SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[(check mark) ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended DECEMBER 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to .
Commission file number 0-10042
One Valley Bancorp of West Virginia, Inc.
(Exact name of registrant as specified in its charter)
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West Virginia 55-0609408
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
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One Valley Square,
Summers and Lee Streets,
P.O. Box 1793
Charleston, West Virginia 25326
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (304) 348-7000
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(g) OF THE ACT:
Common Stock ($10.00 par value)
(Title of Class)
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 Exchange Act of 1934 during the
preceding 12 months, and (2)
has been subject to such filing requirements for the past 90 days.
Yes (Check Mark) 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
registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-K or any
amendment to this Form 10-K. [ ]
106 Total Pages Continued . . .
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State the aggregate market value of the voting stock held by
non-affiliates of
the registrant. The aggregate market value shall be computed by
reference to the
price at which the stock was sold, or the average bid and asked prices
of such stock,
as of a specified date within 60 days prior to the date of filing:
Aggregate of market value of voting stock Based upon reported closing price on
$340,694,524 March 8, 1994
Indicate the number of shares outstanding of each of the
registrant's classes of
common stock as of the latest practicable date.
Class Outstanding at March 8, 1993
Common Stock ($10.00 par value) 17,255,784
DOCUMENTS INCORPORATED BY REFERENCE
The following lists the documents which are incorporated by
reference in the
Form 10-K Annual Report, and the Parts and Items of the Form 10-K into
which the
documents are incorporated.
Part of the Form 10-K into which the
Document Document is Incorporated
Portions of One Valley Bancorp of West Part I, Item 1; Part II, Items 5, 6, 7
Virginia, Inc., 1993 Annual Report to and 8; Part III, Item 13; and Part
Shareholders for the year ended IV, Item 14
December 31, 1993
Portions of One Valley Bancorp of West Part III, Items 10, 11, 12 and 13
Virginia, Inc., Proxy Statement for the
1994 Annual Meeting of Shareholders
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One Valley Bancorp of West Virginia, Inc.
Form 10-K
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INDEX
Page
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Part I
Item 1. Business ............................................................................................. 4
Item 2. Properties .......................................................................................... 16
Item 3. Legal Proceedings ................................................................................... 17
Item 4. Submission of Matters to a Vote of Security Holders ................................................. 17
Item 4A. Executive Officers of the Registrant ................................................................ 18
Part II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters ....................................................................... 20
Item 6. Selected Financial Data ............................................................................. 20
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................................................... 20
Item 8. Financial Statements and Supplementary Data ......................................................... 20
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ............................................................... 20
Part III
Item 10. Directors and Executive Officers of the Registrant ................................................. 21
Item 11. Executive Compensation ............................................................................. 21
Item 12. Security Ownership of Certain Beneficial Owners and
Management ....................................................................................... 21
Item 13. Certain Relationships and Related Transactions ..................................................... 21
Part IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K .......................................................................... 22
Signatures................................................................................................................... 24
Index to Exhibits............................................................................................................ 28
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PART I
Item 1. Business
ONE VALLEY BANCORP OF WEST VIRGINIA, INC.
The Board of Directors of One Valley Bank, National
Association, formerly
Kanawha Valley Bank, National Association ("One Valley Bank"), caused
One
Valley Bancorp of West Virginia, Inc. ("One Valley"), a West Virginia
corporation,
to be formed, through a corporate reorganization, as a single bank
holding company
holding all of the common stock of One Valley Bank. On September 4,
1981, the
effective date of the reorganization, the shareholders of One Valley
Bank exchanged
their shares of Kanawha Valley Bank common stock for shares of One
Valley
common stock, $10 par value ("One Valley Common Stock"), and became
shareholders of One Valley, and One Valley Bank became a wholly-owned
subsidiary of One Valley.
As of December 31, 1993, One Valley owned eight operating
banking
subsidiaries (the "Existing Banking Subsidiaries") including: One
Valley Bank,
National Association; One Valley Bank of Huntington, Inc.; One Valley
Bank of
Mercer County, Inc.; One Valley Bank of Martinsburg, National
Association; One
Valley Bank of Oak Hill, Inc.; One Valley Bank of Ronceverte, National
Association;
One Valley Bank of Morgantown, Inc.; and One Valley Bank of
Summersville, Inc.
In addition, One Valley owns 100% of the outstanding stock of One
Valley Services,
Inc., which, until December, 1993, provided data processing services
to the Banking
Subsidiaries and other non affiliated banks, and 100% of the
outstanding stock of
One Valley Square, Inc., a Texas corporation, which owns the office
building in
which One Valley Bank and One Valley are located. (All of these
subsidiaries,
including the Existing Banking Subsidiaries, are collectively referred
to as the
"Subsidiaries".) One Valley's principal activities consist of owning
and supervising
its Subsidiaries. At December 31, 1993, One Valley had consolidated
assets of
$2,774,359,000, deposits of $2,328,644,000, and shareholders' equity
of $242,590,000.
One Valley has, from time to time, engaged in merger or
acquisition
discussions with other banks and financial institutions both within
and outside of
West Virginia, and it is anticipated that such discussions will
continue in the future.
RECENT DEVELOPMENTS
On January 28, 1994, One Valley consummated its merger with
Mountaineer
Bankshares of W.Va., Inc., and as a result acquired ownership of 100%
of the
outstanding stock of the following seven banking subsidiaries: Old
National Bank,
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Martinsburg; The Empire National Bank of Clarksburg; City National
Bank of
Fairmont; The Bank of Wadestown, Fairview; Mercantile Banking & Trust
Company, Moundsville; The Bank of Cameron, Inc.; and The Sunshine Bank
of
Wheeling (the "New Banking Subsidiaries") (the Existing Banking
Subsidiaries and
the New Banking Subsidiaries are collectively referred to as the
"Banking
Subsidiaries"). The resulting company has total assets of more than
$3,500,000,000
and total deposits of $2,900,000,000 making it the largest bank
holding company in
the State of West Virginia. Except as specifically noted, the
information set forth in
this Annual Report on Form 10-K includes all of the Banking
Subsidiaries.
In September 1993, M & I Data Services, Inc., of Milwaukee,
Wisconsin, began
providing data processing services for the Existing Banking
Subsidiaries. It is
anticipated that the New Banking Subsidiaries will use data processing
services
from M & I Data Services, Inc., beginning in 1995.
The information set forth in the section captioned
"Acquisition Activity" on
page 7 of One Valley's 1993 Annual Report to Shareholders is
incorporated herein
by reference.
HISTORY OF THE BANKING SUBSIDIARIES
One Valley Bank, the principal Banking Subsidiary of One
Valley, was
incorporated in 1867 as a state bank under the laws of West Virginia,
with the name
"The Kanawha Valley Bank". On February 10, 1975, Kanawha Valley Bank
converted from a state bank to a national banking association, and on
September 1,
1987, adopted its present corporate name. The other Banking
Subsidiaries were
incorporated or chartered as state or national banks in the years
indicated in the
chart below. In September 1987, all Existing Banking Subsidiaries
adopted a
common corporate identity utilizing "One Valley Bank." Those name
changes were
undertaken primarily to promote a single corporate image for One
Valley's diverse
banking operations.
Year in Currently
Name Which Organized Chartered As
One Valley Bank of 1892 National
Martinsburg
One Valley Bank of 1911 State
Morgantown
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Year in Currently
Name Which Organized Chartered As
One Valley Bank of 1906 State
Mercer County
One Valley Bank of 1904 State
Oak Hill
One Valley Bank of 1956 State
Huntington
One Valley Bank of 1900 National
Ronceverte
One Valley Bank of 1910 State
Summersville
One Valley Bank-East, 1865 National
(formerly
Old National Bank)
The Empire National Bank of 1903 National
Clarksburg
One Valley Bank of Marion 1939 National
County, National Association
(formerly
City National Bank of Fairmont)
The Bank of Wadestown 1905 State
Mercantile Banking & Trust 1903 State
Company
The Bank of Cameron, Inc. 1903 State
The Sunshine Bank of Wheeling 1965 State
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OPERATIONS OF THE BANKING SUBSIDIARIES
Following consummation of the Mountaineer merger, and in
conjunction
with an orderly transition in each market, One Valley will undertake
certain inter-
company transactions among the Banking Subsidiaries to simplify its
organizational
structure. During the first half of 1994, the two banks in
Martinsburg will be
merged, and One Valley will operate one subsidiary bank (with branch
offices) in
each of the Fairmont, Martinsburg, Clarksburg and Moundsville areas.
Applications
seeking approval of these transactions have been filed with the
appropriate
regulatory agencies. All offices formerly operated by Mountaineer
will be operated
under the title "One Valley Bank."
The Banking Subsidiaries offer all services traditionally
offered by full-service
commercial banks, including commercial and individual demand and time
deposit
accounts, commercial and individual loans, credit card (MasterCard and
Visa) and
drive-in banking services. In addition, One Valley Bank is active in
correspondent
banking services. Trust services are offered on a statewide basis.
No material
portion of any of the Banking Subsidiaries' deposits has been obtained
from a single
or small group of customers, and the loss of any one customer's
deposits or a small
group of customers' deposits would not have a material adverse effect
on the
business of any of the Banking Subsidiaries.
Although the market areas of several of the Banking
Subsidiaries encompass a
portion of the coal fields located in southern West Virginia, an area
of the State
which has been economically depressed, the coal-related loans in the
loan portfolios
of the Existing Banking Subsidiaries constitute less than 5% of One
Valley's total
loans outstanding. Ten of the 22 counties within One Valley's market
areas rank
among the State's top ten counties in household income, and the
Banking
Subsidiaries generally serve the stronger economic areas of the State.
The Banking Subsidiaries also offer services to customers at
various locations
within their service areas by use of automated teller machines
("ATMs"). The
ATMs allow customers to make deposits and withdrawals at convenient
locations.
Customers may also borrow against their revolving lines of credit at
those locations.
Customers of any Banking Subsidiary may conduct transactions at any
One Valley
ATM and, by means of the OWL/MAC system, a regional ATM system,
through the
CIRRUS ATM network, can conduct ATM transactions nationwide.
Customers of
any of the Banking Subsidiaries may also make deposits or withdrawals
at any of
One Valley's 80 statewide main office and branch locations.
As of March 1, 1994, One Valley and its Subsidiaries had
approximately 2013
full time equivalent employees.
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LEGISLATION
The 1980s was a period of significant legislative change in
West Virginia for
banks and bank holding companies. During the 1980s, West Virginia
converted
from a unit banking state to permit unlimited branch banking and the
interstate
acquisition of banks and bank holding companies on a reciprocal basis.
State-wide
unlimited branch banking commenced on and after January 1, 1987.
Interstate
banking activities became permissible on January 1, 1988. The entry
by out-of-state
bank holding companies is permitted only by the acquisition of an
existing
institution which has operated for two years prior to acquisition, but
not by the
chartering and acquisition of de novo banks in West Virginia by out-
of-state bank
holding companies or the establishment of branch banks across state
lines (either de
novo or by acquisition or merger).
West Virginia also allows reciprocal interstate acquisitions
by thrift institutions
such as savings and loan holding companies, savings and loan
associations, savings
banks, and building and loan associations.
Under the Financial Institutions Reform, Recovery, and
Enforcement Act of
1989 ("FIRREA"), enacted in 1989, One Valley is subject to provisions
which among
other things create a so-called "cross guarantee" liability on the
part of insured
depository institutions which are "commonly controlled." This
liability permits the
Federal Deposit Insurance Corporation ("FDIC"), as receiver of a
failed insured
depository institution, to assert claims against other commonly
controlled insured
depository institutions for losses suffered or reasonably anticipated
to be suffered by
the FDIC with respect to such failed depository institution.
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
In December 1991, Congress enacted the Federal Deposit
Insurance Corporation
Improvement Act of 1991 ("FDICIA"), which substantially revises the
bank
regulatory and funding provisions of the Federal Deposit Insurance Act
and makes
revisions to several other federal banking statutes.
Among other things, FDICIA requires federal bank regulatory
authorities to
take "prompt corrective action" with respect to depository
institutions that do not
meet minimum capital requirements. For these purposes, FDICIA
establishes five
capital tiers: well capitalized, adequately capitalized,
undercapitalized, significantly
undercapitalized and critically undercapitalized.
The Office of the Comptroller of the Currency ("OCC") and the
Office of Thrift
Supervision ("OTS") have adopted regulations to implement the prompt
corrective
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action provisions of FDICIA. Among other things, the regulations
define the
relevant capital measures for the five capital categories. An
institution is deemed to
be "well capitalized" if it has a total risk-based capital ratio of
10% or greater, Tier 1
risk-based capital ratio of 6% or greater and a Tier 1 leverage ratio
of 5% or greater
and is not subject to a regulatory order, agreement or directive to
meet and maintain
a specific capital level for any capital measure. An institution is
deemed to be
"adequately capitalized" if it has a total risk-based capital ratio of
8% or greater, a Tier
1 risk-based capital ratio of 4% or greater and, generally, a Tier 1
leverage ratio of 4%
or greater and the institution does not meet the definition of a "well
capitalized"
institution. An institution that does not meet one or more of the
"adequately
capitalized" tests is deemed to be "undercapitalized". If the
institution has a total
risk-based capital ratio that is less than 6%, a Tier 1 risk-based
capital ratio that is less
than 3%, or a leverage ratio that is less than 3%, it is deemed to be
"significantly
undercapitalized". Finally, an institution is deemed to be
"critically
undercapitalized" if it has a ratio of tangible equity (as defined in
the regulations) to
total assets that is equal to or less than 2%.
"Undercapitalized" institutions are subject to growth
limitations and are
required to submit a capital restoration plan. If an
"undercapitalized" institution
fails to submit an acceptable plan, it is treated as if it is
significantly undercapitalized.
"Significantly undercapitalized" institutions may be subject to a
number of
requirements and restrictions, including orders to sell sufficient
voting stock to
become adequately capitalized, requirements to reduce total assets and
cessation of
receipt of deposits from correspondent banks. "Critically
undercapitalized"
institutions may not, beginning 60 days after becoming "critically
undercapitalized"
make any payment of principal or interest on their subordinated debt.
In addition,
"critically undercapitalized" institutions are subject to appointment
of a receiver or
conservator.
Under FDICIA, a depository institution that is not "well
capitalized" is
generally prohibited from accepting brokered deposits and offering
interest rates on
deposits higher than the prevailing rate in its market.
Each of One Valley's Banking Subsidiaries currently meet the
FDIC's definition
of a "well capitalized" institution for purposes of accepting brokered
deposits. For
the purposes of the brokered deposit rules, a bank is defined to be
"well capitalized"
if it maintains a ratio of Tier 1 capital to risk-adjusted assets of
at least 6%, a ratio of
total capital to risk-adjusted assets of at least 10% and a Tier 1
leverage ratio of at
least 5% and is not otherwise in a "troubled condition" as specified
by its appropriate
federal regulatory agency.
FDICIA directs that each federal banking agency prescribe
standards for
depository institutions and depository institution holding companies
relating to
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internal controls, information systems, internal audit systems, loan
documentation,
credit underwriting, interest rate exposure, asset growth,
compensation, a
maximum ratio of classified assets to capital, minimum earnings
sufficient to absorb
losses, a minimum ratio of market value to book value for publicly-
traded shares
and such other standards as the agency deems appropriate. In
December, 1993, the
FDIC adopted final rules to implement these provisions of FDICIA. The
rules set
forth general standards to be observed, but in most instances do not
specify
operating or managerial procedures to be followed. The Board of
Governors of the
Federal Reserve System ("Board of Govenors") and the OCC are in the
process of
issuing rules implementing various aspects of FDICIA. At this time,
One Valley
believes that the rules will not have a material adverse effect on its
operations.
FDICIA also contains a variety of other provisions that may
affect the
operations of One Valley's Banking Subsidiaries, including new
reporting
requirements, revised regulatory standards for real estate lending,
"truth in savings"
provisions and the requirement that a depository institution give 90
days' prior
notice to customers and regulatory authorities before closing any
branch.
In addition to FDICIA, there have been a number of legislative
and regulatory
proposals designed to strengthen the federal deposit insurance system
and to
improve the overall financial stability of the United States banking
system. These
include proposals to increase capital requirements above presently
published
guidelines, to place assessments on depository institutions to
increase funds
available to the FDIC and to allow national banks to branch on an
interstate basis. It
is impossible to predict whether or in what form these proposals may
be adopted in
the future and, if adopted, what their effect would be on One Valley.
It is likewise
impossible to predict what the competitive effect will be as a result
of action by the
OTS allowing certain thrift institutions to engage in interstate
branching on a
nationwide basis.
COMPETITION
Vigorous competition exists in all areas where One Valley and
the Banking
Subsidiaries are engaged in business. The primary market areas served
by the
Banking Subsidiaries are generally defined as West Virginia and
certain adjoining
areas in Kentucky, Maryland, Ohio, Pennsylvania and Virginia.
For most of the services which the Banking Subsidiaries
perform, they compete
with commercial banks as well as other financial institutions. For
instance, savings
banks, savings and loan associations, credit unions, stock brokers,
and issuers of
commercial paper and money market funds actively compete for funds and
for
various types of loans. In addition, insurance companies, investment
counseling
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firms and other business firms and individuals offer personal and
corporate trust
and investment counseling services. The opening of branch banks
within One
Valley's market areas has increased competition for the Banking
Subsidiaries.
Although the bank legislation has provided an opportunity for One
Valley to
acquire banking subsidiaries in other attractive banking areas of the
State, it will
likely result in increased competition for One Valley in its market
areas, and, with
reciprocal interstate banking, One Valley faces additional competition
in efforts to
acquire other subsidiaries throughout West Virginia and in neighboring
states.
Until 1993, the various banks and bank-holding companies
operating in West
Virginia were predominantly owned by shareholders in West Virginia and
were
financed by operations arising principally in West Virginia. During
1993, Banc One
Corp., the seventh largest bank holding company in the United States,
consummated its acquisition of Key Centurion Bancshares Inc., and
Huntington
Bankshares Incorporated consummated its acquisitions of Commerce Banc
Corporation and CB&T Financial Corp. It is anticipated that other
large out-of-state
banks will, over time, expand their operations into West Virginia.
While One
Valley believes that it can compete effectively with out-of-state
banks, One Valley
will face larger competitors which have access to increased capital
resources and
which have relatively sophisticated bank holding companies and
marketing
structures in place.
As of December 31, 1993, there were 18 multi-bank holding
companies and 32
one-bank holding companies in the State of West Virginia registered
with the
Federal Reserve System and the West Virginia Board of Banking and
Financial
Institutions ("Board of Banking"). These holding companies are
headquartered in
various West Virginia cities and control banks throughout the State of
West
Virginia, including banks which compete with the Banking Subsidiaries
in their
market areas. One Valley has actively competed with some of these
bank holding
companies to acquire its Banking Subsidiaries.
SUPERVISION AND REGULATION
One Valley is a bank holding company within the provisions of
the Bank
Holding Company Act of 1956, is registered as such, and is subject to
supervision by
the Board of Governors. The Bank Holding Company Act requires One
Valley to
secure the prior approval of the Board of Governors before One Valley
acquires
ownership or control of more than five percent (5%) of the voting
shares or
substantially all of the assets of any institution, including another
bank.
As a bank holding company, One Valley is required to file with
the Board of
Governors an annual report and such additional information as the
Board of
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Governors may require pursuant to the Bank Holding Company Act. The
Board of
Governors may also make examinations of One Valley and of the Banking
Subsidiaries. Furthermore, under Section 106 of the 1970 Amendments
to the Bank
Holding Company Act and the regulations of the Board of Governors, a
bank
holding company and its subsidiaries are prohibited from engaging in
certain tie-in
arrangements in connection with any extension of credit or any
provision of credit,
sale or lease of property or furnishing of services. In addition, the
Banking
Subsidiaries are subject to certain restrictions under federal law
that limit the
transfer of funds by the Banking Subsidiaries to One Valley and its
nonbanking
subsidiaries, whether in the form of loans, other extensions of
credit, investments
or asset purchases. Such transfers by any Banking Subsidiaries to One
Valley or any
nonbanking subsidiary are limited in amount to 10% of such Banking
Subsidiary's
capital and surplus and, with respect to One Valley and all nonbanking
subsidiaries,
to an aggregate of 20% of such Banking Subsidiary's capital and
surplus.
Furthermore, such loans and extensions of credit are required to be
secured in
specified amounts and must be fully collateralized.
One Valley is required to register annually with the
Commissioner of Banking
of West Virginia ("Commissioner") and to pay a registration fee to the
Commissioner based on the total amount of bank deposits in banks with
respect to
which One Valley is a bank holding company. Although legislation
allows the
Commissioner to prescribe the registration fee, it limits the fee to
ten dollars per
million dollars of deposits rounded off to the nearest million
dollars. One Valley is
also subject to regulation and supervision by the Commissioner.
One Valley is required to secure the approval of the West
Virginia Board of
Banking before acquiring ownership or control of more than five
percent of the
voting shares or substantially all of the assets of any institution,
including another
bank. West Virginia banking law prohibits any West Virginia or non-
West Virginia
bank or bank holding company from acquiring shares of a bank if the
acquisition
would cause the combined deposits of all banks in the State of West
Virginia, with
respect to which it is a bank holding company, to exceed 20% of the
total deposits of
all depository institutions in the State of West Virginia. The total
deposits of the
Banking Subsidiaries upon consummation of the Mountaineer merger, were
approximately 15.5% of the total deposits in the State of West
Virginia.
BANKING SUBSIDIARIES
The Banking Subsidiaries are subject to FDIC deposit insurance
assessments.
The FDIC set an assessment rate for the Bank Insurance Fund ("BIF") of
0.23%
which became effective on July 1, 1991. Because of decreases in the
reserves of the
BIF due to the increased number of bank failures in recent years, it
is possible that
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BIF insurance assessments will be increased, and it is also possible
that there may be
a special additional assessment. A large special assessment could have
an adverse
impact on One Valley's results of operations. The information set
forth in
paragraph number seven in the subsection captioned "Income Statement
Analysis -
Non-Interest Income and Expense" on page 21 of One Valley's 1993
Annual Report
to Shareholders is incorporated herein by reference.
The operations of the Banking Subsidiaries are subject to
federal and state
statutes, which apply to national and state banks. The operations of
the Banking
Subsidiaries may also be subject to regulations of the OCC, the Board
of Governors,
the Board of Banking and the FDIC.
The primary supervisory authority of One Valley's national
Banking
Subsidiaries is the OCC while the primary supervisory authority of its
state
chartered Banking Subsidiaries is the Commissioner. These two
authorities
regularly examine such areas as reserves, loans, investments,
management practices
and other aspects of the operations of the Banking Subsidiaries.
One Valley's nationally chartered Banking Subsidiaries are
chartered under the
laws of the United States and, as such, are member banks of the
Federal Reserve
System. Its state chartered Banking Subsidiaries are non-member banks
of the
Federal Reserve except for One Valley Bank of Summersville, which is a
member
bank.
The regulation and examination of One Valley and its Banking
Subsidiaries are
designed primarily for the protection of depositors and not One Valley
or its
shareholders.
CAPITAL REQUIREMENTS
The Board of Governors has issued risk-based capital guidelines for
bank
holding companies, including One Valley. The guidelines establish a
systematic analytical framework that makes regulatory capital
requirements more sensitive to differences in risk profiles among
banking
organizations, takes off-balance sheet exposures into explicit account
in
assessing capital adequacy, and minimizes disincentives to holding
liquid,
low-risk assets. Under the guidelines and related policies, bank
holding
companies must maintain capital sufficient to meet both a risk-based
asset ratio test and leverage ratio test on a consolidated basis. The
risk-
based ratio is determined by allocating assets and specified off-
balance
sheet commitments into four weighted categories, with higher levels of
capital being required for categories perceived as representing
greater
risk. The leverage ratio is determined by relating core capital (as
described below) to total assets adjusted as specified in the
guidelines.
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All of One Valley's Banking Subsidiaries are subject to substantially
similar capital requirements adopted by applicable regulatory
agencies.
Generally, under the applicable guidelines, the financial
institution's
capital is divided into two tiers. "Tier 1", or core capital,
includes
common equity, noncumulative perpetual preferred stock (excluding
auction rate issues) and minority interests in equity accounts or
consolidated subsidiaries, less goodwill. Bank holding companies,
however, may include cumulative perpetual preferred stock in their
Tier 1
capital, up to a limit of 25% of such Tier 1 capital. "Tier 2", or
supplementary capital, includes, among other things, cumulative and
limited-life preferred stock, hybrid capital instruments, mandatory
convertible securities, qualifying subordinated debt, and the
allowance for
loan losses, subject to certain limitations, less required deductions.
"Total capital" is the sum of Tier 1 and Tier 2 capital.
Financial institutions are required to maintain a risk-based ratio of
8%, of which 4% must be Tier 1 capital. The appropriate regulatory
authority may set higher capital requirements when an institution's
particular circumstances warrant.
Financial institutions that meet certain specified criteria, including
excellent asset quality, high liquidity, low interest rate exposure
and the
highest regulatory rating, are required to maintain a minimum leverage
ratio of 3%. Financial institutions not meeting these criteria are
required
to maintain a leverage ratio which exceeds 3% by a cushion of at least
100
to 200 basis points.
The guidelines also provide that financial institutions experiencing
internal growth or making acquisitions will be expected to maintain
strong capital positions substantially above the minimum supervisory
levels, without significant reliance on intangible assets.
Furthermore,
the Board of Governors' guidelines indicate that the Board of Governors
will
continue to consider a "tangible Tier 1 leverage ratio" in evaluating
proposals for expansion or new activities. The tangible Tier 1
leverage
ratio is the ratio of an institution's Tier 1 capital, less all
intangibles, to
total assets, less all intangibles.
Failure to meet applicable capital guidelines could subject the
financial institution to a variety of enforcement remedies available
to the
federal regulatory authorities, including limitations on the ability
to pay
dividends, the issuance by the regulatory authority of a capital
directive
to increase capital and the termination of deposit insurance by the
FDIC,
as well as to the measures described under FDICIA as applicable to
undercapitalized institutions.
As of December 31, 1993, the Tier 1 risk-based ratio, total risk-based
ratio and total assets leverage ratio for One Valley were as follows:
14
<PAGE>
Regulatory
Requirement One Valley
Tier 1 Risk-Based Ratio 4.00% 12.69%
Total Risk-Based Ratio 8.00% 13.94%
Total Assets Leverage Ratio 3.00% 8.57%
As of December 31, 1993 all of One Valley's Banking Subsidiaries had
capital in excess of all applicable requirements.
The Board of Governors, as well as the FDIC, the OCC and the OTS, have
adopted changes to their risk-based and leverage ratio requirements
that
require that all intangible assets, with certain exceptions, be
deducted
from Tier 1 capital. Under the Board of Governors' rules, the only
types of
intangible assets that may be included in (i.e., not deducted from) a
bank
holding company's capital are readily marketable purchased mortgage
servicing rights ("PMSRs") and purchased credit card relationships
("PCCRs"), provided that, in the aggregate, that total amount of PMSRs
and
PCCRs included in capital does not exceed 50% of Tier 1 capital.
PCCRs
are subject to a separate sublimate of 25% of Tier 1 capital. The
amount
of PMSRs and PCCRs that a bank holding company may include in its
capital
is limited to the lesser of (i) 90% of such assets' fair market value
(as
determined under the guidelines), or (ii) 100% of such assets' book
value,
each determined quarterly. Identifiable intangible assets (i.e.,
intangible
assets other than goodwill) other than PMSRs and PCCRs, including core
deposit intangibles, acquired on or before February 19, 1992 (the date
the
Board of Governors issued its original proposal for public comment),
generally will not be deducted from capital for supervisory purposes,
although they will continue to be deducted for purposes of evaluating
applications filed by bank holding companies.
GOVERNMENTAL POLICIES
In addition to the effect of general economic conditions, the
earnings and
future business activities of the Banking Subsidiaries, both members
and non-
members of the Federal Reserve, are affected by the fiscal and
monetary policies of
the federal government and its agencies, particularly the Board of
Governors. The
Board of Governors regulates the national money supply in order to
mitigate
recessionary and inflationary pressures. The techniques used by the
Board of
Governors include setting the reserve requirements of member banks,
establishing
the discount rate on member bank borrowings and conducting open market
operations in United States government securities to exercise control
over the
supply of money and credit.
15
<PAGE>
Although it is difficult to assess the impact on One Valley of
the change from
the Bush administration to the Clinton administration, during 1993
there was an
increase in corporate taxes, and in the future there may be increased
costs for
medical and other employee benefits, and a possible change in the
regulatory
climate for financial institutions.
The policies of the Board of Governors have a direct and
indirect effect on the
amount of bank loans and deposits, and the interest rates charged and
paid thereon.
While the impact of current economic problems and the policies of the
Board of
Governors and other regulatory authorities designed to deal with these
economic
problems upon the future business and earnings of the Banking
Subsidiaries cannot
be accurately predicted, those policies can materially affect the
revenues and income
of the Banking Subsidiaries. The information set forth in paragraph
number seven
in the subsection captioned "Income Statement Analysis - Non-Interest
Income and
Expense" on page 21 of One Valley's 1993 Annual Report to Shareholders
is
incorporated herein by reference.
