loan basis.
Allowance for Loan Losses
The allowance for loan losses is maintained at a level which, in
management's judgment, is adequate to absorb credit losses
inherent in the loan portfolio. The amount of the allowance is
based on management's evaluation of the collectibility of the
loan portfolio, including the nature of the portfolio, credit
concentrations, trends in historical loss experience, specific
impaired loans, and economic conditions. Allowances for impaired
loans are generally determined based on collateral values or the
present value of estimated cash flows. The allowance is
increased by a provision for loan losses, which is charged to
expense and reduced by charge-offs, net of recoveries. Changes
in the allowance relating to impaired loans are charged or
credited to the provision for loan losses. Because of
uncertainties inherent in the estimation process, management's
estimate of credit losses inherent in the loan portfolio and the
related allowance may change in the near term.
Page 21
<PAGE>
Notes to Consolidated Financial Statements
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated
depreciation. Repairs and maintenance are expensed as incurred.
Gains and losses on routine dispositions are reflected in
current operations.
Depreciation is computed by the straight-line and declining
balance methods over the following estimated useful lives:
Buildings and improvements 10-50 years
Furniture and equipment 3-25 years
Trust Department Assets
Securities and other property held by the Trust Department in a
fiduciary or agency capacity are not assets of the Bank and are
not included in the accompanying financial statements.
Deposit Intangibles
The cost of purchased deposit relationships and other intangible
assets, based on independent valuation, are being amortized over
estimated remaining lives ranging from nine to fifteen years.
Amortization expense charged to operations was $23,652 in 1996,
$23,650 in 1995, and $17,743 in 1994.
Income Taxes
Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary
differences, operating loss carryforwards and tax credit
carryforwards. Deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it
is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
Pension Plan
The Bank has a trusteed, noncontributory defined contribution
pension plan covering substantially all full-time employees.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Note 2. Restrictions on Cash
To comply with Federal Reserve Regulations, the Bank is required
to maintain certain average reserve balances. The daily average
reserve requirement was $4,178,000 and $3,555,000 for the
reserve periods including December 31, 1996 and 1995,
respectively.
Page 22
<PAGE>
Notes to Consolidated Financial Statements
Note 3. Securities
The amortized cost and fair value of the securities being held to
maturity as of December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996
------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
--------------- -------------- --------------- ---------------
<S> <C>
U. S. Treasury $ 998 732 $ 256 $ - - $ 998 988
U. S. Government Agencies 48 284 508 53 094 (383 798) 47 953 804
State and Municipal 18 608 140 79 122 (74 270) 18 612 992
Corporate Securities 249 934 552 - - 250 486
--------------- -------------- -------------- ---------------
Total $ 68 141 314 $ 133 024 $ (458 068) $ 67 816 270
=============== ============== ============== ===============
</TABLE>
<TABLE>
<CAPTION>
1995
------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
--------------- -------------- --------------- ---------------
<S> <C>
U. S. Treasury $ 988 686 $ 5 840 $ - - $ 994 526
U. S. Government Agencies 70 822 956 292 241 (333 282) 70 781 915
State and Municipal 16 586 241 156 117 (66 153) 16 676 205
Corporate Securities 499 816 8 831 - - 508 647
--------------- -------------- -------------- ---------------
Total $ 88 897 699 $ 463 029 $ (399 435) $ 88 961 293
=============== ============== ============== ===============
</TABLE>
The amortized cost and fair value of the securities being held to
maturity as of December 31, 1996 and 1995 by contractual maturity,
are shown below. Expected maturities may differ from contractual
maturities because issuers may have the right to call or prepay
obligations without any penalties.
