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 JUNE 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission file number 010042
One Valley Bancorp of West Virginia, Inc.
(Exact name of registrant as specified in its charter)
West Virginia 55-0609408
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
One Valley Square, Charleston, West Virginia 25326
(Address of principal executive offices)
(Zip Code)
(304) 348-7000
(Registrant's telephone number, including area code)
Not applicable
(Former name, address, and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X No
The number of shares outstanding of each of the issuer's classes of common stock
as of June 30, 1994 was:
Common Stock, $10.00 par value -- 17,110,658 shares
<PAGE>
One Valley Bancorp of West Virginia, Inc.
Part I. Financial Information
Item 1. Financial Statements.
The unaudited interim consolidated financial statements of One Valley Bancorp
of West Virginia, Inc. (One Valley) or (Registrant) are included on pages 3 -
7 of this report.
These consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all the information and footnotes required by generally
accepted accounting principles for annual year-end financial statements. In
the opinion of management, all adjustments considered necessary for a fair
presentation have been included and are of a normal recurring nature.
Operating results for the six month period ended June 30, 1994 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1994. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Management's discussion and analysis of financial condition and results of
operations is included on pages 8 - 16 of this report.
<PAGE>
<TABLE>
ONE VALLEY BANCORP OF WEST VIRGINIA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited in thousands)
<CAPTION>
June 30 December 31 June 30
1994 1993 1993
<S> <C> <C> <C>
Assets
Cash and Due From Banks $129,555 $141,195 $149,352
Interest Bearing Deposits With Other Banks 3,518 8,028 3,545
Federal Funds Sold 2,400 31,145 103,570
------------ ------------ ------------
Cash and Cash Equivalents 135,473 180,368 256,467
Securities
Available-for-Sale, at fair value (Note B) 615,737 0 0
Held-for-Investment (Estimated Fair Value,
June 30, 1994 - $452,522; December 31, 1993 - $1,081,742;
June 30, 1993 - $1,085,240) 462,665 1,060,036 1,057,585
Loans
Total Loans 2,241,449 2,169,372 2,060,524
Less: Allowance For Loan Losses 37,572 36,484 37,029
------------ ------------ ------------
Net Loans 2,203,877 2,132,888 2,023,495
Bank Premises & Equipment - Net 82,230 80,233 80,010
Other Assets 55,713 59,350 55,568
------------ ------------ ------------
Total Assets $3,555,695 $3,512,875 $3,473,125
============ ============ ============
Liabilities and Shareholders' Equity
Deposits
Non-interest Bearing $420,409 $412,317 $400,069
Interest Bearing 2,497,750 2,524,418 2,486,002
------------ ------------ ------------
Total Deposits 2,918,159 2,936,735 2,886,071
Short-term Borrowings
Federal Funds Purchased 34,638 14,012 22,236
Repurchase Agreements and Other Borrowings 238,286 204,408 192,612
------------ ------------ ------------
Total Short-term Borrowings 272,924 218,420 214,848
Long-term Borrowings 27,477 22,788 39,756
Other Liabilities 23,299 29,749 37,434
------------ ------------ ------------
Total Liabilities 3,241,859 3,207,692 3,178,109
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 17,528,658 shares at June 30, 1994;
17,516,795 shares at December 31, 1993;
17,506,795 shares at June 30, 1993 175,287 175,168 175,068
Capital Surplus 25,915 25,830 25,806
Retained Earnings 122,624 107,314 97,271
Unrealized (Losses) on Securities Available-for-Sale,
net of deferred taxes; (Note B) (2,929) 0 0
Treasury Stock - 418,000 shares at June 30, 1994,
270,000 shares at December 31, 1993
and June 30, 1993; at cost (7,061) (3,129) (3,129)
------------ ------------ ------------
Total Shareholders' Equity 313,836 305,183 295,016
------------ ------------ ------------
Total Liabilities and Shareholders' Equity $3,555,695 $3,512,875 $3,473,125
============ ============ ============
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP OF WEST VIRGINIA, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(unaudited in thousands, except per share data)
<CAPTION>
For The Three Months For The Six Months
Ended June 30 Ended June 30
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Interest Income
Interest and Fees on Loans
Taxable $45,776 $44,669 $90,147 $88,652
Tax-Exempt 553 453 1,125 920
------------ ------------ ------------ ------------
Total 46,329 45,122 91,272 89,572
Interest on Investment Securities
Taxable 11,974 14,753 24,657 29,097
Tax-Exempt 2,841 1,487 4,997 2,958
------------ ------------ ------------ ------------
Total 14,815 16,240 29,654 32,055
Other Interest Income 150 838 494 1,798
------------ ------------ ------------ ------------
Total Interest Income 61,294 62,200 121,420 123,425
Interest Expense
Deposits 20,693 22,936 41,410 46,569
Short-term Borrowings 1,432 1,549 2,821 3,086
Long-term Borrowings 289 661 534 1,246
------------ ------------ ------------ ------------
Total Interest Expense 22,414 25,146 44,765 50,901
------------ ------------ ------------ ------------
Net Interest Income 38,880 37,054 76,655 72,524
Provision For Loan Losses 1,213 1,564 2,392 3,115
------------ ------------ ------------ ------------
Net Interest Income
After Provision For Loan Losses 37,667 35,490 74,263 69,409
Other Income
Trust Department Income 2,065 1,859 4,077 3,604
Service Charges on Deposit Accounts 2,977 3,096 5,586 5,682
Real Estate Loan Processing & Servicing Fees 1,310 1,747 2,728 3,893
Other Service Charges and Fees 1,126 1,051 2,276 1,711
Other Operating Income 3,333 2,393 5,043 4,984
Securities Transactions (504) 58 (307) 58