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES
Statistical disclosures required by bank holding companies are
included in
"Management's Discussion and Analysis of Financial Condition and
Results of
Operations" set forth on pages 5 through 22 of One Valley's 1993
Annual Report to
Shareholders for the fiscal year ended December 31, 1993. That
information is
incorporated herein by reference.
Item 2. Properties
ONE VALLEY AND ONE VALLEY BANK
One Valley Bank owns the site of One Valley Bank's current
banking quarters,
One Valley Square in the City of Charleston, West Virginia. This
property is leased
by One Valley Bank to One Valley Square, Inc. One Valley Square,
Inc., constructed
a fifteen story (plus basement) office building on the site, and One
Valley Bank
leases a portion of the basement and seven floors of One Valley Square
for its
operations, consisting of approximately 130,000 square feet. In
addition, One Valley
Bank subleases a portion of the seventh floor to others. One Valley
also conducts its
operations from the space leased by One Valley Bank in One Valley
Square. The
remaining space is leased to various other tenants. Upon expiration
of the land
lease, all improvements will revert to the owner of the land. One
Valley Bank also
conducts operations at its operations center, also located in
Charleston, and at 23
branch locations throughout Kanawha, Putnam, Jackson, and Wood
Counties.
16
<PAGE>
OTHER AFFILIATE BANKS
The properties owned or leased by the other Banking
Subsidiaries consist
generally of fourteen main bank offices, related drive-in facilities,
42 branch offices
and such other properties as are necessary to house related support
activities of
those banks. All of the properties of the Banking Subsidiaries are
suitable and
adequate for their current operations and are generally being fully
utilized.
Item 3. Legal Proceedings
Various legal proceedings are presently pending to which the
Banking
Subsidiaries are parties; however, these proceedings are ordinary
routine litigation
incidental to the business of the Banking Subsidiaries. There are no
material legal
proceedings pending or threatened against One Valley or its
Subsidiaries.
Item 4. Submission of Matters to a Vote of Security Holders
At a Special Meeting held on December 8, 1993, the
shareholders of One Valley
approved an Agreement and Plan of Merger whereby Mountaineer
Bankshares of
W.Va., Inc., was merged with and into One Valley. The terms and
conditions of
that Agreement and merger were fully described in One Valley's
Registration
Statement on Form S-4, Registration No. 33-50729, Filed October 22,
1993. At the
Special Meeting that Agreement was approved as follows:
FOR AGAINST ABSTAIN
10,332,995 (80.1%) 48,732 (.33%) 133,418 (1.03%)
17
<PAGE>
Item 4A. Executive Officers of the Registrant
The executive officers of One Valley are:
Name Age Banking Experience and Qualifications
Robert F. Baronner 67 1991 to Present, Chairman of the Board,
One Valley. 1971 to 1991, One Valley
Bank. Previously, President and Chief
Executive Officer, One Valley.
J. Holmes Morrison 53 1967 to present, One Valley Bank. Vice
President and Trust Officer, 1970; Senior
Vice President and Senior Trust Officer,
1978; Executive Vice President, 1982;
President and Chief Operating Officer,
1985; President and Chief Executive
Officer, 1988; Chairman of the Board,
1991. Vice President, One Valley, 1982;
Senior Vice President, One Valley, 1984;
Executive Vice President, One Valley,
1990; President and Chief Executive
Officer, One Valley, 1991.
Phyllis H. Arnold 45 1973-1979, One Valley Bank. Credit
Officer, 1974-1977; Vice President, 1977-
1979. West Virginia State Banking
Commissioner, 1979-1983. Executive
Vice President, One Valley Bank, 1988;
President and Chief Executive Officer,
One Valley Bank, 1991; Executive Vice
President, One Valley, 1994.
Frederick H. Belden, Jr. 55 1968 to present, One Valley Bank. Senior
Vice President and Senior Trust Officer,
1982; Executive Vice President, 1986.
Executive Vice President, One Valley,
1994.
18
<PAGE>
James L. Whytsell 54 1959 to present, One Valley Bank. Senior
Vice President, 1977; Executive Vice
President, 1986. Senior Vice President,
One Valley, 1986. Data Processing.
Laurance G. Jones 47 1969 to present, One Valley Bank.
Controller, 1971; Vice President,
Controller and Treasurer, 1979; Senior
Vice President, 1980; Executive Vice
President, 1992. Treasurer, One
Valley, 1981; Treasurer and Chief
Financial Officer, One Valley, 1984;
Executive Vice President, One Valley,
1994. Finance and Accounting.
Brent D. Robinson 46 1978 to 1994, Mountaineer Bankshares,
Inc. and its predecessors. Executive Vice
President, One Valley, 1994.
James A. Winter 41 1975 to present, One Valley Bank. Vice
President, Controller and Assistant
Treasurer, 1982. Senior Vice President,
1991; Vice President and Chief
Accounting Officer, One Valley, 1989.
19
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
During 1993, One Valley Common Stock was traded over the
counter by
Merrill Lynch, Pierce, Fenner & Smith, Inc.; Keefe, Bruyette & Woods,
Inc.;
Robinson-Humphrey Co. Inc.; Legg, Mason, Wood, Walker, Inc.; Wheat
First
Securities, Inc.; Rothschild, Inc.; Herzog, Heine, Geduld, Inc.; Mayer
& Schweitzer,
Inc.; McDonald & Company Sec., Inc.; and Sandler O'Neill & Partners.
At March 8,
1994, the total number of holders of One Valley Common Stock was
approximately
8,700, including shareholders of record and shares held in nominee
name. The
information set forth in paragraphs number two and three in the
subsection
captioned "Balance Sheet Analysis-Capital Resources" on page 17 of One
Valley's
1993 Annual Report to Shareholders is incorporated herein by
reference.
Notes N and Q of Notes to the Consolidated Financial
Statements appearing
at pages 38 and 39 of One Valley's 1993 Annual Report to Shareholders
are
incorporated herein by reference. Table 1 "Six-Year Selected
Financial Summary"
on page five of One Valley's 1993 Annual Report to Shareholders is
incorporated
herein by reference.
Item 6. Selected Financial Data
Table 1 "Six-Year Selected Financial Summary" on page five of
One Valley's
1993 Annual Report to Shareholders is incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of Financial
Condition
and Results of Operations
The information contained on pages 5 through 22 of One
Valley's 1993
Annual Report to Shareholders is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The information contained on pages 24 through 39 of One
Valley's 1993
Annual Report to Shareholders is incorporated herein by reference.
See Item 14 for
additional information regarding the financial statements.
Item 9. Changes in and Disagreements with Accountants on
Accounting and
Financial Disclosure
None.
20
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The information set forth in the sections captioned "Election
of Directors",
"Management Nominees to the Board of One Valley", "Directors
Continuing to
Serve Unexpired Terms," and "Compliance with Section 16(a) of the
Securities
Exchange Act of 1934" on pages 2 through 6 and page 19 of One Valley's
definitive
Proxy Statement dated March 23, 1994, is incorporated herein by
reference.
Reference is also made to the information concerning One Valley's
executive
officers provided in Part I, Item 4A, of this report.
Item 11. Executive Compensation
The information set forth in the sections captioned "Executive
Compensation", "Change of Control Agreements", and "Compensation of
Directors" on pages 12 through 15 and page 19 of One Valley's
definitive Proxy
Statement dated March 23, 1994, is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information set forth in the sections captioned "Principal
Holders of
Voting Securities" and "Ownership of Securities by Directors, Nominees
and
Officers" on pages 8 through 11 of One Valley's definitive Proxy
Statement dated
March 23, 1994, is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information set forth in the sections captioned "Certain
Transactions
with Directors and Officers and Their Associates" and "Compensation
Committee
Interlocks and Insider Participation" on page 19 of One Valley's
definitive Proxy
Statement dated March 23, 1994, and Note E of the Notes to the
Consolidated
Financial Statements appearing at page 31 of One Valley's 1993 Annual
Report to
Shareholders is incorporated herein by reference.
21
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
1993 Annual Report
to Shareholders
Index Page(s)
(a) 1. Financial Statements
Consolidated Financial Statements
of One Valley Bancorp of West Virginia,
Inc. incorporated by reference in Part II,
Item 8 of this report.
Consolidated Balance Sheets at 24
December 31, 1993 and 1992
Consolidated Statements of Income 25
for the years ended December 31,
1993, 1992 and 1991
Consolidated Statements of Share- 26
holders' Equity for the years ended
December 31, 1993, 1992 and 1991
Consolidated Statements of Cash Flows 27
for the years ended December 31, 1993,
1992 and 1991
Notes to Consolidated Financial 28-39
Statements
Report of Independent Auditors 23
(a) 2. Financial Statement Schedules
All schedules are omitted, as the required information
is inapplicable or the information is presented in the
Consolidated Financial Statements or related notes thereto.
22
<PAGE>
(a) 3. Exhibits required to be Filed by Item 601 of Page(s)
Regulation S-K and Item 14(c) of Form 10-K Form 10-K
See Index to Exhibits
(b) Reports on Form 8-K:
None.
(c) Exhibits
See Item 14(a)3 above.
(d) Financial Statement Schedules
See Item 14(a)2 above.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ J. Holmes Morrison
J. Holmes Morrison,
President and
Chief Executive Officer
March 16, 1994
Pursuant to the requirements of the Securities Exchange Act of
1934, this
report has been signed below by the following persons on behalf of the
registrant
and in the capacities and as of the date indicated.
Signature Title Date
/s/ Phyllis H. Arnold Director March 16, 1994
PHYLLIS H. ARNOLD
/s/ Charles M. Avampato Director March 16, 1994
CHARLES M. AVAMPATO
/s/ Robert F. Baronner Chairman of the Board March 15, 1994
ROBERT F. BARONNER
/s/ James K. Brown Director March 16, 1994
JAMES K. BROWN
24
<PAGE>
/s/ John T. Chambers Director March 16, 1994
JOHN T. CHAMBERS
/s/ Nelle Ratrie Chilton Director March 16, 1994
NELLE RATRIE CHILTON
/s/ Ray M. Evans, Jr. Director March 16, 1994
RAY M. EVANS, JR.
/s/ James Gabriel Director March 16, 1994
JAMES GABRIEL
/s/ Phillip H. Goodwin Director March 16, 1994
PHILLIP H. GOODWIN
/s/ Thomas E. Goodwin Director March 16, 1994
THOMAS E. GOODWIN
/s/ Cecil B. Highland, Jr. Director March 16, 1994
CECIL B. HIGHLAND, JR.
/s/ Laurance G. Jones Treasurer and Chief March 16, 1994
LAURANCE G. JONES Financial Officer
(Principal Financial
Officer)
/s/ Robert E. Kamm, Jr. Director March 16, 1994
ROBERT E. KAMM, JR.
/s/ David E. Lowe Director March 16, 1994
DAVID E. LOWE
/s/ John D. Lynch Director March 16, 1994
JOHN D. LYNCH
25
<PAGE>
/s/ Edward H. Maier Director March 15, 1994
EDWARD H. MAIER
/s/ J. Holmes Morrison Chief Executive Officer, March 16, 1994
J. HOLMES MORRISON Director and President
/s/ Charles R. Neighborgall, III Director March 16, 1994
CHARLES R. NEIGHBORGALL, III
/s/ Robert O. Orders, Sr. Director March 16, 1994
ROBERT O. ORDERS, SR.
/s/ John L. D. Payne Director March 15, 1994
JOHN L. D. PAYNE
/s/ Angus E. Peyton Director March 15, 1994
ANGUS E. PEYTON
/s/ Lacy I. Rice, Jr. Director March 16, 1994
LACY I. RICE, JR.
/s/ James W. Thompson Director March 16, 1994
JAMES W. THOMPSON
/s/ J. Lee Van Metre, Jr. Director March 15, 1994
J. LEE VAN METRE, JR.
/s/ Richard B. Walker Director March 16, 1994
RICHARD B. WALKER
/s/ H. Bernard Wehrle, III Director March 15, 1994
H. BERNARD WEHRLE, III
26
<PAGE>
Director March , 1994
JOHN H. WICK, III
/s/ Thomas D. Wilkerson Director March 16, 1994
THOMAS D. WILKERSON
/s/ James A. Winter Vice President and Chief March 16, 1994
JAMES A. WINTER Accounting Officer
(Principal Accounting
Officer)
27
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description:
(3) Articles of Incorporation and Bylaws
Exhibit 3.1 Articles of Incorporation of One Valley, filed as part of One
Valley's 1981 Annual Report on Form 10-K and incorporated
herein by reference.
Exhibit 3.2 Articles of Amendment of One Valley dated July 17, 1981,
filed as part of One Valley's 1981 Annual Report on Form 10-
K and incorporated herein by reference.
Exhibit 3.3 Articles of Amendment of One Valley dated December 3,
1982, filed as part of One Valley's 1982 Annual Report on
Form 10-K and incorporated herein by reference.
Exhibit 3.4 Articles of Amendment of One Valley dated May 6, 1986, filed
as part of One Valley's Registration Statement on Form S-4,
Registration No. 33-5737, May 15, 1986, and incorporated
herein by reference.
Exhibit 3.5 Articles of Amendment of One Valley dated May 19, 1988,
filed as part of One Valley's 1992 Annual Report on Form 10-
K and incorporated herein by reference.
Exhibit 3.6 Articles of Amendment of One Valley dated May 26, 1993,
filed as part of One Valley's Registration Statement on Form
S-4, Registration No. 33-50729, October 22, 1993, and
incorporated herein by reference.
Exhibit 3.7 Amendments to the Bylaws of One Valley dated June 20,
1990, and a complete copy of One Valley's Bylaws as
amended, filed as part of One Valley's 1990 Annual Report
on Form 10-K and incorporated herein by reference.
28
<PAGE>
(10) Material Contracts.
Exhibit 10.1 Indemnity Agreement between Resolution Trust
Corporation and One Valley, filed as part of One Valley's
Registration Statement on Form S-2, Registration No. 33-
43384, October 22, 1991, and incorporated herein by reference.
Executive Compensation Plans and Arrangements.
Exhibit 10.2 Agreement dated as of May 7, 1985, between One Valley and
Thomas E. Goodwin, filed as part of One Valley's
Registration Statement on Form S-4, Registration No. 2-
99417, August 5, 1985, and incorporated herein by reference.
Exhibit 10.3 Form of Change of Control Agreement between One Valley
and 7 of its Executive Officers, dated as of January 1,
1987, filed as part of One Valley's 1986 Annual Report on
Form 10-K and incorporated herein by reference.
Exhibit 10.4 One Valley Bancorp of West Virginia, Inc., 1983 Incentive
Stock Option Plan, as amended, filed as Exhibit No. 4 to One
Valley's Registration Statement on Form S-8, Registration
No. 33-3570, July 2, 1990, and incorporated herein by
reference.
Exhibit 10.5 One Valley Bancorp of West Virginia, Inc., 1993 Incentive
Stock Option Plan, filed as part of One Valley's Definitive
Proxy Statement, Registration No. 0-10042, and incorporated
herein by reference.
Exhibit 10.6 One Valley Bancorp of West Virginia, Inc., Management
Incentive Compensation Plan, as amended February, 1990,
filed as part of One Valley's 1992 Annual Report on Form 10-
K and incorporated herein by reference.
Exhibit 10.7 One Valley Bancorp of West Virginia, Inc., Supplemental
Benefit Plan, as amended April, 1990, filed as part of One
Valley's 1992 Annual Report on Form 10-K and incorporated
herein by reference.
29
<PAGE>
(11) Computation of Earnings Per Share -- found at page 31 herein.
(12) Statement Re Computation of Ratios -- found at page 32 herein.
(13) 1993 Annual Report to Security Holders -- found at
page 33 herein.
(21) Consent of Ernst & Young -- found at page 82 herein.
(23) Subsidiaries of Registrant -- found at page 81 herein.
(99) Proxy Statement for the 1993 Annual Meeting of One
Valley -- found at page 83 herein.
30
****************************************************************************
APPENDIX
On Page 2 of Exhibit 13 a photo of J. Holmes Morrison appears in the
upper right corner where indicated.
On Page 3 of Exhibit 13 a bar graph appears where indicated.
The plot points are listed as follows:
Net Income and Dividends Per Share
1988 1989 1990 1991 1992 1993
Net Income $1.33 $1.48 $1.75 $1.93 $2.29 $2.52
Dividends $0.50 $0.56 $0.59 $0.62 $0.70 $0.84
On Page 4 of Exhibit 13 two bar graphs appear where indicated.
The plot points for both are listed as follows:
Return on Average Assets
1988 1989 1990 1991 1992 1993
0.91% 0.90% 1.00% 0.99% 1.10% 1.19%
Return on Average Equity
1988 1989 1990 1991 1992 1993
11.54% 12.02% 13.15% 13.14% 13.92% 13.98
On page 9 of Exhibit 13 the Average Earning Assets bar chart appears where
indicated. It will be sent under cover of Form SE.
On Page 11 of Exhibit 13 the Total Loans bar chart appears where indicated.
It will be sent under cover of Form SE.
On Page 12 of Exhibit 13 the Non-performing Assets and Loans 90 Days Past
Due bar chart and the Provision for Loan Losses and Net Charge-Offs bar
chart appears where indicated. It will be sent under cover of Form SE.
On Page 16 of Exhibit 13 the Average Deposits bar chart appears where indicated.
It will be sent under cover of Form SE.
On Page 18 of Exhibit 13 the Net Interest Margin line graph appears where
indicated. It will be sent under cover of Form SE.
On Page 19 of Exhibit 13 the Net Interest Income line graph appears where
indicated. It will be sent under cover of Form SE.
On Page 21 of Exhibit 13 the Net Overhead Ratio line graph appears where
indicated.It will be sent under cover of Form SE.
On Page 18 of Exhibit 99 the Performance Graph appears where noted.
The plot points are listed in the table below that point.
On Page 43 of Exhibit 13 a photo appears on the left hand side of the
page. The people pictured in the photo are listed in the text on that
page.
On Page 44 of Exhibit 13 a photo appears in the center of the
page. The people pictured in the photo are listed in the text on that
page.
On the Back Cover of Exhibit 13 the One Valley Bancorp logo appears
where indicated.
Exhibit 11
Statement Re: Computation of Earnings per Share
<TABLE>
<CAPTION>
For the Three Months For the Year
Ended December 31 Ended December 31
1993 1992 1993 1992
<S> <C> <C> <C> <C>
PRIMARY:
Average Shares Outstanding 12,893,000 12,866,000 12,884,000 12,858,000
Net effect of the assumed exercise
of stock options - based on the
treasury stock method using
average market price 77,000 78,000 85,000 66,000
Total 12,970,000 12,944,000 12,969,000 12,924,000
Net Income $ 8,209,000 $ 7,513,000 $32,469,000 $29,477,000
Per Share Amount $ 0.63 $ 0.58 $ 2.50 $ 2.28
FULLY DILUTED:
Average Shares Outstanding 12,893,000 12,866,000 12,884,000 12,858,000
Net effect of the assumed exercise
of stock options - based on the
treasury stock method using
average market price or period end
market price, whichever is higher 77,000 98,000 90,000 107,000
Total 12,970,000 12,964,000 12,974,000 12,965,000
Net Income $8,209,000 $ 7,513,000 $32,469,000 $29,477,000
Per Share Amount $ 0.63 $ 0.58 $ 2.50 $ 2.27
</TABLE>
31
Exhibit 12
Statement Re: Computation of Ratios
ROA-Return on Average Assets: Return on Average Assets is defined as net
income divided by average total assets.
ROE-Return on Average Equity: Return on Average Equity is defined as net
income divided by average total equity.
Dividend Payout Ratio: The Dividend Payout Ratio is defined as declared
annual cash dividends per share divided by net income per share.
32
One Valley Bancorp 1993 Annual Report
<PAGE>
Shareholder Information
Stock Listing
Current market quotations for the common stock of One Valley
Bancorp are available on the NASDAQ electronic quotation system for
over-the-counter stocks, under the symbol OVWV. Registered NASDAQ
market makers in One Valley stock include:
Herzog, Heine, Geduld, Inc.
Keefe, Bruyette & Woods, Inc.
Legg, Mason, Wood, Walker, Inc.
Mayer & Schweitzer, Inc.
McDonald & Company Sec., Inc.
Merrill Lynch, Pierce, Fenner & Smith, Inc.
Robinson-Humphrey Co. Inc.
Rothschild, Inc.
Sandler O'Neill & Partners
Wheat First Securities, Inc.
Financial Statements
During the year, One Valley distributes four interim quarterly
financial reports and an annual report. Additionally, One Valley files an
annual report to the Securities and Exchange Commission on Form 10-K
and quarterly reports on Form 10-Q. A copy of the reports may be
obtained without charge upon written request to:
Brien M. Chase, Senior Accountant
One Valley Bancorp
P.O. Box 1793
Charleston, West Virginia 25326
Independent Auditor
Ernst & Young
900 United Center
Charleston, West Virginia 25301
Dividend Reinvestment Plan
One Valley Bancorp maintains a dividend reinvestment plan.
Shareholders may increase their ownership in One Valley by automatically
reinvesting their quarterly dividends into additional shares of common
stock. There are no commission costs or administration charges to the
shareholder. Shareholders can enroll in the Dividend Reinvestment Plan by
contacting Joan L. Schatz, Assistant Secretary, at (304) 348-7023.
Stock Transfer Agent
Harris Trust & Savings Bank
311 West Monroe Street
Chicago, Illinois 60606
Contacts
Analysts, portfolio managers, and others seeking financial
information about One Valley Bancorp should contact Laurance G. Jones,
Senior Vice President and Treasurer, at (304) 348-7062.
News media representatives and others seeking general information
should contact Lloyd P. Calvert, Vice President - Corporate
Communications, at (304) 348-7207.
Shareholders seeking assistance should contact Joan L. Schatz,
Assistant Secretary, at (304) 348-7023.
Number of Shareholders
At December 31, 1993, there were approximately 3,242 shareholders
of record of One Valley Common Stock.
<PAGE>
Contents
Financial Highlights 1
Report to Customers, Employees, Owners and Friends 2
Management's Discussion and Analysis 5
Consolidated Financial Statements 23
Six-Year Financial Summaries 40
Quality Council 43
One Valley Bancorp Directors 44
Directors of Affiliate Banks Inside Back Cover
Financial Highlights
(Dollars in thousands, except per share data) 1993 1992 % Change
For The Year
Net interest income $ 116,912 $ 113,670 2.85 %
Net income 32,469 29,477 10.15
Average Balances
Total loans -- net 1,710,202 1,624,480 5.28
Total assets 2,731,752 2,678,965 1.97
Deposits 2,289,985 2,240,788 2.20
Equity 232,307 211,772 9.70
At Year-End
Year-end Balances
Total loans -- net $ 1,801,763 1,655,155 8.86
Total assets 2,774,359 2,706,994 2.49
Deposits 2,328,644 2,277,845 2.23
Equity 242,590 220,656 9.94
Per Share
Net income $ 2.52 $ 2.29 10.04
Cash dividends 0.84 0.70 20.00
Book value 18.81 17.14 9.74
<PAGE>
Report to Customers, Employees, Owners, and Friends
(Photo of J. Holmes Morrison)
J. Holmes Morrison, President and CEO
On behalf of One Valley's employees, it is a pleasure to report that
One Valley had another record setting year in 1993. As previously
reported, One Valley attained record highs in net income per share, net
income, assets, loans, deposits and shareholders' equity while key asset
quality measures continued to improve to record levels.
Net income per share increased to $2.52 per share in 1993 up 10.0%
from the $2.29 per share earned in 1992. Net income for the year totalled
$32.5 million versus $29.5 million for the prior year and represented
record annual returns of 13.98% on shareholders' equity and 1.19% on
assets. Shareholders' equity increased 9.9% to $242.6 million at year-end
providing an 8.7% equity-to-asset ratio as well as a strong risk based
capital ratio of 13.9%, which compares to the regulatory requirement of
8%. Cash dividends declared in 1993 increased 20% to $0.84 per share
versus $0.70 per share declared in 1992.
The improvement in One Valley's earnings in 1993 was primarily
attributable to higher net interest income and non-interest income as
well as a lower provision for loan losses. Higher net interest income was
reflected in the net interest margin which was 4.76% in 1993 compared to
4.75% in 1992 and was based on a higher level of earning assets. Non-
interest income increased 6.8% in 1993 to $36.2 million versus $33.9
million earned in 1992. The provision for loan losses declined to $4.8
million in 1993 versus $10.3 million in 1992 due to the continued
improvement in the credit quality of the loan portfolio.
Due to the improvement in the credit quality of the loan portfolio,
One Valley's asset quality ratios continued to improve and remained very
strong in 1993. Net charge-offs for the year decreased to $3.6 million
versus $5.0 million in 1992. Net charge-offs as a percentage of average
total loans improved to 0.21% in 1993 compared to 0.30% in 1992.
Although the provision for loan losses decreased in 1993, the allowance
for loan losses of $29.2 million was a strong 1.59% of year-end total
loans. Non-performing assets plus loans 90 days past due declined $6.3
million to $9.0 million or 0.49% of total loans compared to the $15.3
million or 0.90% of total loans at year-end 1992. The $9.0 million of non-
performing assets and loans was covered 325% by the $29.2 million
allowance for loan losses at year- end 1993, a very strong coverage when
compared to peer group banks.
The "Management's Discussion and Analysis" section on pages 5
through 22 provides a detailed analysis of the financial condition and
results of operations of One Valley Bancorp for 1993 and prior years and
should be carefully read. Some of the highlights include:
(bullet) Net income per share grew at a 13.6% compound annual rate over the
past five years. During this same period, return on average assets
averaged 1.04% while return on average equity averaged 13.24%.
(bullet) Net interest income over the last five years grew at a 13.0%
compound annual rate. Non-interest income (excluding securities
transactions) had a five-year compound annual growth rate of 20.7% while
non-interest expense grew at a compound rate of 12.9% during this same
period.
2
<PAGE>
(bullet) The efficiency ratio (non-interest expense divided by the sum of
fully tax-equivalent net interest income plus non-interest income) is a
measure One Valley uses to evaluate its operational efficiency. Higher
non-interest expense related to the conversion to new data processing
systems and the previously announced Mountaineer Bankshares merger
caused the efficiency ratio to increase slightly to 63.6% in 1993 versus
62.5% in 1992.
(bullet) Major components of the balance sheet reflect five-year compound
annual growth rates as follows: average total assets 11.1%; average net
loans 11.8%; average deposits 10.9%; and average equity 12.9%.
(bullet) One Valley's equity-to-average assets over the past five years
averaged 7.8%.
(bullet) Cash dividends declared per share grew at a 10.9% compound annual
rate during the last five years.
Other significant events for One Valley Bancorp during 1993 include:
(bullet) The strategic decision in early 1993 to outsource its data
processing systems to M&I Data Services integrated banking system. In
addition, it was determined that the mortgage loan data processing and
credit card data processing would also be outsourced to Computer Power,
Inc. and First Data Resources, respectively.
(bullet) The conversion during the third and fourth quarters of all affiliate
banks and other One Valley units to the new data processing systems.
These conversions had a significant impact on all of One Valley's
employees and customers but were accomplished due to the extraordinary
effort of One Valley's dedicated employees.
(bullet) In August of 1993, One Valley received the results of a
comprehensive study on the expectations of financial services consumers
in West Virginia. This study will enable One Valley to establish a base
line of customer expectations in an effort to increase customer
satisfaction.
(bullet) The establishment of new common statewide products, services and
fee schedules with common documentation to uniformly enhance customer
service statewide.
(Net Income and Dividends Per Share bar graph appears here--see appendix)
3
<PAGE>
Report to Customers, Employees, Owners, and Friends
(bullet) The statewide One Financial Place trust and investment network,
with assets of $2.6 billion, acquired 801 new account relationships in
1993.
(bullet) Introduction of the OVB Funds, a family of proprietary mutual funds
for which One Valley Bank, National Association, serves as Investment
Adviser. The OVB Funds are available both as an institutional (trust) class
and as an investment opportunity for retail customers.
(bullet) The origination of $369.8 million of mortgage loans for homeowners
throughout West Virginia and the servicing of $1.5 billion in mortgages for
our customers.
(bullet) Using a composite quality ranking, One Valley continued to be ranked
as one of the top banking companies in the country by Keefe, Bruyette and
Woods, Inc., in its December 1993 BankScan report, ranking One Valley
19th out of 131 banks nationwide.
(bullet) In recognition of their hard work and dedication during 1993, each of
the employees was awarded five shares of One Valley Bancorp stock in
their 401(k) plan account. The employees' efforts were truly magnificent
in the 1993 data processing conversion year.
The merger with Mountaineer Bankshares was completed on January
28, 1994. Your management team looks forward to working with our new
partners to successfully integrate these two fine companies during 1994.
It is anticipated that 1994 will be another rewarding year for One
Valley's customers, employees and owners, although our ability to adapt
to change will continually be challenged. We will refocus and expand our
efforts to provide quality service and products that meet or exceed our
customers' expectations, create a challenging and rewarding environment
for our employees, and return a reasonable profit for our shareholders.
