FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission file number 010042
One Valley Bancorp of West Virginia, Inc.
(Exact name of registrant as specified in its charter)
West Virginia 55-0609408
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
One Valley Square, Charleston, West Virginia 25326
(Address of principal executive offices)
(Zip Code)
(304) 348-7000
(Registrant's telephone number, including area code)
Not applicable
(Former name, address, and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X No
The number of shares outstanding of each of the issuer's classes of common stock
as of March 31, 1994 was:
Common Stock, $10.00 par value -- 17,255,688 shares
<PAGE>
One Valley Bancorp of West Virginia, Inc.
Part I. Financial Information
Item 1. Financial Statements.
The unaudited interim consolidated financial statements of One Valley Bancorp of
West Virginia, Inc. (One Valley) or (Registrant) are included on pages 3 - 8 of
this report.
These consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all the information and footnotes required by generally
accepted accounting principles for annual year-end financial statements. In the
opinion of management, all adjustments considered necessary for a fair
presentation have been included and are of a normal recurring nature. Operating
results for the three month period ended March 31, 1994 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1994. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Management's discussion and analysis of financial condition and results of
operations is included on pages 9 - 16 of this report.
<PAGE>
<TABLE>
ONE VALLEY BANCORP OF WEST VIRGINIA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited in thousands)
<CAPTION>
March 31 December 31 March 31
1994 1993 1993
<S> <C> <C> <C>
Assets
Cash and Due From Banks $133,732 $141,195 $135,825
Interest Bearing Deposits With Other Banks 3,880 8,028 6,833
Federal Funds Sold 38,359 31,145 145,427
------------ ------------ ------------
Cash and Cash Equivalents 175,971 180,368 288,085
Securities
Available-for-Sale, at fair value (Note B) 589,258 0 0
Held-for-Investment (Estimated Fair Value, 0 0 0
March 31, 1994 - $457,032; December 31, 1993 - $1,081,742; 0 0 0
March 31, 1993 - $1,078,683) 459,916 1,060,036 1,048,896
Loans
Total Loans 2,173,686 2,169,372 1,999,455
Less: Allowance For Loan Losses 37,111 36,484 36,368
------------ ------------ ------------
Net Loans 2,136,575 2,132,888 1,963,087
Bank Premises & Equipment - Net 82,317 80,233 80,382
Other Assets 56,274 59,350 61,698
------------ ------------ ------------
Total Assets $3,500,311 $3,512,875 $3,442,148
============ ============ ============
Liabilities and Shareholders' Equity
Deposits
Non-interest Bearing $434,096 $412,317 $386,374
Interest Bearing 2,532,265 2,524,418 2,496,653
------------ ------------ ------------
Total Deposits 2,966,361 2,936,735 2,883,027
Short-term Borrowings
Federal Funds Purchased 9,306 14,012 21,564
Repurchase Agreements and Other Borrowings 163,206 204,408 175,759
------------ ------------ ------------
Total Short-term Borrowings 172,512 218,420 197,323
Long-term Borrowings 18,883 22,788 40,051
Other Liabilities 30,351 29,749 34,100
------------ ------------ ------------
Total Liabilities 3,188,107 3,207,692 3,154,501
Shareholders' Equity:
Preferred Stock-$10 par value; 1,000,000 shares authorized
but none issued 0 0 0
Common Stock-$10 par value; 40,000,000 shares authorized,
Issued 17,525,688 shares at March 31, 1994;
17,516,795 shares at December 31, 1993;
17,506,045 shares at March 31, 1993 175,257 175,168 175,060
Capital Surplus 25,880 25,830 25,804
Retained Earnings 114,350 107,314 89,912
