FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission file number 010042
One Valley Bancorp of West Virginia, Inc.
(Exact name of registrant as specified in its charter)
West Virginia 55-0609408
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
One Valley Square, Charleston, West Virginia 25326
(Address of principal executive offices)
(Zip Code)
(304) 348-7000
(Registrant's telephone number, including area code)
Not applicable
(Former name, address, and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities and 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 XXX No
The number of shares outstanding of each of the issuer's classes of common stock
as of September 30, 1994 was:
Common Stock, $10.00 par value -- 17,014,278 shares
<PAGE>
One Valley Bancorp of West Virginia, Inc.
Part I. Financial Information
Item 1. Financial Statements.
The unaudited interim consolidated financial statements of One Valley Bancorp
of West Virginia, Inc. (One Valley) or (Registrant) are included on pages 3 -
7 of this report.
These consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all the information and footnotes required by generally
accepted accounting principles for annual year-end financial statements. In
the opinion of management, all adjustments considered necessary for a fair
presentation have been included and are of a normal recurring nature.
Operating results for the nine month period ended September 30, 1994 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1994. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Management's discussion and analysis of financial condition and results of
operations is included on pages 8 - 16 of this report.
<PAGE>
<TABLE>
ONE VALLEY BANCORP OF WEST VIRGINIA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited in thousands)
<CAPTION>
September 30 December 31 September 30
1994 1993 1993
<S> <C> <C> <C>
Assets
Cash and Due From Banks $130,413 $141,195 $148,156
Interest Bearing Deposits With Other Banks 7,245 8,028 6,232
Federal Funds Sold 20,000 31,145 82,640
------------ ------------ ------------
Cash and Cash Equivalents 157,658 180,368 237,028
Securities
Available-for-Sale, at fair value (Note B) 568,973 0 0
Held-for-Investment (Estimated Fair Value,
Sept. 30, 1994 - $434,818; December 31, 1993 - $1,081,742;
Sept. 30, 1993 - $1,081,741) 448,964 1,060,036 1,052,282
Loans
Total Loans 2,317,995 2,169,372 2,129,214
Less: Allowance For Loan Losses 37,650 36,484 37,280
------------ ------------ ------------
Net Loans 2,280,345 2,132,888 2,091,934
Bank Premises & Equipment - Net 82,893 80,233 80,748
Other Assets 60,350 59,350 59,623
------------ ------------ ------------
Total Assets $3,599,183 $3,512,875 $3,521,615
============ ============ ============
Liabilities and Shareholders' Equity
Deposits
Non-interest Bearing $428,181 $412,317 $394,994
Interest Bearing 2,490,065 2,524,418 2,532,042
------------ ------------ ------------
Total Deposits 2,918,246 2,936,735 2,927,036
Short-term Borrowings
Federal Funds Purchased 12,443 14,012 20,762
Repurchase Agreements and Other Borrowings 299,537 204,408 206,111
------------ ------------ ------------
Total Short-term Borrowings 311,980 218,420 226,873
Long-term Borrowings 24,472 22,788 38,853
Other Liabilities 26,971 29,749 27,659
------------ ------------ ------------
Total Liabilities 3,281,669 3,207,692 3,220,421
Shareholders' Equity:
Preferred Stock-$10 par value; 1,000,000 shares authorized
but none issued 0 0 0
Common Stock-$10 par value; 40,000,000 shares authorized,
Issued 17,533,778 shares at September 30, 1994;
17,516,795 shares at December 31, 1993;
17,516,155 shares at September 30, 1993 175,338 175,168 175,162
Capital Surplus 25,935 25,830 25,827
Retained Earnings 130,138 107,314 103,334
Unrealized (Losses) on Securities Available-for-Sale,
net of deferred taxes; (Note B) (3,919) 0 0
Treasury Stock - 519,500 shares at September 30, 1994,
270,000 shares at December 31, 1993
and September 30, 1993; at cost (9,978) (3,129) (3,129)
------------ ------------ ------------
Total Shareholders' Equity 317,514 305,183 301,194
------------ ------------ ------------
Total Liabilities and Shareholders' Equity $3,599,183 $3,512,875 $3,521,615
============ ============ ============
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP OF WEST VIRGINIA, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(unaudited in thousands, except per share data)
<CAPTION>
For The Three Months For The Nine Months
Ended September 30 Ended September 30
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Interest Income
Interest and Fees on Loans
Taxable $48,720 $45,197 $138,867 $133,849
Tax-Exempt 603 605 1,728 1,525
------------ ------------ ------------ ------------
Total 49,323 45,802 140,595 135,374
Interest on Investment Securities
Taxable 12,189 13,681 36,846 42,778
Tax-Exempt 2,572 1,713 7,569 4,671
------------ ------------ ------------ ------------
Total 14,761 15,394 44,415 47,449
Other Interest Income 255 674 749 2,472
------------ ------------ ------------ ------------
Total Interest Income 64,339 61,870 185,759 185,295
Interest Expense
Deposits 21,167 22,315 62,577 68,884
Short-term Borrowings 2,744 1,576 5,565 4,662
Long-term Borrowings 245 576 779 1,822
------------ ------------ ------------ ------------
Total Interest Expense 24,156 24,467 68,921 75,368
------------ ------------ ------------ ------------
Net Interest Income 40,183 37,403 116,838 109,927