<TABLE>
<CAPTION>
1996 1995
--------------------------------- ----------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------------- -------------- --------------- ---------------
<S> <C>
Due in one year or less $ 9 264 553 $ 9 277 091 $ 25 373 704 $ 25 915 437
Due after one year through
five years 54 728 553 54 416 588 60 878 423 60 369 677
Due after five years through
ten years 3 898 208 3 872 326 2 405 572 2 415 245
Due after 10 years 250 000 250 265 240 000 260 934
--------------- -------------- --------------- ---------------
Total $ 68 141 314 $ 67 816 270 $ 88 897 699 $ 88 961 293
=============== ============== =============== ===============
</TABLE>
Page 23
<PAGE>
Notes to Consolidated Financial Statements
The amortized cost and fair values of securities available
for sale as of December 31, 1996 and 1995, are as follows:
<TABLE>
<CAPTION>
1996
------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
--------------- -------------- ------------- ---------------
<S> <C>
U. S. Treasury $ 12 514 561 $ 67 682 $ (19 716) $ 12 562 527
U. S. Government Agencies 38 282 198 79 082 (265 100) 38 096 180
--------------- -------------- ------------ ---------------
Total $ 50 796 759 $ 146 764 $ (284 816) $ 50 658 707
=============== ============== ============ ===============
</TABLE>
<TABLE>
<CAPTION>
1995
------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
--------------- -------------- ------------- ---------------
<S> <C>
U. S. Treasury $ 13 027 955 $ 81 131 $ (16 026) $ 13 093 060
U. S. Government Agencies 23 254 681 162 217 (59 944) 23 356 954
Other 50 544 - - - - 50 544
--------------- -------------- ------------ ---------------
Total $ 36 333 180 $ 243 348 $ (75 970) $ 36 500 558
=============== ============== ============ ===============
</TABLE>
The amortized cost and fair value of securities available for sale
as of December 31, 1996 and 1995, by contractual maturity are
shown below. Expected maturities may differ from contractual
maturities because issuers may have the right to call or prepay
obligations without any penalties.
<TABLE>
<CAPTION>
1996 1995
--------------------------------- ----------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
-------------- -------------- ---------------- --------------
<S> <C>
Due in one year or less $ 5 495 498 $ 5 476 405 $ 8 994 932 $ 9 018 239
Due after one year through
five years 44 801 810 44 695 116 27 287 704 27 431 775
Due after five years through
ten years 499 451 487 186 - - - -
Other - - - - 50 544 50 544
-------------- -------------- ---------------- --------------
Total $ 50 796 759 $ 50 658 707 $ 36 333 180 $ 36 500 558
============== ============== ================ ==============
</TABLE>
Proceeds from the calls of securities held to maturity during 1996
and 1995 was $217,150 and $251,250. Gross gains of $2,150 and
$1,250 were realized on those calls. There were no sales or calls
of securities held to maturity during 1994.
Proceeds from the sale of securities available for sale during
1996, 1995 and 1994 were $7,023,789, $-0- and $2,006,960. Gross
gains of $14,493, $-0- and $1,219 were realized on those sales.
Gross losses of $10,680 were realized on sales during 1996. No
losses were realized on those sales during 1995 and 1994.
The book value of securities pledged to secure deposits and for
other purposes amounted to $24,701,775 and $20,993,017 at December
31, 1996 and 1995, respectively.
Page 24
<PAGE>
Notes to Consolidated Financial Statements
Note 4. Loans
Loans at December 31, 1996 and 1995, are summarized as follows:
<TABLE>
<CAPTION>
Book Value Rounded to Thousands
----------------------------------
1996 1995
------------ ------------
<S> <C>
Real estate loans:
Construction $ 14 205 $ 12 924
Secured by farmland 933 1 056
Secured by 1-4 family residential 106 693 91 125
Other real estate loans 38 965 40 022
Loans to farmers (except those
secured by real estate) 2 879 2 988
Commercial and industrial loans
(except those secured by real estate) 34 313 34 626
Loans to individuals for household, family
and other consumer expenditures 37 542 29 056
All other loans (including overdrafts) 774 908
------------ ------------
Total loans $ 236 304 $ 212 705
Less: Unearned income 352 378
Allowance for loan losses 3 039 2 786
------------ ------------
Net loans $ 232 913 $ 209 541
============ ============
</TABLE>
Nonaccrual loans excluded from impaired loan disclosure under FASB
114 amounted to $193,876, $140,326 and $219,116 at December 31,
1996, 1995 and 1994, respectively. If interest on these loans had
been accrued, such income would have approximated $15,476, $3,689
and $27,535 for 1996, 1995, and 1994, respectively.