Unrealized (Losses) on Securities Available-for-Sale,
net of deferred taxes; (Note B) (154) 0 0
Treasury Stock - 270,000 shares at March 31, 1994,
December 31, 1993 and March 31, 1993; at cost (3,129) (3,129) (3,129)
------------ ------------ ------------
Total Shareholders' Equity 312,204 305,183 287,647
------------ ------------ ------------
Total Liabilities and Shareholders' Equity $3,500,311 $3,512,875 $3,442,148
============ ============ ============
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP OF WEST VIRGINIA, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(unaudited in thousands, except per share data)
<CAPTION>
For The Three Months
Ended March 31
1994 1993
<S> <C> <C>
Interest Income
Interest and Fees on Loans
Taxable $44,371 $43,983
Tax-Exempt 572 467
------------ ------------
Total 44,943 44,450
Interest on Investment Securities
Taxable 12,683 14,344
Tax-Exempt 2,156 1,471
------------ ------------
Total 14,839 15,815
Other Interest Income 344 960
------------ ------------
Total Interest Income 60,126 61,225
Interest Expense
Deposits 20,717 23,633
Short-term Borrowings 1,389 1,537
Long-term Borrowings 245 585
------------ ------------
Total Interest Expense 22,351 25,755
------------ ------------
Net Interest Income 37,775 35,470
Provision For Loan Losses 1,179 1,551
------------ ------------
Net Interest Income
After Provision For Loan Losses 36,596 33,919
Other Income
Trust Department Income 2,012 1,745
Service Charges on Deposit Accounts 2,609 2,586
Real Estate Loan Processing & Servicing Fees 1,418 2,146
Other Service Charges and Fees 1,150 660
Other Operating Income 1,710 2,591
Securities Transactions 197 0
------------ ------------
Total Other Income 9,096 9,728
Other Expenses
Salaries and Employee Benefits 15,928 15,617
Occupancy Expense - Net 1,561 1,427
Equipment Expenses 2,058 2,640
Federal Deposit Insurance 1,661 1,630
Outside Data Processing 908 472
Other Operating Expenses 7,488 7,544
------------ ------------
Total Other Expenses 29,604 29,330
------------ ------------
Income Before Taxes 16,088 14,317
Applicable Income Taxes 5,257 4,479
------------ ------------
Net Income $10,831 $9,838
============ ============
Net Income Per Common Share $0.63 $0.57
============ ============
Based on Average Shares Outstanding of 17,250 17,228
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP OF WEST VIRGINIA, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(unaudited in thousands)
<CAPTION>
Unrealized
Gain (Loss)
on Securities
Common Capital Retained Treasury Available
Stock Surplus Earnings Stock for Sale
<S> <C> <C> <C> <C> <C>
Balance December 31, 1993 $175,168 $25,830 $107,314 ($3,129) $0
Effect of adopting FAS 115 0 0 0 0 4,765
Three Months Ended March 31, 1994
Net Income 0 0 10,831 0 0
Cash Dividends ($.22 per share) 0 0 (3,795) 0 0
Change in Fair Value of Securities
Available for Sale, net of deferred taxes 0 0 0 0 (4,919)
Stock Options Exercised 89 50 0 0 0
------------ ------------ ------------ ------------ ------------
Balance March 31, 1994 $175,257 $25,880 $114,350 ($3,129) ($154)
============ ============ ============ ============ ============
Balance December 31, 1992 $174,935 $25,352 $83,380 ($3,129) $0
Three Months Ended March 31, 1993
Net Income 0 0 9,838 0 0
Cash Dividends ($.20 per share) 0 0 (3,306) 0 0
Stock Options Exercised 125 452 0 0 0
------------ ------------ ------------ ------------ ------------
Balance March 31, 1993 $175,060 $25,804 $89,912 ($3,129) $0
============ ============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP OF WEST VIRGINIA, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(unaudited in thousands)