Provision For Loan Losses 1,185 1,406 3,577 4,521
------------ ------------ ------------ ------------
Net Interest Income
After Provision For Loan Losses 38,998 35,997 113,261 105,406
Other Income
Trust Department Income 1,891 1,743 5,968 5,347
Service Charges on Deposit Accounts 2,821 3,086 8,407 8,768
Real Estate Loan Processing & Servicing Fees 1,249 1,960 3,977 5,853
Other Service Charges and Fees 1,262 1,121 3,538 2,832
Other Operating Income 2,026 2,104 7,069 7,088
Securities Transactions (410) 119 (717) 177
------------ ------------ ------------ ------------
Total Other Income 8,839 10,133 28,242 30,065
Other Expenses
Salaries and Employee Benefits 15,521 15,037 47,312 45,589
Occupancy Expense - Net 1,507 1,582 4,461 4,458
Equipment Expenses 2,071 2,440 6,200 7,725
Federal Deposit Insurance 1,642 1,634 4,965 4,885
Outside Data Processing 1,242 809 3,483 2,697
Other Operating Expenses 8,331 9,562 23,569 24,832
------------ ------------ ------------ ------------
Total Other Expenses 30,314 31,064 89,990 90,186
------------ ------------ ------------ ------------
Income Before Taxes 17,523 15,066 51,513 45,285
Applicable Income Taxes 5,724 5,299 16,834 15,021
------------ ------------ ------------ ------------
Net Income $11,799 $9,767 $34,679 $30,264
============ ============ ============ ============
Net Income Per Common Share $0.69 $0.57 $2.02 $1.76
============ ============ ============ ============
Based on Average Shares Outstanding of 17,105 17,237 17,173 17,234
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP OF WEST VIRGINIA, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(unaudited in thousands)
<CAPTION>
Unrealized
Gain (Loss)
on Securities
Common Capital Retained Treasury Available
Stock Surplus Earnings Stock for Sale
<S> <C> <C> <C> <C> <C>
Balance December 31, 1993 $175,168 $25,830 $107,314 ($3,129) $0
Effect of adopting FAS 115 0 0 0 0 4,765
Nine Months Ended September 30, 1994
Net Income 0 0 34,679 0 0
Cash Dividends ($.69 per share) 0 0 (11,855) 0 0
Change in Fair Value of Securities
Available for Sale, net of deferred taxes 0 0 0 0 (8,684)
Treasury Shares Purchased 0 0 0 (6,849) 0
Stock Options Exercised 170 105 0 0 0
------------ ------------ ------------ ------------ ------------
Balance September 30, 1994 $175,338 $25,935 $130,138 ($9,978) ($3,919)
============ ============ ============ ============ ============
Balance December 31, 1992 $174,935 $25,352 $83,380 ($3,129) $0
Nine Months Ended September 30, 1993
Net Income 0 0 30,264 0 0
Cash Dividends ($.62 per share) 0 0 (10,310) 0 0
Stock Options Exercised 227 475 0 0 0
------------ ------------ ------------ ------------ ------------
Balance September 30, 1993 $175,162 $25,827 $103,334 ($3,129) $0
============ ============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP OF WEST VIRGINIA, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited in thousands)
<CAPTION>
For The Nine Months
Ended September 30
1994 1993
<S> <C> <C>
Operating Activities
Net Income $34,679 $30,264
Adjustments To Reconcile Net Income To Net Cash
Provided by Operating Activities:
Provision For Loan Losses 3,577 4,521
Depreciation 5,605 5,466
Amortization and Accretion 3,134 5,357
Securities Loss (Gains) 717 (177)
Increase (Decrease) Due to Changes In:
Accrued Interest Receivable (1,568) 1,839
Accrued Interest Payable 283 (2,763)
Other Assets and Other Liabilities (4,038) (1,826)
------------ ------------
Net Cash Provided by Operating Activities 42,389 42,681
Investing Activities
Proceeds From Sales of Securities Available for Sale 131,352 0
Proceeds From Sales of Securities Held to Maturity 179 13,047
Proceeds From Maturities of Securities Available for Sale 180,881 0
Proceeds From Maturities of Securities Held to Maturity 52,651 359,994
Purchases of Securities Available for Sale (246,270) 0
Purchases of Securities Held to Maturity (88,033) (404,238)
Net Increase In Loans (145,920) (127,996)
Purchases of Premises and Equipment (8,265) (4,945)
------------ ------------
Net Cash Used in Investing Activities (123,425) (164,138)
Financing Activities
Net Change in Interest Bearing and Non-interest Bearing Deposits (18,489) 45,424
Net (Decrease) Increase in Federal Funds Purchased (1,569) 3,044
Net Increase in Other Short-term Borrowings 95,129 19,553
Proceeds From Long-term Borrowings 14,699 12,156
Repayment of Long-term Debt (13,015) (3,521)
Proceeds From Issuance of Common Stock 275 702
Dividends Paid (11,855) (10,310)
------------ ------------
Net Cash Provided by Financing Activities 58,326 67,048
------------ ------------
(Decrease) in Cash and Cash Equivalents (22,710) (54,409)
Cash And Cash Equivalents at Beginning of Year 180,368 291,437
------------ ------------
Cash And Cash Equivalents, September 30 $157,658 $237,028
============ ============
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
Note A - Basis of Presentation
The accounting and reporting policies of One Valley conform to generally
accepted accounting principles and practices in the banking industry. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The interim financial information included in this report is
unaudited. In the opinion of management, all adjustments necessary for a fair
presentation of the results of the interim periods have been made. These
notes are presented in conjunction with the Notes to Consolidated Financial
Statements included in the Annual Report of One Valley.