Respectfully yours,
(Signature of J. Holmes Morrison)
J. Holmes Morrison
President and CEO
(Return on Average Assets bar graph appears here--see appendix)
(Return on Average Equity bar graph appears here--see appendix)
4
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Introduction
One Valley Bancorp of West Virginia, Inc. (One Valley) is a
multi-bank holding company
headquartered in Charleston, West Virginia. It operates
eight bank subsidiaries ranging
in size from $95 million to $1.5 billion. Through these
banks, One Valley serves 36
cities and towns with a full range of banking services in 57
locations strategically
located throughout the state. One Valley is also the parent
of a real estate management
corporation that owns and operates a fifteen-floor office
building in Charleston, West
Virginia. This office building is the headquarters for One
Valley Bancorp and the main
location of its lead bank. At December 31, 1993, One Valley
had approximately $2.8
billion in assets, $1.8 billion in total loans, and $2.3
billion in total deposits.
The accompanying consolidated financial statements have been
prepared by the management of
One Valley in conformity with generally accepted accounting
principles. The audit
committee of the Board of Directors engaged Ernst & Young,
independent certified public
accountants, to audit the consolidated financial statements,
and their report is included
on page 23. Financial information appearing throughout this
annual report is consistent
with that reported in the consolidated financial statements.
The following discussion is
designed to assist readers of the consolidated financial
statements in understanding
significant changes in One Valley's financial condition and
results of operations.
Management's objective of a fair presentation of financial
information is achieved through
a system of strong internal accounting controls. The
financial control system of One
Valley is designed to provide reasonable assurance that
assets are safeguarded from loss
and that transactions are properly authorized and recorded
in the financial records. As
an integral part of that financial control system, One
Valley maintains an internal audit
staff at the parent company with audit responsibility for
all of its subsidiaries. The
activities of both the internal and external audit functions
are reviewed by the audit
committee of the Board of Directors.
<TABLE>
Six-Year Selected Financial Summary Table 1
(Dollars in thousands, except per share data)
5-Year
Compound
Growth
1993 1992 1991 1990 1989 1988 Rate
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations
Interest Income $ 195,054 $208,081 $185,974 $178,979 $170,327 $141,315 6.66%
Interest Expense 78,142 94,411 100,348 103,532 99,829 77,725 0.11
Net Interest Income 116,912 113,670 85,626 75,447 70,498 63,590 12.95
Provision for Loan Losses 4,815 10,273 4,862 5,295 7,598 5,200 (1.53)
Non-Interest Income 36,235 33,926 22,099 17,137 15,122 14,145 20.70
Gross Securities Transactions (2) 1 (748) 114 243 406
Non-Interest Expense 99,373 94,022 71,772 61,418 57,172 54,134 12.92
Net Income 32,469 29,477 21,216 19,102 16,173 14,627 17.29
Per Share Data
Net Income $ 2.52 $ 2.29 $ 1.93 $ 1.75 $ 1.48 $ 1.33 13.63%
Cash Dividends 0.84 0.70 0.62 0.59 0.56 0.50 10.93
Book Value 18.81 17.14 15.58 14.00 12.82 11.81 9.76
Selected Average Balances
Net Loans $1,710,202 $1,624,480 $1,266,173 $1,102,529 $1,042,760 $980,270 11.77%
Investment Securities 726,433 737,533 568,050 511,881 440,386 374,750 14.15
Total Assets 2,731,752 2,678,965 2,133,841 1,902,591 1,795,818 1,614,709 11.09
Deposits 2,289,985 2,240,788 1,792,156 1,594,507 1,505,044 1,365,557 10.89
Long-Term Borrowings 9,816 13,469 14,345 21,342 22,489 22,715 (15.45)
Equity 232,307 211,772 161,412 145,260 134,518 126,709 12.89
Selected Ratios
Average Equity to Assets 8.50% 7.90% 7.56% 7.63% 7.49% 7.85%
Return on Average Assets 1.19 1.10 0.99 1.00 0.90 0.91
Return on Average Equity 13.98 13.92 13.14 13.15 12.02 11.54
Dividend Payout Ratio 33.33 30.57 32.12 33.71 37.84 37.59
</TABLE>
5
<PAGE>
Management's Discussion and Analysis
Summary Financial Results
One Valley earned $32.5 million in 1993, a 10.2% increase
over the $29.5 million earned in
1992. The increase is primarily due to increased net
interest income and non-interest
income as well as a lower provision for loan losses. This
increase in earnings follows an
increase in 1992 of 38.9% over the $21.2 million earned in
1991. Earnings per share were
$2.52 in 1993, an increase of 10.0% over the $2.29 earned in
1992, which compares to the
18.7% increase in 1992 over the $1.93 earned in 1991. As
shown in Table 1, the five-year
compound growth rate in earnings per share since 1988 has
been 13.6%. This compound
growth rate exceeds management's strategic goal of
maintaining a range of 8% to 12% annual
growth in net income per share. The increased earnings in
both 1993 and 1992 resulted
from increased net interest income and fee income which more
than offset increased
operating expenses.
Table 1, Six-Year Selected Financial Summary, presents
summary financial data for the past
six years, 1988 through 1993, along with a five-year
compound growth rate. This table
shows the expansion of One Valley due to its growth in
banking operations and its
acquisition activity. Particular attention should be paid
to the sustained growth rates
in Equity, Assets, Net Income and Net Loans. The management
of One Valley values balanced
growth in its financial position rather than growth for
growth's sake. A solid capital
base is a key strength of One Valley. As shown in Table 1,
the average equity-to-asset
ratio has remained consistently strong over the past six
years. During 1993 and 1992,
this ratio significantly improved, a result of a record
earnings performance and an
additional public stock offering in December 1991. Table 2,
Summary Statement of Net
Income, presents three years of comparative income statement
information.
Return on average assets (ROA) measures how effectively One
Valley utilizes its assets to
produce net income. One Valley's ROA increased
significantly in 1993 to 1.19%, up from
1.10% in 1992 and 0.99% in 1991. As shown in Table 3,
Analysis of Return on Assets and
Equity, the rise in ROA is attributed primarily to the
decrease in the provision for loan
losses and increase in non-interest income. Net credit
income (net interest income less
the provision for loan losses) significantly improved in
1993 as a percent of average
earning assets to 4.57%, which compares to the previous two
years at 4.33%. This
highlights One Valley's ability to manage interest rate and
credit risk. The increase in
non-interest income in 1993 was exceeded by the increase in
non-interest expense and thus
One Valley's net overhead ratio (non-interest expense less
non-interest income as a
percentage of average earning assets) increased slightly to
2.50%. While this is slightly
higher than the 2.45% ratio in 1992, it is still
considerably better than the 2.58% ratio
in 1991.
Return on average equity (ROE), another measure of earnings
performance, indicates the
amount of net income earned in relation to the total equity
capital invested. One
Valley's 1993 ROE reached 13.98%, a new high for the
corporation. This ratio compares
favorably to the 13.92% earned in 1992 and the 13.14%
reported in 1991. An increasing ROE
indicates that One Valley's net income continues to grow at
a faster pace than the equity
invested in the company. Table 3 comparatively illustrates
the components of ROA and ROE
over the previous five years.
<TABLE>
Summary Statement of Net Income Table 2
(Dollars in thousands)
Increase (Decrease) From Prior Year
1993 1992 1991 1993 1992
Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income * $195,054 $208,081 $185,974 $ (13,027) (6.26) $22,107 11.89
Interest Expense 78,142 94,411 100,348 (16,269) (17.23) (5,937) (5.92)
Net Interest Income 116,912 113,670 85,626 3,242 2.85 28,044 32.75
Other Operating Income 36,235 33,926 22,099 2,309 6.81 11,827 53.52
Gross Securities Transactions (2) 1 (748) (3) 749
Total Operating Income 153,145 147,597 106,977 5,548 3.76 40,620 37.97
Provision for Loan Losses 4,815 10,273 4,862 (5,458) (53.13) 5,411 111.29
Other Operating Expenses 99,373 94,022 71,772 5,351 5.69 22,250 31.00
Income Before Taxes 48,957 43,302 30,343 5,655 13.06 12,959 42.71
Income Taxes 16,488 13,825 9,127 2,663 19.26 4,698 51.47
Net Income $ 32,469 $ 29,477 $ 21,216 $ 2,992 10.15 $ 8,261 38.94
* Fully tax-equivalent interest income using
the rate of 35% for 1993 and 34% for 1992
and 1991 $ 198,135 $ 210,964 $ 189,769 $ (12,829) (6.08) $ 21,195 11.17
6
</TABLE>
<PAGE>
Acquisition Activity
One Valley entered into a significant merger agreement with
Mountaineer Bankshares of
W.Va., Inc. (Mountaineer) in 1993. At December 31, 1993,
Mountaineer had total assets of
approximately $739 million and total deposits of
approximately $608 million. The merger,
which closed in January 1994 and will be accounted for as a
pooling-of-interests, will
increase One Valley's market presence in the northern and
eastern panhandle regions of the
State of West Virginia. Mountaineer operated seven
affiliate banks, each with different
names and no common corporate identity or product structure.
Over the next several
months, One Valley plans to consolidate backroom operations,
change the names to a common
"One Valley Bank" corporate identity, and merge some of the
acquired affiliates together,
which is anticipated to significantly reduce operating
costs. The resulting One Valley
will operate eleven subsidiary banks, have total assets in
excess of $3.5 billion and
total deposits in excess of $2.9 billion.
In 1991, One Valley purchased certain assets and liabilities
of Atlantic Financial Federal - West Virginia,
F.S.A. (Atlantic) from the Resolution Trust
Corporation (RTC).
Accordingly, the earnings and balances are included in One
Valley's financial information
only from the date of acquisition. As a result of the
purchase, One Valley assumed
approximately $525 million in deposits in exchange for $339
million in net loans, $44
million in investment securities, $134 million in cash and
cash equivalents, and certain
other assets. The transaction increased One Valley's
balance sheet by approximately 26%.
As a result of the substantial increase in assets and
deposits from the Atlantic
acquisition, One Valley substantially improved its earning
potential. The improvement is
clearly demonstrated by the 38.9% increase in 1992 net
income, entirely post-acquisition,
over 1991 net income, mostly pre-acquisition. Through
combining the operations of
Atlantic into the operations of One Valley, many operating
synergies were realized.
Comparisons of average balances and income statement
categories are all largely affected
by the Atlantic acquisition. Throughout this discussion,
many of the increases in
balances and operations from 1991 to 1992 will be attributed
to the Atlantic acquisition,
while other changes will be mentioned only if significant in
comparison.
<TABLE>
Analysis of Return on Assets and Equity Table 3
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
As a percent of average earning assets:
Fully taxable-equivalent net
interest income * 4.76% 4.75% 4.58% 4.61% 4.64%
Provision for loan losses (0.19) (0.42) (0.25) (0.30) (0.47)
Net credit income 4.57 4.33 4.33 4.31 4.17
Non-interest income 1.44 1.38 1.09 0.99 0.94
Non-interest expense (3.94) (3.83) (3.67) (3.54) (3.50)
Tax equivalent adjustment (0.12) (0.12) (0.19) (0.27) (0.32)
Applicable income taxes (0.66) (0.56) (0.47) (0.39) (0.30)
Return on average earning assets 1.29 1.20 1.09 1.10 0.99
Multiplied by average earning assets
to average total assets 92.26 91.68 91.47 91.28 91.02
Return on average assets 1.19% 1.10% 0.99% 1.00% 0.90%
Multiplied by average assets
to average equity 11.75X 12.65X 13.22X 13.10X 13.35X
Return on average equity 13.98% 13.92% 13.14% 13.15% 12.02%
*Fully tax-equivalent using the rate of 35% for 1993 and 34% for earlier years.
</TABLE>
7
<PAGE>
Management's Discussion and Analysis
Balance Sheet Analysis
Summary
A financial institution's primary sources of revenue are
generated by its earning assets,
while its major expenses are produced by the funding of
these assets with interest bearing
liabilities. Information on rate-related sources and uses
of funds for each of the three
years in the period ended December 31, 1993, is provided in
Table 4, Average Balance Sheet / Net
Interest Income Analysis. Effective management of
these sources and uses of funds
is essential in attaining a financial institution's maximum
profitability while
maintaining a minimum amount of interest rate and credit
risk.
In 1993, average earning assets grew by 2.62%, or $64.2
million, over 1992, following a
25.8% or $504.4 million increase in 1992 over 1991.
Average interest bearing
liabilities, the primary source of funds supporting earning
assets, remained relatively
flat in 1993. Average interest bearing liabilities rose by
$14.4 million or 0.7% in 1993
when compared to 1992. This increase follows a $419.8
million or 24.6% increase over
1991. The relatively low growth in average interest bearing
liabilities is attributed to
the lower interest rate environment and the resulting high
competition for funds, as more fully
<TABLE>
Average Balance Sheet / Net Interest Income Analysis Table 4
(Dollars in thousands)
1993 1992 1991
Average Yield/ Average Yield/ Average Yield/
Balance Interest (1) Rate (1) Balance Interest (1) Rate (1) Balance Interest (1) Rate (1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Loans(2)
Taxable $1,713,982 $150,836 8.80% $1,626,853 $156,357 9.61% $1,258,280 $133,514 10.61%
Tax-exempt 25,277 2,594 10.26 22,901 2,368 10.34 24,761 2,942 11.88
Total Loans 1,739,259 153,430 8.82 1,649,754 158,725 9.62 1,283,041 136,456 10.64
Less: Allowance for losses 29,057 25,274 16,868
Total Loans-net 1,710,202 8.97 1,624,480 9.77 1,266,173 10.78
Investment Securities
Taxable 666,731 36,003 5.40 682,332 42,877 6.28 495,590 37,835 7.63
Tax-exempt 59,702 6,208 10.40 55,201 6,111 11.07 72,460 8,218 11.34
Total Securities 726,433 42,211 5.81 737,533 48,988 6.64 568,050 46,053 8.11
Federal funds sold & other 83,782 2,494 2.98 94,165 3,251 3.45 117,578 7,259 6.17
Total Earning Assets 2,520,417 198,135 7.86 2,456,178 210,964 8.59 1,951,801 189,768 9.72
Other assets 211,335 222,787 182,040
Total Assets $2,731,752 $2,678,965 $2,133,841
Liabilities and Equity
Interest bearing liabilities:
Interest bearing demand
deposits $1,953,735 71,713 3.67 $1,924,819 85,991 4.47 $1,551,503 91,322 5.89
Savings deposits 617,318 19,529 3.16 535,190 21,025 3.93 359,774 17,972 5.00
Time deposits 1,037,899 43,603 4.20 1,131,468 55,657 4.92 1,011,045 64,900 6.42
Total Interest Bearing
Deposits 1,953,735 71,713 3.67 1,924,819 85,991 4.47 1,551,503 91,322 5.89
Short-term borrowings 179,373 5,173 2.88 190,267 7,122 3.74 142,945 7,647 5.35
Long-term borrowings 9,816 1,256 12.80 13,469 1,298 9.64 14,345 1,379 9.61
Total Interest Bearing
Liabilities 2,142,924 78,142 3.65 2,128,555 94,411 4.44 1,708,793 100,348 5.87
Demand deposits 336,250 315,969 240,653
Other liabilities 20,271 22,669 22,983
Shareholders' equity 232,307 211,772 161,412
Total Liabilities & Equity $2,731,752 $2,678,965 $2,133,841
Net Interest Earnings $119,993 $116,553 $89,420
Net Yield on Earning Assets 4.76% 4.75% 4.58%
(1) Fully tax-equivalent using the rate of 35% for 1993, and 34% for 1992 and 1991.
(2) Non-accrual loans are included in average balances.
</TABLE>
8
<PAGE>
explained below. The growth in 1992 average balances is
largely attributed to the
Atlantic acquisition.
Additional information on each of the components of earning
assets and interest bearing
liabilities is contained in the following sections of this
report.
Loan Portfolio
One Valley's loan portfolio is its largest and most profit-
able component of average
earning assets, totaling 67.9% of average earning assets.
One Valley continued to
emphasize increasing its loan portfolio in 1993. Average
net loans increased by $85.7
million or 5.3% in 1993. The increase in 1993 average loans
was primarily attributable to
an increase in residential real estate loans. Average net
loans increased by $358.3
million, or 28.3%, in 1992. The increase in 1992 average
loans is largely due to the
Atlantic acquisition late in 1991. As a result, average net
loans have increased as a
percentage of average earning assets, from 64.9% in 1991, to
66.1% in 1992, to 67.9% in
1993. Similarly, One Valley's loan-to-deposit ratio con-
tinued its upward trend in 1993,
ending the year at 77.4%. This ratio compares to 72.7% at
December 31, 1992 and 71.2% at
December 31, 1991. Expanding affiliate markets, as well as
One Valley's carefully planned
acquisition activity, have contributed greatly to the
growth in the loan portfolio .
(Average Easrning Assets bar graph appears here -- see
appendix)
Total loans at December 31, 1993, increased by $147.8
million or 8.8% over the total at
December 31, 1992, which compares to a $52.6 million, or
3.2% increase in 1992 over the
total at December 31, 1991. The increase in 1993 is largely
due to an increase in
residential real estate loans. During 1993 and 1992, the
banking industry was consumed
with home mortgage refinancing due to the significant
decline in home mortgage interest
rates. One Valley competed aggressively for these
refinancing mortgages and increased the
residential real estate portfolio, including revolving home
equity loans, by $90.3 million
or 12.2% in 1993. One Valley also originated $138.7
million of new loans in 1993 to be
sold in the secondary market, a new activity for One Valley
since the Atlantic
acquisition. This compares to approximately $185.0 million
of new loan volume originated
for sale in the secondary market in 1992. This activity
generates considerable processing
and servicing fee income, as discussed further in the
"Income Statement Analysis" section
of this report.
Consumer installment loans increased by $7.5 million or 2.0%
during 1993, following a
$27.7 million, or 7.9%, increase in 1992. Commercial loans
increased by $36.5 million, or
14.3%, during 1993, compared to a $21.0 million, or 9.0%,
increase in 1992. Commercial
real estate loans, including apartment buildings and
complexes, increased by $22.0
million, or 8.0%, during 1993. This follows a $39.7
million, or 16.8%, increase in 1992.
As shown in Table 5, commercial real estate loans have
historically only averaged about
one-sixth of the total loan portfolio, thus limiting One
Valley's exposure to swings in
commercial real estate values.
Table 5, Loan Summary, presents a five-year comparison of
loans by type. With the
exception of those categories included in the comparison,
there are no loan concentrations
which exceed 10% of total loans. Addi-tionally, One
Valley's loan portfolio contains no
loans to foreign borrowers nor does it have any material
volume of highly leveraged
transaction lending. Over the past four years, total loans
have increased $730 million, a
result of acquisitions and internal growth. While loan
growth has been substantial, One
Valley imposes under-writing and credit standards which are
designed to maintain a quality
loan portfolio. One Valley com-pleted extensive due
diligence on the Atlantic loan
portfolio prior to the acquisition and rejected the purchase
of some portions of the loan
portfolio. One Valley continued its evaluation of the
acquired portfolio throughout 1993
and 1992, and continued to conservatively assess the risk of
loss within the portfolio.
Loans secured by real estate, which in total constituted
nearly 63% of One Valley's loan
portfolio at December 31, 1993, consist of a diverse
portfolio of predominantly single
family residential loans and loans for commercial purposes
where real estate is merely
collateral, not the primary source of repayment. The
majority of these loans is secured
by property located within West Virginia, where real estate
values have remained
relatively stable over the past ten years. Significant
fluctuations in real estate values
have caused collateral value problems in other regions of
the country. A portion of the
loans acquired from the Atlantic acquisition is secured by
real estate located outside of
West Virginia. However, management believes that the
allowance for loan losses is
adequate to absorb any material losses that could result
from these loans due to declines
in real estate values.
9
<PAGE>
Management's Discussion and Analysis
<TABLE>
Loan Summary Table 5
(Dollars in thousands)
As of December 31
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Summary of Loans by Type
Commercial, financial,
agricultural, and other loans $ 292,005 $ 255,491 $ 234,467 $ 257,094 $ 247,344
Real estate:
Construction loans 23,367 33,486 31,682 22,568 18,679
Revolving home equity 81,921 72,748 51,977 42,410 32,373
Single family residentials 746,393 665,248 697,327 371,256 330,420
Apartment buildings and complexes 40,062 44,562 36,287 23,805 19,808
Commercial 257,656 231,142 199,719 165,165 155,551
Bankers' acceptances 2,123 560 26,887 0 0
Consumer installment loans 387,420 379,903 352,180 308,168 297,140
Subtotal 1,830,947 1,683,140 1,630,526 1,190,466 1,101,315
Less: Allowance for loan losses 29,184 27,985 22,729 14,633 13,606
Net Loans $1,801,763 $1,655,155 $1,607,797 $1,175,833 $1,087,709
Percent of Loans by Category
Commercial, financial,
agricultural, and other 15.95% 15.18% 14.37% 21.59% 22.46%
Real estate:
Construction loans 1.28 1.99 1.94 1.90 1.70
Revolving home equity 4.47 4.32 3.19 3.56 2.94
Single family residentials 40.76 39.52 42.77 31.19 30.00
Apartment buildings and complexes 2.19 2.65 2.23 2.00 1.80
Commercial 14.07 13.73 12.25 13.87 14.12
Bankers' acceptances 0.12 0.03 1.65 0.00 0.00
Consumer installment loans 21.16 22.58 21.60 25.89 26.98
Total 100.00% 100.00% 100.00% 100.00% 100.00%
Non-Performing Assets
Non-accrual loans $ 5,048 $ 8,306 $ 9,944 $ 6,193 $ 7,794
Other real estate owned 1,524 3,593 4,914 5,415 4,316
Restructured loans 0 100 1,964
Total Non-Performing Assets $ 6,572 $ 11,999 $ 16,822 $ 11,608 $ 12,110
Non-performing assets as a % of
total loans 0.36% 0.71% 1.03% 0.98% 1.10%
Loans Past Due Over 90 Days $ 2,415 $ 3,251 $ 2,595 $ 3,328 $ 3,043
As a % of total loans 0.13% 0.19% 0.16% 0.28% 0.28%
Allocation of Loan Loss Reserve
by Loan Type
Commercial, financial, and
unallocated portion $ 11,561 $ 10,862 $ 6,990 $ 6,984 $ 6,415
Real estate construction loans 180 224 209 76 61
Real estate loans - other 7,207 7,236 6,661 1,640 1,427
Consumer installment loans 10,236 9,663 8,869 5,933 5,703
Total $ 29,184 $ 27,985 $ 22,729 $ 14,633 $ 13,606
</TABLE>
10
<PAGE>
In addition to the loans reported in Table 5, One Valley
also offers certain off-balance
sheet products such as letters of credit, revolving credit
agreements, and other loan
commitments. These products are offered under the same
credit standards as the loan
portfolio and are included in the risk-based capital ratios
used by the Federal Reserve to
evaluate capital adequacy. Additional information on off-
balance sheet commitments is
contained in Note O to the consolidated financial
statements.
Table 5 also reports the level of non-performing assets and
loans contractually past due
over 90 days for the last five years. Total non-performing
assets, which consist of past
due loans on which interest is not being accrued, foreclosed
properties in the process of
liquidation, and loans the terms of which have been
restructured to enable a delinquent
borrower to repay, were $6.6 million or 0.36% of total loans
at year-end 1993. This ratio
is now at its lowest level since the formation of the
company in 1981, and is exceptional
when compared to peer group banks across the country.
During 1993 and 1992, One Valley
diligently worked to reduce its level of non-performing
assets, which increased
significantly in 1991 due to the Atlantic acquisition.
(Total Loans Bar graph appears here -- see appendix)
The amount of loans contractually past due over 90 days, but
which continue to accrue
interest, decreased in dollars as well as a percentage of
year-end total loans. At
December 31, 1993, these loans constituted only 0.13% of
year-end loans, a decrease from
the 0.19% at December 31, 1992, and, as shown in Table 5, a
significant improvement over
years 1989 through 1991. The consistently favorable ratio
of problem loans to total loans
has occurred while the loan portfolio has increased
significantly over the last five
years, and thus the favorable ratio is indicative of One
Valley's commitment to a quality
loan portfolio. Both the increase in the size and the
credit quality of the loan
portfolio have enabled One Valley to increase its net credit
income by $8.7 million or
8.4% in 1993.
It is One Valley's policy to place loans that are past due
over 90 days on non-accrual
status, unless the loans are adequately secured and in the
process of collection. For
real estate loans, upon repos-session (or substantive
repossession), the balance of the
loan is transferred to "Other Real Estate Owned" (OREO) and
carried at the lower of the
outstanding loan balance or the fair market value of the
property based on current
appraisals and other current market trends. If a writedown
of the OREO property is
necessary at the time of foreclosure, the amount is charged
off against the allowance for
loan losses. A quarterly review of the recorded property
value is performed in
conjunction with normal loan reviews, and if market
conditions indicate that the recorded
value exceeds the fair market value, additional write-downs
of the property
<TABLE>
Remaining Maturities of Loans Table 6
(Dollars in thousands)
Balance Projected Maturities*
December 31 One Year One to Five Over Five
1993 or Less Years Years
<S> <C> <C> <C> <C>
Commercial, financial, and agricultural loans $264,362 $123,974 $103,578 $36,810
Real estate construction loans 23,367 18,401 1,782 3,184
Commercial real estate loans 297,718 59,267 146,411 92,040
Loans with:
Floating rates $393,477 $142,181 $160,208 $91,088
Predetermined rates 191,970 59,461 91,563 40,946
*Based on scheduled or approximate repayments.
</TABLE>
11
<PAGE>
Management's Discussion and Analysis
value are charged directly to operations. One Valley had no
commitments to provide additional funds
on non-accrual loans at December 31, 1993. During 1993, One
Valley recognized less than
$0.1 million of interest on non-accrual loans, while
approximately $0.6 million would have
been recognized on these loans had they been current
throughout 1993 in accordance with
their original terms. In comparison, during 1992,
approximately $0.2 million was
recognized on non-accrual loans, while approximately $0.9
million would have been
recognized in accordance with their original terms.
(Non-performing Assests and Loans 90 Days Past Due Bar graph
appears here -- see appendix)
In May 1993, the FASB issued Statement No. 114, "Accounting
by Creditors for Impairment
of a Loan," which is effective for fiscal years beginning
after December 15, 1994. The
Statement requires that impaired loans be measured at the
present value of expected future
cash flows discounted at the loan's original effective
interest rate or, as a practical
expedient, at the loan's observable market price or the fair
value of the collateral if
the loan is collateral dependent. The adoption of this
Statement is not anticipated to
have a material effect on One Valley's financial statements.
(Provision for Loan Losses and Net Charge-offs bar graph
appears here -- see appendix)
The allowance for loan losses is maintained to absorb
probable losses associated with
lending activities. Factors considered in determining the
adequacy of the loss reserve
and the size of the provision each month include an
individual assessment of risk on large
commercial credits, historical charge-off experience, levels
of non-performing loans, and
an evaluation of current economic conditions. As a part of
the holding company structure,
One Valley maintains a loan analysis and review department
to evaluate large commercial
credit requests and to complete loan follow-up procedures.
One Valley also maintains a
loan administration function to continually identify and
monitor problem loans. At
December 31, 1993, the allowance for loan losses was $29.2
million or 1.59% of total year-
end loans, which is sufficient to absorb over eight times
the amount of net charge-offs
experienced during 1993. The 1.59% ratio is a decrease from
the prior year's 1.66% but is
a substantial increase over the 1.39% in 1991 and 1.23% in
1990. In management's opinion,
the allowance for loan losses is adequate to absorb the
estimated risk of loss in the
existing portfolio. The increase in 1992 is primarily the
result of growth in the loan
portfolio and a conservatively assessed risk of loss in the
purchased Atlantic portfolio.
Table 5 includes a summary of the allowance for loan losses
allocated by loan type. Table
7, Comparative Loan Loss Information, provides a detailed
history of the allowance for
loan losses, illustrating charge-offs and recoveries by loan
type, and the annual
provision for loan losses over the past five years.
The provision for loan losses in 1993 was $4.8 million, down
significantly from the
record $10.3 million provision in 1992 but relatively close
to the $4.9 million provision
in 1991. As mentioned earlier, the increase in 1992 was in
response to growth in the loan
portfolio and a continued conservative assessment of the
remaining portion of the
purchased Atlantic portfolio. Management has evaluated
these loans conservatively because
the loans were originated under the former Atlantic credit
standards, rather than the
stricter One Valley credit standards. While One Valley
experienced greater loan growth in
1993, the credit risk of the portfolio has improved
significantly, as evidenced by the
historically low level of non-performing assets and the low
level of net charge-offs
during the year. Thus management was able to lower the
provision for loan losses for the
year and still maintain a relatively high ratio of the
allowance for loan losses to the
loan portfolio.
Net charge-offs in 1993 decreased by $1.4 million or 27.9%
from 1992 net charge-offs.
This decrease follows an increase in 1992 of 40.0% or $1.4
million over 1991 net charge-
offs. Net charge-offs as a percentage of average total
loans declined to 0.21%, which
compares to 0.30% in 1992 and 0.28% in 1991. All three of
these ratios compare favorably
to peer group institutions. Although the dollar amount of
net charge-offs could increase
in the coming months due to the increase in the total dollar
amount of loans, management
anticipates, based on the credit quality of the loan
portfolio, that the ratio of net
charge-offs to average total loans will continue to remain
near the historically low level
One Valley has experienced over the years.