<CAPTION>
For The Three Months
Ended March 31
1994 1993
<S> <C> <C>
Operating Activities
Net Income $10,831 $9,838
Adjustments To Reconcile Net Income To Net Cash
Provided by Operating Activities:
Provision For Loan Losses 1,179 1,551
Depreciation 1,742 1,936
Amortization and Accretion 951 2,219
Securities Gains (197) 0
Increase (Decrease) Due to Changes In:
Accrued Interest Receivable (345) 695
Accrued Interest Payable (228) 407
Other Assets and Other Liabilities 5,000 900
------------ ------------
Net Cash Provided by Operating Activities 18,933 17,546
Investing Activities
Proceeds From Sale of Securities Available for Sale 36,497 0
Proceeds From Sale of Investment Securities 0 78
Proceeds From Maturities of Securities Available for Sale 106,584 0
Proceeds From Maturities of Securities Held to Maturity 22,758 87,305
Purchases of Securities Available for Sale (101,567) 0
Purchases of Securities Held to Maturity (55,021) (109,904)
Net (Increase) Decrease In Loans (4,912) 1,111
Purchases of Premises and Equipment (3,826) (1,048)
------------ ------------
Net Cash Provided by (Used in) Investing Activities 513 (22,458)
Financing Activities
Net Change in Interest Bearing and Non-interest Bearing Deposits 29,626 1,453
Net (Decrease) Increase in Federal Funds Purchased (4,706) 3,846
Net (Decrease) in Other Short-term Borrowings (41,202) (10,843)
Proceeds From Long-term Borrowings 1,099 12,038
Repayment of Long-term Debt (5,004) (2,205)
Proceeds From Issuance of Common Stock 139 577
Dividends Paid (3,795) (3,306)
------------ ------------
Net Cash (Used in) Provided by Financing Activities (23,843) 1,560
------------ ------------
(Decrease) in Cash and Cash Equivalents (4,397) (3,352)
Cash And Cash Equivalents at Beginning of Year 180,368 291,437
------------ ------------
Cash and Cash Equivalents, March 31 $175,971 $288,085
============ ============
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation
The accounting and reporting policies of One Valley conform to generally
accepted accounting principles and practices in the banking industry. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The interim financial information included in this report is
unaudited. In the opinion of management, all adjustments necessary for a fair
presentation of the results of the interim periods have been made. These notes
are presented in conjunction with the Notes to Consolidated Financial Statements
included in the Annual Report of One Valley.
Note B - Accounting Change
Effective January 1, 1994, One Valley adopted the provisions of FASB Statement
115, "Accounting for Certain Investments in Debt and Equity Securities." In
accordance with the provisions of the Statement, One Valley reevaluated its
classification of securities and assigned a portion of its securities investment
as available-for-sale. Securities designated available-for-sale are presented
at fair value. The corresponding unrealized gain or loss on these securities
due to any difference between historical cost and current fair value is
presented as a component of Shareholders' Equity, net of deferred taxes.
Securities designated as available-for-sale at December 31, 1993 approximated
$632,380. The effect of adopting this Statement was to increase the opening
balance of shareholders' equity at January 1, 1994 by $4,765, which was the net
unrealized gain on securities available-for-sale of $7,942, net of $3,177 in
deferred income taxes. At March 31, 1994, securities available-for-sale had a
historical cost of $589,516, with a net unrealized loss of approximately $258,
which decreased shareholders' equity by $154, net of $104 in deferred income
taxes.