Note B - Accounting Change
Effective January 1, 1994, One Valley adopted the provisions of FASB Statement
115, "Accounting for Certain Investments in Debt and Equity Securities." In
accordance with the provisions of the Statement, One Valley reevaluated its
classification of securities and assigned a portion of its securities
investment as available-for-sale. Securities designated available-for-sale
are presented at fair value. The corresponding unrealized gain or loss on
these securities due to any difference between historical cost and current
fair value is presented as a component of Shareholders' Equity, net of
deferred taxes. Securities designated as available-for-sale at December 31,
1993 approximated $632,380. The effect of adopting this Statement was to
increase the opening balance of shareholders' equity at January 1, 1994 by
$4,765, which was the net unrealized gain on securities available-for-sale of
$7,942, net of $3,177 in deferred income taxes. At September 30, 1994,
securities available-for-sale had a historical cost of $575,506, with a net
unrealized loss of approximately $6,533, which decreased shareholders' equity
by $3,919, net of $2,614 in deferred income taxes.
Note C - Mergers
At the close of business on January 28, 1994, One Valley acquired all of the
outstanding stock of Mountaineer Bankshares of W.Va., Inc. in exchange for
4,350,000 shares of One Valley common stock. This combination was accounted
for as a pooling-of-interest. Accordingly, all prior period financial
information has been restated to reflect the merger of the two companies as
though they had always been combined.
<PAGE>
One Valley Bancorp of West Virginia, Inc.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
September 30, 1994
INTRODUCTION AND SUMMARY
Net income for the third quarter of 1994 totaled $11.8 million, an
increase of 20.1% over the $9.8 million earned in the same quarter of 1993.
On a per share basis, net income of $0.69 for the third quarter of 1994
increased 21.1% over the $0.57 earned during the same period in 1993. The
improvement in earnings during the quarter can be attributed, in large part,
to an increase in total interest income and a decrease in the provision for
loan losses.
Net income for the first nine months of 1994 totaled $34.7 million, a
14.6% increase over the first nine months of 1993. Earnings per share during
the nine month period were $2.02, up 14.8% over the $1.76 earned in the first
nine months of 1993.
Return on average assets (ROA) measures how effectively One Valley
utilizes its assets to produce net income. ROA was 1.31% in the first nine
months of 1994, a significant increase over the 1.17% earned during the first
nine months of 1993. Return on average equity (ROE) also increased, from
13.83% for the first nine months of 1993 to 14.70% earned over the first nine
months of 1994.
The following discussion is an analysis of the financial condition and
results of operations of One Valley for the first nine months of 1994. This
discussion should be read in conjunction with the 1993 Annual Report to
Shareholders and the other financial information included in this report.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income for the nine months ended September 30, 1994 was
$121.8 million on a fully tax-equivalent basis, a 7.6% increase from the
$113.3 million earned during the same period in 1993. This increase is
largely due to an increase in earning assets greater than the increase in
interest bearing liabilities during the year-to-date comparision. Average
earning assets increased by 2.9% in the first nine months of 1994 over the
same period in 1993, primarily in loans. Average interest bearing liabilities
increased by 1.3% in the same nine month comparison. While the yield on
earning assets and the rate on the cost of funds have declined in the year-to-
date comparison due to declines in market interest rates from mid 1993 to
early 1994, the increase in the volume of earning assets has resulted in a
slight growth in total interest income during the first nine months of 1994.
As shown in the consolidated average balance sheets (page 16), the yield on
earning assets declined 14 basis points to 7.80% in the first nine months of
1994 from 7.94% in the first nine months of 1993. During the same period, the
cost of interest bearing liabilities declined 35 basis points to 2.82% from
last year's 3.17% level.
