SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) JANUARY 10, 1995
ONE VALLEY BANCORP OF WEST VIRGINIA, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
WEST VIRGINIA 0-10042 55-0609408
(State or other jurisdiction (Commission File Number) (I.R.S. Employer Identification No.)
of incorporation or organization)
</TABLE>
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)
<PAGE>
ONE VALLEY BANCORP OF WEST VIRGINIA, INC.
Item 5. Other Events
As previously reported on Form 8-K, the merger between One Valley Bancorp of
West Virginia, Inc., and Mountaineer Bankshares of W.Va., Inc., was consummated
on January 28, 1994. Set forth below are the Consolidated Financial Statements
of Registrant as of December 31, 1993 and 1992, and for the three years in the
period ended December 31, 1993, and Management's Discussion and Analysis of
Financial Condition and Results of Operations restated to reflect that merger,
which was accounted for as a pooling of interests.
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Audited Consolidated Financial Statements
December 31, 1993
Contents
Report of Independent Auditors . . . . . . . . . . . . . . . . 1, 1A and 1B
Audited Consolidated Financial Statements
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Income . . . . . . . . . . . . . . . 3
Consolidated Statements of Shareholders' Equity . . . . . . . . 4
Consolidated Statements of Cash Flows . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . 6
<PAGE>
Report of 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 (formed as a result of the
merger of One Valley and Mountaineer) 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. These consolidated financial statements have
been restated to give retroactive effect to the merger of One Valley and
Mountaineer on January 28, 1994, which was accounted for using the pooling
of interests method as described in Notes 1 and 3 to the consolidated
financial statements. We did not audit the consolidated financial statements
of Mountaineer Bankshares of W.Va., Inc. and subsidiaries (Mountaineer)
which statements reflect total assets of $738,517 and $720,593 as of
December 31, 1993 and 1992, respectively, and total interest income of
$52,645, $55,403, and $56,818 for each of the three years in the period
ended December 31, 1993. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it
relates to data included for Mountaineer, is based solely on the report of
the other auditors.
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.
/s/ Ernst & Young
January 25, 1994, except for Note 1, as to
which the date is November 30, 1994
1
<PAGE>
Report of Independent Auditors
Board of Directors and Shareholders
Mountaineer Bankshares of W.Va., Inc.
Martinsburg, West Virginia
We have audited the accompanying consolidated balance sheets of
MOUNTAINEER BANKSHARES OF W.VA., INC., as of December 31, 1993 and 1992
and the related consolidated statements of income, changes in shareholders'
equity and cash flows for each of the three years in the period ended
December 31, 1993 (which are not presented separately herein). 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 did not audit the consolidated financial statements
of Sunrise Bancorp, Inc., a wholly-owned subsidiary acquired January 29,
1993, in a pooling-of-interests transaction, which statements reflect total
assets of $64,995,000 as of December 31, 1992, and net income of $570,000
and $484,000 for the years ended December 31, 1992 and 1991, respectively.
Those statements were audited by other auditors and our opinion, in so
far as it relates to the amounts included for Sunrise Bancorp, Inc., is
based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
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
and the report of the other auditors provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements present fairly, in
all material respects, the consolidated financial position of MOUNTAINEER
BANKSHARES OF W.VA., INC. as of December 31, 1993 and 1992, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles.
As discussed in Notes 1 and 11 to the consolidated financial statements,
the Company changed its method of accounting for postretirement benefits
other than pensions and income taxes.
/s/ CROWE, CHIZEK AND COMPANY
Columbus, Ohio
February 4, 1994
1A
<PAGE>
Report of Independent Auditors
Board of Directors and Shareholders
Sunrise Bancorp, Inc.
Wheeling, West Virginia
We have audited the accompanying consolidated balance sheet of Sunrise
Bancorp, Inc., as of December 1992 and 1991, and the related consolidated
statements of income, changes in shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1992 (not
presented separately herein). 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 audits
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in
all material respects, the consolidated financial position of Sunrise
Bancorp, Inc., as of December 31, 1992 and 1991, and the consolidated
results of its operations and its cash flows for each of the three years
in the period ended December 31, 1992, in conformity with generally
accepted accounting principles.
Wheeling, West Virginia /s/ S.R. Snodgrass, A.C.