The amortized cost and estimated fair values of securities available-for-sale
are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
March 31, 1994
U.S. Treasury securities and obligations
of government agencies corporations $543,981 $1,947 $(1,928) $544,000
Mortgage backed securities 43,879 67 (412) 43,534
Other securities 1,656 68 (0) 1,742
-------- ------ ------- --------
Total securities available-for-sale $589,516 $2,082 $(2,340) $589,258
======== ====== ======= ========
</TABLE>
Note B - Accounting Change (continued)
The amortized cost and estimated fair values of securities held-to-maturity are
summarized as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
March 31, 1994
U.S. Treasury securities and obligations
of government agencies corporations $125,662 $1,493 $ (821) $126,334
Obligations of states and political
subdivisions 178,434 1,157 (4,732) $174,859
Mortgage backed securities 142,444 599 (718) 142,325
Other securities 13,376 141 (3) 13,514
-------- ------ ------- --------
Total securities held to maturity $459,916 $3,390 $(6,274) $457,032
======== ====== ======= ========
December 31, 1993
U.S. Treasury securities and obligations
of government agencies corporations $ 709,229 $12,330 $ (526) $ 721,033
Obligations of states and political
subdivisions 137,654 5,864 (650) 142,868
Mortgage backed securities 197,444 5,104 (731) 201,817
Other securities 15,709 319 (4) 16,024
---------- ------- ------- ----------
Total securities held to maturity $1,060,036 $23,617 $(1,911) $1,081,742
========== ======= ======= ==========
March 31, 1993
U.S. Treasury securities and obligations
of government agencies corporations $ 742,683 $18,875 $ (81) $ 761,477
Obligations of states and political
subdivisions 85,742 5,111 (22) 90,831
Mortgage backed securities 200,201 6,103 (550) 205,754
Other securities 20,270 352 (1) 20,621
---------- ------- ------- ----------
Total securities held to maturity $1,048,896 $30,441 $(654) $1,078,683
========== ======= ======= ==========
</tTABLE>
Note C - Mergers
At the close of business on January 28, 1994, One Valley acquired all of the
outstanding stock of Mountaineer Bankshares of W.Va., Inc. in exchange for
4,350,000 shares of One Valley common stock. This combination was accounted for
as a pooling-of-interest. Accordingly, all prior period financial information
has been restated to reflect the merger of the two companies as though they had
always been combined.
One Valley Bancorp of West Virginia, Inc.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
March 31, 1994
INTRODUCTION AND SUMMARY
Net income for the first quarter of 1994 totaled $10.8 million, an
increase of 10.1% over the $9.8 million earned in the same quarter of 1993. On
a per share basis, net income of $0.63 for the first quarter of 1994 increased
10.5% over the $0.57 earned during the same period in 1993. The improvement in
earnings during the quarter can be attributed, in large part, to an increase in
net interest income and a decrease in the provision for loan losses.
Return on average assets (ROA) measures how effectively One Valley
utilizes its assets to produce net income. ROA was 1.24% in the first three
months of 1994, a significant increase over the 1.16% earned during the first
three months of 1993. Return on average equity (ROE) also increased, from
13.76% for the first three months of 1993 to 14.00% earned over the first three
months of 1994.
The following discussion is an analysis of the financial condition and
results of operations of One Valley for the first three months of 1994. This
discussion should be read in conjunction with the 1993 Annual Report to
Shareholders and the other financial information included in this report.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income for the three months ended March 31, 1994 was $39.2
million on a fully tax-equivalent basis, a 7.5% increase from the $36.5 million
earned during the same period in 1993. This increase is largely due to an
increase in earning assets greater than the increase in interest bearing
liabilities during the first quarter comparision. Average earning assets
increased by 3.9% in the first three months of 1994 over the same period in
1993, while average interest bearing liabilities increased by 1.7% in the same
comparison. Both total interest income and total interest expense decreased from
the prior year due to the decline in the interest rate environment, however, the
net margin increased.
As the interest rate environment declined over the past months, the rate
of decline in the yield on earning assets was slightly less than the decline in
costs of interest bearing liabilities. As shown in the consolidated average
balance sheets (page 16), the yield on earning assets, declined 38 basis points
to 7.68% in the first three months of 1994 from 8.06% in the first three months
of 1993. During the same period, the cost of interest bearing liabilities
declined 57 basis points to 3.30% from last year's 3.87% level. Due to the
higher volume of earning assets, the net interest margin increased to 4.88%
during the first three months of 1994, compared to 4.71% during the first three
months of 1993. At March 31, 1994, One Valley's asset/liability structure was
slightly asset sensitive in the six month time frame. Thus, an increase in
market interest rates should increase One Valley's net interest margin.
Credit Experience
The provision for loan losses was $1.2 million for the three months ended
March 31, 1994, a 24% decline from the $1.6 million provision during the first
three months of 1993. The decline in the provision for loan losses is primarily
due to the continued improvement in the quality of the loan portfolio. As a
percentage of average total loans, the provision for loan losses through the
first three months of 1994 was 0.22% annualized compared to 0.31% in the first
three months of 1993. Net charge-offs as a percentage of average total loans in
the first three months of 1994 also decreased to 0.10% on an annualized basis,
down from an annualized 0.17% during the first three months of 1993.