Recent increases in the market interest rate environment have had a
greater impact on the yield on earning assets than the cost of interest
bearing liabilities. As shown in the quarter-to-quarter comparison on
consolidated average balance sheets, the yield on earning assets in the third
quarter of 1994 increased 11 basis points to 7.93%. During the same period,
the cost of interest bearing liabilities declined 12 basis points to 2.90%.
The combined effect was to increase the net interest margin by 23 basis points
to 5.03%. Year-to-date, One Valley's net interest margin averaged 4.98%
compared to 4.77% during the first nine months of 1993. At September 30,
1994, One Valley's asset/liability structure was neither asset nor liability
sensitive in the six month time frame. Thus, normal fluctuations in market
interest rates should have little impact on One Valley's net interest margin.
Credit Experience
The provision for loan losses was $3.6 million for the nine months ended
September 30, 1994, a 21% decline from the $4.5 million provision during the
first nine months of 1993. The decline in the provision for loan losses is
primarily due to the continued improvement in the quality of the loan
portfolio. As a percentage of average total loans, the provision for loan
losses through the first nine months of 1994 was 0.22% annualized compared to
0.30% in the first nine months of 1993. Net charge-offs as a percentage of
average total loans in the first nine months of 1994 also decreased to 0.15%
on an annualized basis, down from an annualized 0.19% during the first nine
months of 1993.
Total non-performing assets at September 30, 1994 were 0.42% of period-
end loans, a decrease from the 0.58% at year-end 1993 and a greater decline
from the 0.83% at September 30, 1993. Loans past due over 90 days have also
declined. At September 30, 1994, loans past due over 90 days were 0.16% of
outstanding loans, a slight increase from the 0.15% at year-end 1993, but down
from the 0.19% at September 30, 1993. The dollar amounts of both non-
performing assets and loans past due over 90 days have also declined
proportionately from levels one year ago, as reflected in the analysis on page
15.
With the improved credit quality of the loan portfolio, the allowance
for loan losses has decreased in relationship to the loan portfolio. At
September 30, 1994, the allowance was 1.62% of outstanding loans, compared to
1.75% one year ago and 1.68% at year-end 1993.
In May 1993, the FASB issued Statement 114, Accounting for the
Impairment of a Loan, to be adopted for years beginning after December 15,
1994. In October 1994, the FASB issued Statement 118 amending Statement 114
to allow creditors to use existing methods for recognizing interest income on
impaired loans. The amendment, however, retained the original adoption time
period. The adoption of these Statements is not anticipated to have a
material effect on One Valley's financial statements.
Non-Interest Income and Expense
Total non-interest income was $28.2 million through the first nine
months of 1994, down 6.1% from the $30.1 million earned during the same period
in 1993. Excluding securities transactions however, non-interest income was
down 3.1% in the nine month comparison. Trust income increased by 11.6%, or
$0.6 million, over the first nine months of last year, primarily due to an
increase in the number of trust accounts and trust products. Other service
charges and fees increased by $0.7 million due to increases in ATM revenue and
other commissions One Valley has earned on new products and services offered.
Other operating income remained relatively flat when comparing year-to-date
1994 results with the same period of 1993. These increases were more than
offset by declines in mortgage loan processing and service fees and service
charges on deposit accounts. As interest rates declined in 1993, mortgages
serviced by One Valley for others have refinanced or paid-off, thus reducing
One Valley's servicing fee revenue. Furthermore, recent increases in interest
rates have also reduced the fees from the origination and sale of loans in the
secondary market. With the decline in the mortgage loan servicing portfolio,
it is anticipated that throughout the remainder of 1994 servicing fee revenue
will be significantly lower than the prior year. Income from security
transactions decreased by $0.9 million in the first nine months of 1994 due to
a change in investment strategies corresponding to the adoption of FAS 115.
Total non-interest expense was $90.0 million during the nine months
ended September 30, 1994, down 0.2% over the same period in 1993. Staff costs
rose 3.8% in 1994 when compared to 1993, reflecting normal salary and benefit
increases. Occupancy expense remained flat in the first nine months of 1994
as increases in real estate taxes were offset by reductions in other property
expenses. Equipment expenses decreased by $1.5 million largely due to the
outsourcing of data processing services previously on an in-house system.
This decline is partially offset by a $0.8 million increase in outside data
processing costs. FDIC insurance increased by 0.2% due to modest deposit
growth. Other operating expenses declined by 5.1% in 1994 when compared to
the first nine months of 1993, largely due to Mountaineer Bankshares
acquisition and restructuring expenses incurred in the third quarter of 1993.