------------ ------------ ------------ ------------
Total Other Income 10,307 10,204 19,403 19,932
Other Expenses
Salaries and Employee Benefits 15,863 14,935 31,791 30,552
Occupancy Expense - Net 1,393 1,449 2,954 2,876
Equipment Expenses 2,071 2,645 4,129 5,285
Federal Deposit Insurance 1,662 1,621 3,323 3,251
Outside Data Processing 1,333 1,416 2,241 1,888
Other Operating Expenses 7,750 7,726 15,238 15,270
------------ ------------ ------------ ------------
Total Other Expenses 30,072 29,792 59,676 59,122
------------ ------------ ------------ ------------
Income Before Taxes 17,902 15,902 33,990 30,219
Applicable Income Taxes 5,853 5,243 11,110 9,722
------------ ------------ ------------ ------------
Net Income $12,049 $10,659 $22,880 $20,497
============ ============ ============ ============
Net Income Per Common Share $0.70 $0.62 $1.33 $1.19
============ ============ ============ ============
Based on Average Shares Outstanding of 17,165 17,237 17,207 17,232
</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) $0
Effect of adopting FAS 115 0 0 0 0 4,765
Six Months Ended June 30, 1994
Net Income 0 0 22,880 0 0
Cash Dividends ($.44 per share) 0 0 (7,570) 0 0
Change in Fair Value of Securities
Available for Sale, net of deferred taxes 0 0 0 0 (7,694)
Treasury Shares Purchased 0 0 0 (3,932) 0
Stock Options Exercised 119 85 0 0 0
------------ ------------ ------------ ------------ ------------
Balance June 30, 1994 $175,287 $25,915 $122,624 ($7,061) ($2,929)
============ ============ ============ ============ ============
Balance December 31, 1992 $174,935 $25,352 $83,380 ($3,129) $0
Six Months Ended June 30, 1993
Net Income 0 0 20,497 0 0
Cash Dividends ($.40 per share) 0 0 (6,606) 0 0
Stock Options Exercised 133 454 0 0 0
------------ ------------ ------------ ------------ ------------
Balance June 30, 1993 $175,068 $25,806 $97,271 ($3,129) $0
============ ============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP OF WEST VIRGINIA, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited in thousands)
<CAPTION>
For The Six Months
Ended June 30
1994 1993
<S> <C> <C>
Operating Activities
Net Income $22,880 $20,497
Adjustments To Reconcile Net Income To Net Cash
Provided by Operating Activities:
Provision For Loan Losses 2,392 3,115
Depreciation 3,647 3,759
Amortization and Accretion 1,074 4,511
Securities Loss (Gains) 307 (58)
Increase (Decrease) Due to Changes In:
Accrued Interest Receivable (385) 1,687
Accrued Interest Payable (361) (839)
Other Assets and Other Liabilities (1,264) 8,221
------------ ------------
Net Cash Provided by Operating Activities 28,290 40,893
Investing Activities
Proceeds From Sales of Securities Available for Sale 70,497 0
Proceeds From Sales of Securities Held to Maturity 179 4,290
Proceeds From Maturities of Securities Available for Sale 134,655 0
Proceeds From Maturities of Securities Held to Maturity 35,345 216,140
Purchases of Securities Available for Sale (183,034) 0
Purchases of Securities Held to Maturity (84,075) (254,537)
Net Increase In Loans (70,427) (57,809)
Purchases of Premises and Equipment (5,644) (2,491)
------------ ------------
Net Cash Used in Investing Activities (102,504) (94,407)
Financing Activities
Net Change in Interest Bearing and Non-interest Bearing Deposits (18,576) 4,497
Net Increase in Federal Funds Purchased 20,626 4,518
Net Increase in Other Short-term Borrowings 33,878 6,010
Proceeds From Long-term Borrowings 14,699 12,038
Repayment of Long-term Debt (10,010) (2,500)
Proceeds From Issuance of Common Stock 204 587
Dividends Paid (7,570) (6,606)
------------ ------------
Net Cash Provided by Financing Activities 29,319 18,544
------------ ------------
(Decrease) in Cash and Cash Equivalents (44,895) (34,970)
Cash And Cash Equivalents at Beginning of Year 180,368 291,437
------------ ------------
Cash And Cash Equivalents, June 30 $135,473 $256,467
============ ============
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
Note A - Basis of Presentation
The accounting and reporting policies of One Valley conform to generally
accepted accounting principles and practices in the banking industry. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The interim financial information included in this report is
unaudited. In the opinion of management, all adjustments necessary for a fair
presentation of the results of the interim periods have been made. These
notes are presented in conjunction with the Notes to Consolidated Financial
Statements included in the Annual Report of One Valley.
Note B - Accounting Change
Effective January 1, 1994, One Valley adopted the provisions of FASB Statement
115, "Accounting for Certain Investments in Debt and Equity Securities." In
accordance with the provisions of the Statement, One Valley reevaluated its
classification of securities and assigned a portion of its securities
investment as available-for-sale. Securities designated available-for-sale
are presented at fair value. The corresponding unrealized gain or loss on
these securities due to any difference between historical cost and current
fair value is presented as a component of Shareholders' Equity, net of
deferred taxes. Securities designated as available-for-sale at December 31,
1993 approximated $632,380. The effect of adopting this Statement was to
increase the opening balance of shareholders' equity at January 1, 1994 by
$4,765, which was the net unrealized gain on securities available-for-sale of
$7,942, net of $3,177 in deferred income taxes. At June 30, 1994, securities
available-for-sale had a historical cost of $620,618, with a net unrealized
loss of approximately $4,881, which decreased shareholders' equity by $2,929,
net of $1,952 in deferred income taxes.