Note 5. Allowance for Loan Losses
Transactions in the allowance for loan losses for each of the
three years ended December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
<S> <C>
Balance, beginning $ 2 785 791 $ 2 524 309 $ 2 217 175
Recoveries 70 955 95 359 25 584
Provisions charged to operations 450 000 309 000 420 887
------------- ------------- -------------
Total $ 3 306 746 $ 2 928 668 $ 2 663 646
Loans charged off 267 788 142 877 139 337
------------- ------------- -------------
Balance, ending $ 3 038 958 $ 2 785 791 $ 2 524 309
============= ============= =============
</TABLE>
Page 25
<PAGE>
Note 6. Bank Premises and Equipment
The major classes of bank premises and equipment and the total
accumulated depreciation are as follows:
1996 1995
------------- -------------
Land $ 877 694 $ 877 694
Buildings and improvements 4 266 597 4 265 570
Furniture and equipment 3 852 943 3 597 700
------------- -------------
$ 8 997 234 $ 8 740 964
Accumulated depreciation 4 607 543 4 431 810
------------- -------------
$ 4 389 691 $ 4 309 154
============= =============
Depreciation charged to operations was $408,181 in 1996, $413,683
in 1995 and $393,391 in 1994.
Note 7. Income Taxes
Net deferred tax assets consist of the following components as of
December 31, 1996 and 1995:
1996 1995
------------- -------------
Deferred tax assets:
Allowance for loan losses $ 799 235 $ 713 158
Deferred loan fees 85 057 106 430
Securities available for sale 46 937 - -
Other 15 628 11 782
------------- -------------
$ 946 857 $ 831 370
------------- -------------
Deferred tax liabilities:
Bank premises $ 104 867 $ 112 112
Securities available for sale - - 56 910
Other 1 773 3 753
------------- -------------
$ 106 640 $ 172 775
------------- -------------
$ 840 217 $ 658 595
============= =============
The provision for income taxes charged to operations for the years
ended December 31, 1996, 1995 and 1994, consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------ -------------
<S> <C>
Current tax expense $ 2 592 045 $ 2 350 772 $ 2 177 746
Deferred tax (benefit) (77 777) (72 864) (73 077)
------------ ------------ ------------
$ 2 514 268 $ 2 277 908 $ 2 104 669
============ ============ ============
</TABLE>
The income tax provision differs from the amount of income tax
determined by applying the U.S. federal income tax rate to pretax
income due to the following:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ -------------
<S> <C>
Computed "expected" tax expense $ 2 739 063 $ 2 486 255 $ 2 331 662
Increase (decrease) in income taxes
resulting from:
Tax exempt interest income (234 641) (221 993) (235 323)
Other 9 846 13 646 8 330
------------ ------------ ------------
$ 2 514 268 $ 2 277 908 $ 2 104 669
============ ============ ============
</TABLE>
Page 26
<PAGE>
Notes to Consolidated Financial Statements
Note 8. Related Party Transactions
The following transactions between the Bank and
stockholders/directors are reflected in the financial statements:
1. Benham M. Black: Director
During 1996, the Bank paid $44,651 for legal services to
the firm of Black, Noland & Read of which Mr. Black is a
member.
2. H. C. Stuart Cochran: Director
During 1996, the Bank paid $75,302 to Staunton
Insurance Agency, Incorporated, for various insurance
coverages. Mr. Cochran is Vice President and Treasurer of
Staunton Insurance Agency, Incorporated.