Total non-performing assets at March 31, 1994 were 0.53% of period-end
loans, a decrease from the 0.58% at year-end 1993 and a further decline from the
1.06% at March 31, 1993. Loans past due over 90 days have also declined. At
March 31, 1994, loans past due over 90 days were 0.13% of outstanding loans, a
decrease from the 0.15% at year-end 1993 and 0.17% at March 31, 1993. The
dollar amounts of both non-performing assets and loans past due over 90 days
have also declined proportionately from levels recorded at year-end 1993 and one
year ago, as reflected in the analysis on page 15.
With the improved credit quality of the loan portfolio, the allowance for
loan losses has decreased in relationship to the loan portfolio. At March 31,
1994, the allowance was 1.71% of outstanding loans, compared to 1.82% one year
ago and 1.68% at year-end 1993.
In May 1993, the FASB issued Statement 114, Accounting for the Impairment
of a Loan, to be adopted for years beginning after December 15, 1994. Due to
rules already established by bank regulatory authorities, management believes
that it substantially complies with the material provisions of Statement 114.
Accordingly, the adoption of this Statement is not anticipated to have a
material effect on One Valley's financial statements.
Non-Interest Income and Expense
Total non-interest income was $9.1 million through the first three months
of 1994, down 6.5% from the $9.7 million earned during the same period in 1993.
Trust income increased by 15.3%, or $0.2 million, over the first three months of
last year primarily due to an increase in the number of trust accounts and
growth in the size of existing trust accounts. Service charges on deposit
accounts increased by 0.9% in the first three month comparisons due to increases
in the customer base. Other service charges and fees increased by $0.5 million
due to increases in investment fees and other commissions One Valley has earned
on new products and services offered. These increases were more than offset by
declines in mortgage loan processing and service fees and other operating
income. As interest rates declined in 1993, mortgages serviced by One Valley
for others have refinanced or paid-off, thus reducing One Valley's servicing fee
revenue. Furthermore, recent increases in interest rates have also reduced the
fees from the origination and sale of loans in the secondary market. With the
decline in the mortgage loan servicing portfolio, it is anticipated that
throughout the remainder of 1994 servicing fee revenue will be significantly
lower than the prior year. Other operating income decreased by $0.9 million due
to decreases in checkbook sales and other income related to the acquired
Atlantic loan portfolio. Income from security transactions increased by $0.2
million in the first quarter of 1994 due to a change in investment strategies
corresponding to the adoption of FAS 115.
Total non-interest expense was $29.6 million during the three months
ended March 31, 1994, up 0.9% over the same period in 1993. Staff costs rose
2.0% in 1994 when compared to 1993, reflecting salary and benefit increases.
Occupancy expense increased by 9.4% in the first quarter of 1994 due to
increases in utility costs and real estate taxes. Equipment expenses decreased
by $0.6 million due to the outsourcing of data processing services from an
inhouse system. This decline is partially offset by a $0.4 million increase in
outside data processing costs. FDIC insurance increased by 1.9% due to deposit
growth. Other operating expenses remained relatively flat in 1994 when compared
to the first quarter of 1993.
The net overhead ratio (non-interest expense less non-interest income
excluding security transactions divided by average earning assets) is a measure
of the company's ability to control costs and equalizes the comparison of
differently sized operations. As this ratio decreases, more of the net interest
margin earned flows to net income. One Valley's net overhead ratio for the
first three months of 1994 was 2.56%, down from 2.68% during all of 1993 but up
from the 2.51% during the first three months of 1993. The increase in the first
quarter of 1994 when compared to the first quarter of 1993 is largely due to the
declines in non-interest income discussed above.
Income tax expense increased by $0.8 million, or 17.4%, for the first
three months of 1994 in comparison to 1993. The increase in taxes is a result
of the 12.4% growth in pretax earnings and an increase in corporate income rates
enacted during the third quarter 1993. One Valley's effective income tax rate
for the first three months of 1994 was 32.7% versus 31.3% for the same period
last year.