Note C - Mergers
At the close of business on January 28, 1994, One Valley acquired all of the
outstanding stock of Mountaineer Bankshares of W.Va., Inc. in exchange for
4,350,000 shares of One Valley common stock. This combination was accounted
for as a pooling-of-interest. Accordingly, all prior period financial
information has been restated to reflect the merger of the two companies as
though they had always been combined.
<PAGE>
One Valley Bancorp of West Virginia, Inc.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
June 30, 1994
INTRODUCTION AND SUMMARY
Net income for the second quarter of 1994 totaled $12.0 million, an
increase of 13.0% over the $10.7 million earned in the same quarter of 1993.
On a per share basis, net income of $0.70 for the second quarter of 1994
increased 12.9% over the $0.62 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.
Net income for the first six months of 1994 totaled $22.9 million, an
11.6% increase over the first six months of 1993. Earnings per share during
the six month period were $1.33, up 11.8% over the $1.19 earned in the first
six months of 1993.
Return on average assets (ROA) measures how effectively One Valley
utilizes its assets to produce net income. ROA was 1.30% in the first six
months of 1994, a significant increase over the 1.20% earned during the first
six months of 1993. Return on average equity (ROE) also increased, from
14.21% for the first six months of 1993 to 14.62% earned over the first six
months of 1994.
The following discussion is an analysis of the financial condition and
results of operations of One Valley for the first six 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 six months ended June 30, 1994 was $80.0
million on a fully tax-equivalent basis, a 7.1% increase from the $74.6
million earned during the same period in 1993. This increase is largely due
to an increase in earning assets greater than the increase in interest bearing
liabilities during the year-to-date comparision. Average earning assets
increased by 2.9% in the first six months of 1994 over the same period in
1993, while average interest bearing liabilities increased by 1.0% 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 27
basis points to 7.73% in the first six months of 1994 from 8.00% in the first
six months of 1993. During the same period, the cost of interest bearing
liabilities declined 47 basis points to 2.78% from last year's 3.25% level.
Due to the higher volume of earning assets, the net interest margin increased
to 4.95% during the first six months of 1994, compared to 4.75% during the
first six months of 1993. At June 30, 1994, One Valley's asset/liability
structure was neither asset nor liability sensitive in the six month time
frame. Thus, normal fluctuations in market interest rates should have little
impact One Valley's net interest margin.
Credit Experience
The provision for loan losses was $2.4 million for the six months ended
June 30, 1994, a 23% decline from the $3.1 million provision during the first
six 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 six months of 1994 was 0.22% annualized compared to 0.31% in the first
six months of 1993. Net charge-offs as a percentage of average total loans in
the first six months of 1994 also decreased to 0.12% on an annualized basis,
down from an annualized 0.18% during the first six months of 1993.
Total non-performing assets at June 30, 1994 were 0.45% of period-end
loans, a decrease from the 0.58% at year-end 1993 and a greater decline from
the 0.93% at June 30, 1993. Loans past due over 90 days have also declined.
At June 30, 1994, loans past due over 90 days were 0.12% of outstanding loans,
a decrease from the 0.15% at year-end 1993 and 0.16% at June 30, 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 June
30, 1994, the allowance was 1.68% of outstanding loans, compared to 1.80% 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 $19.4 million through the first six months
of 1994, down 2.7% from the $19.9 million earned during the same period in
1993. Excluding securities transactions however, non-interest income was down
less than 1% in the six month comparison. Trust income increased by 13.1%, or
$0.4 million, over the first six months of last year, primarily due to an
increase in the number of trust accounts and growth in the size of existing
trust accounts. Other service charges and fees increased by $0.6 million due
to increases in investment fees and other commissions One Valley has earned on
new products and services offered. Other operating income remainied
relatively flat when comparing year-to-date 1994 results with the same period
of 1993. These increases were more than offset by declines in mortgage loan
processing and service fees and service charges on deposit accounts. As
interest rates declined in 1993, mortgages serviced by One Valley for others
have refinanced or paid-off, thus reducing One Valley's servicing fee revenue.
Furthermore, recent increases in interest rates have also reduced the fees
from the origination and sale of loans in the secondary market. With the
decline in the mortgage loan servicing portfolio, it is anticipated that
throughout the remainder of 1994 servicing fee revenue will be significantly
lower than the prior year. Income from security transactions decreased by
$0.4 million in the first six months of 1994 due to a change in investment
strategies corresponding to the adoption of FAS 115.
Total non-interest expense was $59.7 million during the six months ended
June 30, 1994, up 0.9% over the same period in 1993. Staff costs rose 4.1% in
1994 when compared to 1993, reflecting normal salary and benefit increases.
Occupancy expense increased by 2.7% in the first six months of 1994 primarily
due to increases in real estate taxes. Equipment expenses decreased by $1.2
million largely due to the outsourcing of data processing services previously
on an in-house system. This decline is partially offset by a $0.4 million
increase in outside data processing costs. FDIC insurance increased by 2.2%
due to deposit growth. Other operating expenses remained relatively flat in
1994 when compared to the first six months 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 six months of 1994 was 2.46%, down from 2.68% during all of 1993
and down from the 2.49% during the first six months of 1993. The decline in
1994, when compared to the 1993 ratios, is largely due One Valley's increase
in earning assets in 1994 without a corresponding increase in operating
expenses.