The Bank has also had, and may be expected to have in the future,
banking transactions in the ordinary course of business with
directors, their immediate families and affiliated companies in
which they are principal stockholders, all of which have been, in
the opinion of management, on the same terms, including interest
rates and collateral, as those prevailing at the time for
comparable transactions with others.
Aggregate loan transactions with related parties were as follows:
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C>
Beginning balance $ 757 547 $ 1 212 416
New loans 247 696 503 344
Repayments (154 538) (555 817)
Reduction due to board member retirement (160 114) (402 396)
------------- -------------
Ending balance $ 690 591 $ 757 547
============= =============
Maximum balance during the year $ 757 547 $ 1 238 295
============= =============
</TABLE>
Note 9. Financial Instruments With Off-Balance Sheet Risk
The Bank is a party to financial instruments with
off-balance-sheet risk in the normal course of business to meet
the financing needs of its customers. These financial instruments
include commitments to extend credit and standby letters of
credit. These instruments involve, to varying degrees, elements of
credit risk in excess of the amount recognized in the balance
sheet. The Bank's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for
commitments to extend credit and standby letters of credit is
represented by the contractual amount of those instruments. The
Bank uses the same credit policies in making commitments as it
does for on-balance-sheet instruments.
A summary of the contract amount of the Bank's exposure to
off-balance-sheet risk as of December 31, 1996 and 1995 is as
follows:
1996 1995
-------- --------
(in thousands)
Financial instruments whose contract
amounts represent credit risk:
Commitments to extend credit $ 42 816 $ 48 404
Standby letters of credit 2 895 3 114
Page 27
<PAGE>
Notes to Consolidated Financial Statements
Commitments to extend credit are agreements to lend to a customer
as long as there is no violation of any condition established in
the contract and represent the undrawn portion of the total
commitment. Collateral held is, primarily, deeds of trust on real
estate.
Standby letters of credit are conditional commitments issued by
the Bank to guarantee the performance of a customer to a third
party. Most commitments are extended for less than one year with
the longest expiring in 1997. The credit risk involved in issuing
letters of credit is essentially the same as that involved in
extending loans to customers. The extent of collateral held for
those commitments at December 31, 1996, varies from 0% to 100%;
the average amount collateralized is 31.8%.
The securities portfolio includes U.S. Treasury and U.S.
Government agency securities which may, on occasions, be loaned to
securities dealers designated as "Primary Government Dealers" by
the Federal Reserve System. Such loans of securities are secured
by U.S. Treasury securities, U.S. Government agency securities, or
cash with a market value exceeding 102% of the market value of
securities lent. The loaned securities continue to be reported in
the consolidated financial statements, and the loan transaction is
not reflected therein. In the event loans are secured by cash, the
pledged cash is reported as an asset in the Corporation's
consolidated balance sheet and an offsetting liability is reported
as short-term borrowings. All such loans are callable in one
business day. Such transactions may involve credit and interest
rate risk. At December 31, 1996, securities loaned totaled
$4,789,000.
The Bank maintains cash accounts in other commercial banks. The
amount on deposit at December 31, 1996 exceeded the insurance
limits of the Federal Deposit Insurance Corporation by
approximately $10,299,835.
Note 10. Commitments and Contingencies
The Bank is party to various legal proceedings. Counsel is of the
opinion that settlement of these items should not have a material
effect on financial position.
Note 11. Regulatory Matters
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory -
possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Bank's
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must
meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios
(set forth in the table below) of total and Tier 1 capital (as
defined in the regulations) to risk-weighted assets, and of Tier 1
capital to average assets. Management believes, as of December 31,
1996, that the Bank meets all capital adequacy requirements to
which it is subject.
As of December 31, 1996, the most recent notification from the
Federal Deposit Insurance Corporation categorized the Bank as well
capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized, the Bank must
maintain minimum total risk-based, Tier 1 risk-based, and Tier 1
leverage ratios as set forth in the table. There are no conditions
or events since that notification that management believes have
changed the institution's category.