The net overhead ratio (non-interest expense less non-interest income
excluding security transactions divided by average earning assets) is a
measure of the company's ability to control costs and equalizes the comparison
of differently sized operations. As this ratio decreases, more of the net
interest margin earned flows to net income. One Valley's net overhead ratio
for the first nine months of 1994 was 2.49%, down from 2.68% during all of
1993 and down from the 2.53% during the first nine months of 1993. The
decline in 1994, when compared to the 1993 ratios, is largely due to One
Valley's increase in earning assets in 1994 without a corresponding increase
in operating expenses.
Income tax expense increased by $1.8 million, or 12.1%, for the first
nine months of 1994 in comparison to 1993. The increase in taxes is a result
of the 13.8% growth in pretax earnings and an increase in corporate income tax
rates enacted during the third quarter 1993. However, primarily due to the
50% increase in One Valley's tax-exempt income, the effective income tax rate
for the first nine months of 1994 declined to 32.7% versus 33.2% for the same
period last year.
FINANCIAL CONDITION
Asset Structure
Total loans continued to grow when compared to the first nine months of
1993. At September 30, 1994, total loans exceeded September 30, 1993, levels
by 8.9% or $188.8 million. The consolidated loan-to-deposit ratio has also
increased to 79.4% at September 30, 1994, compared to 72.7% at September 30,
1993. Since year-end 1993, total loans have increased by 6.9% or $148.6
million, primarily in the consumer installment loan and real estate lending
areas.
Investment portfolio assets have decreased $42.1 million or 4.0% from
the level at year-end and decreased $34.3 million or 3.3% from the level one
year ago. Approximately $6.5 million of the decline is attributable to the
adoption of FAS 115, which requires the balance sheet reporting of market
value fluctuations in securities available for sale. Due to strong loan
demand during the third quarter of 1994, maturing investments have not been
replaced as the proceeds have been used to fund higher yielding loans. Some
investment securities have been sold at a loss during the year. However, the
proceeds were used to purchase higher yielding investments which should result
in a overall higher total return on the invested funds.
Effective January 1, 1994, One Valley adopted the provisions of FASB
Statement 115, "Accounting for Certain Investments in Debt and Equity
Securities." The effect of adopting this Statement was to increase
shareholders' equity at January 1, 1994, by $4.8 million, which was the
unrealized gain on securities available-for-sale of $7.9 million, net of $3.1
million in deferred income taxes. At September 30, 1994, securities
available-for-sale had a historical cost of $575.5 million, with an unrealized
loss of approximately $6.5 million, which decreased shareholders' equity by
$3.9 million, net of $2.6 million in deferred income taxes.
At the time of purchase, management determines the appropriate
classification of securities. If management has the positive intent and One
Valley has the ability at the time of purchase to hold securities until
maturity, they are classified as held-for-investment and carried at amortized
historical cost adjusted for amortization of premiums and accretion of
discounts, which are recognized as adjustments to interest income. Securities
to be held for indefinite periods of time and not intended to be held to
maturity or on a long-term basis are classified as available-for-sale and
carried at fair value. The corresponding difference between the historical
cost and the current fair value of these securities, the unrealized gain or
loss, is an adjustment to shareholders' equity, net of deferred taxes.
Securities available-for-sale include securities that management intends to
use as part of its asset/liability management strategy and that may be sold in
response to changes in interest rates, resultant prepayment risk, and other
factors related to interest rate and resultant prepayment risk changes.
In order to improve its fully tax equivalent net interest income and to
hedge against higher income tax rates, One Valley increased its holdings of
tax-exempt securities that were offering attractive yields, in the latter part
of 1993 through the first part of 1994. As shown on the consolidated average
balance sheet (page 16), average tax-exempt securities in the first nine
months of 1994 are nearly double the average during first nine months 1993.
One Valley will continue to monitor its investment opportunties and may
purchase additional tax-exempt securities of similar yield and quality.
Federal funds sold at September 30, 1994, were $20.0 million, down $11.1
million from year-end and down $62.6 million from a year ago. The decline
since September 30, 1993 was partially in response to the strong loan demand
experienced in 1993 and 1994. Fluctuations in federal funds sold are normal
and largely due to planned changes in the company's asset/liability structure
in order to maximize the return on investment in response to changes in the
interest rate environment.
One Valley's investments have been limited to traditional investment
securities and the company does not currently have any investments in
derivative instruments. However, One Valley continually evaluates all
investment alternatives in its management of interest rate risk and
asset/liability structure.
Liability Structure
Total deposits decreased $18.5 million or 0.6% from the level at year-
end and decreased $8.8 million or 0.3% since September 30, 1993. Non-interest
deposits have increased by 3.8% from year-end, and have increased by 8.4%
since September 30, 1993. Interest bearing deposits at September 30, 1994,
however, decreased $34.4 million or 1.4% from year-end and $42.0 million or
1.7% from one year ago. While One Valley has increased its customer base, as
shown by the increase in non-interest bearing deposits, because of the low
interest rate environment deposit customers are shortening the maturities of
their interest-bearing deposit reinvestments and seeking higher yielding non-
traditional investment alternatives. One Valley continues to market
alternative products to meet the changing needs of its customers in order to
expand its customer base. In October 1994, One Valley initiated a new series
of checking products which offer lifestyle benefits to the customer. It is
anticipated that increased non-interest expenses due to advertising and other
costs of the product will be offset by increased service charge revenue and
decreases in operating costs associated with a reduction in the number of
nominally funded deposit accounts.