Income tax expense increased by $1.4 million, or 14.3%, for the first
six months of 1994 in comparison to 1993. The increase in taxes is a result
of the 12.5% growth in pretax earnings and an increase in corporate income tax
rates enacted during the third quarter 1993. One Valley's effective income
tax rate for the first six months of 1994 was 32.7% versus 32.2% for the same
period last year.
FINANCIAL CONDITION
Asset Structure
Total loans continued to grow when compared to the first six months of
1993. At June 30, 1994, total loans exceeded June 30, 1993, levels by 8.8% or
$180.9 million. The consolidated loan-to-deposit ratio has also increased to
76.8% at June 30, 1994, compared to 71.4% at June 30, 1993. Since year-end
1993, total loans have increased by 3.3% or $72.1 million, primarily in the
consumer installment loan and real estate lending areas.
Investment portfolio assets increased $18.4 million or 1.7% from the
level at year-end and increased $20.8 million or 2.0% 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." 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 June 30, 1994, securities available-for-
sale had a historical cost of $620.6 million, with an unrealized loss of
approximately $4.9 million, which decreased shareholders' equity by $2.9
million, net of $2.0 million in deferred income taxes.
At the time of purchase, management determines the appropriate
classification of securities. If management has the positive intent and One
Valley has the ability at the time of purchase to hold securities until
maturity, they are classified as held-for-investment and carried at amortized
historical cost adjusted for amortization of premiums and accretion of
discounts, which are recognized as adjustments to interest income. Securities
to be held for indefinite periods of time and not intended to be held to
maturity or on a long-term basis are classified as available-for-sale and
carried at fair value. The corresponding difference between the historical
cost and the current fair value of these securities, the unrealized gain or
loss, is an adjustment to shareholders' equity, net of deferred taxes.
Securities available-for-sale include securities that management intends to
use as part of its asset/liability management strategy and that may be sold in
response to changes in interest rates, resultant prepayment risk, and other
factors related to interest rate and resultant prepayment risk changes.
In order to improve its fully tax equivalent net interest income and to
hedge against higher income tax rates, One Valley increased its holdings of
tax-exempt securities that were offering attractive yields, in the latter part
of 1993 through the first part of 1994. As shown on the consolidated average
balance sheet (page 16), average tax-exempt securities in the first half of
1994 are more than double the average during first six months 1993. One
Valley will continue to monitor its investment opportunties and may purchase
additional tax-exempt securities of similar yield and quality.
Federal funds sold at June 30, 1994, were $2.4 million, down $28.7
million from year-end and down $101.2 from a year ago. The decline since June
30, 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.
One Valley's investments have been limited to traditional investment
securities and the company does not currently have any investments in
derivative instruments. However, One Valley continually evaluates all
investment alternatives in its management of interest rate risk and
asset/liability structure.
Liability Structure
Total deposits decreased $18.6 million or 0.6% from the level at year-
end and increased $32.1 million or 1.1% since June 30, 1993. Non-interest
deposits have increased by 2.0% from year-end, and have increased by 5.1%
since June 30, 1993. Interest bearing deposits at June 30, 1994, however,
decreased $26.7 million or 1.1% from year-end and $11.7 million or 0.5% 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 increased $54.5 million or 25.0% from the
year-end level, and $58.1 million or 27.0% from the level at June 30, 1993.
Due to increased loan demand and declines in total deposits, One Valley's
short-term borrowings have increased to fund the loan growth. Short-term
borrowings, which consist of Federal funds purchased from correspondent banks
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 increased $4.7 million or 20.6% since year-end 1993
but decreased $12.3 million or 30.9% since June 30, 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. The $27.5 of
long-term borrowings at June 30, 1994 principally consisted of FHLB advances
used to fund mortgage backed investments and loans. Approximately, $8.0
million of these advances mature in 1994, $11.5 mature in 1995, and another
$5.0 million mature in 1996. Proceeds from maturing investments will be used
to meet the demands for maturing FHLB advances.
Capital Structure and Liquidity
One Valley's equity-to-asset ratio has increased since year-end. At
June 30, 1994, the ratio was 8.83% compared to 8.68% at December 31, 1993, and
8.49% one year ago. Due to strong earnings the ratio has steadily increased.
One Valley's cash dividends totaling $0.44 per share through the first six
months of 1994, were up 10.0% over the $0.40 per share in dividends during the
same period in 1993. One Valley's dividend policy coupled with the continued
growth in net income, demonstrates management's commitment to a stable equity-
to-asset ratio benefiting both the investor and the depositors of the local
community. One Valley's risk based capital ratio at June 30, 1994 was 14.9%,
well above the 8.0% required, while its Tier I capital ratio was 13.6%. One
Valley's strong capital position is demonstrated further by its leverage ratio
of 8.7% compared to a regulatory guidance of 4.0% to 5.0%. The capital ratios
of the banking subsidiaries also remain strong and allow them to effectively
serve the communities in which they are located.
The capital positions of the banks, coupled with proper asset/liability
matching and the stable nature of the primarily consumer base of core
deposits, results in the maintenance of a strong liquidity position. The
liquidity of the parent company is dependent upon dividends from its banking
subsidiaries which, although restricted by banking regulations, are adequate
to meet its cash needs.