Page 28
<PAGE>
Notes to Consolidated Financial Statements
The Bank's actual capital amounts and ratios are also presented in the
table.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------------- ------------------------ ----------------------
Amount Ratio Amount Ratio Amount Ratio
------------ ----- ----------- ----- --------- -----
(Amount in Thousands)
<S> <C>
As of December 31, 1996:
Total Capital (to Risk
Weighted Assets) $ 40 096 18.45% =>$ 17 388 => 8.0% =>$ 21 734 => 10.0%
Tier 1 Capital (to Risk
Weighted Assets) $ 37 375 17.20% =>$ 8 694 => 4.0% =>$ 13 040 => 6.0%
Tier 1 Capital (to
Average Assets) $ 37 375 9.99% =>$ 14 972 => 4.0% =>$ 18 715 => 5.0%
As of December 31, 1995:
Total Capital (to Risk
Weighted Assets) $ 36 252 17.99% =>$ 16 120 => 8.0% =>$ 20 150 => 10.0%
Tier 1 Capital (to Risk
Weighted Assets) $ 33 730 16.74% =>$ 8 060 => 4.0% =>$ 12 090 => 6.0%
Tier 1 Capital (to
Average Assets) $ 33 730 9.53% =>$ 14 151 => 4.0% =>$ 17 689 => 5.0%
</TABLE>
Under applicable laws of Virginia, dividend payments are restricted
to undivided profits after set-aside of required surplus funds.
Amounts available for dividend distribution were $14,110,888 and
$10,489,087 at December 31, 1996 and 1995, respectively.
Note 12. Employee Retirement Plan
The Bank has a defined contribution retirement plan which covers
substantially all full-time salaried employees of the Bank.
Contributions are at the discretion of the Board of Directors.
Contributions amounted to $316,464, $292,346 and $247,938 in 1996,
1995 and 1994, respectively.
Note 13. Leases
The Bank leases its Terry Court banking facility located in the Terry
Court Shopping Center on North Augusta Street, Staunton, Virginia.
The lease provides for an original five (5) year term ending April
30, 1991, with options for three (3) five (5) year extensions. The
second option for a five (5) year extension was exercised. The
current minimum lease payment is $19,190. Lease expense was $20,244,
$21,885 and $19,583, for the years ended December 31, 1996, 1995, and
1994, respectively.
Page 29
<PAGE>
Note 14. Disclosures about Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is
practicable to estimate that value:
Cash and Short-Term Investments
For those short-term instruments, the carrying amount is a reasonable
estimate of fair value.
Securities
For securities held for investment purposes, fair values are based on
quoted market prices or dealer quotes.
Loan Receivables
For certain homogeneous categories of loans, such as some residential
mortgages, and other consumer loans, fair value is estimated using
the quoted market prices for securities backed by similar loans,
adjusted for differences in loan characteristics. The fair value of
other types of loans is estimated by discounting the future cash
flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining
maturities.
Deposit Liabilities
The fair value of demand deposits, savings accounts, and certain
money market deposits is the amount payable on demand at the
reporting date. The fair value of fixed-maturity certificates of
deposit is estimated using the rates currently offered for deposits
of similar remaining maturities.
Off-Balance Sheet Financial Instruments
The fair value of commitments is estimated using the fees currently
charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of
the counterparties. For fixed-rate loan commitments, fair value also
considers the difference between current levels of interest rates and
the committed rates. The fair value of letters of credit is based on
fees currently charged for similar agreements or on the estimated
cost to terminate them or otherwise settle the obligations with the
counterparties at the reporting date. The carrying amount is a
reasonable estimate of the fair value of securities loaned.
At December 31, 1996 and 1995, the carrying amounts and fair values
of loan commitments, stand-by letters of credit, and securities
loaned were immaterial.