12
<PAGE>
<TABLE>
Comparitive Loan Loss Information Table 7
(Dollars in thousands)
For the Year Ended December 31
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Allowance for Loan Losses, Beginning of Period $ 27,985 $ 22,729 $ 14,633 $ 13,606 $11,863
Charge-offs:
Commercial, financial, and agricultural loans 1,313 1,775 1,290 1,415 1,004
Real estate construction loans 0 0 0 0 0
Real estate loans - other 917 1,316 871 1,488 2,937
Installment loans 2,976 3,445 2,710 2,410 3,005
Total Charge-offs 5,206 6,536 4,871 5,313 6,946
Recoveries:
Commercial, financial, and agricultural loans 446 389 512 272 263
Real estate construction loans 0 0 0 0 0
Real estate loans - other 344 362 143 146 135
Installment loans 800 768 627 627 693
Total Recoveries 1,590 1,519 1,282 1,045 1,091
Net Charge-offs 3,616 5,017 3,589 4,268 5,855
Provision for loan losses 4,815 10,273 4,862 5,295 7,598
Balance of acquired subsidiaries 0 0 6,823 0 0
Allowance for Loan Losses, End of Period $ 29,184 $ 27,985 $ 22,729 $ 14,633 $ 13,606
Average total loans $1,739,259 $1,649,754 $1,283,041 $1,116,943 $1,055,577
Total loans at year-end 1,830,947 1,683,140 1,630,526 1,190,466 1,101,315
As a Percent of Average Total Loans:
Net charge-offs 0.21% 0.30% 0.28% 0.38% 0.55%
Provision for loan losses 0.28 0.62 0.38 0.47 0.72
Allowance for loan losses 1.68 1.70 1.77 1.31 1.29
As a Percent of Total Loans at Year-end:
Allowance for loan losses 1.59% 1.66% 1.39% 1.23% 1.24%
As a Multiple of Net Charge-offs:
Allowance for loan losses 8.07X 5.58X 6.33X 3.43X 2.32X
Income before tax and provision for loan losses 14.87 10.68 9.81 7.31 4.90
</TABLE>
Investment Portfolio and Other Earning Assets
Investment securities averaged $726.4 million in 1993, a
1.5% decrease from the $737.5
million averaged in 1992. This slight decrease follows a
29.8% increase over the $568.1
million averaged in 1991. The decrease in the average
balance during 1993 is primarily in
response to the increased loan demand during the year, as
One Valley was able to place
maturing investments in its more profitable loan portfolio.
The increase in 1992 was due
largely to the investment securities and other highly liquid
assets acquired through the
Atlantic transaction, and the sale of $35.6 million of
marketable equity securities in
January 1992. These funds were originally invested in
federal funds sold, which are
short-term investments with other banks. During the first
two quarters of 1992, as market
conditions permitted, the funds were reinvested into the
higher yielding investment
portfolio. During the remaining part of 1992 and throughout
most of 1993, the investment
portfolio has, on average, declined as funds have been
reinvested into the loan portfolio
and used to maintain liquidity due to a decline in short-
term repurchase agreements with
corporate customers.
As sources of funds (deposits, federal funds purchased, and
repurchase agreements with
corporate customers) fluctuate, excess funds are initially
invested in federal funds sold
and other short-term investments. Based upon continual
analyses of asset/liability
repricing, interest rate forecasts, and liquidity
requirements, funds are periodically
reinvested in high-quality debt securities, which typically
mature over a
13
<PAGE>
Management's Discussion and Analysis
longer period of time (Table 8). At the time of purchase,
management determines whether investment
securities will be held for sale or held for investment. If
held for investment,
securities are recorded at historical cost and adjusted
monthly over their remaining lives
for the accretion or amortization of the difference between
cost and maturity value of the
investments. Thus at the time of maturity, the proceeds
from maturity and the book value
of the investment are equivalent and no gain or loss is
recognized. One Valley, through
its size and the stable nature of its deposit base, is able
to purchase investment
securities with a wide variety of maturities, a majority of
which are short-term.
Therefore, since One Valley's investment portfolio is
constantly maturing and rolling over
into new investments, investment portfolio sales are
infrequent, as shown in the
Statements of Cash Flows.
In May 1993 the Financial Accounting Standards Board (FASB)
issued Statement No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities," effective January 1,
1994 for One Valley. Under this Statement, debt securities
that One Valley has the
positive intent and ability to hold to maturity are carried
at amortized cost. Debt
securities that One Valley does not have the positive intent
and ability to hold to
maturity are classified as available-for-sale or trading and
carried at fair value.
Unrealized holding gains and losses on securities classified
as available-for-sale are
carried as a separate component of shareholders' equity,
while unrealized holding gains
and losses on securities classified as trading are reported
in earnings. One Valley does
not have any securities classified as trading and it has no
plans to establish such
classification at the present time.
With the impending adoption of this new statement and the
additional volume of investments
to be managed after the Mountaineer merger, management has
reevaluated its investment
portfolio philosophies and assigned additional securities to
the available-for-sale
classification. Accordingly, management designated as
available-for-sale at December 31,
1993 approximately $486,469 of securities which had
unrealized appreciation of $5,701.
The remaining is classified
Investment Securities Analysis Table 8
(Dollars in thousands)
As of December 31, 1993
Average Taxable
Book Maturity Equivalent
Value (Years/ Months) Yield*
U. S. Treasury Securities
Within one year $161,039 3.98%
After one but within five years 218,624 4.52
After five but within ten years 27,211 7.12
Over ten years 21,351 7.06
Total U.S. Treasury Securities 428,225 1/11 4.61
U. S. Government Agencies Securities
Within one year 51,008 8.87
After one but within five years 75,796 5.19
After five but within ten years 54,958 6.92
Total U.S. Government Agencies
Securities 181,762 3/2 6.75
States and Political Subdivisions Securities
Within one year 12,301 10.98
After one but within five years 16,859 11.01
After five but within ten years 11,215 9.66
After ten years 50,573 7.69
Total States and Political
Subdivisions Securities 90,948 9/0 8.99
Other Securities 19,760
Total Investment Securities $720,695 3/2 5.57%
*Fully tax-equivalent using the rate of 35%.
14
<PAGE>
as held-to-maturity as management has the positive intent
and
ability to hold these securities to maturity. The effect on
One Valley's financial
statements of adopting Statement 115 will be to increase the
opening balance of
shareholders' equity as of January 1, 1994 by $3,478 (net of
$2,223 in deferred income
taxes) to reflect the net unrealized holding gains on
securities classified as available-
for-sale previously carried at amortized cost.
Over the past three years, the market value of the
investment portfolio has not materially
varied from its historical amortized cost basis, and
unrealized losses within the
investment portfolio have been more than offset by
unrealized gains. Similarly, realized
investment securities gains and losses have not materially
impacted the net income of One
Valley over the past five years. Other information
regarding investment securities may be
found in Table 8, Investment Securities Analysis, and in
Note D to the consolidated
financial statements.
Due to unfavorable laws relating to investments in tax-
exempt assets and corporate minimum
tax regulations, levels of tax-exempt securities held by One
Valley, as well as their
average maturity period, have declined over the last several
years. However, due to the
lower interest rate environment, overall yields on tax-
exempt securities have become
attractive once again. During 1993, One Valley increased
its tax-exempt securities by
$42.5 million, or 87.6%, over the level of tax-exempt
securities held at December 31,
1992. Future investments in tax-exempt securities will be
made if the related yield is
greater than that available with a similar taxable
investment.
The average maturity of the investment portfolio lengthened
during 1993 in response to the
economic environment and the direction of interest rates.
The average maturity period of
the entire investment portfolio increased from approximately
2 years no months at the end
of 1992 to 3 years 2 months at the end of 1993, somewhat the
result of the purchase of
typically longer term tax-exempt investments. The average
maturity of the investment
portfolio is managed at a level to maintain a proper
matching with liability maturity
patterns.
One Valley's average investment in federal funds sold has
remained relatively constant
over the past three years, averaging $81.3 million in 1993,
a slight decrease from the
$89.5 million averaged during 1992, and the $82.8 million
averaged during 1991.
Fluctuations in federal funds sold and other short-term
investments reflect management's
goal to maximize asset yields while maintaining proper
asset/liability structure, as
discussed in greater detail above.
In 1987, One Valley invested a portion of its funds in a
mutual fund of securities
guaranteed by the U.S. Government. At December 31, 1991,
these assets were held for sale,
and accordingly, approximately $753,000 was charged to
operations in 1991 to reduce the
carrying amount to market value. These securities were
subsequently sold during the first
part of January 1992.
Funding Sources
Over the past three years, declines in market interest rates
have forced banks to reduce
their rates paid on interest bearing deposits. Due to
alternative sources of investment
and an increasing sophistication of customers in funds
management techniques to maximize
return on their money, competition for funds has become more
intense. In 1993, the
average rate paid on interest bearing liabilities was 3.65%,
down from the 4.44% average
rate paid in 1992, and down further still from 5.87% paid in
1991. One Valley has offered
new deposit products as well as slightly higher than market
rates to attract additional
deposits. One Valley's deposits, on average, increased by
2.2% or $49.2 million in 1993.
This increase follows a 25.0% increase in 1992, largely due
to the $525.2 million of
deposits acquired through the Atlantic transaction, and a
12.4% increase in average
deposits during 1991. During 1993, non-interest bearing
deposits increased on average by
6.4% over 1992, while interest bearing deposits increased by
only 1.5%. This trend is
reflective of an increased customer base in the use of
checking and other
Maturity Distribution of Certificates of Deposit
In Amounts of $100,000 or More Table 9
(Dollars in thousands)
As of December 31, 1993 As of December 31, 1992
Amount Percent Amount Percent
Three months or less $ 57,005 38.05 % $ 74,798 52.74%
Three through six months 27,846 18.58 22,006 15.51
Six through twelve months 24,614 16.43 13,014 9.18
Over twelve months 40,358 26.94 32,009 22.57
Total $149,823 100.00 % $141,827 100.00%
15
<PAGE>
non-interest bearing deposit products, and the stiff
competition for interest bearing investments in a
low interest rate environment. An illustration of the
growth in deposit categories over
the past five years is shown in the Average Deposits graph.
(Average Deposits bar graph appears here -- see appendix)
Short-term borrowings decreased, on average, by $10.9
million or 5.7% from 1992, following
a 33.1% increase in 1992 over 1991. Passthrough federal
funds purchased from corres-
pondent banks increased, on average, by 1.0% in 1993
following a 5.6% increase in 1992.
Fluctuations in federal funds purchased are considered
normal and are generally influenced
by market interest rates and the availability of funds.
Repurchase agreements declined,
on average, by 6.5% in 1993, primarily due to a lower level
of public funds. The decrease
follows a 37.1% increase in 1992, due primarily to an
emphasis on cross-selling of
products to commercial customers. On average, repurchase
agreements grew by 37.1% in
1992, which follows a 24.1% increase in 1991. It should be
noted that no federal funds
purchased nor repurchase agreements were assumed in the
Atlantic acquisition.
Long-term borrowings, on average, declined by 27.1% in 1993,
reflecting the payment of
$4.0 million of parent company senior notes in November 1992
and the payoff of $10.0
million of debt incurred in the purchase of the headquarters
of One Valley. As a result,
One Valley now has little more than $0.1 million of long-
term debt, with repayment
schedules from one to four years. Other information
regarding short- and long-term
borrowings is contained in Notes I and J to the consolidated
financial statements.
Interest Sensitivity and Liquidity
Asset/liability management is a means of maximizing net
interest income while minimizing
interest rate risk by planning and controlling the mix and
maturities of interest related
assets and liabilities. Several techniques are available to
achieve a desired interest
sensitivity position. Among these are the types of
investments and loans made and the
rate of interest paid on deposits for various terms. During
most of 1993, One Valley
maintained its gap sensitivity position in the zero to six-
month category as primarily
asset sensitive. As shown in Table 10, Comparative Rate
Sensitivity Summary, One Valley's
sensitivity gap ratio in the zero to six-month category was
1.04 at December 31, 1993. A
sensitivity ratio greater than 1.00 indicates that the
volume of earning assets which will
be subject to interest rate repricing during a given period
exceeds the volume of interest
bearing liabilities which are subject to repricing during
the same period. Thus, an
increase in interest rates would tend to have a positive
impact on net interest income,
while a decline in rates would tend to have the opposite
effect. One Valley's strategy is
to continually maintain a rate sensitivity ratio of between
0.90 and 1.10 for the six-
month time frame, allowing management flexibility in
maximizing net interest earnings
while minimizing overall interest rate risk.
Liquidity is the ability to satisfy demands for deposit
withdrawals, lending com-mitments,
and other corporate needs. One Valley's liquidity is based
on the stable nature of
consumer core deposits held by the banking subsidiaries.
Likewise, additional liquidity
is available from holdings of investment securities and
short-term investments which can
be readily converted to cash. Furthermore, One Valley
continues to have the ability to
attract short-term sources of funds such as federal funds
and repurchase agreements, and
to arrange credit lines to meet its cash needs.
Capital Resources
One Valley's average equity-to-asset ratio increased to
8.50% during 1993, up from 7.90%
during 1992 and 7.56% in 1991. The increase from 1992 to
1993 primarily resulted from the
record earnings performance of One Valley for the year. The
increase from 1991 to 1992
primarily resulted from the sale of new shares of common
stock on the open market during
December 1991 for the purpose of restoring the capital
ratios after the Atlantic
acquisition. Approximately $29.1 million of capital was
raised from the sale of 1,035,000
shares. At year-end 1993, One Valley's primary capital
ratio was 9.69% compared to 9.09%
at year-end 1992. The Federal Reserve's Risk-Based
Guidelines and leverage ratio measure
the capital adequacy of banking institutions. The risk-
based capital guidelines weight
balance
16
<PAGE>
sheet assets and off-balance sheet commitments by prescribed
factors relative to
credit risk, thus eliminating disincentives for holding low
risk assets and requiring more
capital for holding higher risk assets. At year-end 1993,
One Valley's risk adjusted
capital-to-assets ratio was 13.9% compared to 15.2% at
December 31, 1992. The decline in
the ratio is primarily due to an increase in securities
loaned, an off-balance sheet
factor, at the lead bank during the year. However, both of
these ratios are well above
the minimum level of 8.0% prescribed for bank-holding
companies of One Valley's size. The
leverage ratio is a measure of total tangible equity to
total tangible assets. One
Valley's leverage ratio at December 31, 1993 was 8.6%
compared to 7.9% at December 31,
1992. Both of these ratios are well above the minimum 3.0%
and the recommended 4.0 to
5.0% prescribed by the Federal Reserve. These healthy
ratios are the direct result of
management's desire to maintain a strong capital position.
The primary source of funds for dividends paid by One Valley
to its shareholders is the
dividends received from its subsidiary banks. Federal
regulatory agencies impose certain
restrictions on the payment of dividends and the transfer of
assets from the banking
subsidiaries to the holding company. Historically, these
restrictions have not had an
impact on One Valley's dividend policy, and it is not
anticipated that they will in the
future. Additional information concerning dividend
restrictions is discussed in Note N to
the consolidated financial statements.
In September 1988, the Board of Directors authorized
management to repurchase up to
360,000 shares of One Valley Bancorp common stock in the
open market. As of year-end 1993
and 1992, 270,000 shares had been repurchased. While the
last purchase occurred in 1990,
any additional purchases will depend upon future market
conditions.
<TABLE>
December 31, 1993 0-3 Months 3-6 Months 6-12 Months Over 1 Year Total
<S> <C> <C> <C> <C> <C>
Earning Assets
Loans $725,693 $95,481 $176,813 $ 832,960 $1,830,947
Investments 100,995 29,656 186,951 405,255 722,857
Other earning assets 21,000 0 0 0 21,000
Total Earning Assets 847,688 125,137 363,764 1,238,215 2,574,804
Interest Bearing Liabilities
Interest bearing deposits 562,355 202,867 179,332 1,034,517 1,979,071
Short-term borrowings 171,899 1,972 4,289 579 178,739
Long-term borrowings 35 3 6 89 133
Total Interest Bearing Liabilities 734,289 204,842 183,627 1,035,185 2,157,943
Interest Sensitivity Gap for Period 113,399 (79,705) 180,137 203,030 416,861
Cumulative Interest Sensitivity Gap 113,399 33,694 213,831 416,861
Cumulative Rate Sensitivity Ratio 1.15 1.04 1.19 1.19
December 31, 1992
Earning Assets
Loans $677,343 $112,829 $188,086 $ 704,882 $1,683,140
Investments 64,116 95,089 220,900 328,499 708,604
Other earning assets 102,275 0 0 0 102,275
Total Earning Assets 843,734 207,918 408,986 1,033,381 2,494,019
Interest Bearing Liabilities
Interest bearing deposits 616,539 193,314 132,032 996,548 1,938,433
Short-term borrowings 168,332 2,720 2,044 563 173,659
Long-term borrowings 64 65 153 9,710 9,992
Total Interest Bearing Liabilities 784,935 196,099 134,229 1,006,821 2,122,084
Interest Sensitivity Gap for Period 58,799 11,819 274,757 26,560 371,935
Cumulative Interest Sensitivity Gap 58,799 70,618 345,375 371,935
Cumulative Rate Sensitivity Ratio 1.07 1.07 1.31 1.18
Averages are used when period-end balances would produce distorted results.
This table includes various assumptions and estimates by management of maturity and repayment patterns.
</TABLE>
17
<PAGE>
Management's Discussion and Analysis
Income Statement Analysis
Net Interest Income
Net interest income, the amount by which interest generated
from earning assets exceeds
the expense associated with funding those assets, is One
Valley's most significant
component of earnings. Net interest income on a fully tax-
equivalent basis was $120.0
million in 1993, up 3.0% over the 1992 level, following a
30.3% increase in 1992 over
1991. When net interest income is presented on a fully tax-
equivalent basis, interest
income from tax-exempt earning assets is increased by the
amount equivalent to the federal
income taxes which would have been paid if this income were
taxable at the statutory
federal tax rate (35% for 1993, 34% for 1992 and 1991). The
higher percentage increase in
net interest income in 1992 is largely due to the increase
in earning assets resulting
from the Atlantic acquisition. As shown in Table 11, Rate
Volume Analysis, increases in
the volume of earning assets in both 1993 and 1992 have
provided most of the increase in
net interest income. In 1993, the increase in the volume of
earning assets increased
interest income by $7.5 million. This increase was more
than offset by declines in
interest yields on earning assets due to declines in the
overall interest rate
environment, and therefore, a decline in total interest
income of $12.8 million occurred
in 1993. Similarly, increased volume of interest bearing
liabilities boosted interest
expense by $0.5 million, but the lower cost of interest
bearing liabilities resulted in an
overall decline in total interest expense of $16.3 million.
Due to the additional
interest income provided by the higher volume of earning
assets, the decline in total
interest income was less than the decline in total interest
expense, which resulted in a
net increase in net interest income.
In 1993, as net interest income increased, the net interest
margin percentage on a fully
tax-equivalent basis increased slightly. Rising to 4.76% in
1993, the net interest margin
maintained its level when compared to the prior year's 4.75%
net interest margin. In
1993, One Valley sought ways to maintain a proportional
decline in rates paid on deposits
with the declines in loan and other investment yields.
When market rates on deposits
fell more rapidly in 1992 than did rates on total earning
assets, One Valley's net
interest margin increased from the 4.58% margin realized in
1991 to 4.75% in 1992. It
should be noted that during the time of declining interest
rates, fixed-rate loans were
not subject to interest rate repricing unless refinanced.
Thus the yield on the total
loan portfolio did not decline as rapidly as market rates
paid for deposits. However, as
shown in the Net Interest Margin graph, One Valley's net
interest margin has not
fluctuated substantially, up or down, over the past six
years. Further discussion of net
interest income is included in the section of this report
entitled "Balance Sheet
Analysis."
(Net Interest Margin line and area graph appear here -- see
appendix)
18
<PAGE>
Non-interest Income and Expense
Non-interest income has been and will continue to be an
important factor for improving
profitability. Recognizing this importance, management
continues to evaluate areas where
non-interest income can be enhanced. As shown in Table 12,
Non-interest Income and
Expense, non-interest income increased $2.3 million or 6.8%
in 1993 compared to 1992.
This followed a 58.9% increase in 1992 over 1991. A large
portion of the increase in 1992
is due to the Atlantic transaction. In 1993, service
charges on deposit accounts and
credit card fees increased due to an increase in the number
of customers, while service
charges on deposit accounts also increased due to the
adoption of a common fee and product
structure at all One Valley Banks. Trust income increased
significantly in 1993 to $6.7
million, a $1.2 million or 21.4% increase over 1992. This
increase follows a 17.6%
increase in 1992 over 1991. Trust revenues are increasing
primarily due to new business
over the past two years. Real estate loan processing fees
declined by 4.6% in 1993 when
compared to 1992, largely due to a lower volume of loans
originated for sale during the
year. This major source of non-interest income, acquired
through the Atlantic
transaction, increased over three-fold in 1992. One Valley
generates fee income for the
loan application processing as well as for servicing the
debt payments over the life of
the mortgage after it is transferred to the investor.
In 1991, One Valley recognized a net securities loss of
$748,000, primarily the writedown
of marketable equity securities in anticipation of their
sale, which occurred in the first
part of January 1992. Immaterial securities gains and
losses were realized in 1993 and
1992.
Just as management continues to evaluate areas where non-
interest income can be enhanced,
it strives to find ways to improve the efficiency of its
operations and thus reduce
operating costs. However, with the increase in 1993
operating expenses primarily due to
conversion costs for its data processing systems and other
costs associated with the
Mountaineer merger, One Valley's net overhead ratio
increased for the first time in six
years. As shown in the Net Overhead graph, One Valley's
1993 net overhead ratio, or non-
interest expense less non-interest income excluding
securities transactions to average
earning assets, was 2.50%, a slight increase from the 2.45%
ratio realized in 1992. For
the year 1993, net overhead was $63.1 million, an increase
of 5.1% over the 1992 net
overhead of $60.1 million. By comparison, net overhead
totaled $49.6 million in 1991,
which did not include a full year of Atlantic operations. A
lower net overhead ratio
means more of the net interest margin flows through as net
income. The net overhead ratio
in 1993 was 2.50%, up slightly from 2.45% in 1992 but down
from 2.54% in 1991. Over the
past five years, net overhead has grown by a compound rate
of 9.56% whereas average
earning assets have grown by over 11.62%.
(Net Interest Income line and area graph appear here -- see
appendix)
19
<PAGE>
Total non-interest expense increased by $5.4 million, or
5.7% over 1992. This compares to
a 31.0% increase in 1992 versus 1991. Total staff costs
rose by 11.1% in 1993, compared
to a 23.3% increase in 1992. Normal salary and benefit
increases as well as severance
packages for employees of One Valley's data processing
subsidiary, and additional expense
associated with the adoption of FASB Statement 106 account
for the growth in this expense.
Additional information concerning the adoption of FASB
Statement 106 is discussed in Note
L to the consolidated financial statements. The increase in
1992 was largely attributable
to the increase in the number of employees from the Atlantic
transaction.
In 1993, the FASB issued Statement No. 112, "Employers'
Accounting for Postemployment
Benefits," which is effective in 1994 for One Valley. This
Statement requires employers
to recognize the obligation to provide postemployment
benefits if the obligation is
attributable to employees' services already rendered,
employees' rights to those benefits
accumulate or vest, payment of the benefits is probable, and
the amount of the benefits
can be reasonably estimated. The adoption of this Statement
will not be material to One
Valley's financial statements.
Advertising decreased by 8.9% in 1993 compared to 1992, due
to the leveling off of an
extensive advertising campaign in 1992. Advertising expense
increased by 45.3% in 1992,
due to increased local advertising in the early part of 1992
following the Atlantic
acquisition and increased statewide advertising in the
latter part of 1992 in response to
the announced acquisition of the largest bank holding
company in the state by an out-of-
state institution. FDIC insurance increased by 7.0% in 1993
due to normal deposit growth
and 37.4% in 1992 due to the deposits assumed in the
Atlantic acquisition. Net occupancy
expense remained virtually unchanged in 1993 when compared
to 1992, while occupancy
expense increased by 57.2% in 1992 over 1991 as a result of
operating fourteen additional
branch locations acquired in the Atlantic transaction.
Equipment expenses increased by
1.9% in 1993 versus 1992, which compares to a 28.1% increase
in 1992. The large increase
in 1992 was largely due to the equipment bought in the
Atlantic transaction. Outside
data processing costs increased by 57.4% in 1993 compared to
1992, largely due to costs
related to the conversion of One Valley's in house data
processing system to M&I Data
Services in Milwaukee, Wisconsin. Outside data processing
costs
<TABLE>
Rate Volume Analysis of Changes in Interest Income and Expenses Table 11
(Dollars in thousands)
1993 vs 1992 1992 vs 1991
Increase (Decrease) Increase (Decrease)
In Net Interest Income In Net interest Income
Volume Rate Total Volume Rate Total
<S> <C> <C> <C> <C> <C> <C>
Earning Assets
Loans:
Taxable $ 8,100 $(13,621) $ (5,521) $36,320 $(13,477) $22,843
Tax-exempt 244 (18) 226 (210) (364) (574)
Total Loans 8,344 (13,639) (5,295) 36,110 (13,841) 22,269
Investment Securities:
Taxable (961) (5,913) (6,874) 12,540 (7,498) 5,042
Tax-exempt 481 (384) 97 (1,915) (192) (2,107)
Total Investment Securities (480) (6,297) (6,777) 10,625 (7,690) 2,935
Federal funds sold & other (337) (420) (757) (1,247) (2,761) (4,008)
Total Earning Assets 7,527 (20,356) (12,829) 45,488 (24,292) 21,196
Interest Bearing Liabilities
Time and savings deposits 1,274 (15,552) (14,278) 19,328 (24,659) (5,331)
Short-term borrowings (389) (1,560) (1,949) 2,133 (2,658) (525)
Long-term borrowings (404) 362 (42) (84) 3 (81)
Total Interest Bearing Liabilities 481 (16,750) (16,269) 21,377 (27,314) (5,937)
Net Interest Earnings $ 7,046 $ (3,606) $ 3,440 $24,111 $ 3,022 $27,133
* Fully taxable equivalent using the rate of 35% for 1993 and 34% for 1992 and 1991.
Note - Changes to rate/volume are allocated to both rate and volume on a proportionate dollar basis.
</TABLE>
20
<PAGE>
increased by 28.7% in
1992 compared to 1991 largely due to additional services
needed as a result of the
increased branch network and customer base after the
Atlantic transaction. Taxes not on
income increased by 10.4% in 1993 due to increases in equity
based state and county taxes.
Supplies and postage expense increased by 4.0% in 1993
versus 1992 due to data processing
conversion. Supplies and postage expense increased by 43.4%
in 1992 when compared to 1991
as a result of the increase in the number of customers and
accounts from the Atlantic
purchase. Other expenses declined by 8.0% in 1993,
primarily due to declines in telephone
costs, collection and OREO maintenance costs, professional
fees, and intangible asset
amortization. This decrease follows a 43.1% increase in
1992 versus 1991, largely due to
increased operating costs associated with the Atlantic
transaction.
(Net Overhead Ratio line graph appears here -- see appendix)
As noted above, the required payments for FDIC insurance
assessments have increased
significantly over the last several years. One Valley's
assessment increased from $1.2
million in 1989 to $3.5 million in 1991 largely due to
increases in rates, as a result of
continued losses in the FDIC insurance fund from bank
failures in other regions of the
country. During 1992, in response to repeated appeals for a
more equitable method of
determining assessments, the FDIC announced a change in its
insurance rate structure to a
multi-rate system based on bank soundness and
capitalization. Due to its strengths in
asset quality and capitalization, One Valley was assessed at
the lowest level possible
during 1993, 1992, and 1991, and management anticipates that
FDIC insurance rates will
remain at that level during 1994.
An analysis of the allowance for loan losses and related
provision for loan losses is
included as a portion of the Balance Sheet Summary, Loan
Portfolio section of this
report.
Applicable Income Taxes
Income tax expense in 1993 was $16.5 million compared to
$13.8 million in 1992 and $9.1
million in 1991. The increase in 1993 is primarily due to
increases in pretax earnings
and an increase in corporate income tax rates. In addition
to the increased pretax
earnings, declining tax-exempt income also contributed to
increases in income taxes in
prior years. With the purchase of additional tax-exempt
investments in 1993, discussed
above, tax-exempt interest remained relatively unchanged in
1993 and is anticipated to
increase in 1994. In 1993, One Valley's effective tax rate
was 33.7%, up from 31.9% in
1992 and 30.1% in 1991. Additional information regarding
income taxes is contained in
Note K to the consolidated financial statements.
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.
Regard-less 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. Management's efforts to meet these
goals are described in other
sections of this report.