Effects of Changing Prices
The results of operations and financial condition presented in this
report are based on historical cost, unadjusted for the effects of inflation.
Inflation affects One Valley in two ways. One is that inflation can result in
increased operating costs which must be absorbed or recovered through
increased prices for services. The second effect is on the purchasing power
of the corporation. Virtually all of a bank's assets and liabilities are
monetary in nature. Regardless of changes in prices, most assets and
liabilities of the banking subsidiaries will be converted into a fixed number
of dollars. Non-earning assets, such as premises and equipment, do not
comprise a major portion of One Valley's assets; therefore, most assets are
subject to repricing on a more frequent basis than in other industries. One
Valley's ability to offset the effects of inflation and potential reductions
in future purchasing power depends primarily on its ability to maintain
capital levels by adjusting prices for its services and to improve net
interest income by maintaining an effective asset/liability mix.
<PAGE>
<TABLE>
ONE VALLEY BANCORP OF WEST VIRGINIA, INC. AND SUBSIDIARIES
Analysis of Loan Losses and Non-Performing Assets
(unaudited in thousands)
<CAPTION>
For The Three Months For The Six Months
Ended June 30 Ended June 30
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Allowance For Loan Losses
Balance, Beginning of Period $37,111 $36,368 $36,484 $35,680
Loan Losses 1,189 1,525 2,325 2,825
Loan Recoveries 437 622 1,021 1,059
------------------------ ------------------------
Net Charge-offs 752 903 1,304 1,766
Provision For Loan Losses 1,213 1,564 2,392 3,115
------------------------ ------------------------
Balance, End of Period $37,572 $37,029 $37,572 $37,029
======================== ========================
<S> <C> <C.
Total Loans, End of Period $2,241,449 $2,060,524
Allowance For Loan Losses As a % of Total Loans 1.68 1.80
========================
<S> <C> <C>
Non-Performing Assets at Quarter End
Non-Accrual Loans $7,605 $12,251
Foreclosed Properties 2,404 6,673
Restructured Loans 169 239
------------------------
Total Non-Performing Assets $10,178 $19,163
========================
<S> <C. <C>
Non-Performing Assets As a % of Total Loans 0.45 0.93
Loans Past Due Over 90 Days $2,741 $3,201
Loans Past Due Over 90 Days As a % of Total Loans 0.12 0.16
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP OF WEST VIRGINIA, INC. AND SUBSIDIARIES
Consolidated Average Balance Sheets
(unaudited in thousands)
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
1994 1993 1994 1993
Amount Yield/Rate Amount Yield/Rate Amount Yield/Rate Amount Yield/Rate
(pct.) (pct.) (pct.) (pct.)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Loans
Taxable $2,161,681 8.49 $1,998,719 8.96 $2,143,090 8.48 $1,981,415 9.02
Tax-Exempt 33,896 10.07 26,962 10.37 33,640 10.38 27,880 10.24
------------ ------------ ------------ ------------
Total 2,195,577 8.52 2,025,681 8.98 2,176,730 8.51 2,009,295 9.04
Less: Allowance for Losses 37,308 36,923 37,024 36,440
------------ ------------ ------------ ------------
Net Loans 2,158,269 8.67 1,988,758 9.15 2,139,706 8.66 1,972,855 9.21
Securities
Taxable 889,233 5.39 1,010,045 5.84 901,432 5.47 982,876 5.92
Tax-Exempt 184,628 9.47 85,746 10.67 171,490 8.97 84,757 10.74
------------ ------------ ------------ ------------
Total 1,073,861 6.09 1,095,791 6.22 1,072,922 6.03 1,067,633 6.30
Federal Funds Sold & Other 19,819 3.04 106,037 3.17 33,643 2.96 115,164 3.15
------------ ------------ ------------ ------------
Total Earning Assets 3,251,949 7.78 3,190,586 7.94 3,246,271 7.73 3,155,652 8.00
Other Assets 262,378 264,704 260,693 267,234
------------ ------------ ------------ ------------
Total Assets $3,514,327 $3,455,290 $3,506,964 $3,422,886
============ ============ ============ ============
Liabilities And Equity
Interest Bearing Liabilities
Deposits $2,527,311 3.28 $2,493,784 3.69 $2,524,753 3.31 $2,482,853 3.78
Short-term Borrowings 209,669 2.74 211,649 2.94 205,323 2.77 202,211 3.08
Long-term Borrowings 19,918 5.82 39,722 6.67 21,187 5.08 37,877 6.63
------------ ------------ ------------ ------------
Total Interest
Bearing Liabilities 2,756,898 3.26 2,745,155 3.67 2,751,263 3.28 2,722,941 3.77
Non-interest Bearing Deposits. 419,197 391,897 414,484 384,164
Other Liabilities 24,136 27,209 28,120 27,304
------------ ------------ ------------ ------------
Total Liabilities 3,200,231 3,164,261 3,193,867 3,134,409
Shareholders' Equity 314,096 291,029 313,097 288,477
------------ ------------ ------------ ------------
Total Liabilities & Equity $3,514,327 $3,455,290 $3,506,964 $3,422,886
============ ============ ============ ============
Interest Income To Earning Assets 7.78 7.94 7.73 8.00
Interest Expense To Earning Assets 2.76 3.16 2.78 3.25
------ ------ ------ ------
Net Interest Margin 5.02 4.78 4.95 4.75
====== ====== ====== ======
<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 4. Submission of Matters to a Vote of Security Holders.
The Regular Annual Meeting of Shareholders of One Valley was held on
April 26, 1994. At that meeting the matters set forth below were voted upon.