February 15, 1993
1B
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
December 31
1993 1992
<S> <C> <C>
Assets
Cash and due from banks Note 2 $ 141,195 $ 155,716
Interest-bearing deposits in other banks 8,028 7,791
Federal funds sold 31,145 127,939
Cash and cash equivalents 180,368 291,446
Securities (fair value approximated $1,081,742 at December 31,
1993 and $1,051,762 at December 31, 1992) Note 4 1,060,036 1,029,275
Loans, net Notes 5 and 6 2,132,888 1,962,222
Premises and equipment Note 7 80,233 81,269
Accrued interest receivable 26,900 29,275
Other assets 32,451 34,100
Total assets $3,512,876 $3,427,587
Liabilities and shareholders' equity
Liabilities:
Deposits Note 8:
Non-interest bearing $ 412,317 $ 399,777
Interest bearing 2,524,418 2,481,835
Total deposits 2,936,735 2,881,612
Short-term borrowings Note 9:
Federal funds purchased 14,012 17,718
Securities sold under agreements to repurchase and other 204,408 186,558
Total short-term borrowings 218,420 204,276
Long-term borrowings Note 10 22,788 30,218
Other 29,749 30,943
Total liabilities 3,207,692 3,147,049
Shareholders' equity Note 14:
Preferred stock $10 par value; authorized 1,000,000 shares;
none issued
Common stock $10 par value; authorized 40,000,000 shares;
17,516,795 and 17,493,518 shares outstanding at December 31,
1993 and 1992, respectively, including 270,000 shares in
treasury at December 31, 1993 and 1992 175,168 174,935
Capital surplus 25,830 25,352
Retained earnings 107,315 83,380
Treasury stock (3,129) (3,129)
Total shareholders' equity 305,184 280,538
Total liabilities and shareholders' equity $3,512,876 $3,427,587
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Interest income:
Interest and fees on loans:
Taxable $179,971 $186,681 $165,539
Tax-exempt 2,122 2,068 2,552
Total 182,093 188,749 168,091
Interest and dividends on securities:
Taxable 55,868 64,466 58,483
Tax-exempt 6,634 5,979 7,076
Total 62,502 70,445 65,559
Other 3,104 4,290 9,142
Total interest income 247,699 263,484 242,792
Interest expense:
Deposits 90,807 109,713 120,437
Short-term borrowings Note 9 6,270 8,203 8,947
Long-term borrowings Note 10 2,709 2,123 1,529
Total interest expense 99,786 120,039 130,913
Net interest income 147,913 143,445 111,879
Provision for loan losses Note 6 5,788 11,389 6,671
Net interest income after provision for loan losses 142,125 132,056 105,208
Other income:
Trust Department 7,272 6,041 5,327
Service charges on deposit accounts 11,963 11,281 8,981
Real estate loan processing and servicing fees 8,080 8,453 2,423
Other service charges and fees 4,083 4,236 3,531
Securities gains (losses) 113 (35) (730)
Other Note 16 8,751 7,392 4,824
Total other income 40,262 37,368 24,356
Other expenses:
Salaries and employee benefits Note 12 61,511 55,457 46,236
Net occupancy Note 7 6,206 6,199 4,315
Equipment 10,604 10,503 8,759
Outside data processing 4,575 2,351 1,864
Federal deposit insurance 6,519 6,127 4,629
Other Note 16 36,692 35,503 26,626
Total other expenses 126,107 116,140 92,429
Income before income taxes 56,280 53,284 37,135
Applicable income taxes Note 11 18,326 16,646 10,743
Net income $ 37,954 $ 36,638 $ 26,392
Net income per common share $2.20 $2.13 $1.72
Average common shares outstanding 17,237 17,211 15,361
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
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 $105,157 $ 6,108 $ 99,540 $(3,129) $(3,648)
Net income for 1991 26,392
Acquisition of treasury stock by
Mountaineer (502)
Issuance of common stock:
Public offering (1,035,000 shares) 10,350 18,757
Stock options exercised (56,955
shares) Note 12 569 570
Cash dividends on One Valley shares
($.62 per share) (7,064)
Cash dividends on Mountaineer shares (2,313)
Change in net unrealized loss on
marketable equity securities 3,409
Balances at December 31, 1991 116,076 24,933 116,555 (3,129) (239)
Net income for 1992 36,638
Acquisition of treasury stock by
Mountaineer (41)
Stock options exercised (50,423
shares) Note 12 505 472
Cash dividends on One Valley shares
($.70 per share) (8,968)
Cash dividends on Mountaineer shares (2,483)
Three-for-two stock split in the form
of a 50% stock dividend 36,453 (12) (36,461)
Six-for-five stock split in the form
of a 20% stock dividend 21,901 (21,901)
Change in net unrealized loss on
marketable equity securities 239
Balances at December 31, 1992 174,935 25,352 83,380 (3,129)
Net income for 1993 37,954
Sale of treasury stock by Mountaineer 420
Stock options exercised (24,280
shares) and adjustment for
fractional shares Note 12 233 58
Cash dividends on One Valley shares
($.84 per share) (10,826)
Cash dividends on Mountaineer shares (3,193)
Balances at December 31, 1993 $175,168 $25,830 $107,315 $(3,129) $
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Operating activities:
Net income $ 37,954 $ 36,638 $ 26,392
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 5,788 11,389 6,671