21
<PAGE>
<TABLE>
Increase (Decrease) Over Prior Year
1993 1992 1991 1993 1992
Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C> <C>
Service Charges and Other
Operating Income
Trust income $ 6,716 $ 5,534 $ 4,706 $ 1,182 21.36 $ 828 17.59
Credit card fees 2,720 2,027 1,407 693 34.19 620 44.07
Service charges on deposit accounts 10,258 9,580 7,460 678 7.08 2,120 28.42
Insurance service fees 710 860 803 (150) (17.44) 57 7.10
Real estate loan processing &
servicing fees 7,657 8,022 2,423 (365) (4.55) 5,599 231.08
Checkbook sales 2,468 2,623 1,866 (155) (5.91) 757 40.57
Securities transactions (2) 1 (748) (3) 749
Miscellaneous 5,706 5,280 3,434 426 8.07 1,846 53.76
Total Non-Interest Income $36,233 $33,927 $21,351 $ 2,306 6.80 $12,576 58.90
Staff and Other Operating Expenses
Salaries & wages $40,075 $37,297 $29,592 $ 2,778 7.45 $ 7,705 26.04
Employee benefits 10,307 8,046 7,186 2,261 28.10 860 11.97
Total Staff Expenses 50,382 45,343 36,778 5,039 11.11 8,565 23.29
Other Operating Expenses
Advertising 2,068 2,269 1,562 (201) (8.86) 707 45.26
FDIC insurance 5,153 4,816 3,506 337 7.00 1,310 37.36
Occupancy, net 4,849 4,822 3,067 27 0.56 1,755 57.22
Equipment 8,634 8,471 6,613 163 1.92 1,858 28.10
Outside data processing 3,018 1,917 1,489 1,101 57.43 428 28.74
Taxes not on income 2,159 1,955 1,697 204 10.43 258 15.20
Supplies and postage 5,492 5,281 3,682 211 4.00 1,599 43.43
All other 17,618 19,148 13,378 (1,530) (7.99) 5,770 43.13
Total Other Operating Expenses 48,991 48,679 34,994 312 0.64 13,685 39.11
Total Non-Interest Expense $99,373 $94,022 $71,772 $ 5,351 5.69 $22,250 31.00
</TABLE>
Summary Results of Operations
Fourth Quarter 1993
Net income for the three months ended December 31, 1993 was
$8.2 million, up 9.3% from the
$7.5 million earned during the same period in 1992. On a
per share basis, fourth quarter
earnings were $0.64 compared to $0.59 in 1992, an increase
of 8.5%.
The higher fourth quarter net income primarily resulted from
continued growth in net
interest income and non-interest income as well as a lower
provision for loan losses. Net
interest income increased by 7.3% when compared to the same
three months of 1992. Non-
interest income increased by 2.1%, excluding fourth quarter
1993 securities gains,
primarily due to an increase in trust department revenue and
deposit account fee income.
The provision for loan losses declined by 61.0% when
compared to the fourth quarter of
1992. These improvements more than offset a 12.2% increase
in non-interest expense, when
compared to the fourth quarter of 1992. Fourth quarter 1993
non-interest expenses include
costs associated with the completed data processing
conversion and the Mountaineer merger.
Additional quarterly financial data is provided in Note Q to
the consolidated financial statements.
22
<PAGE>
Report of Ernst and Young, Independent Auditors
The Board of Directors and Shareholders
One Valley Bancorp of West Virginia, Inc.
We have audited the accompanying consolidated balance sheets of One
Valley Bancorp of West Virginia, Inc. and subsidiaries as of December 31,
1993 and 1992, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the three years in the
period ended December 31, 1993. These financial statements are the
responsibility of the Company'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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of One Valley
Bancorp of West Virginia, Inc. and subsidiaries at December 31, 1993 and
1992, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1993,
in conformity with generally accepted accounting principles.
Charleston, West Virginia
January 25, 1994
23
<PAGE>
Consolidated Balance Sheets
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31
1993 1992
<S> <C> <C>
Assets
Cash and due from banks--Note B $ 116,242 $ 128,301
Interest-bearing deposits in other banks 2,162 4,193
Federal funds sold 21,000 102,275
Cash and cash equivalents 139,404 234,769
Securities (fair value approximated
$734,815 at December 31, 1993, and $718,761 at
December 31, 1992)--Note D 720,695 704,411
Loans, net--Notes E and F 1,801,763 1,655,155
Premises and equipment--Note G 68,386 67,819
Accrued interest receivable 21,354 23,198
Other assets 22,757 21,642
Total Assets $2,774,359 $2,706,994
Liabilities
Deposits--Note H:
Non-interest bearing $ 349,573 $ 339,412
Interest bearing 1,979,071 1,938,433
Total deposits 2,328,644 2,277,845
Short-term borrowings--Note I:
Federal funds purchased 14,012 17,718
Securities sold under agreements to repurchase and other 164,727 155,941
Total short-term borrowings 178,739 173,659
Long-term borrowings--Note J 133 9,992
Other liabilities 24,253 24,842
Total Liabilities 2,531,769 2,486,338
Shareholders' Equity
Preferred Stock--$10 par value; authorized 1,000,000 shares;
none issued
Common Stock--$10 par value; authorized 40,000,000 shares;
13,163,766 and 13,140,490 shares outstanding at December 31,
1993 and 1992, including 270,000 shares in treasury at
December 31, 1993 and 1992 131,638 131,405
Capital surplus 40,750 40,692
Retained earnings 73,331 51,688
Treasury stock (3,129) (3,129)
Total Shareholders' Equity 242,590 220,656
Total Liabilities and Shareholders' Equity $2,774,359 $2,706,994
See notes to consolidated financial statements.
</TABLE>
24
<PAGE>
Consolidated Statements of Income
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
(Dollars in thousands, except per share data)
<TABLE>
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Interest Income
Interest and fees on loans:
Taxable $150,836 $156,357 $133,514
Tax-exempt 1,686 1,563 1,942
Total 152,522 157,920 135,456
Interest and dividends on securities:
Taxable 36,003 42,877 37,835
Tax-exempt 4,035 4,033 5,424
Total 40,038 46,910 43,259
Other 2,494 3,251 7,259
Total interest income 195,054 208,081 185,974
Interest Expense
Deposits 71,713 85,991 91,322
Short-term borrowings--Note I 5,173 7,122 7,647
Long-term borrowings--Note J 1,256 1,298 1,379
Total interest expense 78,142 94,411 100,348
Net Interest Income 116,912 113,670 85,626
Provision For Loan Losses--Note F 4,815 10,273 4,862
Net Interest Income After Provision For Loan Losses 112,097 103,397 80,764
Other Income
Trust Department 6,716 5,534 4,706
Service charges on deposit accounts 10,258 9,580 7,460
Real estate loan processing and servicing fees 7,657 8,022 2,423
Other service charges and fees 3,300 3,659 3,137
Securities (losses) gains (2) 1 (748)
Other--Note P 8,304 7,131 4,373
Total other income 36,233 33,927 21,351
Other Expenses
Salaries and employee benefits--Note L 50,382 45,343 36,778
Net occupancy--Note G 4,849 4,822 3,067
Equipment 8,634 8,471 6,614
Federal deposit insurance assessments 5,153 4,816 3,506
Outside data processing 3,018 1,917 1,489
Other--Note P 27,337 28,653 20,318
Total other expenses 99,373 94,022 71,772
Income Before Income Taxes 48,957 43,302 30,343
Applicable Income Taxes--Note K 16,488 13,825 9,127
Net Income $ 32,469 $ 29,477 $ 21,216
Net Income Per Common Share $ 2.52 $ 2.29 $ 1.93
Average common shares outstanding 12,884 12,858 11,008
See notes to consolidated financial statements.
</TABLE>
25
<PAGE>
Consolidated Statements of Shareholders' Equity
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
(Dollars in thousands, except per share data)
<TABLE>
Net
Unrealized
Loss on
Marketable
Common Capital Retained Treasury Equity
Stock Surplus Earnings Stock Securities
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1991 $ 61,627 $20,905 $75,389 $(3,129) $(3,302)
Net income 21,216
Issuance of common stock:
Public offering (1,035,000 shares) 10,350 18,757
Stock options exercised (56,955 shares)--
Note L 569 570
Cash dividends ($0.62 per share) (7,064)
Change in net unrealized loss on
marketable equity securities 3,302
Balances at December 31, 1991 72,546 40,232 89,541 (3,129) 0
Net income 29,477
Stock options exercised (50,423 shares)--
Note L 505 472
Three-for-two stock split in the form of a
50% stock dividend 36,453 (12) (36,461)
Six-for-five stock split in the form of a
20% stock dividend 21,901 (21,901)
Cash dividends ($0.70 per share) (8,968)
Balances at December 31, 1992 131,405 40,692 51,688 (3,129) 0
Net income 32,469
Stock options exercised (24,280 shares)--
Note L 233 58
Cash dividends ($0.84 per share) (10,826)
Balances at December 31, 1993 $131,638 $40,750 $73,331 $(3,129) $ 0
See notes to consolidated financial statements.
</TABLE>
26
<PAGE>
Consolidated Statements of Cash Flows
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
(Dollars in thousands)
<TABLE>
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Operating Activities
Net income $ 32,469 $ 29,477 $ 21,216
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 4,815 10,273 4,862
Depreciation 5,755 6,520 4,969
Amortization, net of accretion 5,214 7,318 5,843
Deferred income taxes (benefit) (1,023) (1,683) (1,440)
Loans originated for sale (138,682) (185,246) (39,199)
Proceeds from loans sold 144,431 178,307 30,949
Net (gains) losses from sales of assets (926) (393) 1,235
Decrease (increase) in accrued interest receivable 1,844 2,659 (2,170)
Decrease in accrued interest payable (2,978) (70) (1,051)
Net change in other assets and other liabilities 2,406 (3,157) (2,629)
Net cash provided by operating activities 53,325 44,005 22,585
Investing Activities
Proceeds from sale of marketable equity securities 35,572
Proceeds from sales of securities 15,116 21,772 10,002
Proceeds from maturities of securities 379,035 493,286 383,545
Purchases of securities (418,960) (503,247) (553,198)
Cash received in acquisition, net of cash paid 135,859
Sale of branch, net of deposits transferred and gain
on sale (8,489)
Net increase in loans (152,355) (53,036) (75,815)
Purchases of premises and equipment (7,011) (6,281) (4,536)
Net cash used in investing activities (184,175) (20,423) (104,143)
Financing Activities
Net increase in deposits 50,799 29,039 51,913
Net (decrease) increase in federal funds purchased (3,706) 4,607 (147)
Net increase (decrease) in other short-term borrowings 8,786 (9,282) 47,168
Repayment of long-term borrowings (9,859) (4,256) (235)
Proceeds from long-term borrowings 56
Proceeds from issuance of common stock 291 957 30,246
Cash dividends (10,826) (8,968) (7,064)
Net cash provided by financing activities 35,485 12,097 121,937
(Decrease) increase in cash and cash equivalents (95,365) 35,679 40,379
Cash and cash equivalents at beginning of year 234,769 199,090 158,711
Cash and cash equivalents at end of year $139,404 $234,769 $199,090
See notes to consolidated financial statements.
</TABLE>
27
<PAGE>
Notes to Consolidated Financial Statements
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
December 31, 1993
(Dollars in thousands, except per share data)
Summary of Significant Accounting and Reporting Policies Note A
The accounting and reporting policies of One Valley Bancorp of West
Virginia, Inc. and its subsidiaries (One Valley) conform to generally
accepted accounting principles and to general practices within the banking
industry. The following is a summary of the more significant policies.
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of One Valley Bancorp of West Virginia, Inc. and its wholly-
owned subsidiaries. All significant inter-company balances and
transactions have been eliminated.
Cash and Cash Equivalents
One Valley considers cash and due from banks, interest-bearing
deposits in other banks, and federal funds sold as cash and cash
equivalents. The carrying amounts reported in the December 31, 1993 and
1992, balance sheets for cash and cash equivalents approximate those
assets' fair values.
Securities
Management determines the appropriate classification of securities
at the time of purchase. If management has the intent and One Valley has
the ability at the time of purchase to hold securities until maturity, they
are classified as investments 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 are
classified as available-for-sale and carried at the lower of cost or
market value. Securities held for indefinite periods of time 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.
The adjusted cost of the specific security sold is used to compute
gain or loss on the sale of investment securities.
Loans Held for Sale
Mortgage loans originated and intended for sale in the secondary
market are carried at the lower of cost or estimated fair value in the
aggregate.
Allowance for Loan Losses
In determining the adequacy of the allowance for loan losses, as
well as the appropriate provision for loan losses, management takes into
consideration the results of internal review procedures, historical loan
loss experience, an assessment of the effect of current and anticipated
future economic conditions on the loan portfolio, the financial condition
of the borrower and such other factors which, in management's judgment,
deserve recognition. In management's judgment, the allowance for loan
losses is maintained at a level adequate to provide for probable losses on
existing loans and commitments.
Premises and Equipment
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed principally on the straight-line
method over the estimated useful lives of the assets.
Income Taxes
The consolidated provision for applicable income taxes is based upon
reported income and expense. Deferred income taxes (included in other
assets) are provided for temporary differences between the tax basis of
an asset or liability and its reported amount in the financial statements
at the statutory tax rate.
One Valley and its subsidiaries file consolidated federal and state
income tax returns. Each subsidiary provides for income taxes on a
separate return basis, and remits amounts determined to be currently
payable to the parent company.
Revenue Recognition
Interest income on loans, amortization of unearned income, and
accretion of discounts are computed by methods which generally result in
level rates of return on principal amounts outstanding.
The accrual of interest income generally is discontinued when a loan
becomes 90 days past due as to principal or interest. When interest
accruals are discontinued, unpaid interest recognized in income in the
current year is reversed, and interest accrued in prior years is charged to
the allowance for loan losses. Management may elect to continue the
accrual of interest when the estimated net realizable value of collateral
exceeds the principal balance and accrued interest, and the loan is in the
process of collection.
28
<PAGE>
Summary of Significant Accounting and Reporting Policies-continued Note A
Loan Fees and Costs
Loan origination and commitment fees and direct loan origination
costs are being recognized as collected and incurred. The use of this
method of recognition does not produce results that are materially
different from results which would have been produced if such costs and
fees were deferred and amortized as an adjustment of the loan yield over
the life of the related loan.
Net Income per Common Share
Net income per common share is computed by dividing net income by
the average common shares outstanding during the year. Options under the
One Valley stock option plan are considered common stock equivalents for
the purpose of net income per common share data but are excluded from
the computation because they are immaterial.
Restrictions on Cash and Due from Bank Accounts Note B
Bank subsidiaries are required to maintain average reserve balances with
the Federal Reserve Bank. The average amount of those reserve balances
for the year ended December 31, 1993, was approximately $21,700.
Merger and Acquisitions
Note C
In January 1994, One Valley acquired all of the outstanding common stock
of Mountaineer Bankshares of W. Va., Inc. (Mountaineer) in exchange for
4,350,000 shares of One Valley common stock. This combination will be
accounted for as a pooling of interests. The pooling of interests method
combines the financial information of the merging companies as though
they had always been combined. As of December 31, 1993, Mountaineer
had total assets and deposits of approximately $738,500 and $608,100.
Following is an analysis presenting the 1993, 1992, and 1991 income of
the separate companies and as though the combination had been
consummated at December 31, 1993.
1993 1992 1991
Net interest income:
One Valley $116,912 $113,670 $ 85,626
Mountaineer 31,001 29,775 26,253
Consolidated $147,913 $143,445 $111,879
Net income:
One Valley $ 32,469 $ 29,477 $ 21,216
Mountaineer 5,485 7,161 5,176
Consolidated $ 37,954 $ 36,638 $ 26,392
Net income per common share:
One Valley $2.52 $2.29 $1.93
Mountaineer 1.89 2.48 1.79
Consolidated $2.20 $2.13 $1.72
In 1991, One Valley was declared the successful bidder for the
purchase of certain assets and the assumption of the deposits and certain
other liabilities of Atlantic Financial Federal - West Virginia, F.S.A. (AFF-
WV) following its closure by the Office of Thrift Supervision. One Valley
assumed deposits of approximately $525 million in exchange for net loans
of $339 million, securities of $44 million, cash and cash equivalents of
$134 million (including $41.2 million, which represents One Valley's
negative bid for the acquired assets) and certain other assets. This
acquisition was accounted for under the purchase method of accounting.
29
<PAGE>
Notes to Consolidated Financial Statements
(Dollars in thousands)
Merger and Acquisitions--continued Note C
In addition, One Valley has acquired several other banks in prior years in
acquisitions accounted for using the purchase method of accounting. The
purchase prices of all these acquisitions were allocated to the
identifiable tangible and intangible assets acquired based upon their fair
value at the acquisition date. Intangible assets representing the present
value of future net income to be earned from deposits of acquired banks
are being amortized on an accelerated basis over a ten-year period.
Deposit intangibles included in other assets approximated $1,000 and
$1,500 at December 31, 1993 and 1992. Deposit intangible amortization
approximated $600 in 1993 and $700 in 1992 and 1991.
The excess of purchase price over the fair market value of assets of
subsidiary banks acquired (goodwill) is being amortized on a straight-line
basis over periods ranging from 15 to 25 years. Goodwill, included in
other assets, approximated $4,200 and $4,500 at December 31, 1993 and
1992. Goodwill amortization approximated $300 in 1993, 1992, and 1991.
Securities Note D
The amortized cost and estimated fair values of debt securities are
summarized as follows:
<TABLE>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
December 31, 1993
U.S. Treasury securities and obligations of
U.S. government agencies and corporations $609,987 $10,681 $(364) 620,304
Obligations of states and political subdivisions 90,948 3,750 (608) 94,090
Other securities 19,760 662 (1) 20,421
Total securities $720,695 $15,093 $(973) $734,815
December 31, 1992
U.S. Treasury securities and obligations of
U.S. government agencies and corporations $634,514 $10,761 $(233) $645,042
Obligations of states and political subdivisions 48,481 3,351 (11) 51,821
Other securities 21,416 484 (2) 21,898
Total securities $704,411 $14,596 $(246) $718,761
December 31, 1991
U.S. Treasury securities and obligations of
U.S. government agencies and corporations $642,635 $15,894 $658,529
Obligations of states and political subdivisions 65,456 3,978 $ (30) 69,404
Other securities 11,281 (3) 11,278
Total securities $719,372 $19,872 $ (33) $739,211
</TABLE>
In May 1993 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," effective for fiscal
years beginning after December 15, 1993. With the impending adoption of
this Statement, management has reevaluated its classification of
securities and assigned an additional $446,140 of securities as available-
for-sale. Securities designated as available-for-sale at December 31,
1993, approximated $486,469 and consisted primarily of U.S. Treasury
securities and obligations of U.S. government corporations and agencies
with remaining contractual maturities of less than five years. These
securities had unrealized appreciation of approximately $5,701. One
Valley will adopt the provisions of the new standard as of January 1,
1994. In accordance with the Statement, prior period financial statements
will not be restated to reflect the change in accounting principle. The
effect of adopting this Statement will be to increase the opening balance
of shareholders' equity by $3,478 (net of $2,223 in deferred income taxes)
to reflect the net unrealized holding gains on securities classified as
available-for-sale previously carried at amortized cost.
30
<PAGE>
Securities -- continued Note D
The amortized cost and estimated fair value of debt securities at
December 31, 1993, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
Estimated
Amortized Fair
Cost Value
Due in one year or less $224,348 $226,388
Due after one year through five years 311,279 316,508
Due after five years through ten years 93,384 98,120
Due after ten years 91,684 93,799
Total securities $720,695 $734,815
At December 31, 1993 and 1992, securities carried at $343,000 and
$331,000, respectively, were pledged to secure public deposits,
repurchase agreements, and for other purposes as required or permitted by
law.
Fair values for securities are based on quoted market prices, where
available. If quoted market prices are not available, fair values are based
on quoted market prices of comparable instruments.
Loans Note E
Loans are summarized as follows:
December 31
1993 1992
Commercial, financial
and agricultural $ 264,362 $ 240,868
Real estate:
Revolving home equity 81,921 72,748
Single family residential 746,393 665,248
Apartment buildings
and complexes 40,062 44,562
Commercial 257,656 231,142
Construction 23,367 33,486
Installment loans to individuals 387,420 379,903
Bankers' acceptances 2,123 560
Other 27,643 14,623
Total loans net of
unearned income 1,830,947 1,683,140
Less allowance for loan losses 29,184 27,985
Loans - net $1,801,763 $1,655,155
Unearned income approximated $4,100 and $5,400 at December 31, 1993
and 1992, respectively.
One Valley and its subsidiaries have granted loans to officers and
directors of One Valley and its subsidiaries and to their associates.
Related party loans were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for
comparable transactions with unrelated persons and did not involve more
than normal risk of collectibility.
The following presents the activity with respect to related party
loans aggregating $60 or more to any one related party:
1993 1992
Balance, January 1 $60,562 $58,407
Additions 22,362 27,498
Amount collected (21,688) (25,343)
Balance, December 31 $61,236 $60,562
In May 1993, the FASB issued Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan,"
which is effective for fiscal years beginning after December 15, 1994.
The Statement requires that impaired loans be measured at the present
value of expected future cash flows discounted at the loan's original
effective interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. The adoption of this Statement is not anticipated to
have a material effect on One Valley's financial statements.
31
<PAGE>
Notes to Consolidated FInancial Statements
(Dollars in thousands)
Loans -- continued Note E
The fair values for fixed-rate commercial, mortgage, and consumer loans
are estimated using discounted cash flow analyses at interest rates
currently being offered for loans with similar terms to borrowers of
similar credit quality. For variable-rate loans that reprice frequently and
with no significant change in credit risk, fair values are based on carrying
values. The carrying value of accrued interest approximates its fair value.
The estimated fair value of loans at December 31, 1993 and 1992
approximated $1,837,000 and $1,693,000.
One Valley originates and sells fixed-rate mortgage loans primarily
to governmental agencies on a servicing retained basis. Interest rates are
determined at the date of the commitment to sell the loans and the
commitment period generally ranges from 60 to 90 days. At December 31,
1993, One Valley held loans for sale of approximately $14,300 and had
commitments to originate and sell loans of approximately $13,100.
The mortgage loan portfolio serviced by One Valley for the benefit of
others approximated $780,000, $963,000, and $1,082,000 at December 31,
1993, 1992, and 1991, respectively. Custodial escrow balances
maintained in connection with the foregoing loan servicing and One
Valley's own mortgage loan portfolio were approximately $10,500 and
$12,000 at December 31, 1993 and 1992.
Allowance for Loan Losses Note F
Changes in the allowance for loan losses for each of the three years
in the period ended December 31, 1993, were as follows:
1993 1992 1991
Balance, January 1 $27,985 $22,729 $14,633
Charge-offs (5,206) (6,536) (4,871)
Recoveries 1,590 1,519 1,282
Net charge-offs (3,616) (5,017) (3,589)
Provision for loan losses 4,815 10,273 4,862
Balance of acquired subsidiaries 6,823
Balance, December 31 $29,184 $27,985 $22,729
Premises and Equipment Note G
The major categories of premises and equipment and accumulated
depreciation are summarized as follows:
December 31
1993 1992
Land $ 11,934 $ 12,000
Buildings and improvements 59,749 59,215
Equipment 37,473 36,618
Total 109,156 107,833
Less accumulated depreciation (40,770) (40,014)
Premises and equipment-net $ 68,386 $ 67,819
One Valley has entered into noncancelable lease agreements
(operating leases) for certain premises and equipment and outside data
processing services. The minimum annual rental commitment under these
lease and service agreements, exclusive of taxes and other charges
payable by the lessees, is: 1994--$3,100; 1995--$3,100: 1996--$3,000;
1997--$2,600; and 1998--$2,500, with $4,600 of commitments extending
beyond 1998.
Total expense under these lease agreements, including cancelable
and noncancelable leases, was $2,900 in 1993, $1,500 in 1992, and $1,300
in 1991.
32
<PAGE>
Deposit Liabilities Note H
The fair values of demand deposits (i.e., interest and non-interest
bearing checking, regular savings, and other types of money market
demand accounts) are, by definition, equal to their carrying amounts. Fair
values for certificates of deposit are estimated using a discounted cash
flow calculation that applies interest rates currently being offered on
certificates to a schedule of aggregate expected monthly maturities of
time deposits. The estimated fair value of total deposits at December 31,
1993 and 1992, approximated $2,337,000 and $2,286,000. FASB
Statement No. 107 defines the fair value of demand deposits as the
amount payable on demand, and prohibits adjusting fair value for any value
derived from retaining those deposits for an unexpected future period of
time (commonly referred to as a deposit base intangible). Accordingly,
the deposit base intangible is not considered in the above estimated fair
value of total deposits at December 31, 1993 and 1992.
Interest paid on deposits, short-term borrowings, and long-term
borrowings approximated $81,000 in 1993, $95,000 in 1992, and $101,000
in 1991.
Short-term Borrowings Note I
Federal funds purchased and securities sold under agreements to
repurchase represent borrowings with maturities primarily from
overnight to 90 days. The carrying amounts of short-term borrowings
approximate their fair values. Additional details regarding short-term
borrowings are set forth below:
Federal Repurchase
Funds Agreements
Purchased and Other
1993
Average amount outstanding during year $19,313 $159,993
Maximum amount outstanding at any month-end 22,236 187,328
Weighted average interest rate:
During year 3.17% 2.85%
End of year 2.92 2.54
1992
Average amount outstanding during year $19,183 $171,084
Maximum amount outstanding at any month-end 42,366 186,992
Weighted average interest rate:
During year 3.51% 3.76%
End of year 2.92 3.32
1991
Average amount outstanding during year $18,159 $124,786
Maximum amount outstanding at any month-end 22,123 165,223
Weighted average interest rate:
During year 5.72% 5.29%
End of year 4.47 4.59
Long-term Borrowings Note J
Long-term borrowings consist of mortgages payable of $133 and
$9,992 at December 31, 1993 and 1992. The fair values of long-term
borrowings are estimated using discounted cash flow analyses based on
One Valley's current incremental borrowing rates for similar types of
borrowing arrangements. The estimated fair value of long-term
borrowings at December 31, 1993 and 1992 approximated $100 and
$11,200.
33
<PAGE>
Income Taxes Note K
The income tax provisions (benefits) included in the consolidated
statements of income are summarized as follows:
1993 1992 1991
Federal:
Current $15,507 $14,090 $9,055
Deferred (1,023) (1,683) (1,440)
State 2,004 1,418 1,512
Total $16,488 $13,825 $9,127
A reconciliation between the amount of reported income tax expense
and the amount computed by applying the statutory federal income tax
rate to income before income taxes is as follows:
<TABLE>
1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Computed tax at statutory federal rate $17,135 35.0 % $14,723 34.0 % $10,317 34.0 %
Plus: State income taxes,
net of federal tax benefits 1,303 2.7 936 2.2 998 3.3
18,438 37.7 15,659 36.2 11,315 37.3
Increase (decrease) in taxes resulting from:
Tax-exempt interest (1,908) (3.9) (1,874) (4.3) (2,256) (7.4)
Other--net (42) (.1) 40 68 .2
Actual tax expense $ 16,488 33.7 % $13,825 31.9 % $9,127 30.1 %
</TABLE>
Significant components of One Valley's deferred tax assets and
liabilities are as follows:
December 31
1993 1992
Deferred tax assets:
Allowance for loan losses $10,214 $ 9,515
Accrued employee benefits 1,850 1,700
Other accrued expenses 1,007 902
Total deferred tax assets 13,071 12,117
Deferred tax liabilities:
Premises and equipment 2,628 2,513
Loans 3,439 3,623
Total deferred tax liabilities 6,067 6,136
Net deferred tax assets $ 7,004 $ 5,981
Income tax benefit related to securities losses approximated $299 in
1991.
One Valley made tax payments of approximately $19,000 in 1993, $17,000
in 1992, and $9,500 in 1991.
34
<PAGE>
Employee Benefit Plans Note L
One Valley has a defined benefit pension plan covering substantially
all of its employees. The benefits are based on years of service and the
employee's compensation during the last five years of employment. One
Valley's funding policy is to contribute annually the maximum amount that
can be deducted for federal income tax purposes.
The following table sets forth the plan's funded status and amounts
recognized in the consolidated balance sheets at December 31:
<TABLE>
1993 1992
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits
of $14,720 in 1993 and $10,450 in 1992 $ 15,720 $ 10,600
Projected benefit obligation $ (23,687) $ (18,481)
Plan assets at fair value, consisting primarily of cash, listed
stocks, and U.S. bonds 18,167 14,695
Projected benefit obligation in excess of plan assets (5,520) (3,786)
Unrecognized net asset at November 1, 1987, net of amortization (2,044) (2,229)
Unrecognized net loss from past experience different from that assumed and
effects of changes in assumptions 5,391 3,468
Accrued pension cost included in other liabilities $ (2,173) $ (2,547)
</TABLE>
Following is a summary of the components of net periodic pension
cost:
1993 1992 1991
Service cost--benefits earned during the period $ 1,185 $ 1,007 $ 883
Interest cost on projected benefit obligation 1,449 1,287 1,010
Actual return on plan assets (2,253) (1,019) (1,305)
Net amortization and deferral 896 (24) 110
Early retirement benefits 326
Net periodic pension cost $ 1,277 $ 1,033 $ 1,024
The weighted-average discount rate used in determining the
actuarial present value of projected benefit obligations was 7% and 8% at
December 31, 1993 and 1992. The rate of increase in future compensation
levels used in determining the actuarial present value of projected benefit
obligations was 5.5% in 1993 and 6% in 1992. The expected long-term
rate of return on plan assets in 1993, 1992, and 1991 was 8.5%. During
1993, the unrecognized net loss increased due to the change in the
weighted-average discount rate. This increase was partially offset by
actuarial experience gains relating to the return on plan assets.