The number of votes cast for, against or withheld, as well as the number of
abstentions and broker non-votes concerning each matter and nominee are
indicated in the following tabulation.
1. Election of Directors
Withheld & Broker
Nominee For Against Abstensions Non-Votes
Chambers 15,014,141 0 28,074 0
Highland 14,997,800 0 28,074 0
Kamm 15,037,325 0 28,074 0
Lowe 14,955,927 0 28,074 0
Maier 15,039,163 0 28,074 0
Peyton 15,014,896 0 28,074 0
Rice 15,011,770 0 28,074 0
Walker 14,960,053 0 28,074 0
Wehrle 14,935,254 0 28,074 0
Wilkerson 15,014,426 0 28,074 0
2. Approve increase in maximum number of directors from 27 to 33
Withheld & Broker
For Against Abstensions Non-Votes
13,971,580 523,405 100,637 430,527
3. Approve Selection of Auditors
Withheld & Broker
For Against Abstensions Non-Votes
14,948,555 39,559 38,034 0
<PAGE>
One Valley Bancorp of West Virginia, Inc.
Item 6. Exhibits and Reports on Form 8-K
a.) Exhibits
10.1. One Valley Bancorp of West Virginia, Inc. Management
Incentive Compensation Plan as amended and restated January 1, 1992 - pages
19 through 28 attached.
11. Statement of Computation of Earnings per Share - page 29
attached
b.) Reports on Form 8-K
April 26, 1994 - Approval by board of directors to repurchase as
Treasury Stock an additional 400,000 shares of One Valley common stock.
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 August 11, 1994
BY /S/ J. Holmes Morrison
J. Holmes Morrison
President and
Chief Executive Officer
BY /S/ Laurance G. Jones
Laurance G. Jones
Executive Vice President & Treasurer
<TABLE>
Exhibit 11
Statement Re: Computation of Earnings per Share
<CAPTION>
For The Three Months For The Six Months
Ended June 30 Ended June 30
1994 1993 1994 1993
<S> <C> <C> <C> <C>
PRIMARY:
Average Shares Outstanding 17,165,000 17,237,000 17,207,000 17,232,000
Net effect of the assumed exercise
of stock options - based on the
treasury stock method 93,000 108,000 95,000 117,000
------------ ------------ ------------ ------------
Total 17,258,000 17,345,000 17,302,000 17,349,000
============ ============ ============ ============
Net Income $12,049,000 $10,659,000 $22,880,000 $20,497,000
Per Share Amount $0.70 $0.61 $1.32 $1.18
============ ============ ============ ============
FULLY DILUTED:
Average Shares Outstanding 17,165,000 17,237,000 17,207,000 17,232,000
Net effect of the assumed exercise
of stock options - based on the
treasury stock method 102,000 108,000 105,000 117,000
------------ ------------ ------------ ------------
Total 17,267,000 17,345,000 17,312,000 17,349,000
============ ============ ============ ============
Net Income $12,049,000 $10,659,000 $22,880,000 $20,497,000
Per Share Amount $0.70 $0.61 $1.32 $1.18
============ ============ ============ ============
</TABLE>
<PAGE>
Exhibit 10.1
AMENDED AND RESTATED
MANAGEMENT INCENTIVE COMPENSATION PLAN OF
ONE VALLEY BANCORP OF WEST VIRGINIA, INC.
January 1, 1992
<PAGE>
I. PURPOSE
The purpose of this Plan is to further the interests of One Valley
Bancorp (OVB) of West Virginia, Inc., its participating subsidiaries and
its shareholders by providing selected key officers of the Corporation
and its subsidiaries, who are able to contribute materially to the
success and profitability of OVB, with an opportunity to earn incentive
compensation awards. Such awards are designed to recognize and reward
outstanding performance and individual contributions and give key
officers an interest in OVB parallel to that of the shareholders, thus
enhancing the proprietary and personal interest of the Plan Participants
in OVB's continued success and progress. This Plan is also expected to
enhance the likelihood of OVB and its subsidiaries to attract and retain
key employees.
II. DEFINITIONS
a) Affiliate Bank - A banking subsidiary of One Valley Bancorp, other
than One Valley Bank, National Association.
b) Committee - Compensation Committee of the Board of Directors of One
Valley Bancorp.
c) Plan Earnings Per Share (EPS) - Plan Net Income divided by the
average number of shares of common stock of the Corporation
outstanding during the Plan Year.
d) Effective Date - The date of inception of the Plan, January 1,
1983.
e) One Valley Bancorp - One Valley Bancorp of West Virginia, Inc.;
also referred to as the Corporation, and as OVB.
f) Participant - An employee of the Corporation or of a Participating
Employer who has been selected by the Committee to participate in
the Plan.
g) Participant Award Opportunity (PAO) - The percentage of Plan
Compensation that a Participant is approved to receive under the
Plan. The amount increases as relative position level within the
Corporation increases. The amounts are set by the Committee, but
absent Committee direction to the contrary, they are as follows:
PARTICIPANT
POSITION AWARD OPPORTUNITY
CEO, OVB 35%
CEO, One Valley Bank, N.A. 30%
OVB Executive Management 27.5%
All Other Affiliate Bank CEOs 25%
Senior Officers 20%
Other Management 10 - 15%
h) Participating Employer - A participating subsidiary of the
Corporation.
i) Plan - The Management Incentive Compensation Plan of One Valley
Bancorp of West Virginia, Inc.; also referred to as MICP.
j) Plan Compensation - The total base salary paid to a Participant by
the Corporation or by a Participating Employer for a Plan Year.