Total short-term borrowings increased $93.6 million or 42.8% from the
year-end level, and $85.1 million or 37.5% from the level at September 30,
1993. Due to increased loan demand and declines in total deposits, One
Valley's short-term borrowings have increased to fund the loan growth. Short-
term borrowings, which consist of Federal funds purchased from correspondent
banks, repurchase agreements with large corporate and public entities, and
short-term credit line advances can fluctuate significantly depending upon the
customers' cash needs and the interest rate environment.
Long-term borrowings increased $1.7 million or 7.4% since year-end 1993
but decreased $14.4 million or 37.0% since September 30, 1993. During the
latter part of 1993, One Valley paid-off $10.0 million of debt incurred in the
purchase of its headquarters, and $1.2 million of debt incurred in the
purchase of an affiliate, and another $5.1 million in Federal Home Loan Bank
(FHLB) advances which were incurred to fund investments in mortgage backed
securities. In the third quarter of 1994, One Valley paid-off an additional
$3.0 million in FHLB advances. The $24.5 of long-term borrowings at September
30, 1994 principally consisted of FHLB advances used to fund mortgage backed
investments and loans. Approximately, $5.0 million of these advances mature
in the remaining quarter of 1994, $11.5 mature in 1995, and another $5.0
million mature in 1996. Proceeds from maturing investments will be used to
meet the demands for maturing FHLB advances.
Capital Structure and Liquidity
One Valley's equity-to-asset ratio has increased since year-end. At
September 30, 1994, the ratio was 8.82% compared to 8.69% at December 31,
1993, and 8.55% one year ago. Due to strong earnings the ratio has steadily
increased. One Valley's cash dividends totaling $0.69 per share through the
first nine months of 1994, were up 11.3 % over the $0.62 per share in
dividends during the same period in 1993. One Valley's dividend policy
coupled with the continued growth in net income, demonstrates management's
commitment to a stable equity-to-asset ratio benefiting both the investor and
the depositors of the local community.
During the second and third quarters, One Valley repurchased 249,500
shares of its common stock in the open market as part of a 400,000 share
repurchase plan authorized by One Valley's board of directors in April 1994.
Additional purchases as part of this plan or in conjunction with the
previously announced Point Bancorp acquisition (see page 17) will depend upon
market conditions.
One Valley's risk based capital ratio at September 30, 1994 was 14.7%,
well above the 8.0% required, while its Tier I capital ratio was 13.5%. One
Valley's strong capital position is demonstrated further by its leverage ratio
of 8.7% compared to a regulatory guidance of 4.0% to 5.0%. The capital ratios
of the banking subsidiaries also remain strong and allow them to effectively
serve the communities in which they are located.
The capital positions of the banks, coupled with proper asset/liability
matching and the stable nature of the primarily consumer base of core
deposits, results in the maintenance of a strong liquidity position. The
liquidity of the parent company is dependent upon dividends from its banking
subsidiaries which, although restricted by banking regulations, are adequate
to meet its cash needs.
Effects of Changing Prices
The results of operations and financial condition presented in this
report are based on historical cost, unadjusted for the effects of inflation.
Inflation affects One Valley in two ways. One is that inflation can result in
increased operating costs which must be absorbed or recovered through
increased prices for services. The second effect is on the purchasing power
of the corporation. Virtually all of a bank's assets and liabilities are
monetary in nature. Regardless of changes in prices, most assets and
liabilities of the banking subsidiaries will be converted into a fixed number
of dollars. Non-earning assets, such as premises and equipment, do not
comprise a major portion of One Valley's assets; therefore, most assets are
subject to repricing on a more frequent basis than in other industries. One
Valley's ability to offset the effects of inflation and potential reductions
in future purchasing power depends primarily on its ability to maintain
capital levels by adjusting prices for its services and to improve net
interest income by maintaining an effective asset/liability mix.