In 1993, the FASB issued Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits,"
which is effective in 1994 for One Valley. This Statement requires
employers to recognize the obligation to provide postemployment benefits
if the obligation is attributable to employees' services already rendered,
employees' rights to those benefits accumulate or vest, payment of the
benefits is probable, and the amount of the benefits can be reasonably
estimated. The adoption of this Statement will not be material to One
Valley's financial statements.
One Valley has a stock option plan for certain key employees.
Pursuant to the Plan, an aggregate maximum of 960,000 shares of common
stock was reserved for issuance, although no more than 96,000 shares
may be issued in any calendar year. At December 31, 1993, there were
outstanding and exercisable options for the purchase of 256,520 shares at
prices ranging from $10.28 to $28.38 per share. During 1993, 24,280
shares were exercised at prices ranging from $10.28 to $15.00.
35
<PAGE>
Notes to Consolidated Financial Statements
(Dollars in thousands)
Employee Benefit Plans -- continued Note L
In 1993, One Valley adopted FASB No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions." One Valley has a
defined benefit postretirement plan covering all employees who qualify
for and elect to retire with a normal or early retirement benefit under the
defined benefit pension plan. The plan provides medical and dental
benefits. This plan is contributory and contains cost sharing features
such as deductibles and co-insurance. One Valley's policy is to fund the
cost of the plan in amounts determined at the discretion of management.
The effect of adopting Statement 106 increased 1993 net periodic
postretirement benefit cost by approximately $400. Postretirement
benefit costs for 1992 and 1991, which were recorded on a cash basis,
have not been restated.
The following table presents the plan's funded status and amounts
recognized in the consolidated balance sheets at December 31:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Accumulated postretirement benefit obligation:
Active plan participants fully eligible for benefits $ (54) $ (72)
Other active participants (2,512) (1,472)
Current retirees (2,700) (2,826)
(5,266) (4,370)
Plan assets 0 0
Accumulated postretirement benefit obligation in excess of plan assets (5,266) (4,370)
Unrecognized transition obligation 4,151 4,370
Unrecognized prior service cost 245 0
Unrecognized net loss from past experience different from that assumed and
effects of changes in assumptions 467 0
Accrued postretirement benefit cost included in other liabilities $ (403) $ 0
Net periodic postretirement benefit cost included the following
components:
</TABLE>
<TABLE>
1993 1992 1991
<S> <C> <C> <C>
Service cost $ 141
Interest cost 350
Amortization of transition obligation over 20 years 218
Net periodic postretirement benefit cost $ 709 $ 261 $ 148
</TABLE>
The weighted-average annual assumed rate of increase in the per
capita cost of covered benefits (i.e., health care cost trend rate) is 12%
for 1994 (same as the rate previously assumed for 1993) and is assumed
to decrease gradually to 5% in 2001 and remain at that level thereafter.
The health care cost trend rate assumption has a significant effect on the
amounts reported. For example, increasing the assumed health care cost
trend rates by one percentage point in each year would increase the
accumulated postretirement benefit obligation for the plan as of
December 31, 1993, by $358 and the aggregate of the service and interest
cost components of net periodic postretirement benefit cost for 1993 by
$68.
The weighted-average discount rate used in determining the
accumulated postretirement benefit obligation was 7% and 8% at
December 31, 1993 and 1992.
36
<PAGE>
Parent Company Condensed Financial Information Note M
Condensed Balance Sheets
December 31
Assets 1993 1992
Interest-bearing deposits in
subsidiary bank $ 24,062 $ 14,031
Investment securities 1,486 1,408
Premises and equipment 375 418
Investment in subsidiaries:
Banks 213,505 202,371
Non-banks 8,869 7,743
Other assets 16 5
Total Assets $248,313 $ 225,976
Liabilities
Other liabilities $ 5,723 $ 5,320
Total Liabilities 5,723 5,320
Shareholders' Equity
Common stock 131,638 131,405
Capital surplus 40,750 40,692
Retained earnings 73,331 51,688
Treasury stock (3,129) (3,129)
Total Shareholders' Equity 242,590 220,656
Total Liabilities and
Shareholders' Equity $248,313 $225,976
Condensed Statements of Income
Year Ended December 31
1993 1992 1991
Income:
Dividends from
bank subsidiaries $26,415 $18,409 $14,028
Other income 2,341 1,934 1,787
Total income 28,756 20,343 15,815
Expenses:
Salaries and employee benefits 4,845 4,178 3,430
Other expenses 3,183 3,434 1,604
Interest expense 2 404 458
Total expenses 8,030 8,016 5,492
Income before income taxes and
equity in undistributed earnings
of subsidiaries 20,726 12,327 10,323
Applicable income tax (benefit) (2,439) (2,954) (2,038)
Income before equity in undistrib-
uted earnings of subsidiaries 23,165 15,281 12,361
Equity in undistributed earnings
of subsidiaries 9,304 14,196 8,855
Net Income $32,469 $29,477 $21,216
Condensed Statements of Cash Flows
Year Ended December 31
1993 1992 1991
Operating Activities:
Net income $32,469 $29,477 $21,216
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation & amortization 185 617 209
Equity in undistributed
earnings of subsidiaries (9,304) (14,196) (8,855)
Net change in other assets
and other liabilities 436 336 351
Net cash provided by
operating activities 23,786 16,234 12,921
Investing Activities:
Proceeds from maturities and
sale of investment securities 2,520
Purchase of investment
securities (78) (1,042)
Investment in subsidiaries (3,000) (31,060)
Purchase of equipment (142) (203) (106)
Net cash (used in) provided by
investing activities (3,220) 1,275 (31,166)
Financing Activities:
Repayment of long-term
borrowings (4,000)
Proceeds from issuance of
common stock 291 957 30,246
Cash dividends paid (10,826) (8,968) (7,064)
Net cash (used in) provided by
financing activities (10,535) (12,011) 23,182
Increase in cash and
cash equivalents 10,031 5,498 4,937
Cash and cash equivalents at
beginning of year 14,031 8,533 3,596
Cash and cash equivalents at
end of year $24,062 $14,031 $ 8,533
37
<PAGE>
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
Restrictions on Subsidiary Dividends Note N
The primary source of funds for the dividends paid by One Valley
Bancorp is dividends received from its subsidiary banks. Dividends paid by
the subsidiary banks are subject to restrictions by banking regulations.
The most restrictive provision requires regulatory approval if dividends
declared in any year exceed the year's retained net profits, as defined,
plus the retained net profits of the two preceding years. During 1994, the
retained net profits available for distribution to One Valley Bancorp as
dividends without regulatory approval are approximately $26,000, plus
retained net profits for the interim periods through the date of
declaration.
Commitments and Contingent Liabilities Note O
In the normal course of business, One Valley offers certain financial
products to its customers to aid them in meeting their requirements for
liquidity and credit enhancement. Generally accepted accounting
principles require that these products be accounted for as contingent
liabilities and, accordingly, they are not reflected in the accompanying
financial statements. One Valley's exposure to loss in the event of
nonperformance by the counterparty for commitments to extend credit and
standby letters of credit is the contract or notional amounts of these
instruments. Management does not anticipate any material losses as a
result of these commitments and contingent liabilities. The fair values of
commitments are estimated based on fees currently charged to enter into
similar agreements, taking into consideration the remaining terms of the
agreements and the counterparties' credit standing. The estimated fair
value of these commitments at December 31, 1993 and 1992,
approximates their carrying value. Following is a discussion of these
commitments and contingent liabilities.
Standby Letters of Credit
These agreements are used by One Valley's customers as a means of
improving their credit standing in their dealings with others. Under these
agreements, One Valley guarantees certain financial commitments in the
event that its customers are unable to satisfy their obligations. One
Valley has issued standby letters of credit of $36,000 as of December 31,
1993.
Management conducts regular reviews of these commitments on an
individual customer basis, and the results are considered in assessing the
adequacy of One Valley's allowance for loan losses.
Loan Commitments
As of December 31, 1993, the Bank had commitments outstanding to
extend credit at prevailing market rates totaling $333,000. These
commitments generally require the customers to maintain certain credit
standards. The amount of collateral obtained, if deemed necessary by One
Valley upon extension of credit, is based on management's credit
evaluation of the customer. Collateral held varies but may include
accounts receivable, inventory, property, plant and equipment, and income
producing commercial properties.
Loans Sold with Recourse
In the acquisition of AFF-WV, One Valley assumed a contingent
liability relating to certain loans previously sold by AFF-WV subject to
certain recourse provisions which requires it to repurchase these loans or
repay any deficiencies on collateral sold in the event the borrower
defaults on the original contract. At December 31, 1993, One Valley had
approximately $60,000 in outstanding loans sold with recourse. The
majority of these loans originated prior to 1980 and have an average
balance of less than $20. In connection with its evaluation of AFF-WV,
One Valley reviewed these loans utilizing the same lending policies and
collateral evaluations that One Valley has historically used in the
ordinary course of its business and does not anticipate any material
losses as a result of these contingent liabilities. In addition, pursuant to
the terms of an Indemnity Agreement with the Resolution Trust
Corporation, the Resolution Trust Corporation agreed to indemnify any and
all costs, losses, liabilities and expenses, including legal fees, resulting
from certain third-party claims.
38
<PAGE>
Other Income and Expenses Note P
Included in other income are checkbook sales which approximated
$2,468 in 1993, $2,623 in 1992, and $1,866 in 1991. Included in other
expenses is supplies expense which approximated $2,938 in 1993, $2,832
in 1992, and $2,040 in 1991 and postage expense which approximated
$2,554 in 1993, $2,699 in 1992 and $1,826 in 1991.
Quarterly Financial Data (Unaudited) Note Q
Quarterly financial data for 1993 and 1992 is summarized below:
<TABLE>
1993 1992
Three Months Ended Three Months Ended
March 31 June 30 Sept 30 Dec 31 March 31 June 30 Sept 30 Dec 31
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $47,947 $48,750 $48,704 $49,653 $53,492 $53,047 $51,861 $49,681
Interest expense 20,148 19,626 19,104 19,264 25,783 24,175 23,092 21,361
Net interest income 27,799 29,124 29,600 30,389 27,709 28,872 28,769 28,320
Provision for loan losses 1,328 1,329 1,159 999 2,475 2,497 2,740 2,561
Net interest income after provision for loan losses 26,471 27,795 28,441 29,390 25,234 26,375 26,029 25,759
Other income, excluding securities gains 8,857 9,121 9,070 9,187 7,799 8,063 9,063 9,001
Securities transactions (5) 3 (72) 15 58
Other expenses 23,890 24,263 24,701 26,519 23,147 23,464 23,771 23,640
Income before income taxes 11,438 12,653 12,805 12,061 9,814 10,989 11,379 11,120
Applicable income taxes 3,820 4,234 4,581 3,853 3,008 3,488 3,722 3,607
Net Income $ 7,618 $ 8,419 $ 8,224 $ 8,208 $ 6,806 $ 7,501 $ 7,657 $ 7,513
Per Share Data:
Average shares outstanding (in thousands) 12,875 12,884 12,884 12,893 12,844 12,858 12,865 12,866
Net income per share $ .59 $ .65 $ .64 $ .64 $ .53 $ .58 $ .59 $ .59
Dividends per share .20 .20 .22 .22 .17 .17 .18 .18
High bid/share 32.25 29.75 33.25 31.25 20.56 26.25 23.96 30.21
Low bid/share 28.25 25.25 26.75 27.00 19.58 19.73 21.46 26.25
</TABLE>
39
<PAGE>
Six-Year Net Interest Income Summary
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
(Dollars in thousands)
<TABLE>
1993 1992 1991 1990 1989 1988
% of % of % of % of % of % of
Total Total Total Total Total Total
Interest Interest Interest Interest Interest Interest
$ Income $ Income $ Income $ Income $ Income $ Income
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans:
Taxable 150,836 76.1 156,357 74.1 133,514 70.3 122,808 66.9 116,247 66.2 101,858 69.4
Tax-exempt 2,594 1.3 2,368 1.1 2,942 1.6 4,111 2.2 4,908 2.8 4,729 3.2
Total loans 153,430 77.4 158,725 75.2 136,456 71.9 126,919 69.1 121,155 69.0 106,587 72.6
Securities
Taxable 36,003 18.2 42,877 20.3 37,835 20.0 36,702 20.0 29,846 17.0 20,403 13.9
Tax-exempt 6,208 3.1 6,111 2.9 8,218 4.3 9,556 5.2 10,630 6.0 11,624 7.9
Total securities 42,211 21.3 48,988 23.2 46,053 24.3 46,258 25.2 40,476 23.0 32,027 21.8
Funds sold & other 2,494 1.3 3,251 1.5 7,259 3.8 10,449 5.7 13,979 8.0 8,261 5.6
Total interest income 198,135 00.0 210,964 100.0 189,768 100.0 183,626 100.0 175,610 00.0 146,875 100.0
Interest Expense
Deposits 71,713 36.2 85,991 40.8 91,322 48.1 92,480 50.4 88,197 50.2 69,664 47.4
Short-term borrowings 5,173 2.6 7,122 3.4 7,647 4.1 8,877 4.8 9,329 5.3 5,737 3.9
Long-term borrowings 1,256 0.6 1,298 0.6 1,379 0.7 2,175 1.2 2,303 1.3 2,324 1.6
Total interest expense 78,142 39.4 94,411 44.8 100,348 52.9 103,532 56.4 99,829 56.8 77,725 52.9
Tax equivalent
net interest income 119,993 60.6 116,553 55.2 89,420 47.1 80,094 43.6 75,781 43.2 69,150 47.1
Tax equivalent adjustment 3,081 1.6 2,883 1.4 3,794 2.0 4,647 2.5 5,283 3.1 5,560 3.8
Net interest income 116,912 59.0 113,670 53.9 85,626 45.1 75,447 41.1 70,498 40.1 63,590 43.3
Summary of Average Rates
Earned & Paid*
Taxable loans 8.80% 9.61% 10.61% 11.30% 11.38% 10.66%
Tax-exempt loans 10.26 10.34 11.88 13.56 14.31 13.11
Net loans 8.97 9.77 10.78 11.51 11.62 10.87
Taxable securities 5.40 6.28 7.63 8.61 8.68 7.62
Tax-exempt securities 10.40 11.07 11.34 1.15 11.00 10.86
Total securities 5.81 6.64 8.11 9.04 9.19 8.55
Funds sold & deposits 2.98 3.45 6.17 8.54 9.23 8.29
Total earning assets 7.86% 8.59% 9.72% 10.57% 10.74% 9.82%
Time & savings deposits 3.67 4.47 5.89 6.73 6.81 6.05
Short-term borrowings 2.88 3.74 5.35 7.27 8.18 6.82
Long-term borrowings 12.80 9.64 9.61 10.19 10.24 10.23
Total interest cost 3.65 4.44 5.87 6.82 6.98 6.17
Total cost of all funds 3.10 3.84 5.14 5.96 6.10 5.35
Net interest margin 4.76% 4.75% 4.58% 4.61% 4.64% 4.75%
</TABLE>
* Yields are computed on a fully taxable equivalent basis using the rates
of 35% for 1993 and 34% for years earlier.
40
<PAGE>
Six-Year Operating Income Summary
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
(Dollars in thousands)
<TABLE>
1993 1992 1991 1990 1989 1988
% of % of % of % of % of % of
Adjusted Adjusted Adjusted Adjusted Adjusted Adjusted
Operating Operating Operating Operating Operating Operating
$ Income $ Income $ Income $ Income $ Income $ Income
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income 195,054 84.3 208,081 86.0 185,974 89.7 178,979 91.2 170,327 91.7 141,315 90.7
Interest expense 78,142 33.8 94,411 39.0 100,348 48.4 103,532 52.8 99,829 53.7 77,725 49.9
Net interest income 116,912 50.5 113,670 47.0 85,626 41.3 75,447 38.4 70,498 38.0 63,590 40.8
Provision for loan losses 4,815 2.1 10,273 4.3 4,862 2.4 5,295 2.7 7,598 4.1 5,200 3.3
Net interest income after
provision for loan losses 112,097 48.4 103,397 42.7 80,764 38.9 70,152 35.7 62,900 33.9 58,390 37.5
Other Income:
Trust Department income 6,716 2.9 5,534 2.3 4,706 2.3 4,345 2.2 3,983 2.1 3,798 2.4
Service charges on
deposit accounts 10,258 4.5 9,580 4.0 7,460 3.6 5,277 2.7 4,390 2.4 3,937 2.5
Other service
charges and fees 10,957 4.7 11,681 4.8 5,560 2.7 4,054 2.1 3,491 1.9 3,282 2.1
Other operating income 8,304 3.6 7,131 2.9 4,373 2.1 3,461 1.8 3,258 1.8 3,128 2.0
Securities transactions (2) 0.0 1 0.0 (748) (0.4) 114 0.0 243 0.1 406 0.3
Total other income 36,233 15.7 33,927 14.0 21,351 10.3 17,251 8.8 15,365 8.3 14,551 9.3
Operating Expenses:
Salaries & benefits 50,382 21.8 45,343 18.7 36,778 17.7 32,310 16.5 29,838 16.1 28,337 18.2
Occupancy expense 4,849 2.1 4,822 2.0 3,067 1.5 2,266 1.1 2,143 1.2 1,820 1.2
Equipment expense 8,634 3.7 8,471 3.5 6,614 3.2 4,971 2.5 5,110 2.7 5,055 3.3
External computer costs 3,018 1.3 1,917 0.8 1,489 0.7 1,549 0.8 1,535 0.8 1,862 1.2
Other expense 32,490 14.1 33,469 13.8 23,824 11.5 20,392 10.4 18,546 10.0 17,060 10.9
Total operating expenses 99,373 43.0 94,022 38.8 71,772 34.6 61,488 31.3 57,172 30.8 54,134 34.7
Income before tax 48,957 21.1 43,302 7.9 30,343 14.6 25,915 13.2 21,093 11.4 18,807 12.1
Applicable income taxes 16,488 7.1 13,825 5.7 9,127 4.4 6,813 3.5 4,920 2.7 4,180 2.7
Net income 32,469 14.0 29,477 12.2 21,216 10.2 19,102 9.7 16,173 8.7 14,627 9.4
* Adjusted operating income equals interest income plus other income.
</TABLE>
<TABLE>
Per Share Summary
(in dollars, except average shares) 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C>
Net income 2.52 2.29 1.93 1.75 1.48 1.33
Cash dividends 0.84 0.70 0.62 0.59 0.56 0.50
Stock dividends 0 50%/20% 0 0 0 0
Average shares 12,884,000 12,858,000 11,008,000 10,906,000 10,942,000 11,034,000
</TABLE>
41
<PAGE>
Six-Year Average Balance Sheet Summary
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
(Dollars in thousands)
<TABLE>
1993 1992 1991 1990 1989 1988
% of % of % of % of % of % of
$ Total $ Total $ Total $ Total $ Total $ Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Loans:
Taxable 1,713,982 63 1,626,853 61 1,258,280 59 1,086,627 57 1,021,282 57 955,716 59
Tax-exempt 25,277 1 22,901 1 24,761 1 30,316 2 34,295 2 36,077 2
Total loans 1,739,259 64 1,649,754 62 1,283,041 60 1,116,943 59 1,055,577 59 991,793 61
Less: Allowance for losses 29,057 1 25,274 1 16,868 1 14,414 1 12,817 1 11,523 1
Total loans-net 1,710,202 63 1,624,480 61 1,266,173 59 1,102,529 58 1,042,760 58 980,270 60
Investment Securities:
Taxable 666,731 24 682,332 25 495,590 23 426,179 22 343,784 19 267,745 17
Tax-exempt 59,702 2 55,201 2 72,460 3 85,702 5 96,602 6 107,005 7
Total securities 726,433 26 737,533 27 568,050 26 511,881 27 440,386 25 374,750 24
Federal funds sold & other 83,782 3 94,165 4 117,578 6 122,354 6 151,387 8 99,599 6
Total earning assets 2,520,417 92 2,456,178 92 1,951,801 91 1,736,764 91 1,634,533 91 1,454,619 90
Other assets 211,335 8 222,787 8 182,040 9 165,827 9 161,285 9 160,090 10
Total assets 2,731,752 100 2,678,965 100 2,133,841 100 1,902,591 100 1,795,818 100 1,614,709 100
Liabilities &
Shareholders' Equity
Interest Bearing Liabilities:
Time & savings deposits 1,953,735 72 1,924,819 72 1,551,503 73 1,373,971 72 1,294,586 72 1,151,825 71
Short-term borrowings 179,373 6 190,267 6 142,945 6 122,064 6 114,109 6 84,168 6
Long-term borrowings 9,816 0 13,469 1 14,345 1 21,342 1 22,489 1 22,715 1
Total interest bearing
liabilities 2,142,924 78 2,128,555 79 1,708,793 80 1,517,377 79 1,431,184 79 1,258,708 78
Demand deposits 336,250 12 315,969 12 240,653 11 220,536 12 210,458 12 213,732 13
Other liabilities 20,271 1 22,669 1 22,983 1 19,418 1 19,658 1 15,560 1
Total liabilities 2,499,445 91 2,467,193 92 1,972,429 92 1,757,331 92 1,661,300 92 1,488,000 92
Shareholders' equity 232,307 9 211,772 8 161,412 8 145,260 8 134,518 8 126,709 8
Total liabilities &
Shareholders' equity 2,731,752 100 2,678,965 100 2,133,841 100 1,902,591 100 1,795,818 100 1,614,709 100
</TABLE>
42
<PAGE>
One Valley Bancorp Quality Council
Front row
Robert E. Kamm, Jr.
President & CEO, One Valley Bank of Summersville
Second row left to right
John L. Robertson
President & CEO, One Valley Bank of Ronceverte
Frederick H. Belden, Jr.
Senior Vice President and Assistant Corporate Secretary
Third row left to right
John M. Frazier
President & CEO, One Valley Bank of Oak Hill
Phyllis H. Arnold
Senior Vice President
President & CEO, One Valley Bank, NA
Fourth row left to right
James W. Thompson
President & CEO, One Valley Bank of Mercer County
James L. Whytsell
Senior Vice President - Data Processing
J. Holmes Morrison
President and Chief Executive Officer
Fifth row left to right
Laurance G. Jones
Senior Vice President and Chief Financial Officer
William D. Stegall
President & CEO, One Valley Bank of Martinsburg
J. G. Call
President & CEO, One Valley Bank of Huntington
Top row
Kenneth R. Summers
President & CEO, One Valley Bank of Morgantown
43
<PAGE>
Directors of One Valley Bancorp
Seated left to right
John M. Wells, Sr.
Honorary Member
James R. McCartney
Honorary Member
Mary Price Ratrie
Honorary Member
Nelle Ratrie Chilton
Director, Dickinson Fuel Company, Inc. and Terra Co., Inc.
Standing front row left to right
James W. Thompson
President & Chairman of the Board,
One Valley Bank of Mercer County
Robert O. Orders, Sr.
Chief Executive Officer,
Orders Construction Company
David E. Lowe
President, Chesapeake and Potomac
Telephone Company of West Virginia
Angus E. Peyton
Attorney, Brown & Peyton
Phillip H. Goodwin
President, CAMCARE & CAMC
J. Holmes Morrison
President & Chief Executive Officer,
One Valley Bancorp of West Virginia, Inc.
Chairman of the Board,
One Valley Bank, N.A.
Phyllis H. Arnold
President, One Valley Bank, N.A.
Robert F. Baronner
Chairman of the Board,
One Valley Bancorp of West Virginia, Inc.
Robert E. Kamm, Jr.
President & Chief Executive Officer,
One Valley Bank of Summersville
James K. Brown
Attorney, Jackson & Kelly
John L. Van Metre, Jr.
Attorney, Steptoe & Johnson
Standing second row left to right
Charles R. Neighborgall, III
President, Neighborgall Construction Co.
John T. Chambers
Commercial Realtor,
President, Ravenswood Land Co. and
Mt. Alpha Development Company
James Gabriel
President & CEO, Gabriel Brothers, Inc.
John D. Lynch
Vice President, Davis Lynch Glass Co.
John L. D. Payne
President, Payne-Gallatin Mining Co.
Ray M. Evans, Jr.
President, Dickinson Company and
Quincy Coal Company
Standing on stairs left to right
Charles M. Avampato
President, Clay Foundation, Inc.
John Henry Wick, III
Dickinson Fuel Co., Inc.
H. Bernard Wehrle, III
President, McJunkin Corporation
Thomas E. Goodwin
Chairman of the Board,
One Valley Bank of Ronceverte, N.A.
Not pictured
Edward H. Maier
President, General Corporation
Richard B. Walker
Chairman of the Board and CEO,
Cecil I. Walker Machinery Co.
Thomas D. Wilkerson
General Agent,
Northwestern Mutual Life Insurance Co.
Honorary Members
James F. Brown, III
Charles T. Jones
J. William Martin
44
<PAGE>
Affiliate Directors
ONE VALLEY BANK,
National Association
One Valley Square
Charleston, WV 25326
Phyllis H. Arnold*
Charles M. Avampato
Robert F. Baronner
James K. Brown
John T. Chambers
Nelle Ratrie Chilton
Ray Marshall Evans, Jr.
Robert F. Goldsmith
Phillip H. Goodwin
O. Nelson Jones
Carl E. Little
David E. Lowe
Edward H. Maier
John F. Mork
J. Holmes Morrison
Robert O. Orders, Sr.
John L. D. Payne
Angus E. Peyton
K. Richard C. Sinclair
James C. Smith
James R. Thomas, II
Edwin H. Welch
John Henry Wick, III
Thomas D. Wilkerson
James D. Williams
Honorary Members
James F. Brown, III
Charles T. Jones
J. William Martin
Mary Price Ratrie
John M. Wells, Sr.
ONE VALLEY BANK OF
RONCEVERTE. N.A.
100 Maplewood Avenue
Ronceverte, WV 24970
Richard Aide
Gary M. Ambler
Thomas E. Goodwin
Norman O. Nutter
Michael O'Brien
Henry E. Riffe
John L. Robertson*
David Sebert
Marion Shiflet
Honorary Member
George A. Aide
ONE VALLEY BANK OF
HUNTINGTON
Sixth Ave. & First St.
Huntington, WV 25701
J. G. Call*
W. Dan Egnor
Stephen G. Fox
Henry M. Kayes
Sara H. Lowe
Charles R. Neighborgall, III
Stephen G. Roberts
Kevin D. Thompson
David P. Reed
J. Roger Smith
ONE VALLEY BANK OF
SUMMERSVILLE
811 Main Street
Summersville, WV 26651
Roy V. Groves
W. H. Henderson
Charles H. Hinkle
Robert E. Kamm, Jr.*
David Lackey
Glenn H. McMillion
Robert C. Rader
ONE VALLEY BANK OF
MARTINSBURG, N.A.
110 West King Street
Martinsburg, WV 25401
Walter Lee Butler
Howard Newton Carper, Jr.
F. Dennis Clarke
Frank H. Fischer
Charles A. Hensell
Carol Fritts Kable
Lucien G. Lewin
Robert A. McMillan
John M. Miller III
Peter L. Mulford
Bonn A. Poland, III
William D. Stegall*
Paul E. Tederick
John L. Van Metre, Jr.
Honorary Members
Guy R. Avey
T. Fred Hammond
Floyd C. Odom
Robert A. Sanders
Clyde E. Smith, Jr.
ONE VALLEY BANK OF
OAK HILL
100 Main Street
Oak Hill, WV 25901
John M. Frazier*
George W. Jones III
Elizabeth M. Lewis
James E. Lively
William E. Meador
Marilyn T. Montgomery
Donald C. Newell, Jr.
Walter A. Noyes
N. M. Steen
ONE VALLEY BANK OF
MERCER COUNTY
Courthouse Square
Princeton, WV 24740
Homer K. Ball
Jerry L. Beasley
Fred A. Bolton
J. Richard Copeland
Harry Finkelman
H. Allen Griffith
A. Glendon Hill
M. D. Kirk, Jr.
Joseph F. Marsh
James L. Miller
Charles W. Pace
Dewey W. Russell
Guy B. Scyphers
James W. Thompson*
Ted L. White
H. Elwood Winfrey
Honorary Members
James W. Anderson
John C. Anderson
W. R. Cooke
Richard V. Lilly
Fred McKenzie
Lawrence J. Pace
Joseph C. Shaffer, Jr.
ONE VALLEY BANK OF
MORGANTOWN
496 High Street
Morgantown, WV 26505
Iona L. Bucklew
Samuel Chico, Jr.
Laurence S. DeLynn
George R. Farmer, Jr.
Arthur Gabriel
Kenneth Juskowich
James L. Laurita, Sr.
John D. Lynch
Paul F. Malone
Jordan C. Pappas
James M. Stevenson
Paul T. Swanson
Kenneth R. Summers*
Bernard G. Westfall
Honorary Members
James R. McCartney
Glenn W. Thorne
* President and CEO
<PAGE>
(One Valley Bancorp logo)
P.O. Box 1793/Charleston, WV/25326/(304) 348-7000
Exhibit (21)
SUBSIDIARIES OF REGISTRANT
1) One Valley Bank, National Association, a national banking association
organized under the laws of the United States of America.