FINANCIAL CONDITION
Asset Structure
Total loans continued to grow when compared to the first quarter of 1993.
At March 31, 1994, total loans exceeded March 31, 1993, levels by 8.7% or $174.2
million The consolidated loan-to-deposit ratio has also increased to 73.3% at
March 31, 1994, compared to 69.4% at March 31, 1993. Since year-end 1993, total
loans have increased by 0.2% or $4.3 million, primarily in the real estate
lending area.
Investment portfolio assets decreased $10.9 million or 1.0% from the
level at year-end but remain relatively unchanged from the level one year ago.
Due to strong loan demand during 1993, growth in the investment portfolio has
been relatively modest as One Valley has been able to place more of its
investable funds into the higher yielding loan portfolio.
Effective January 1, 1994, One Valley adopted the provisions of FASB
Statement 115, "Accounting for Certain Investments in Debt and Equity
Securities." In accordance with the provisions of the Statement, One Valley
reevaluated its classification of securities at December 31, 1993 and assigned a
portion of those securities as available-for-sale. The effect of adopting this
Statement was to increase shareholders' equity at January 1, 1994 by $4.8
million, which was the unrealized gain on securities available-for-sale of $7.9
million, net of $3.1 million in deferred income taxes. At March 31, 1994,
securities available-for-sale had a historical cost of $589.5 million, with an
unrealized loss of approximately $0.3 million, which decreased shareholders'
equity by $0.2 million, net of $0.1 million in deferred income taxes.
At the time of purchase, management determines the appropriate
classification of securities. If management has the positive intent and One
Valley has the ability at the time of purchase to hold securities until
maturity, they are classified as held-for-investment and carried at amortized
historical cost adjusted for amortization of premiums and accretion of
discounts, which are recognized as adjustments to interest income. Securities
to be held for indefinite periods of time and not intended to be held to
maturity or on a long-term basis are classified as available-for-sale and
carried at fair value. The corresponding difference between the historical cost
and the current fair value of these securities, the unrealized gain or loss, is
an adjustment to shareholders' equity, net of deferred taxes. Securities
available-for-sale include securities that management intends to use as part of
its asset/liability management strategy and that may be sold in response to
changes in interest rates, resultant prepayment risk, and other factors related
to interest rate and resultant prepayment risk changes.
In order to improve its fully tax equivalent net interest income and to
hedge against higher income tax rates, One Valley increased its holdings of tax-
exempt securities that were offering attractive yields, in the latter part of
1993. As shown on the consolidated average balance sheet (page 16), average
tax-exempt securities in the first quarter of 1994 increased by 89% over the
average first quarter 1993 level. One Valley will continue to monitor its
investment opportunties and may purchase additional tax-exempt securities of
similar yield and quality.
Federal funds sold at March 31, 1994 were $38.4 million, up $7.2 million
from year-end but down $107.1 from a year ago. The decline since March 31, 1993
was partially in response to the strong loan demand experienced in 1993.
Fluctuations in federal funds sold are normal and largely due to planned changes
in the company's asset/liability structure in order to maximize the return on
investment in response to changes in the interest rate environment.
Liability Structure
Total deposits increased $29.6 million or 1.0% from the level at year-end
and increased $83.3 million or 2.9% since March 31, 1993. Non-interest deposits
have increased by 5.3% from year-end, and have increased by 12.4% since March
31, 1993. Interest bearing deposits at March 31, 1994, increased $7.8 million
or 0.3% from year-end and $35.6 million or 1.4% from one year ago. Because of
the low interest rate environment, deposit customers are shortening the
maturities of their deposit reinvestments and seeking higher yielding non-
traditional investment alternatives. One Valley continues to market alternative
products to meet the changing needs of its customers in order to expand its
customer base.