Compensation of a Participant who is at any time simultaneously in
the employ of more than one Participating Employer shall be the sum
of such compensation received by the Participant from all such
Participating Employers. Compensation shall include amounts
deferred pursuant to Code Section 125.
k) Plan Net Income (PNI) - Net income as reported in the consolidated
financial statements of the Corporation for the Plan Year,
adjusted for any non-recurring charges or credits, net of tax,
with the intent being to include income actually derived from the
ongoing operations of the Corporation and its subsidiaries.
l) Plan Year - A calendar year beginning January 1 and ending December
31.
III. SELECTION OF PLAN PARTICIPANTS
The selection of Plan Participants will be made on an annual basis by the
Committee. The selection of the Participants by the Committee shall be
made on the recommendation of the CEO of the Corporation or on the
recommendation of such other senior officer(s) of the Corporation as the
CEO may designate, but the Committee shall have sole authority to act
with respect to the selection award opportunity and participation in the
Plan.
IV. SUMMARY OF PLAN DESIGN
The Plan contains two major components: a Corporate Component and a
Unit/Individual Component...for each Participant.
a) The Corporate Component is that portion of a participant's award
attributable to the earnings performance of One Valley Bancorp for
the Plan Year as measured by EPS. Corporate EPS Threshold, Target
and Maximum levels of the Corporate Component are established by
senior Corporation management and approved by the Compensation
Committee.
b) The Unit/Individual Component is that portion of a Participant's
award attributable to the Participant's measured performance in
meeting unit and individual goals established for the Plan Year.
Unit/Individual goals are established by each Participant's
immediate supervisor and approved by OVB executive management.
V. DETAILS OF PLAN DESIGN
The Plan is comprised of the following:
A) Corporate Component
A corporate earnings per share (EPS) Target is established
annually, which is typically the EPS budget for the Corporation for
the Plan Year and which is considered to have a 50/50 probability
of achievement. An EPS Threshold below the EPS Target is
established which is deemed to have an 80% probability of
achievement and below which no award is paid under the Plan for the
Plan Year; except as may be permitted under Section VII., Item G.
An EPS Maximum is also established which is deemed to have a 20% or
less probability of achievement.
B) Unit/Individual Component
There are expected to be three (3) to five (5) such goals, each of
which will have a designated weighting (to total 100%) of the total
Unit/Individual Component, and each goal shall have three levels of
achievement designated with applicable payout percentages.
Goals for each affiliate entity, the holding company unit and each
non-banking subsidiary are established annually by the Corporate
CEO, which are incorporated into the MICP goals of each
Participant, as applicable.
Performance goals for this Component are established at 100% for
Target, at 70% for the Minimum acceptable level of performance, and
at 110% for a defined Maximum level of performance (at 130% Maximum
for designated positions - see Tables 1 and 2 which follow in Item
E.2). The Target level of achievement is typically not less than
budget. It is expected that all Participants fully or principally
employed by a Participating Employer of One Valley Bancorp will
have one or more of their Unit/Individual goals pertinent to the
performance of the subject subsidiary unit. For example, Plan
Participants employed by an affiliate bank will have one or more
goals which pertain at least to the overall performance of the
affiliate bank. Plan Participants employed by One Valley Bank,
N.A. will have a goal applicable to the overall performance of the
Bank, and unit goals which relate to the department/division, etc.
in which they work.
C) Participant Award Opportunity
Each Participant has a Participant Award Opportunity (PAO), which
is a designated percentage of their Plan Compensation. The PAO
serves as the basis for calculation of the cash award payout and is
approved by the Compensation Committee for each Participant.
D) Component Opportunity Weights
Each Plan Participant has a percentage of his total award
opportunity allocated to Corporate results (the Corporate
Component) and the balance (to 100%) allocated to Unit/Individual
performance (the Unit/Individual Component).
1) Corporate Component Weight
While the Committee has full discretion to establish such
percentages, the following Corporate Component weightings will
apply absent Committee designation to the contrary:
CORPORATE
POSITION COMPONENT WEIGHTING
CEO, OVB 100%
CEO, One Valley Bank, N.A. 60%
Executive Management of OVB 40 - 50%
All Other Affiliate Bank CEOs 50%
All Other Plan Participants 30 - 50%
2) Unit/Individual Component Weight
The Unit/Individual Component weighting is the difference between
the Corporate Component weighting and 100%, as
UNIT/INDIVIDUAL
POSITION COMPONENT WEIGHTING
CEO, OVB 0%
CEO, One Valley Bank, N.A. 40%
Executive Management of OVB 50 - 60%
All Other Affiliate Bank CEOs 50%
All Other Plan Participants 50 - 70%
E) Component Payout Ranges
1) Corporate Component Payout Range
The Corporate Component Payout will be based on the EPS corporate results
relative to the EPS Target. Achievement of the EPS Target level pays at
100% for the Corporate Component award, and as actual EPS for the Plan
Year varies above or below the Target, the award will vary similarly from
the EPS Threshold, eligible for a 70% payout, to the EPS Maximum,
eligible for a 130% payout.
If EPS Corporate results are less than the Plan Threshold, there is no
payout for the Corporate Component; and if less than the prior year's
achieved EPS, there is no payout from the Plan to any Participant. If
EPS Corporate results exceed the EPS Maximum, payout for the Corporate
Component will not exceed 130%.