2) One Valley Bank of Huntington, Inc., a West Virginia banking corporation.
3) One Valley Bank of Mercer County, Inc., a West Virginia banking
corporation.
4) One Valley Bank of Martinsburg, National Association, a national banking
association organized under the laws of the United States of America.
5) One Valley Bank of Oak Hill, Inc., a West Virginia banking corporation.
6) One Valley Bank of Ronceverte, National Association, a national banking
association organized under the laws of the United States of America.
7) One Valley Bank of Morgantown, Inc., a West Virginia banking corporation.
8) One Valley Bank of Summersville, Inc., a West Virginia banking corporation.
9) One Valley Bank - East, National Association, a national banking association
organized under the laws of the United States of America.
10) The Empire National Bank of Clarksburg, a national banking association
organized under the laws of the United States of America.
11) One Valley Bank of Marion County, National Association, a national banking
association organized under the laws of the United States of America.
12) The Bank of Wadestown, a West Virginia banking corporation.
13) Mercantile Banking & Trust Company, a West Virginia banking corporation.
14) The Bank of Cameron, Inc., a West Virginia banking corporation.
15) The Sunshine Bank of Wheeling, a West Virginia banking corporation.
16) One Valley Services, Inc., a West Virginia corporation.
17) One Valley Square, Inc., a Texas corporation.
18) Sunrise Bancorp, Inc., a West Virginia corporation.
Exhibit (23)
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of One Valley Bancorp of West Virginia, Inc. of our report dated January 25,
1994, included in the 1993 Annual Report to Shareholders of One Valley Bancorp
of West Virginia, Inc.
We also consent to the incorporation by reference in the Registration
Statements pertaining to the Amended 1983 Incentive Stock Option Plan
(Form S-8, Number 2-90738) and pertaining to the 1993 Incentive Stock
Option Plan (Form S-8, Number 33-66700) of One Valley Bancorp of West
Virginia, Inc. of our report dated January 25, 1994, with respect to the
consolidated financial statements of One Valley Bancorp of West Virginia,
Inc. and Subsidiaries incorporated by reference in the Annual Report
(Form 10-K) for the year ended December 31, 1993.
/s/ Ernst & Young
Charleston, West Virginia
March 25, 1994
ONE VALLEY BANCORP OF WEST VIRGINIA, INC.
Charleston, West Virginia
NOTICE OF REGULAR ANNUAL MEETING OF SHAREHOLDERS
To be held April 26, 1994
To the Shareholders:
The Regular Annual Meeting of Shareholders of One Valley
Bancorp of West Virginia, Inc. ("One
Valley"), will be held at the Charleston Town Center Marriott, 200 Lee
Street, East, in Charleston,
West Virginia, at 10:00 a.m. on Tuesday, April 26, 1994, for the
purpose of considering and voting upon
proposals:
1. To elect ten directors - eight to serve for a term of three
years, one to serve for a term of two
years, and one to serve for a term of one year, and until their
successors are chosen and qualify.
2. To approve an amendment to the Bylaws to increase the maximum
number of One Valley's
directors from 27 to 33.
3. To approve the appointment by the Board of Directors of Ernst
& Young as independent Certified
Public Accountants for the year 1994.
4. To transact such other business as may properly be
brought before the meeting or any adjournment thereof.
Only those shareholders of record at the close of business on
March 8, 1994, are entitled to notice of
the meeting and to vote at the meeting. We hope that you will attend
this meeting.
By Order of the Board of Directors
J. Holmes Morrison
President
PLEASE SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. YOU MAY
REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED AT THE ANNUAL
MEETING.
March 23, 1994
ONE VALLEY BANCORP OF WEST VIRGINIA, INC.
ONE VALLEY SQUARE
CHARLESTON, WEST VIRGINIA
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS -- APRIL 26, 1994
This statement is furnished in connection with the
solicitation of proxies for use at the Annual Meeting
of Shareholders of One Valley Bancorp of West Virginia, Inc. ("One
Valley"), to be held on Tuesday, April
26, 1994, at the time and for the purposes set forth in the
accompanying Notice of Regular Annual Meeting
of Shareholders. The approximate date on which this Proxy Statement
and the form of proxy are to be first
mailed to shareholders is March 23, 1994. The mailing address of the
principal executive offices of One
Valley is P. O. Box 1793, Charleston, West Virginia, 25326.
Solicitation of Proxies
The solicitation of proxies is made by management at the
direction of the Board of Directors of One
Valley. These proxies enable shareholders to vote on all matters
which are scheduled to come before the
meeting. If the enclosed proxy is signed and returned, it will be
voted as directed; or if not directed, the
proxy will be voted "FOR" the election of the ten management nominees
as directors for the terms
specified, "FOR" the approval of an amendment to the Bylaws to
increase the maximum number of
directors from 27 to 33, and "FOR" the approval of the appointment of
Ernst & Young as independent
Certified Public Accountants. A shareholder executing the proxy may
revoke it at any time before it is
voted by notifying One Valley in person, by giving written notice to
One Valley of the revocation of the
proxy, by submitting to One Valley a subsequently dated proxy, or by
attending the meeting and
withdrawing the proxy before it is voted at the meeting.
The expense for the solicitation of proxies will be paid by
One Valley. In addition to this solicitation
by mail, officers and regular employees of One Valley and its
subsidiaries may, to a limited extent, solicit
proxies personally or by telephone or telegraph. In addition,
Georgeson & Company Inc. will be engaged as
proxy solicitation agent pursuant to an agreement which provides that
One Valley will pay Georgeson &
Company Inc. $10,000 plus expenses. It is anticipated that pursuant
to that agreement Georgeson &
Company Inc. will primarily solicit brokers, banks and other
institutional holders to ensure that proxies are
returned in a timely manner. One Valley is not aware of any person
who intends to oppose the action
proposed by management to be taken at the Annual Meeting. Because
proposal number 2 (increasing the
maximum size of the board) must be approved by the holders of at least
80% of the outstanding shares of
One Valley's common stock, management has engaged an independent
solicitation firm.
Eligibility of Stock for Voting Purposes
Pursuant to the Bylaws of One Valley, the Board of Directors
has fixed March 8, 1994, as the record
date for the purpose of determining the shareholders entitled to
notice of, and to vote at, the meeting or any
adjournment thereof, and only shareholders of record at the close of
business on that date are entitled to
notice of and to vote at the Annual Meeting of Shareholders or any
adjournment thereof.
As of the record date for the Annual Meeting, 17,255,784
shares of the common stock with a par value
of Ten Dollars ($10.00) per share ("One Valley Common Stock") of One
Valley were issued and
outstanding and entitled to vote. One Valley's subsidiary banks hold
of record as trustee, co-trustee,
executor or co-executor, but not beneficially, 3,095,827 shares of
stock representing 17.94% of the shares
of One Valley outstanding. Of these shares, the banks hold 2,673,411
shares as co-trustee or co-executor
and 422,396 shares as sole trustee or sole executor (other principal
holders of One Valley's stock are
discussed under "Principal Holders of Securities"). The 2,673,411
shares held as co-trustee or co-executor
are voted by the individual co-trustee(s) or co-executor(s) and not by
the banks. Of the remaining 422,396
shares held by the banks as sole trustee or sole executor, 372,423
shares (or 2.16% of the total shares
outstanding) will be voted by the banks, as trustee or executor, "FOR"
the election of the ten management
nominees as directors, "FOR" the approval of an amendment to the
Bylaws to increase the maximum
number of directors of One Valley, and "FOR" the approval of the
appointment of Ernst & Young as
independent Certified Public Accountants. The remaining 49,973 shares
are held by the banks as sole
trustee or sole executor in personal trust and self-directed employee
benefit accounts and will be voted by the
banks at the direction of the grantor, settlor or beneficiary of those
accounts.
PURPOSE OF MEETING
1. ELECTION OF DIRECTORS
The Bylaws of One Valley currently provide that the Board of
Directors shall consist of not fewer than
six nor more than 27 members, the exact number of directors within
these minimum and maximum limits
to be fixed and determined by resolution of a majority of the Board of
Directors. There are presently 27
directors on the Board; and, at a meeting held February 16, 1994, the
Board fixed at 27 the number of
directors to constitute the full Board of Directors of One Valley
effective April 26, 1994.
One Valley's Articles of Incorporation authorize
classification of the Board of Directors into three
classes, each of which serves for three years, with one class being
elected each year. Pursuant to this
arrangement, eight nominees have been nominated for three-year terms,
one nominee has been nominated
for a two-year term, and one nominee has been nominated for a one-year
term, and until their successors are
chosen and qualify. This will result in a Board composed of three
classes with nine directors in the class of
1995, ten directors in the class of 1996, and eight directors in the
class of 1997.
Management Nominees to the Board of One Valley
Unless otherwise directed, the proxies will be voted "FOR" the
election of the following ten directors
to serve for terms expiring at the Annual Meeting of Shareholders in
the years indicated in the table below,
and until their successors are chosen and qualify. If proposal number
2 is adopted, then One Valley will
elect C. Michael Blair and Brent D. Robinson to the Board of Directors
for terms to expire at the 1995
Annual Meeting of Shareholders. (For a more complete discussion, see
the section of this Proxy Statement
captioned "Purpose of Meeting - Proposal to Approve an Increase in the
Maximum Number of Directors.")
The nominees have broad executive experience in a wide variety of
businesses and are all currently members
of the Board. Mr. Highland, who has served as a director or officer
of Mountaineer Bankshares of W.Va.,
Inc. ("Mountaineer") or one of its subsidiaries since 1949, and Mr.
Rice, who has served as a director or
officer of Mountaineer or one of its subsidiaries since 1961, were
elected to the Board in January, 1994, for
terms expiring at the 1994 Annual Meeting.
<TABLE>
Served
As A Family
Director Relationship Principal
of One With Directors Year In Occupation
Valley and Other Which Term Or Employment
Nominees Age Since Nominees Expires Last Five Years
<S> <C> <C> <C> <C> <C>
John T. Chambers 70 1981 None 1996 Commercial Realtor; Presi-
dent-Ravenswood Land
Co. and Mt. Alpha
Development Co., Charles-
ton, WV
Served
As A Family
Director Relationship Principal
of One With Directors Year In Occupation
Valley and Other Which Term Or Employment
Nominees Age Since Nominees Expires Last Five Years
Cecil B. Highland, Jr. 75 (1) None 1997 Vice Chairman - Board of
Directors, Mountaineer
Bankshares of W.Va.,
Inc.; Chairman of the
Board and Chief Executive
Officer -The Empire
National Bank of
Clarksburg, Clarksburg,
WV; President and General
Manager - Clarksburg
Publishing Co.,
Clarksburg, WV.
Robert E. Kamm, Jr. 42 1987 None 1997 President and Chief
Executive Officer-One
Valley Bank of
Summersville, Inc.,
Summersville, WV
David E. Lowe 52 1993 None 1997 1993-President and Chief
Executive Officer-
Chesapeake and Potomac
Telephone Company of
West Virginia,
Charleston, WV; 1990 to
1993, Vice President,
Chesapeake and Potomac
Telephone Company of
Virginia, Richmond, VA;
1988 to 1990, Assistant
Vice President, Bell
Atlantic, Arlington, VA
Edward H. Maier 50 1983 None 1997 President - General
Corporation, Charleston,
WV (Real Estate
Investment, Natural Gas
Production, Warehousing)
Angus E. Peyton (2) 67 1981 None 1997 Attorney-Brown and
Peyton, Charleston, WV
Lacy I. Rice, Jr. 62 (3) None 1997 Chairman of the Board,
Chief Executive Officer
and Director - Mountaineer
Bankshares of W.Va.,
Inc.; Chairman of the
Board - Old National
Bank, Martinsburg, WV;
Partner - Bowles, Rice,
McDavid, Graff & Love
Law Firm.
Served
As A Family
Director Relationship Principal
of One With Directors Year In Occupation
Valley and Other Which Term Or Employment
Nominees Age Since Nominees Expires Last Five Years
Richard B. Walker 55 1991 None 1997 Chairman of the Board and
Chief Executive Officer-
Cecil I. Walker Machinery
H. Bernard Wehrle, III 42 1991 None 1995 President-McJunkin
Corporation; Charleston,
WV (Steel Fabricators)
Thomas D. Wilkerson 65 1981 None 1997 General Agent-North-
western Mutual Life
Insurance Company,
Charleston, WV
Directors Continuing to Serve Unexpired Terms
The following Directors will continue to serve until the expiration of their terms:
Served
As A Family
Director Relationship Principal
of One With Directors Year In Occupation
Valley and Other Which Term Or Employment
Nominees Age Since Nominees Expires Last Five Years
Phyllis H. Arnold 45 1993 None 1996 1991 to present - President
and Chief Executive
Officer - One Valley Bank,
National Association;
formerly Executive Vice
President - One Valley
Bank, National
Association, Charleston,
WV
Charles M. Avampato 55 1984 None 1996 President-Clay Found-
ation, Inc., Charleston,
WV (Charitable
Foundation)
Robert F. Baronner 67 1981 None 1995 Chairman of the Board-
One Valley Bancorp of
West Virginia, Inc.,
Charleston, WV; formerly
President and Chief
Executive Officer-One
Valley Bancorp of West
Virginia, Inc., Charleston,
WV
James K. Brown 64 1981 None 1995 Attorney - Jackson &
Kelly, Charleston, WV
Served
As A Family
Director Relationship Principal
of One With Directors Year In Occupation
Valley and Other Which Term Or Employment
Nominees Age Since Nominees Expires Last Five Years
Nelle Ratrie Chilton 54 1989 (4) 1995 Director and Vice
President - Dickinson Fuel
Co., Inc., Charleston,
WV; TerraCo., Inc.,
Charleston, WV; Terra-
Care, Inc., Terra Salis,
Inc., TerraSod, Inc.,
Malden, WV
(Landscaping)
Ray M. Evans, Jr. 52 1984 (5) 1995 President-Dickinson Co.,
and Quincy Coal Co.,
Charleston, WV
James Gabriel 63 1993 None 1996 President and Chief
Executive Officer - Gabriel
Brothers, Inc. (Retail
Sales)
Phillip H. Goodwin 53 1989 None 1995 President-CAMCARE and
Charleston Area Medical
Center, Charleston, WV
Thomas E. Goodwin 64 1985 None 1996 Chairman of the Board -
One Valley Bank of
Ronceverte, National
Association, Ronceverte,
WV
John D. Lynch 53 1986 None 1996 Vice President-Davis
Lynch Glass Company,
Star City, WV
J. Holmes Morrison 53 1990 None 1995 1991 to present-President
and Chief Executive
Officer-One Valley
Bancorp of West Virginia,
Inc.; formerly Executive
Vice President-One Valley
Bancorp of West Virginia,
Inc.; President and Chief
Executive Officer-One
Valley Bank, National
Association, Charleston,
WV
Served
As A Family
Director Relationship Principal
of One With Directors Year In Occupation
Valley and Other Which Term Or Employment
Nominees Age Since Nominees Expires Last Five Years
Charles R.
Neighborgall, III 52 1987 None 1996 President - The
Neighborgall Construction
Company, Huntington,
WV (General Contractors)
Robert O. Orders, Sr. 68 1989 None 1995 Chief Executive Officer-
Orders Construction Co.,
St. Albans, WV
John L. D. Payne 55 1981 (5) 1995 President - Payne-Gallatin
Mining Co., Charleston,
WV
James W. Thompson 66 1983 None 1996 President and Chairman of
the Board-One Valley
Bank of Mercer County,
Inc., Princeton, WV
J. Lee Van Metre, Jr. 56 1986 None 1996 Attorney-Steptoe &
Johnson; Secretary of the
Board-One Valley Bank of
Martinsburg, National
Association, Martinsburg,
WV
John H. Wick, III 48 1993 (4) 1996 1992 to present - Vice
President - Dickinson Fuel
Co., Inc., Charleston,
WV; 1980 to 1992 -
Commercial Realtor,
Harrison & Bates, Inc.,
Richmond, VA
</TABLE>
(1) Served as a director or officer of Mountaineer or one of its
subsidiaries since 1949.
(2) Angus E. Peyton is a member of the Board of Directors of
American Electric Power Company, Inc.
(3) Served as a director or officer of Mountaineer or one of its
subsidiaries since 1961.
(4) John H. Wick, III, is the brother-in-law of Nelle Ratrie
Chilton.
(5) Ray M. Evans, Jr. and John L. D. Payne are first cousins.
General
The Bylaws of One Valley provide that in the election of
directors of One Valley each shareholder will
have the right to vote the number of shares owned by that shareholder
for as many persons as there are
directors to be elected, or to cumulate such shares and give one
candidate as many votes as the number of
such directors multiplied by the number of shares owned will equal, or
to distribute them on the same
principle among as many candidates as the shareholder sees fit. For
all other purposes, each share is entitled
to one vote. If any shares are voted cumulatively for the election of
directors, the Proxies, unless otherwise
directed, will have full discretion and authority to cumulate their
votes and vote for less than all such
nominees.
The Bylaws of One Valley provide that nominations for election
to the Board of Directors, other than
those made by or on behalf of the existing management of One Valley,
must be made by a shareholder in
writing delivered or mailed to the President not less than 14 days nor
more than 50 days prior to the
meeting called for the election of directors; provided, however, that
if less than 21 days' notice of the
meeting is given to shareholders, the nominations must be mailed or
delivered to the President not later
than the close of business on the 7th day following the day on which
the notice of meeting was mailed. The
notice of nomination must contain the following information, to the
extent known: (a) name and address of
proposed nominee(s); (b) principal occupation of proposed nominee(s);
(c) total shares to be voted for each
proposed nominee; (d) name and address of notifying shareholder; and
(e) number of shares owned by
notifying shareholder. Nominations not made in accordance with these
requirements may be disregarded by
the Chairman of the meeting, in which case the votes cast for the
proposed nominee will likewise be
disregarded.
One Valley commenced business on September 4, 1981, as a bank
holding company. The financial
operations of One Valley in 1993 primarily related to the ownership
and the establishment of policies for
the management and direction of One Valley Bank, National Association,
One Valley Bank of Huntington,
Inc., One Valley Bank of Mercer County, Inc., One Valley Bank of
Martinsburg, National Association,
One Valley Bank of Ronceverte, National Association, One Valley Bank
of Morgantown, Inc., One Valley
Bank of Oak Hill, Inc., and One Valley Bank of Summersville, Inc. On
August 4, 1993 an Agreement and
Plan of Merger was executed pursuant to which Mountaineer agreed to
merge with and into One Valley.
That merger was consummated on January 28, 1994.
Committees of the Board
One Valley has a standing Audit Committee, Compensation
Committee and Nominating Committee.
The Audit Committee of One Valley consists of six members,
Charles M. Avampato, Robert F.
Baronner, Edward H. Maier, John L. D. Payne, Richard B. Walker and H.
Bernard Wehrle, Jr., and met four
times in 1993. This Committee reviews and evaluates significant
matters relating to audit and internal
controls, reviews the scope and results of audits by independent
auditors, reviews the activities of the
internal audit staff, meets with the appropriate management personnel
regarding internal and external audit
results and reports its findings to the Board of Directors.
The Compensation Committee of One Valley consists of six
members, Charles M. Avampato, Nelle
Ratrie Chilton, Phillip H. Goodwin, David E. Lowe, John L. D. Payne,
and H. Bernard Wehrle, III, and
met four times in 1993. The Compensation Committee administers the
One Valley Bancorp of West
Virginia, Inc., 1983 and 1993 Incentive Stock Option Plans. It also
approves compensation levels for the
executive management group of One Valley and its subsidiaries.
The Nominating Committee of One Valley consists of five
members, Robert F. Baronner, Nelle Ratrie
Chilton, J. Holmes Morrison, John L. D. Payne and Angus E. Peyton and
met once in 1993. The
Nominating Committee recommends nominees to fill vacancies on the
Board of Directors, although the
President of One Valley will also entertain nominations made in
accordance with the Bylaws of One Valley
previously described.
The Board of One Valley met 14 times in 1993, and there were
numerous meetings of the Committees
of the Board. During 1993, Directors Lowe, Orders, Walker, and Wehrle
attended fewer than 75% of the
aggregate of the total number of meetings of the Board of One Valley
and the total number of meetings held
by all Committees on which they served.
Principal Holders of Voting Securities
John L. Dickinson and C. C. Dickinson, sons of John Q.
Dickinson, one of the original incorporators
of One Valley Bank, National Association, formerly Kanawha Valley
Bank, National Association
(hereinafter "One Valley Bank"), each owned more than 10% of the
issued and outstanding stock of One
Valley Bank. Both John L. and C. C. Dickinson are deceased, and much
of the stock formerly held by them
is now held by family trusts created by them or their spouses. At the
time of the formation of One Valley
as a one bank holding company holding all of the stock of One Valley
Bank, the shares of One Valley Bank
were exchanged on a one for one basis for shares of One Valley. The
John L. Dickinson Family Trusts
collectively hold 1,291,301 shares, representing 7.5% of the issued
and outstanding stock of One Valley.
The C. C. Dickinson Family Trusts collectively hold 866,980 shares,
representing 5.0% of the issued and
outstanding stock of One Valley. The following table sets forth the
names and addresses of those
shareholders who own beneficially more than 5% of the outstanding One
Valley Common Stock as of
March 8, 1994, the amount and nature of the beneficial ownership, and
the percentage of outstanding voting
securities represented by the amount owned. The individuals named in
the table are co-trustees of certain of
the Dickinson Family Trusts and most of the shares owned by them are
owned in their capacity as co-
trustees.
<TABLE>
Title of Name and Address Amount and Nature of Percent of
Class of Beneficial Owner Beneficial Ownership (1) Class
<S> <C> <C> <C>
Common Stock Mary Price Ratrie 979,151(2) 5.7%
Kanawha Salines
Malden, WV 25306
Common Stock Charles C. Dickinson, III 923,369(3) 5.4%
1111 City National Building
Wichita Falls, Texas 76301
Common Stock Robert F. Goldsmith 865,020(4) 5.0%
1528 Dogwood Road
Charleston, WV 25314
Common Stock Ray M. Evans, Jr. 1,435,871(5) 8.3%
3401 Northside Parkway
Atlanta, GA 30327
</TABLE>
(1) This table includes a duplication of beneficial ownership of
securities in cases where the named
individuals have overlapping co-trustee relationships. These four
individuals hold, excluding
duplication, a total of 2,498,442 shares, or 14.5% of the total
17,255,784 shares of One Valley
Common Stock outstanding as of the record date. Although One Valley
Bank, a subsidiary of One
Valley, is a co-trustee of these various trusts, in all instances, the
named individual co-trustees vote the
stock of One Valley held in the trusts.
(2) Consists of 41,060 shares owned of record; 866,980 shares held
as co-trustee with Charles C.
Dickinson, III, and One Valley Bank (in which trusts Mary Price Ratrie
has a one-third beneficial
interest); 756 shares owned by J. Q. Dickinson & Co., a sole
proprietorship owned by Mary Price
Ratrie; and 70,355 shares owned by Dickinson Property Limited
Partnership in which Mary Price
Ratrie is a beneficial owner.
(3) Consists of 56,389 shares owned of record and 866,980 shares
held as co-trustee with Mary Price Ratrie
and One Valley Bank (in which trusts Mr. Dickinson has a one-fifth
beneficial interest).
(4) Consists of 24,698 shares owned of record; 2,331 shares owned
of record by his wife; 837,991 shares
held as co-trustee with Ray M. Evans, Jr., and One Valley Bank. Not
included in this total amount are
36,643 shares held in trusts from which Mr. Goldsmith may, at the
discretion of the co-trustees,
receive distributions of income and, under certain circumstances,
distributions of principal.
(5) Consists of 837,991 shares held as co-trustee with Robert F.
Goldsmith and One Valley Bank; 140,460
shares held as co-trustee with One Valley Bank and another individual
co-trustee; 119,526 shares held
with One Valley Bank as co-trustee; 23,131 shares held by his wife as
trustee of trusts for the benefit
of his children; 28,502 shares owned of record; 5,782 shares owned of
record by his wife; and 280,479
shares owned by Dickinson Company, of which Mr. Evans is an executive
officer. Not included in
this total amount are 11,713 shares held in a trust from which Mr.
Evans may, at the discretion of the
co-trustees, receive distributions of income and, under certain
circumstances, distributions of principal.
Ownership of Securities by Directors, Nominees and Officers
The following tabulation sets forth the number of shares of
One Valley Common Stock beneficially
owned by (i) each of the nominees and directors, (ii) each of the
executive officers listed in the Summary
Compensation Table, and (iii) the directors, nominees, and executive
officers of One Valley as a group as of
March 8, 1994, and indicates the percentages of common stock so owned.
There is no other class of voting
securities issued and outstanding.
Amount and Nature
of Beneficial Percent of
Name of Beneficial Owner Ownership (1) Class
Phyllis H. Arnold 34,088 Direct (2)
145 Indirect *
Charles M. Avampato 16,580 Direct
2,808 Indirect *
Robert F. Baronner 10,216 Direct
6,037 Indirect *
Frederick H. Belden, Jr. 21,905 Direct (3)
136 Indirect *
James K. Brown 2,487 Direct
1,165 Indirect *
John T. Chambers 14,067 Direct
850 Indirect *
Nelle Ratrie Chilton 41,075 Direct
52,513 Indirect *
Amount and Nature
of Beneficial Percent of
Name of Beneficial Owner Ownership (1) Class
Ray M. Evans, Jr. 28,502 Direct
1,407,369 Indirect (4) 8.3%
James Gabriel 4,425 Direct
5,500 Indirect *
Phillip H. Goodwin 920 Direct *
Thomas E. Goodwin 14,904 Direct
145 Indirect *
Cecil B. Highland, Jr. 339,582 Direct
7,207 Indirect 2.0%
Laurance G. Jones 10,500 Direct (5) *
2,600 Indirect
Robert E. Kamm, Jr. 273,967 Direct (6)
106,086 Indirect 2.2%
David Lowe 700 Direct *
John D. Lynch 18,000 Direct
28,806 Indirect *
Edward H. Maier 5,780 Direct *
J. Holmes Morrison 46,321 Direct (7)
782 Indirect *
Charles R. Neighborgall,
III 1,150 Direct
2,664 Indirect *
Robert O. Orders, Sr. 13,543 Direct *
John L. D. Payne 714 Direct
434,479 Indirect (8) 2.5%
Angus E. Peyton 34,202 Direct
166,170 Indirect 1.2%
Lacy I. Rice, Jr. 150,000 Direct *
James W. Thompson 14,470 Direct (9)
4,325 Indirect *
J. Lee Van Metre, Jr. 3,208 Direct *
Richard B. Walker 1,724 Direct *
H. Bernard Wehrle, III 1,180 Direct *
Amount and Nature
of Beneficial Percent of
Name of Beneficial Owner Ownership (1) Class
John H. Wick, III 8,754 Direct
39,575 Indirect *
Thomas D. Wilkerson 1,800 Direct *
All Directors, Nominees and Executive 1,149,511 Direct
Officers as a Group (31 individuals) 1,988,883 Indirect 18.2%
*Beneficial ownership does not exceed one percent of the class.
(1) Share totals of directors include 100 directors' qualifying
shares, which each director is required to own
pursuant to One Valley's Bylaws. Shares held indirectly include
shares held by family members and
shares held through trusts or corporations which in turn hold shares
of One Valley.
(2) Includes options to purchase 23,310 shares pursuant to One
Valley's 1983 Stock Option Plan.
Includes options to purchase 5,040 shares pursuant to One
Valley's 1993 Stock Option Plan.
(3) Includes options to purchase 7,560 shares pursuant to One
Valley's 1983 Stock Option Plan.
Includes options to purchase 3,960 shares pursuant to One
Valley's 1993 Stock Option Plan.
(4) See Note (5) to Principal Holders of Voting Securities.
(5) Includes options to purchase 3,420 shares pursuant to One
Valley's 1983 Stock Option Plan.
Includes options to purchase 3,480 shares pursuant to One
Valley's 1993 Stock Option Plan.
(6) Includes options to purchase 11,295 shares pursuant to One
Valley's 1983 Stock Option Plan.
Includes options to purchase 2,520 shares pursuant to One
Valley's 1993 Stock Option Plan.
(7) Includes options to purchase 31,320 shares pursuant to One
Valley's 1983 Stock Option Plan.
Includes options to purchase 9,000 shares pursuant to One
Valley's 1993 Stock Option Plan.
(8) Consists of 70,599 shares held in nine trusts of which John L.
D. Payne is a co-trustee, 363,160
shares held by Dickinson Company, Payne-Gallatin Mining Company and
Horse Creek Land and
Mining Company (in which companies Mr. Payne is an executive officer),
and 720 shares owned by
his children; does not include 88,033 shares held in or through trusts
in which John L. D. Payne, at the
discretion of the trustees, is an income beneficiary.
(9) Includes options to purchase 2,970 shares pursuant to One
Valley's 1983 Stock Option Plan.
Includes options to purchase 3,000 shares pursuant to One
Valley's 1993 Stock Option Plan.
Executive Compensation
The following table sets forth the annual and long-term
compensation for services in all capacities to
One Valley for the fiscal years ended December 31, 1993, 1992, and
1991, of those persons who were, as of
December 31, 1993, (i) the chief executive officer and (ii) the four
other most highly compensated officers
of One Valley.