Total short-term borrowings decreased $45.9 million or 21.0% from the
year-end level, but only $24.8 million or 12.6% from the level at March 31,
1993, primarily due to decreases in overnight repurchase agreements. Short-term
borrowings, which consist of Federal funds purchased from correspondent banks
and repurchase agreements with large corporate and public entities, can
fluctuate significantly depending upon the customers' cash needs and the
interest rate environment.
Long-term borrowings declined $3.9 million or 17.1% since year-end 1993
and $21.2 million or 52.9% since March 31, 1993. During 1993, One Valley paid-
off $10.0 million of debt incurred in the purchase of its headquarters, $1.2
million of debt incurred in the purchase of an affiliate, and another $6.1
million in Federal Home Loan Bank (FHLB) advances which were incurred to fund
investments in mortgage backed securities. In 1994, One Valley paid down
another $3.9 million of its FHLB borrowings. The $18.9 of long-term borrowings
at March 31, 1994 was principally consist of FHLB advances used to fund
investments in mortgage backed securites. Approximately, $12.0 of these
advances mature in 1995, and another $5.0 million mature in 1996.
Capital Structure and Liquidity
One Valley's equity-to-asset ratio has increased since year-end. At
March 31, 1994, the ratio was 8.92% compared to 8.68% at December 31, 1993, and
8.36% one year ago. Due to strong earnings the ratio has steadily increased.
One Valley's cash dividend totaling $0.22 per share in the first quarter of
1994, was up 10.0% over the $0.20 per share dividend during the same period in
1993. One Valley's dividend policy coupled with the continued growth in net
income, demonstrates management's commitment to a stable equity-to-asset ratio
benefiting both the investor and the depositors of the local community. One
Valley's risk based capital ratio at March 31, 1994 was 15.0%, well above the
8.0% required, while its Tier I capital ratio was 13.7%. One Valley's strong
capital position is demonstrated further by its leverage ratio of 8.8% compared
to a regulatory guidance of 4.0% to 5.0%. The capital ratios of the banking
subsidiaries also remain strong and allow them to effectively serve the
communities in which they are located.
The capital positions of the banks, coupled with proper asset/liability
matching and the stable nature of the primarily consumer base of core deposits,
results in the maintenance of a strong liquidity position. The liquidity of the
parent company is dependent upon dividends from its banking subsidiaries which,
although restricted by banking regulations, are adequate to meet its cash needs.
Effects of Changing Prices
The results of operations and financial condition presented in this
report are based on historical cost, unadjusted for the effects of inflation.
Inflation affects One Valley in two ways. One is that inflation can result in
increased operating costs which must be absorbed or recovered through increased
prices for services. The second effect is on the purchasing power of the
corporation. Virtually all of a bank's assets and liabilities are monetary in
nature. Regardless of changes in prices, most assets and liabilities of the
banking subsidiaries will be converted into a fixed number of dollars. Non-
earning assets, such as premises and equipment, do not comprise a major portion
of One Valley's assets; therefore, most assets are subject to repricing on a
more frequent basis than in other industries. One Valley's ability to offset
the effects of inflation and potential reductions in future purchasing power
depends primarily on its ability to maintain capital levels by adjusting prices
for its services and to improve net interest income by maintaining an effective
asset/liability mix.
<PAGE>
</TABLE>
<TABLE>
ONE VALLEY BANCORP OF WEST VIRGINIA, INC. AND SUBSIDIARIES
Analysis of Loan Losses and Non-Performing Assets
(unaudited in thousands)
<CAPTION>
For The Three Months
Ended March 31
1994 1993
<S> <C> <C>
Allowance For Loan Losses
Balance, Beginning of Period $36,484 $35,680
Loan Losses 1,136 1,300
Loan Recoveries 584 437
------------- ---------
Net Charge-offs 552 863
Provision For Loan Losses 1,179 1,551
------------- ---------
Balance, End of Period $37,111 $36,368
============= =========
<S> <C> <C>
Total Loans, End of Period $2,173,686 $1,999,455
Allowance For Loan Losses As a % of Total Loans 1.71 1.82
============= =========
<S> <C> <C>
Non-Performing Assets at Quarter End
Non-Accrual Loans $9,057 $14,224
Foreclosed Properties 2,237 6,904
Restructured Loans 323 99
------------- ---------
Total Non-Performing Assets $11,617 $21,227
============= =========
<S> <C> <C>
Non-Performing Assets As a % of Total Loans 0.53 1.06
Loans Past Due Over 90 Days $2,727 $3,383
Loans Past Due Over 90 Days As a % of Total Loans 0.13 0.17
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP OF WEST VIRGINIA, INC. AND SUBSIDIARIES
Consolidated Average Balance Sheets
(unaudited in thousands)
<CAPTION>
Three Months Ended March 31
1994 1993
Amount Yield/Rate Amount Yield/Rate
(pct.) (pct.)