Depreciation 7,492 8,104 6,738
Amortization, net of accretion 7,390 7,828 5,610
Deferred income taxes (benefit) (2,142) (2,018) (1,442)
Net (gains) losses from sales of assets (544) (593) 1,213
Loans originated for sale (163,800) (218,466) (45,184)
Proceeds from loans sold 170,220 207,871 36,988
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 3,141 (4,239) (1,324)
Net cash provided by operating activities 64,365 49,103 32,441
Investing activities:
Proceeds from sale of marketable equity securities 35,572
Proceeds from sales of securities 35,604 27,326 42,241
Proceeds from maturities of securities 504,582 611,284 442,843
Purchases of securities (581,210) (665,703) (669,219)
Net cash received in acquisitions, net of cash paid 140,758
Sale of branch, net of deposits transferred and gain
on sale (8,489)
Net increase in loans (175,424) (62,691) (67,563)
Purchases of premises and equipment (7,524) (8,797) (6,142)
Net cash used in investing activities (223,972) (71,498) (117,082)
Financing activities:
Net increase in deposits 55,123 64,258 54,345
Net (decrease) increase in federal funds purchased (3,706) 4,607 (147)
Net increase (decrease) in other short-term borrowings 17,850 (4,783) 52,997
Repayment of long-term borrowings (19,586) (4,821) (644)
Proceeds from long-term borrowings 12,156 18,900 2,356
Proceeds from issuance of common stock 291 957 30,246
Proceeds from sales (purchases) of treasury stock by
Mountaineer 420 (41) (502)
Cash dividends (14,019) (11,451) (9,377)
Net cash provided by financing activities 48,529 67,626 129,274
(Decrease) increase in cash and cash equivalents (111,078) 45,231 44,633
Cash and cash equivalents at beginning of year 291,446 246,215 201,582
Cash and cash equivalents at end of year $180,368 $291,446 $246,215
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1993
(Dollars in thousands, except per share data)
1. Summary of Significant Accounting and Reporting Policies
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.
Basis of Presentation
These consolidated financial statements have been prepared to give
retroactive effect to the merger with Mountaineer on January 28, 1994, which
was accounted for as a pooling of interests.
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 intercompany 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.
6
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
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.
7
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
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.
2. Restrictions on Cash and Due From Bank Accounts
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 $26,900.
3. Merger and Acquisitions
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 has been
accounted for as a pooling of interests. The consolidated financial
statements have been restated, giving retroactive effect to the merger as
though it had been consummated in the earliest period presented. Following
is an analysis presenting the results of operations for 1993, 1992 and 1991
of the separate companies.
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
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
</TABLE>
9
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
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.
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 $1,800 and $2,600 at December 31, 1993 and
1992. Deposit intangible amortization approximated $800 in 1993 and $900 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 $4,300 and $4,700 at December 31, 1993 and 1992.
Goodwill amortization approximated $300 in 1993, 1992, and 1991.
4. Securities
The amortized cost and estimated fair values of debt securities are
summarized as follows:
<TABLE>
<CAPTION>
December 31, 1993
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies $ 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 debt securities 15,709 319 (4) 16,024
Totals $1,060,036 $23,617 $(1,911) $1,081,742
</TABLE>
9
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
<TABLE>
<CAPTION>
December 31, 1992
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies $ 755,737 $13,590 $(354) $ 768,973
Obligations of states and political
subdivisions 83,653 4,402 (115) 87,940
Mortgage-backed securities 171,346 5,182 (410) 176,118
Other debt securities 18,539 200 (8) 18,731
Totals $1,029,275 $23,374 $(887) $1,051,762
</TABLE>
<TABLE>
<CAPTION>
December 31, 1991
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies $ 765,784 $20,135 $ (9) $ 785,910
Obligations of states and political
subdivisions 84,146 5,100 (70) 89,176
Mortgage-backed securities 144,993 7,780 (60) 152,713
Other debt securities 9,822 87 (12) 9,897
Totals $1,004,745 $33,102 $(151) $1,037,696
</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 $492,809 of securities as available-for-sale.