<PAGE>
<TABLE>
ONE VALLEY BANCORP OF WEST VIRGINIA, INC. AND SUBSIDIARIES
Analysis of Loan Losses and Non-Performing Assets
(unaudited in thousands)
<CAPTION>
For The Three Months For The Nine Months
Ended September 30 Ended September 30
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Allowance For Loan Losses
Balance, Beginning of Period $37,572 $37,029 $36,484 $35,680
Loan Losses 1,908 1,921 4,233 4,746
Loan Recoveries 801 766 1,822 1,825
------------------------ ------------------------
Net Charge-offs 1,107 1,155 2,411 2,921
Provision For Loan Losses 1,185 1,406 3,577 4,521
------------------------ ------------------------
Balance, End of Period $37,650 $37,280 $37,650 $37,280
======================== ========================
Total Loans, End of Period $2,317,995 $2,129,214
Allowance For Loan Losses As a % of Total Loans 1.62 1.75
========================
Non-Performing Assets at Quarter End
Non-Accrual Loans $7,695 $10,644
Foreclosed Properties 1,503 6,711
Restructured Loans 593 237
------------------------
Total Non-Performing Assets $9,791 $17,592
========================
Non-Performing Assets As a % of Total Loans 0.42 0.83
Loans Past Due Over 90 Days $3,656 $4,080
Loans Past Due Over 90 Days As a % of Total Loans 0.16 0.19
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP OF WEST VIRGINIA, INC. AND SUBSIDIARIES
Consolidated Average Balance Sheets
(unaudited in thousands)
<CAPTION>
Three Months Ended September 30 Nine Months Ended September 30
1994 1993 1994 1993
Amount Yield/Rate Amount Yield/Rate Amount Yield/Rate Amount Yield/Rate
(pct.) (pct.) (pct.) (pct.)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Loans
Taxable $2,231,477 8.66 $2,053,742 8.73 $2,172,876 8.54 $2,005,789 8.92
Tax-Exempt 35,011 10.51 35,390 10.43 34,102 10.42 30,411 10.31
------------ ------------ ------------ ------------
Total 2,266,488 8.69 2,089,132 8.76 2,206,978 8.57 2,036,200 8.94
Less: Allowance for Losses 37,982 37,621 37,347 36,838
------------ ------------ ------------ ------------
Net Loans 2,228,506 8.84 2,051,511 8.92 2,169,631 8.72 1,999,362 9.11
Securities
Taxable 870,093 5.60 968,140 5.65 890,871 5.51 977,910 5.83
Tax-Exempt 181,935 8.70 105,487 9.99 175,010 8.87 91,743 10.44
------------ ------------ ------------ ------------
Total 1,052,028 6.14 1,073,627 6.08 1,065,881 6.07 1,069,653 6.23
Federal Funds Sold & Other 29,299 3.45 85,653 3.12 32,179 3.11 105,219 3.14
------------ ------------ ------------ ------------
Total Earning Assets 3,309,833 7.93 3,210,791 7.82 3,267,691 7.80 3,174,234 7.94
Other Assets 264,338 276,532 261,921 270,367
------------ ------------ ------------ ------------
Total Assets $3,574,171 $3,487,323 $3,529,612 $3,444,601
============ ============ ============ ============
Liabilities And Equity
Interest Bearing Liabilities
Deposits $2,497,186 3.36 $2,501,824 3.54 $2,515,463 3.33 $2,489,246 3.70
Short-term Borrowings 281,704 3.86 218,107 2.87 231,063 3.22 207,568 3.00
Long-term Borrowings 25,160 3.86 35,999 6.35 22,526 4.62 37,244 6.54
------------ ------------ ------------ ------------
Total Interest
Bearing Liabilities 2,804,050 3.42 2,755,930 3.52 2,769,052 3.33 2,734,058 3.69
Non-interest Bearing Deposits. 423,161 406,494 417,408 391,689
Other Liabilities 29,272 26,674 28,508 27,092
------------ ------------ ------------ ------------
Total Liabilities 3,256,483 3,189,098 3,214,968 3,152,839
Shareholders' Equity 317,688 298,225 314,644 291,762
------------ ------------ ------------ ------------
Total Liabilities & Equity $3,574,171 $3,487,323 $3,529,612 $3,444,601
============ ============ ============ ============
Interest Income To Earning Assets 7.93 7.82 7.80 7.94
Interest Expense To Earning Assets 2.90 3.02 2.82 3.17
------ ------ ------ ------
Net Interest Margin 5.03 4.80 4.98 4.77
====== ====== ====== ======
<FN> Note: Yields are computed on a fully taxable equivalent basis using the rate of 35%.
</TABLE>
<PAGE>
One Valley Bancorp of West Virginia, Inc.
Part II. Other Information
Item 5. Acquisition of Point Bancorp, Inc.
On September 2, 1994, One Valley Bancorp and Point Bancorp, Inc.
announced that they had entered into a definitive agreement providing for One
Valley to acquire Point Bancorp, a savings and loan holding company. Under
the terms of the agreement, One Valley will exchange 0.6 shares of One
Valley's common stock plus cash of $7.10 for each share of Point Bancorp's
common stock outstanding. The transaction will be accounted for as a purchase
and is subject to, among other things, approval by regulatory authorities and
the stockholders of Point Bancorp. One Valley intends to purchase, in the
open market, an equivalent number of shares to that which will be issued for
the consumation of the transaction. One Valley expects the acquisition to be
completed by early 1995.