<S> <C> <C> <C> <C>
Assets
Loans
Taxable $2,124,292 8.47 $1,963,919 9.08
Tax-Exempt 33,381 10.69 28,808 10.11
------------ ------------
Total 2,157,673 8.51 1,992,727 9.10
Less: Allowance for Losses 36,737 35,952
------------ ------------
Net Loans 2,120,936 8.65 1,956,775 9.26
Securities
Taxable 913,767 5.55 955,405 6.01
Tax-Exempt 158,206 8.39 83,757 10.81
------------ ------------
Total 1,071,973 5.97 1,039,162 6.39
Federal Funds Sold & Other 47,621 2.93 124,392 3.13
------------ ------------
Total Earning Assets 3,240,530 7.68 3,120,329 8.06
Other Assets 256,377 269,793
------------ ------------
Total Assets $3,496,907 $3,390,122
============ ============
Liabilities And Equity
Interest Bearing Liabilities
Deposits $2,522,167 3.33 $2,471,801 3.88
Short-term Borrowings 200,929 2.80 192,668 3.24
Long-term Borrowings 22,470 4.42 36,011 6.59
------------ ------------
Total Interest
Bearing Liabilities 2,745,566 3.30 2,700,480 3.87
Non-interest Bearing Deposits 409,719 376,345
Other Liabilities 32,148 27,400
------------ ------------
Total Liabilities 3,187,433 3,104,225
Shareholders' Equity 309,474 285,897
------------ ------------
Total Liabilities & Equity $3,496,907 $3,390,122
============ ============
Interest Income To Earning Assets 7.68 8.06
Interest Expense To Earning Assets 2.80 3.35
------ ------
Net Interest Margin 4.88 4.71
====== ======
<FN> Note: Yields are computed on a fully taxable equivalent basis using the rate of 35%.
</TABLE>
<PAGE>
One Valley Bancorp of West Virginia, Inc.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
a.) Exhibits
11. Statement of Computation of Earnings per Share - page 18 attached
b.) Reports on Form 8-K
January 28, 1994 - Merger of One Valley and Mountaineer Bankshares
completed
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
One Valley Bancorp of West Virginia, Inc.
DATE May 13, 1994
BY /S/ J. Holmes Morrison
J. Holmes Morrison
President and
Chief Executive Officer
BY /S/ Laurance G. Jones
Laurance G. Jones
Senior Vice President & Treasurer
<TABLE>
Exhibit 11
Statement Re: Computation of Earnings per Share
<CAPTION>
For Three Months
Ended March 31
1994 1993
<S> <C> <C>
PRIMARY:
Average Shares Outstanding 17,250,000 17,228,000
Net effect of the assumed exercise
of stock options - based on the
treasury stock method 96,000 126,000
------------ ------------
Total 17,346,000 17,354,000
============ ============
Net Income $10,831,000 $9,838,000
Per Share Amount $0.62 $0.57
============ ============
FULLY DILUTED:
Average Shares Outstanding 17,250,000 17,228,000
Net effect of the assumed exercise
of stock options - based on the
treasury stock method 96,000 126,000
------------ ------------
Total 17,346,000 17,354,000
============ ============
Net Income $10,831,000 $9,838,000
Per Share Amount $0.62 $0.57
============ ============
</TABLE>