Securities designated as available-for-sale at December 31, 1993,
approximated $632,380 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 $7,942. 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 $4,765
(net of $3,177 in deferred income taxes) to reflect the net unrealized
holding gains on securities classified as available-for-sale previously
carried at amortized cost.
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
10
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
<S> <C> <C>
Due in one year or less $ 267,046 $ 269,612
Due after one year through five years 392,464 399,007
Due after five years through ten years 110,079 116,187
Due after ten years 93,003 95,119
862,592 879,925
Mortgage-backed securities 197,444 201,817
Totals $1,060,036 $1,081,742
</TABLE>
At December 31, 1993 and 1992, securities carried at $429,200 and $408,300,
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.
5. Loans
Loans are summarized as follows:
<TABLE>
<CAPTION>
December 31
1993 1992
<S> <C> <C>
Commercial, financial and agricultural $ 306,425 $ 286,532
Real estate:
Revolving home equity 102,648 93,092
Single family residential 869,502 777,428
Apartment buildings and complexes 41,465 45,798
Commercial 320,668 282,728
Construction 33,682 43,108
Installment loans to individuals 465,216 454,032
Bankers' acceptances 2,123 560
Other 27,643 14,623
Total loans net of unearned income 2,169,372 1,997,901
Less allowance for loan losses 36,484 35,679
Loans net $2,132,888 $1,962,222
11
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Unearned income approximated $4,100 and $5,400 at December 31, 1993 and
1992, respectively.
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.
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
$2,173,000 and $2,017,000.
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 $18,433 and had commitments
to originate and sell loans of approximately $16,100.
The mortgage loan portfolio serviced by One Valley for the benefit of others
approximated $842,000, $1,007,000, 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 $10,968 and $12,304 at December 31, 1993
and 1992.
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 $70,695 $67,346
Additions 26,989 33,168
Amount collected (24,838) (29,819)
Balance, December 31 $72,846 $70,695
12
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. Allowance for Loan Losses
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 $35,679 $30,567 $20,290
Charge-offs (7,381) (8,561) (7,588)
Recoveries 2,398 2,284 2,110
Net charge-offs (4,983) (6,277) (5,478)
Provision for loan losses 5,788 11,389 6,671
Balance of acquired subsidiaries 9,084
Balance, December 31 $36,484 $35,679 $30,567
7. Premises and Equipment
The major categories of premises and equipment and accumulated depreciation
are summarized as follows:
December 31
1993 1992
Land $ 14,510 $ 14,576
Buildings and improvements 73,065 72,351
Equipment 49,202 49,328
Total 136,777 136,255
Less accumulated depreciation (56,544) (54,986)
Premises and equipment net $ 80,233 $ 81,269
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 $3,200; 1995 $3,200; 1996 $3,100; 1997 $2,700; and 1998 $2,600, with
$5,200 of commitments extending beyond 1998.
Total expense under these lease agreements, including cancelable and
noncancelable leases, was $3,100 in 1993, $1,700 in 1992, and $1,500 in
1991.
8. Deposit Liabilities
The fair values of demand deposits (i.e. interest and noninterest 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
13
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
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 $2,946,000 and $2,891,000. 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 $103,000 in 1993, $121,000 in 1992, and $130,000 in 1991.
9. Short-Term Borrowings
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:
</TABLE>
<TABLE>
<CAPTION>
Federal Repurchase
Funds Agreements
Purchased and Other
<S> <C> <C>
1993:
Average amount outstanding during year $19,313 $195,080
Maximum amount outstanding at any month end 22,236 221,779
Weighted average interest rate:
During year 3.17% 2.90%
End of year 2.92% 2.58%
1992:
Average amount outstanding during year $19,183 $202,418
Maximum amount outstanding at any month end 42,366 218,381
Weighted average interest rate:
During year 3.51% 3.71%
End of year 2.92% 3.26%
1991:
Average amount outstanding during year $18,159 $144,037
Maximum amount outstanding at any month end 22,123 191,341
Weighted average interest rate:
During year 5.72% 5.41%
End of year 4.47% 4.55%
</TABLE>
10. Long-Term Borrowings
Long-term borrowings of $22,788 and $30,218 at December 31, 1993 and 1992
primarily consist of Federal Home Loan advances. The advances mature as
follows: 1994 - $5,000, 1995 - $12,000, 1996 - $5,000, and 2002 - $500. The
advances bear a weighted average interest rate of 5.17% at December 31,
1993. The fair values of the long-term borrowings are estimated using
14
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
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 $22,900 and $31,000.