The estimated fair values of the Bank's financial instruments are as
follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------- -----------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
----------- ----------- ------------ ------------
(in thousands) (in thousands)
<S> <C>
Financial assets:
Cash and short-term investments $ 16 287 $ 16 287 $ 12 575 $ 12 575
Securities 118 800 118 475 125 398 125 462
Loans 235 952 237 946 212 327 215 369
Less: allowance for loan losses (3 039) - - (2 786) - -
---------- ----------- ----------- ------------
Total financial assets $ 368 000 $ 372 708 $ 347 514 $ 353 406
========== =========== =========== ============
</TABLE>
Page 30
<PAGE>
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
1996 1995
--------------------------- --------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ----------- ----------- -----------
(in thousands) (in thousands)
<S> <C>
Financial liabilities:
Deposits $ 330 375 $ 330 253 $ 319 578 $ 320 372
Securities sold under agreements
to repurchase 3 110 3 110 1 330 1 330
Federal funds purchased 5 000 5 000 - - - -
------------ ----------- ----------- -----------
Total financial liabilities $ 338 485 $ 338 363 $ 320 908 $ 321 702
============ =========== =========== ===========
</TABLE>
Note 15. Short-Term Borrowings
The Bank had unused lines of credit totaling $9,000,000 with
nonaffiliated banks at December 31, 1996.
Note 16. Holding Company Formation
On November 14, 1996, the stockholders of Planters Bank & Trust
Company of Virginia approved an Agreement and Plan of
Reorganization and a Plan of Share Exchange.
This action provided for a share exchange in which each
shareholder of the Bank will receive one share of Virginia
Financial Corporation, a bank holding company formed to serve as
the holding company of the Bank, for each share of Bank stock they
now own. This reorganization was subject to approval by various
regulatory agencies and will be accounted for using the
pooling-of-interests method of accounting.
On January 2, 1997, this transaction was consummated.
Note 17. Unaudited Interim Financial Information
The results of operations for each of the quarters during the
two years ended December 31, 1996 and 1995 are summarized below
(in thousands, except per share data):
<TABLE>
<CAPTION>
1996
-------------------------------------------------------
Quarter Ended
March 31, June 30, September 30, December 31,
---------- ---------- ------------- ------------
<S> <C>
Interest income $ 6 686 $ 6 747 $ 6 900 $ 6 988
Net interest income 3 557 3 597 3 689 3 794
Income before
income taxes 2 244 1 832 1 827 2 153
Net income 1 539 1 268 1 264 1 471
Net income per share 0.77 0.63 0.63 0.74
</TABLE>
Page 31
<PAGE>
1995
---------------------------------------------------
Quarter Ended
March 31, June 30, September 30, December 31,
--------- -------- ------------- ------------
Interest income $ 6 298 $ 6 469 $ 6 538 $ 6 768
Net interest income 3 396 3 390 3 406 3 538
Income before
income taxes 1 841 1 717 1 862 1 893
Net income 1 272 1 189 1 284 1 290
Net income per share 0.64 0.59 0.64 0.65
Page 32
<PAGE>
Management
DIRECTORS
Lee S. Baker - Owner-Manager, Staunton Tractor, Inc.,
Farm equipment dealership
Benham M. Black - Attorney at Law; Member of law firm Black, Noland & Read,
P.L.C.
Harry V. Boney, Jr. - President, Virginia Financial Corporation; Vice Chairman,
Planters Bank & Trust Company of Virginia
H. C. Stuart Cochran - Vice President and Treasurer,
Staunton Insurance Agency, Inc.
Steven C. Corell - President-Owner, Corell, Ltd., Retail hardware store
G. Raymond Ergenbright - Commissioner of Revenue,
City of Staunton
Paul Flanagan - Retired Hospital Administrator
Jan S. Hoover -Vice President & Treasurer, Arehart Associates, Ltd. Certified
Public Accounting firm
Martin F. Lightsey -President & CEO, Specialty Blades, Inc.