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payouts
Other Securities All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options Payouts sation(1)
Position Year ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Holmes Morrison 1993 275,000 114,297 0 0 9,000 0 5,263
President & CEO 1992 233,000 106,015 0 0 9,000 0 4,577
1991 185,602 81,250 - 0 5,940 0 3,763
Phyllis H. Arnold 1993 170,000 63,750 0 0 5,040 0 4,553
Senior Vice President 1992 150,000 58,500 0 0 5,040 0 3,890
1991 121,348 41,125 - 0 3,780 0 2,484
Frederick H. Belden, Jr.1993 148,000 50,875 0 0 3,960 0 4,550
Senior Vice President 1992 135,000 48,263 0 0 3,960 0 3,479
1991 120,330 33,758 - 0 3,780 0 2,444
Laurance G. Jones 1993 132,000 43,560 0 0 3,480 0 4,462
Senior Vice President 1992 117,000 41,828 0 0 3,420 0 3,017
1991 106,189 29,538 - 0 3,240 0 2,136
James W. Thompson 1993 127,000 38,100 0 0 3,000 0 4,251
President, One Valley 1992 120,000 34,500 0 0 2,970 0 3,609
Bank of Mercer 1991 114,000 30,075 - 0 1,525 0 3,414
County, Inc.
</TABLE>
(1) The amounts included in "All Other Compensation" consist of One
Valley's contributions on behalf of
the listed officers to the 401(k) Plan, pursuant to which all eligible
employees receive up to a 50%
matching contribution from One Valley for all amounts contributed to
the 401(k) Plan by the employee, to
a maximum of 5% of the employee's salary. In the case of Mr.
Thompson, the amount reported for 1993
pertains to the 401(k) Plan, however, the amounts for 1992 and 1991
pertain to an Employee Stock
Ownership Plan of Mercer County Bank, pursuant to which that Bank made
an annual contribution of 2%
of the Bank's total payroll, which was allocated to participating
employees on the basis of the ratio of the
employee's compensation to the total compensation of all participating
employees.
The following table sets forth further information on grants
of stock options during 1993 to (i) the
listed officers and (ii) all optionees as a group pursuant to One
Valley's 1993 Incentive Stock Option Plan.
The table also provides information concerning the potential gain to
all shareholders at the designated rate of
appreciation. No stock appreciation rights ("SARs") were awarded by
One Valley.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
Grant Date
Individual Grants Value(1)
% of
Number of Total Potential Realizable Value
Securities Options at Assumed Annual Rates
Underlying Granted to Exercise of Stock Appreciation for
Options Employees or Base Expira- Ten-Year Option Term
Granted (2) in Fiscal Price tion 0% 5% 10%
Name (#) Year ($/Sh) Date ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
J. Holmes Morrison 9,000 11.8% 28.50 4/28/03 0 161,280 408,780
Phyllis H. Arnold 5,040 6.6% 28.50 4/28/03 0 90,317 228,917
Frederick H. Belden, Jr. 3,960 5.2% 28.50 4/28/03 0 70,963 179,863
Laurance G. Jones 3,480 4.6% 28.50 4/28/03 0 62,362 158,062
James W. Thompson 3,000 3.9% 28.50 4/28/03 0 53,760 136,260
All Optionees (including
the five listed above) 76,380 100% 28.50 4/28/03 0 1,368,730 3,469,180
All Shareholders - - - - 0 309,233,649 783,757,709
Optionee Gain as % of
All Shareholders Gain - - - - 0 0.44% 0.44%
</TABLE>
(1) The actual value, if any, an executive may realize depends on the
excess of the stock price over the
exercise price on the date the option is exercised.
(2) The exercise price is the fair market value of One Valley Common
Stock on the date the options were
granted. Options are exercisable immediately, and terminate upon
termination of employment for reasons
other than death or retirement, upon the expiration of three months
after the date of retirement, upon the
expiration of one year from the date of death, or ten years from the
option date.
The following table sets forth information concerning (i) the
value realized upon the exercise of stock
options during 1993 by the listed officers, and (ii) the number of
unexercised options held by each listed
officer as of December 31, 1993, and the market value of the
underlying shares if the options had been
exercised on that date. No SARs have been awarded by One Valley.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares Acquired Value FY-End (#) FY-End ($)
Name On Exercise (#) Realized ($)(1) Exercisable Exercisable
<S> <C> <C> <C> <C>
J. Holmes Morrison 0 0 40,320 379,524
Phyllis H. Arnold 0 0 28,350 306,262
Frederick H. Belden, Jr. 9,360 172,305 11,520 82,822
Laurance G. Jones 11,640 211,565 6,900 21,409
James W. Thompson 0 0 5,970 18,592
</TABLE>
(1) Market value of underlying securities at exercise, minus the
exercise or base price.
The following table indicates, for purposes of illustration,
the approximate annual retirement benefits
(Qualified Plan and Supplemental Plan) that would be payable to an
employee retiring on November 1,
1993, at age 65 on the full life annuity form under various
assumptions as to salary and years of service.
Benefits are not subject to deduction for Social Security or other
offset amounts.
PENSION PLAN TABLE
Years of Service
Remuneration 15 20 25 30 35
$125,000 $28,296 $37,728 $67,714 $67,714 $67,714
150,000 34,296 45,728 83,964 83,964 83,964
175,000 40,296 53,728 100,214 100,214 100,214
200,000 46,296 61,728 116,464 116,464 116,464
225,000 52,296 69,728 132,714 132,714 132,714
235,840** 54,898 73,197 139,760 139,760 139,760
250,000 54,898 73,197 148,964 148,964 148,964
300,000 54,898 73,197 181,464 181,464 181,464
400,000 54,898 73,197 246,464 246,464 246,464
450,000 54,898 73,197 278,964 278,964 278,964
500,000 54,898 73,197 311,464 311,464 311,464
**IRS Maximum for Qualified Plan.
Compensation covered by the qualified pension plan is based on
total pay, including all Management
Incentive Compensation Plan payments, received during the sixty
consecutive months of employment
which results in the highest total divided by five. Such compensation
is directly related to the total annual
salary and bonus set forth in the Summary Compensation Table and does
not vary by more than ten percent
from that set forth therein, except that bonus payments listed in the
table are actually paid to the recipient
(and consequently included in determining plan benefits) in the year
after that listed. As of November 1,
1993, the credited years of service under the retirement plan for the
individuals named in the table shown
under Executive Compensation were: Phyllis H. Arnold, 17.667 years;
J. Holmes Morrison, 26.17 years;
Frederick H. Belden, Jr., 26 years; Laurance G. Jones, 24.33 years;
and James W. Thompson, 9.92 years.
Change of Control Arrangements
In January 1987, One Valley entered into agreements with the
officers listed in the Summary Compensation Table,
except Mr. Thompson, and with certain other officers to encourage those
key officers not to seek other
employment because of the possibility that One Valley might be
acquired by another entity. The Board of
Directors determined that such an arrangement was appropriate,
especially in view of the volatile banking
market anticipated in West Virginia with the advent of interstate
banking. The agreements were not
undertaken in the belief that a change of control of One Valley was
imminent.
The agreements are for a term of three years and on each
anniversary date the term is automatically
extended for an additional one-year period unless a 60-day prior
written notice is given by either party.
Generally, the agreements provide severance compensation to those
officers if their employment should end
under certain specified conditions after a change of control of One
Valley. Compensation is paid upon any
involuntary termination following a change of control unless the
officer is terminated for cause. In
addition, compensation will be paid after a change of control if the
officer voluntarily terminates
employment because of a salary reduction, reassignment without consent
to an office more than 50 miles
from the officer's location at the time of a change of control,
failure by One Valley to obtain assumption of
the contract by its successor, or termination of employment without a
30-day written notice.
Under the agreements, a change of control is deemed to occur
in the event of any business combination
which would require a higher than majority vote of the shareholders
under One Valley's Articles of
Incorporation, or an occurrence of a nature that would be required to
be reported to the Securities and
Exchange Commission as a change of control. Severance benefits
include: (a) a cash payment equal to the
officer's monthly base salary multiplied by the number of full months
between the date of termination and a
date which is 30 months after the date on which the change of control
occurs; (b) payment of the award
due, if any, under One Valley's Management Incentive Compensation Plan
for the year in which
termination occurs; and (c) continuing participation in employee
benefit plans and programs such as
retirement, disability and medical insurance for a period of 30 months
after the change in control.
Board Compensation Committee Report on Executive Compensation
The Compensation Committee ("Committee") of the Board of
Directors establishes compensation
policies, plans and programs which are intended to accomplish three
objectives: to attract and retain highly
capable and well-qualified executives; to focus executives' efforts on
increasing long-term shareholder value;
and to reward executives at levels which are competitive with the
marketplace for similar positions and
commensurate with performance of each executive and of One Valley.
The Committee has determined that
to accomplish these objectives, total compensation should be comprised
of base salary, short-term incentive
compensation, and long-term incentive compensation.
The Committee meets several times annually with the Chief
Executive Officer and senior human
resources executives to review, modify as appropriate, and approve the
compensation programs for
executives, utilizing the services of outside compensation consultants
when appropriate. In determining the
salary budget for 1993 and in fixing levels of executive compensation,
the Committee considered internal
equity, external competitiveness of base compensation and total
compensation, the inflation rate, and One
Valley's performance relative to its long-range goals.
In its evaluation of One Valley's corporate performance for the
purpose of fixing base salary levels, the Committee does not attempt
to assign specific weights to multiple factors which, taken together,
constitute "corporate performance." Consequently, its evaluation of
corporate performance is subjective to the extent that the Committee
considers all aspects of corporate performance, including but not
limited to long-range plan goals for earnings, asset quality, capital,
liquidity and resource utilization; however, significant emphasis is
given to the annual increase in One Valley's earnings per share.
Base salaries for executive officers are determined first
by an evaluation of the officer's success as measured against annually
established goals for individual
performance and the performance of the business unit(s) for which they
have responsibility. Second, base
salaries are measured against market place salaries of equivalent
positions in financial institutions of
comparable size. Marketplace information is determined using data from
several recognized compensation
survey services, specifically the 1993 Hay Compensation Report of
Banks and Associated Financials
produced by Hay Management Consultants, wherein participating
financial institutions are grouped by size.
One Valley's comparable group consists of twenty financial
institutions having $800 million to $7 billion
in assets, and the 1993 Financial Institutions Compensation Survey of
Wyatt Data Services which covers
the compensation practices of approximately 113 financial institutions
having $2 billion to $5.9 billion in
assets. This information was selected for comparison in 1993/1994
because of the formidable position that
these surveys hold in the industry.
Currently base compensation for executives of One Valley,
while competitive, continues to be below
the average for similar positions within comparable financial
institutions. When One Valley executives,
including the CEO and the officers listed in the Summary Compensation
Table, were compared to the
marketplace, their base salaries were, in the aggregate, well below
the median of the marketplace. The
Committee believes, philosophically, that compensation should, on the
whole, be incentive driven,
however base compensation should be reasonably competitive in the
marketplace. To this end, the
Committee has set a base salary range target for executives at the
37.5 percentile of the marketplace
average. The Committee believes that the appropriate level of
executive base compensation is primarily
market-driven, although base compensation is also dependent on
corporate performance and on each
executive's progress toward individual goals. Thus, while the
midpoint of the salary range is a corporate-
wide target, base compensation for each executive is specifically
determined by individual performance.
The Committee believes that incentive compensation is an
appropriate adjunct to base compensation
which, together with base compensation, should approach the industry
median for total compensation if
established goals are met. Short-term incentive compensation is
provided to key executives, as determined
by the Compensation Committee pursuant to One Valley's Management
Incentive Compensation Plan
("MICP"). Awards under MICP are granted based upon One Valley's
earnings per share relative to a target
level set by the Board of Directors. If the target is met, awards are
calculated for each participant based upon
the level of corporate performance relative to the target, upon
performance of the executive and the unit he
or she manages in meeting assigned objectives, and upon the
executive's relative position within One
Valley. The determination of corporate performance for this
purpose is based solely upon earnings per share.
Thus the level of annual performance of One Valley,
determined in a manner which emphasizes
factors which should have a positive impact upon total return to
shareholders, has a significant impact upon
total executive compensation.
The Committee believes that shareholder value can be further
enhanced by closely aligning the financial
interests of One Valley's key executives with those of its
shareholders. Awards of stock options pursuant
to One Valley's Incentive Stock Option Plan ("ISOP") are intended to
meet this objective and constitute the
long-term incentive portion of executive compensation. Under the
ISOP, the option price paid by the
executive to exercise the option is the fair market value of the stock
on the day the option is granted, and
the option is freely exercisable within a ten-year period. The
options attain value over that time only if the
market price of the underlying stock increases, and the increase in
value of the option is directly tied to the
increase in the value of the stock. The Committee believes the ISOP
focuses the attention and efforts of
executive management upon increasing long-term shareholder value and
the Committee periodically awards
options to key executives in amounts it believes are adequate to
achieve the desired objective. The total number of shares available
for award in each plan year is specified in the ISOP. These shares
are generally allocated based upon the Committee's subjective
judgment, taking into account the historical levels of awards and
the relative positions of the participants in the ISOP.
Total compensation for the CEO is determined in essentially
the same way as for other executives,
recognizing that the CEO has overall responsibility for the
performance of One Valley. Therefore, One
Valley's performance has a direct impact upon the CEO's compensation
in that its earnings per share
determine the amount of base compensation increase and the MICP award,
and, in addition, the market price
of One Valley's Common Stock determines the value of options awarded
during prior periods. The base
compensation of the CEO in 1993 was based in large measure on the
corporate results in 1992 relative to
long-range plan goals for earnings, asset quality, capital, liquidity
and resource utilization. As discussed above, no attempt is made by
the Committee to assign relative weights to the various components
of corporate performance in fixing the CEO's base compensation.
The targeted earnings were $2.07 per share and actual earnings per share were
$2.29, which was 10.6% higher than the
targeted earnings per share, and 19% higher than 1991 earnings of
$1.93 per share. This relative success of
One Valley was a major consideration in establishing the base
compensation for the CEO. Further, the
CEO assumed this position in July 1991 and has a relatively low salary
compared to the market place for
this position, and this, too was taken into consideration in
establishing the base compensation of the CEO
for 1993. The MICP award for 1993 was based on the earnings per share
performance in 1993 which was
$2.52 versus targeted earnings of $2.47 per share. The ISOP awards to
the CEO for 1993 were based on the
historical level of awards and the Committee's determination of the
appropriate level of prospective
ownership necessary to motivate long-term performance.
Recent revisions to the Internal Revenue Code disallow
deductions in excess of $1,000,000 for certain executive compensation.
The Committee has not adopted a policy in this regard since none
of One Valley's executives receive compensation approaching the
$1,000,000 level. The report shall not be deemed incorporated by reference by
any general statement incorporating by
reference this proxy statement into any filing under the Securities
Act of 1933 or the Securities Exchange
Act of 1934, except to the extent that One Valley specifically
incorporates this report by reference, and shall
not otherwise be filed under such Acts.
The report is submitted by the Compensation Committee,
which consists of
Phillip H. Goodwin, Chairman
Charles M. Avampato
Nelle Ratrie Chilton
David E. Lowe
John L. D. Payne
H. Bernard Wehrle, III
Performance Graph
The following graph compares the yearly percentage change in
One Valley's cumulative total
shareholder return on its Common Stock for the five-year period ending
December 31, 1993, with the
cumulative total return of the Standard & Poor's 500 Stock Index and
the Media General Industry Group Index - 04, which consists of
all banks and bank holding
companies within the United States whose stock has been publicly
traded for at least six years. There is no
assurance that One Valley's stock performance will continue in the
future with the same or similar trends as
depicted in the graph. The graph shall not be deemed incorporated by
reference by any general statement
incorporating by reference this proxy statement into any filing under
the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that One Valley
specifically incorporates this graph
by reference, and shall not otherwise be filed under such Acts.
(Performance Graph appears here, see appendix)
1988 1989 1990 1991 1992 1993
One Valley $ 0 $ 0 $102 $207 $323 $308
Standard & Poors 500 $100 $131 $128 $166 $179 $197
All Publicly Traded Banks $100 $117 $ 91 $129 $153 $181
(Media General Industry Group Index - 04)
Compensation of Directors
During 1993, each director who was not also an officer and
full-time employee of One Valley received
$300 for each meeting of the Board of Directors of One Valley attended
and, as members of certain
committees of the Board of Directors, received $250 for each meeting
of a committee of the Board of
Directors attended. In addition, Mr. Baronner received compensation
in the amount of $18,000 for serving
as Chairman of the Board of Directors. During 1993, there were no
other arrangements pursuant to which
any director of One Valley was compensated for services as a director.
Directors of One Valley are eligible to defer fees pursuant to
One Valley Deferred Compensation Plan,
which was adopted in 1984, with respect to fees received in 1984 and
thereafter for services rendered as a
director of One Valley.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's directors and executive
officers, and persons who own more than ten percent of a registered
class of the Company's equity
securities, to file with the Securities and Exchange Commission
initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of
the Company. Officers, directors
and greater than ten-percent shareholders are required by SEC
regulation to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely upon review of the
copies of such reports furnished to the
Company and written representations that no other reports were
required, during the two fiscal years ended
December 31, 1993, all Section 16(a) filing requirements applicable to
its officers, directors and greater than
ten-percent beneficial owners were complied with, except that one
report covering one transaction was filed
late by Mr. Ray Marshall Evans, Jr. and one report covering one
transaction was filed late by H. Bernard
Wehrle, III.
Certain Transactions with Directors and Officers and Their Associates
One Valley and its various banking subsidiaries have had and
expect to have in the future, transactions
in the ordinary course of business with directors, officers, principal
shareholders and their associates. During
1993, all of these transactions were made on substantially the same
terms, including interest rates, collateral
and repayment terms on extensions of credit, as those prevailing at
the same time for comparable
transactions with other unaffiliated persons. Such transactions,
which at December 31, 1993, were, in the
aggregate, 25.2% of total shareholders' equity, and in the opinion of
the management of One Valley, did not
involve more than the normal risk of collectibility or present other
unfavorable features.
Jackson & Kelly, a law firm in which Director James K. Brown
is a partner, and Steptoe & Johnson, a
law firm in which Director J. Lee Van Metre, Jr., is a partner,
performed legal services for One Valley and
its subsidiaries in 1993 and will perform similar services in 1994.
On the basis of information provided by
Mr. Brown and Mr. Van Metre, it is believed that less than five
percent of the gross revenues of those law
firms did in 1993, and will in 1994, result from payment for legal
services by One Valley and its
subsidiaries. In the opinion of One Valley, these transactions were
on terms as favorable to One Valley as
they would have been with third parties not otherwise affiliated with
One Valley.
Compensation Committee Interlocks and Insider Participation
During 1993, One Valley's affiliate banks, and One Valley
Square, Inc., paid $86,239 to TerraCare,
Inc., for landscaping services. TerraCare, Inc., is a wholly-owned
subsidiary of TerraCo, Inc. Mary Price
Ratrie, a principal shareholder of One Valley, is the principal
shareholder and President of TerraCo, Inc., and
Director Nelle Ratrie Chilton is director of TerraCo, Inc. During
1993, The Neighborgall Construction Co.
received payments of $72,893.71 from One Valley's affiliate, One
Valley Bank of Huntington, Inc., for
miscellaneous renovation and repair work to facilities owned by the
bank. It is anticipated that additional
payments will be made in 1994 to TerraCare, Inc., and to the
Neighborgall Construction Co. In the
opinion of One Valley, these transactions were on terms as favorable
to One Valley as they would have
been with third parties not otherwise affiliated with One Valley.
The members of One Valley's Compensation Committee are Phillip H.
Goodwin, Charles M. Avampato, Nelle Ratrie Chilton, David E. Lowe,
John L. D. Payne, and H. Bernard Wehrle, III.
2. PROPOSAL TO APPROVE AN INCREASE IN THE MAXIMUM NUMBER OF
DIRECTORS
At a meeting held on February 16, 1994, a resolution was
unanimously adopted by the Board of
Directors of One Valley which approved for submission to a vote of the
shareholders a proposal to amend
Article III, Section 2 of the Bylaws of One Valley to provide that the
Board of Directors may be comprised
of up to thirty-three directors. Article V.1. of the Articles of
Incorporation of One Valley, as amended,
provides that the number of directors of One Valley is determined by
the provisions of its Bylaws. Article
III, Section 2 of the Bylaws provides that the number of the directors
shall be fixed by the Board of
Directors, but shall not be less than six nor more than twenty-seven.
Generally, the Bylaws of One Valley
can be amended by a vote of the Board of Directors. However, Article
V.2. of the Articles of Incorporation
of One Valley provides that an amendment of the Bylaws to increase the
number of Directors to more than
twenty-seven must be approved by the affirmative vote of the holders
of at least 80% of the outstanding
shares of One Valley. This provision requiring approval by more than
a majority of One Valley's
outstanding shares was adopted in 1986 as one of several amendments to
One Valley's Articles of
Incorporation and Bylaws. The intent of those amendments was to
ensure that a party seeking control of
One Valley will discuss its proposal with One Valley's Board of
Directors. In all other respects, the
provisions of Article III, Section 2 of the Bylaws would remain
unchanged.
The Board of Directors believes that the proposed amendment is
appropriate for two reasons. First, it
satisfies the contractual obligation One Valley made to Mountaineer
Bankshares of W. Va., Inc.
("Mountaineer"), which was merged into One Valley on January 28, 1994.
As part of its merger agreement
with Mountaineer (the "Merger Agreement"), One Valley agreed that upon
consummation of the merger the
Board of Directors of One Valley would elect as directors two persons
designated by Mountaineer. Pursuant
to that agreement, effective January 28, 1994, the Board elected as
directors Cecil B. Highland, Jr., and Lacy
I. Rice, Jr., each to fill terms expiring at the 1994 Annual Meeting
of Shareholders. As set forth above in
the section of this Proxy Statement captioned "Purpose of Meeting - 1.
Election of Directors," these two
individuals have been nominated for election as directors, each to
serve a full three-year term. Pursuant to
the Merger Agreement, One Valley also agreed to seek to have two
additional persons, also designated by
Mountaineer, elected as directors at the earliest practicable date.
Because of the maximum size limitation on
the number of Directors imposed by Article III, Section 2 of the
Bylaws, however, One Valley is unable to
add those two additional persons to the Board without shareholder
approval of an increase in the maximum
number of Directors. One Valley's proposed amendment to its Bylaws
will permit the addition of these two
directors in accordance with the Merger Agreement. If One Valley
shareholders approve the proposed
amendment, C. Michael Blair and Brent D. Robinson, who were designated
by Mountaineer, will be elected
to the Board of Directors of One Valley at the May 1994, meeting of
One Valley's Board of Directors, each
for terms expiring at the 1995 Annual Meeting of Shareholders. Mr.
Robinson, an executive vice president of
One Valley, was previously a director, president, chief operating
officer and chief financial officer of
Mountaineer. He is 47 years old and had served as a director or
officer of Mountaineer or one of its
subsidiaries since 1978. He is the beneficial owner of 23,655 shares
of One Valley Common Stock. Mr.
Blair, Chairman of the Board and Chief Executive Officer of Mercantile
Banking & Trust Company, is 51
years old and had served as an officer or director of Mountaineer or
one of its subsidiaries since 1970. He is
the beneficial owner of 52,327 shares of One Valley Common Stock.
The Board has proposed this amendment to the Bylaws for a
second reason. One Valley has had and
will continue to have discussions with various banks and bank holding
companies regarding the possible
acquisition of additional banking subsidiaries and branch facilities.
As part of those negotiations it is
possible that the company to be acquired may request that it be
represented on One Valley's Board of
Directors following the acquisition. With the addition of the two
additional former Mountaineer directors,
One Valley's Board will be comprised of twenty-nine members. The
proposed increase to a maximum of
thirty-three members would provide One Valley with needed flexibility
in future negotiations, when and if
they occur. At the present time, One Valley has no intention of
increasing the number of directors on its
Board of Directors beyond twenty-nine and is not engaged in merger
negotiations. Although a Board
comprised of up to thirty-three directors is large, One Valley does
not believe that it will be so large as to
be unworkable or ineffective. To the contrary, One Valley has found
that participation by Directors from
various parts of the state following acquisitions has been helpful in
planning and conducting post-merger
operations, and it believes that the continuation of such an approach
is prudent.
The Board recommends that the following amendment to the first
sentence of Section 2 of Article III of
the Bylaws, unanimously approved by the Board of Directors at its
February meeting, be approved by the
shareholders.
Section 2. Number, election and terms; nominations. Except as
otherwise fixed by or pursuant to the
provisions of Article VI of the Articles of Incorporation relating to
the rights of the holders of any class or
series of stock having a preference over the Common Stock as to
dividends or upon liquidation to elect
additional directors under specified circumstances, the number of the
directors of the Corporation shall be
fixed from time to time by resolution of the Board of Directors but
shall not be less than six nor more than
thirty-three.
A copy of the entire text of Section 2 of Article III of the
Bylaws is attached as Exhibit A to this
Proxy Statement. The italicized portions of Section 2 of Article III
in Exhibit A reflect the proposed
amendment to be voted on at the Annual Meeting.
Vote Required
An affirmative vote of the holders of at least 80% of the
outstanding shares of One Valley Common
Stock is required to approve the amendment. Shares voted "ABSTAIN"
and shares not voted will have the
same effect as if the shares were voted "AGAINST" approval of the
amendment.
The Board of Directors unanimously recommends that
shareholders vote "FOR" approval of this
proposal. Unless otherwise directed, the enclosed proxy will be voted
"FOR" the approval of the proposed
increase in the maximum number of directors of One Valley from 27 to
33.
3. PROPOSAL TO APPROVE SELECTION OF AUDITORS
The Board of Directors has selected the firm of Ernst & Young
to serve as independent auditors for One
Valley for the calendar year 1994 and proposes the approval by the
shareholders at the Annual Meeting of
Shareholders of that selection. If that selection does not receive
the approval of a majority of the votes
represented in person or by proxy, the Board will request a later
approval of an alternate auditor. One Valley
is advised that no member of this accounting firm has any direct or
indirect material interest in One Valley,
or any of its subsidiaries. A representative of Ernst & Young will be
present at the Annual Meeting to
respond to appropriate questions and to make a statement if desired.
The enclosed proxy will be voted
"FOR" the approval of the selection of Ernst & Young unless otherwise
directed. The affirmative vote of a
majority of the shares of One Valley Common Stock represented at the
Annual Meeting of Shareholders is
required to approve the selection of Ernst & Young.
FORM 10-K ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
Upon written request by any shareholder to Laurance G. Jones,
Treasurer, One Valley Bancorp of West
Virginia, Inc., P. O. Box 1793, Charleston, West Virginia 25326, a
copy of One Valley's 1993 Annual
Report on Form 10-K will be provided without charge.
OTHER INFORMATION
If any of the nominees for election as directors are unable to
serve as directors by reason of death or
other unexpected occurrence, proxies will be voted for a substitute
nominee or nominees designated by the
Board of One Valley unless the Board of Directors adopts a resolution
pursuant to the Bylaws reducing the
number of directors. The Board of Directors is unaware of any other
matters to be considered at the
meeting, but if any other matters properly come before the meeting,
persons named in the proxy will vote
such proxy in accordance with the recommendation of the Board of
Directors.
Shareholder Proposals for 1995
Any shareholder who wishes to have a proposal placed before
the next Annual Meeting of Shareholders
must submit the proposal to Merrell S. McIlwain II, Secretary of One
Valley, at its executive offices, no
later than November 22, 1994, to have it considered for inclusion in
the proxy statement of the Annual
Meeting in 1995.
J. Holmes Morrison
President
Charleston, West Virginia
March 23, 1994
ARTICLE III. BOARD OF DIRECTORS
Section 2. Number, election and terms; nominations. Except
as otherwise fixed by or pursuant to the
provisions of Article VI of the Articles of Incorporation relating to
the rights of the holders of any class or
series of stock having a preference over the Common Stock as to
dividends or upon liquidation to elect
additional directors under specified circumstances, the number of the
directors of the Corporation shall be
fixed from time to time by resolution of the Board of Directors but
shall not be less than six nor more than
thirty-three. The directors, other than those who may be elected by
the holders of any class or series of
stock having a preference over the Common Stock as to dividends or
upon liquidation, shall be classified,
with respect to the time for which they severally hold office, into
three classes, as nearly equal in number as
possible, as determined by the board of Directors of the Corporation,
one class to be originally elected for a
term expiring at the annual meeting of stockholders to be held in
1987, another class to be originally
elected for a term expiring at the annual meeting of shareholders to
be held in 1988, and another class to be
originally elected for a term expiring at the annual meeting of
shareholders to be held in 1989, with each
class to hold office until its successor is elected and qualified. At
each annual meeting of the shareholders of
the Corporation, the successors of the class of directors whose term
expires at that meeting shall be elected
to hold office for a term expiring at the annual meeting of
shareholders held in the third year following the
year of their election. Nominations for the election of directors
shall be given in the manner provided in
Article II, Section 13, of these bylaws. Directors need not be
residents of the State of West Virginia, but
shall hold not less than one hundred shares of the capital stock of
the Corporation in order to be eligible to
serve as a director of the Corporation.