2) Unit/Individual Component Payout Range
The Unit/Individual Component payout is subject to the refined measure of
rating performance against established goals for each Participant, in the
categories of Good, Superior, and Outstanding.
The % Range of Awards available to each Participant varies from 70% to
110% for Participants in positions deemed to have an indirect impact on
earnings and performance, and from 70% to 130% for Participants in
positions deemed to have a direct impact on Corporate and/or Unit
results. The Committee has full discretion to determine the applied
Range of Awards for any position/Participant, however the determination
is normally consistent with the direct/indirect impact relationship of
the position on earnings and performance. Table 1 and Table 2 set forth
the performance levels and Range of Awards in each instance.
<PAGE>
Table 1...Direct Impact:
RATING % RANGE OF AWARDS
Outstanding Performance consistently, 110% - 130%
decisively, and repeatedly
exceeds job requirements.
Superior Performance continually meets 90% - 110%
all job requirements and a
pattern of exceeding job
requirements exists.
Good Performance reliably meets job 70% - 90%
requirements and occasionally
exceeds expected level.
Less Than Good No Payout
Table 2...Indirect Impact:
RATING % RANGE OF AWARDS
Outstanding Performance consistently, 100% - 110%
decisively, and repeatedly
exceeds job requirements.
Superior Performance continually meets 85% - 100%
all job requirements and a
pattern of exceeding job
requirements exists.
Good Performance reliably meets job 70% - 85%
requirements and occasionally
exceeds expected level.
Less Than Good No Payout
<PAGE>
VI. CALCULATION OF AWARDS
1. Determine the Plan EPS for the Corporation for the Plan Year and
ensure that it meets or exceeds the Corporate Performance
Threshold. Calculate the EPS percentage (between 70% and 130%) to
apply to each Participant's weighted Corporate Component portion of
his Participant Award Opportunity based on EPS results relative to
Threshold, Target and Maximum levels.
2. Evaluate each Participant and determine that the Participant's
overall Unit/Individual Rating is at the Good level or better.
Establish a percentage within the applicable Range of Awards for
the Participant relative to his overall performance level.
3. Ascertain each Participant's Plan Compensation, PAO, Corporate
Component weighting, and Unit/Individual weighting.
4. Determine each Participant's Corporate Component Payout:
a) Multiply each Participant's Plan Compensation by his PAO;
b) Multiply the product of Step 4a) by the Participant's Corporate
Component weighting percentage;
c) Multiply the product of Step 4b) by the Corporate EPS percentage
factor (determined in Step 1);
d) The resultant of Steps a), b) and c) for each Participant
reflects each Participant's Corporate Component award. The sum of
this resultant for all Participants is the total Corporate
Component payout for all Participants for a Plan Year.
5. Determine each Participant's Unit/Individual Component payout:
a) Multiply each Participant's Plan Compensation by his PAO;
b) Multiply the product of Step 5a) by each Participant's
Unit/Individual Component weighting percentage;
c) Multiply the product of Step 5b) by each Participant's overall
Unit/Individual performance rating percentage;
d) The resultant of Steps a), b) and c) for each Participant
reflects each Participant's Unit/Individual award; and as a total
for all Participants, the total Unit/Individual Component payouts
for all Participants for a Plan Year.
6. The sum of Steps 4 and 5 for each Participant reflects each
Participant's total MICP award, and as a total for all
Participants, the total MICP payouts for a Plan Year.
VII. ELIGIBILITY AND PAYOUT
A. Awards will be paid only to Participants who are actively employed
on December 31 of the Plan Year, except for those Participants who
terminate due to retirement in good standing, death or disability,
for whom an award may be made at the discretion of the Committee.
B. All awards will generally be made within the first calendar quarter
following the completion of the Plan Year as soon as all ratings
and calculations can be made.
C. Awards are to be in cash; however, Participants may elect to defer
award compensation with the approval of the Committee. Such
deferrals shall be in accordance with the provisions of the
Deferred Compensation Plan of the Corporation.
D. A change in a Participant's position responsibilities during the
Plan Year may change his eligibility for awards subject to a review
and determination by the Committee.
E. No award is to be considered a mandatory obligation of the
Corporation or of a Participating Employer and all awards are
payable only at the full discretion of the Committee.
F. No award will be paid to any Participant whose overall
Unit/Individual performance rating is below the "Good" level.
G. In making the EPS calculations for award payout, the Committee has
the discretion to consider nonrecurring financial transactions
which might have occurred during the Plan Year. In calculating
Earnings Per Share for purposes of MICP awards in any Plan Year, no
MICP payments will be made if such payments would reduce net income
per share below the Threshold EPS level.
H. The Plan provides for Committee discretion to reward outstanding
performance of a Participant even if the EPS Threshold is not
achieved, however, in no event shall any award be made under this
Plan if the prior year's corporate EPS is not achieved.
VIII. CHANGES TO THE PLAN
The Board of Directors or the Compensation Committee of OVB may at any
time alter, amend, revise, suspend or discontinue the Plan in their
absolute and sole discretion, but any changes, suspensions or
terminations shall not affect awards made prior thereto.
IX. RIGHT TO CONTINUE EMPLOYMENT AND INTEREST IN AWARDS
Neither the existence of this Plan nor any award granted pursuant to it
shall create any right to continued employment of any Participant by the
Corporation or any Participating Employer. No person, under any
circumstances, shall have any vested or contingent interest in any
particular property or asset of One Valley Bancorp or by any
Participating Employer that may be held either by One Valley Bancorp or
by any Participating Employer, by virtue of any award or any installment
thereof.