Lewis W. Moore - Farmer
James S. Quarforth - President, CEO & Director, CFW Communications Company
OFFICERS
Benham M. Black......................Chairman of the Board
Harry V. Boney, Jr. .........................Vice Chairman
William P. Heath, Jr. .....................President & CEO
Joseph Shomo........................Senior Vice President
Fred D. Bowers...............Sr. Vice President & Cashier
Thomas A. Davis......................Senior Trust Officer
COMMERCIAL OFFICERS
Carl H. Craig, Jr...........................Vice President
Merle M. Dodson.............................Vice President
Robert E. Harris............................Vice President
Bobbie E. Meyerhoeffer......................Vice President
Jackson E. Quick, Jr........................Vice President
Donna H. Snyder.............................Vice President
Larry F. Staples............................Vice President
George Ballew.....................Assistant Vice President
David W. Balser...................Assistant Vice President
JoAnn W. Bartley..................Assistant Vice President
John P. Bowers....................Assistant Vice President
James H. Carper...................Assistant Vice President
M. Paul Coleman...................Assistant Vice President
Mark R. Dunsmore..................Assistant Vice President
Elizabeth I. Early................Assistant Vice President
Brenda F. Moore...................Assistant Vice President
Edward L. Pursley.................Assistant Vice President
Robert D. Thompson................Assistant Vice President
Eric K. Moore......................................Auditor
Kelly S. Davis............................Training Officer
Jeffrey C. Jones............................Branch Officer
Davis A. Miers...................Retail Investment Officer
Alan J. Sweet...............................Branch Officer
ADMINISTRATIVE OFFICERS
Susan S. Brown.....................Loan Operations Officer
Kathy C. Floyd.............................Systems Officer
Janice T. Johnson.............Human Resources Adm. Officer
Sheila M. Price.........Secondary Mtg. Operations Officer
Diane R. Rohr............Financial Administrative Officer
Dorothea S. Stewart..............Trust Operations Officer
TRUST DEPARTMENT OFFICERS
Ruth C. Beam.................................Trust Officer
Beverly S. Moran.............................Trust Officer
Mark J. Setaro..........................Investment Officer
Priscilla R. Stanley.................Pension Trust Officer
Gregory L. Owen................Asst. Pension Trust Officer
Mollie K. Butler...................Assistant Trust Officer
SUBSIDIARIES
Planters Bank & Trust Company of Virginia, sole subsidiary
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0001036070
<NAME> VIRGINIA FINANCIAL CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 16,287
<INT-BEARING-DEPOSITS> 279,115
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 50,658
<INVESTMENTS-CARRYING> 68,141
<INVESTMENTS-MARKET> 67,816
<LOANS> 232,913
<ALLOWANCE> 3,039
<TOTAL-ASSETS> 377,113
<DEPOSITS> 330,375
<SHORT-TERM> 8,110
<LIABILITIES-OTHER> 1,055
<LONG-TERM> 0
0
0
<COMMON> 20,000
<OTHER-SE> 17,574
<TOTAL-LIABILITIES-AND-EQUITY> 377,113
<INTEREST-LOAN> 20,250
<INTEREST-INVEST> 6,980
<INTEREST-OTHER> 91
<INTEREST-TOTAL> 27,321
<INTEREST-DEPOSIT> 12,406
<INTEREST-EXPENSE> 12,684
<INTEREST-INCOME-NET> 14,637
<LOAN-LOSSES> 450
<SECURITIES-GAINS> 6
<EXPENSE-OTHER> 8,679
<INCOME-PRETAX> 8,056
<INCOME-PRE-EXTRAORDINARY> 8,056
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,542
<EPS-PRIMARY> 2.77
<EPS-DILUTED> 2.77
<YIELD-ACTUAL> 7.41
<LOANS-NON> 194
<LOANS-PAST> 248
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,786
<CHARGE-OFFS> 268
<RECOVERIES> 71
<ALLOWANCE-CLOSE> 3,039
<ALLOWANCE-DOMESTIC> 2,625
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 414
</TABLE>