At June 30, 1994, Point Bancorp assets totaled $57 million, deposits
totaled $43 million and loans and mortgage-backed securities totaled $31
million. The company, which earned $254 thousand during the first six months
of 1994, owns Point Pleasant Federal Savings Bank which operates two offices
in Point Pleasant, West Virginia.
Item 6. Exhibits and Reports on Form 8-K
a.) Exhibits
11. Statement of Computation of Earnings per Share - page 19 attached
27. Financial Data Shedule - electronic copy only
b.) Reports on Form 8-K
None filed.
<PAGE>
One Valley Bancorp of West Virginia, Inc.
Part II. Other Information (con't)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
One Valley Bancorp of West Virginia, Inc.
DATE November 7, 1994
BY /S/ J. Holmes Morrison
J. Holmes Morrison
President and
Chief Executive Officer
BY /S/ Laurance G. Jones
Laurance G. Jones
Executive Vice President & Treasurer
<TABLE>
Exhibit 11
Statement Re: Computation of Earnings per Share
<CAPTION>
For The Three Months For The Nine Months
Ended September 30 Ended September 30
1994 1993 1994 1993
<S> <C> <C> <C> <C>
PRIMARY:
Average Shares Outstanding 17,105,000 17,237,000 17,173,000 17,234,000
Net effect of the assumed exercise
of stock options - based on the
treasury stock method 112,000 115,000 101,000 117,000
------------ ------------ ------------ ------------
Total 17,217,000 17,352,000 17,274,000 17,351,000
============ ============ ============ ============
Net Income $11,799,000 $9,767,000 $34,679,000 $30,264,000
Per Share Amount $0.69 $0.56 $2.01 $1.74
============ ============ ============ ============
FULLY DILUTED:
Average Shares Outstanding 17,105,000 17,237,000 17,173,000 17,234,000
Net effect of the assumed exercise
of stock options - based on the
treasury stock method 114,000 132,000 118,000 137,000
------------ ------------ ------------ ------------
Total 17,219,000 17,369,000 17,291,000 17,371,000
============ ============ ============ ============
Net Income $11,799,000 $9,767,000 $34,679,000 $30,264,000
Per Share Amount $0.69 $0.56 $2.01 $1.74
============ ============ ============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
condolidated balance sheets and statements of income of One Valley Bancorp as
well as supplemental schedules of the analysis of loan losses and non-performing
assets and the consolidated average balance sheets and is qualified in its
entirety by reference to such financial statements and supplemental schedules.
</LEGEND>
<CIK> 0000351616
<NAME> ONE VALLEY BANCORP
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> QTR-3 9-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1994
<PERIOD-END> SEP-30-1994 SEP-30-1994
<CASH> 130,413 130,413
<INT-BEARING-DEPOSITS> 7,245 7,245
<FED-FUNDS-SOLD> 20,000 20,000
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 568,973 568,973
<INVESTMENTS-CARRYING> 448,964 448,964
<INVESTMENTS-MARKET> 434,818 434,818
<LOANS> 2,317,995 2,317,995
<ALLOWANCE> 37,650 37,650
<TOTAL-ASSETS> 3,599,183 3,599,183
<DEPOSITS> 2,918,246 2,918,246
<SHORT-TERM> 311,980 311,980
<LIABILITIES-OTHER> 26,971 26,971
<LONG-TERM> 24,472 24,472
<COMMON> 175,338 175,338
0 0
0 0
<OTHER-SE> 142,176 142,176
<TOTAL-LIABILITIES-AND-EQUITY> 3,599,183 3,599,183
<INTEREST-LOAN> 49,323 140,595
<INTEREST-INVEST> 14,761 44,415
<INTEREST-OTHER> 255 749
<INTEREST-TOTAL> 64,339 185,759
<INTEREST-DEPOSIT> 21,167 62,577
<INTEREST-EXPENSE> 24,156 68,921
<INTEREST-INCOME-NET> 40,183 116,838
<LOAN-LOSSES> 1,185 3,577
<SECURITIES-GAINS> (410) (717)
<EXPENSE-OTHER> 30,314 89,990
<INCOME-PRETAX> 17,523 51,513
<INCOME-PRE-EXTRAORDINARY> 17,523 51,513
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 11,799 34,679
<EPS-PRIMARY> 0.69 2.02
<EPS-DILUTED> 0.69 2.02
<YIELD-ACTUAL> 5.03 4.98
<LOANS-NON> 7,695 7,695
<LOANS-PAST> 3,656 3,656
<LOANS-TROUBLED> 593 593
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 37,572 36,484
<CHARGE-OFFS> 1,908 4,233
<RECOVERIES> 801 1,822
<ALLOWANCE-CLOSE> 37,650 37,650
<ALLOWANCE-DOMESTIC> 37,650 37,650
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