11. Income Taxes
The income tax provisions (benefits) included in the consolidated statements
of income are summarized as follows:
1993 1992 1991
Federal:
Current $18,100 $16,854 $10,435
Deferred (2,142) (2,018) (1,442)
State 2,368 1,810 1,750
Total $18,326 $16,646 $10,743
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>
<CAPTION>
1993 1992 1991
Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Computed tax at statutory federal
rate $19,698 35.0% $18,116 34.0% $12,626 34.0%
Plus: State income taxes net of
federal tax benefits 1,511 2.7 1,198 2.2 1,166 3.1
21,209 37.7 19,314 36.2 13,792 37.1
Increase (decrease) in taxes
resulting from:
Tax-exempt interest (2,931) (5.2) (2,708) (5.1) (3,018) (8.1)
Other net 48 .1 40 .1 (31) (.1)
Actual tax expense $18,326 32.6% $16,646 31.2% $10,743 28.9%
</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 $12,829 $11,193
Accrued employee benefits 2,331 2,206
Other accrued expenses 2,054 1,348
Total deferred tax assets 17,214 14,747
Deferred tax liabilities:
Premises and equipment 2,521 2,629
Loans 4,522 4,089
Total deferred tax liabilities 7,043 6,718
Net deferred tax assets $10,171 $ 8,029
15
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Income taxes (benefit) related to securities gains (losses) approximated
$45, $(14), and $(292) in 1993, 1992, and 1991.
One Valley made tax payments of approximately $22,000 in 1993, $20,000 in
1992, and $12,000 in 1991.
12. Employee Benefit Plans
One Valley and Mountaineer have defined benefit pension plans covering
substantially all of their employees. The benefits are based on years of
service and the employee's compensation during the last five years of
employment. The funding policy of One Valley and Mountaineer is to
contribute annually the maximum amount that can be deducted for federal
income tax purposes.
The following table presents the funded status of these plans and amounts
recognized in the consolidated balance sheets at December 31:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Actuarial present value of accumulated benefit obligation,
including vested benefits of $18,020 in 1993 and $13,150
in 1992 $ 19,137 $ 13,316
Actuarial present value of projected benefit obligation for
services rendered to date $(28,602) $(22,183)
Plan assets at fair value, consisting primarily of cash,
listed stocks, and U.S. bonds 22,705 18,424
Projected benefit obligation in excess of plan assets (5,897) (3,759)
Unrecognized net asset at November 1, 1987, net of
amortization (2,598) (2,842)
Unrecognized net loss from past experience different from
that assumed and effects of changes in assumptions 6,064 3,582
Unrecognized prior service cost 219 235
Accrued pension cost included in other liabilities $ (2,212) $ (2,784)
</TABLE>
Following is a summary of the components of net periodic pension cost:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Service cost benefits earned during the period $1,445 $1,231 $1,044
Interest cost on projected benefit obligation 1,740 1,568 1,247
Actual return on plan assets (2,640) (996) (1,830)
Net amortization and deferral 893 (629) 282
Early retirement benefits 326
Net periodic pension cost $1,438 $1,174 $1,069
</TABLE>
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
16
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
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, 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
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
Unrecognized net loss from past experience different from
that assumed and effects of changes in assumptions 467
Accrued postretirement benefit cost included in other
liabilities $ (403) $
</TABLE>
Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
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)
17
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
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.
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 nonqualified and incentive stock option plans for certain key
employees. Pursuant to these Plans, an aggregate maximum of 1,158,000 shares
of common stock were reserved for issuance, although no more than 162,000
shares may be issued in any calendar year. At December 31, 1993, there were
outstanding and exercisable options for the purchase of 314,713 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.
22
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
13. Parent Company Condensed Financial Information
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
1993 1992
<S> <C> <C>
Assets
Interest-bearing deposits in subsidiary bank $ 25,841 $ 16,358
Investment securities 1,486 1,408
Premises and equipment 393 694
Investment in subsidiaries:
Banks 274,337 261,048
Nonbanks 8,869 7,743
Other assets 1,320 773
Total assets $312,246 $288,024
Liabilities and shareholders' equity
Liabilities:
Long-term borrowings $ $ 1,326
Other liabilities 7,062 6,160
Total liabilities 7,062 7,486
Shareholders' equity:
Common stock 175,138 174,905
Capital surplus 25,860 25,382
Retained earnings 107,315 83,380
Treasury stock (3,129) (3,129)
Total shareholders' equity 305,184 280,538
Total liabilities and shareholders' equity $312,246 $288,024
19
<PAGE>
CONDENSED STATEMENTS OF INCOME
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Income:
Dividends from bank subsidiaries $31,869 $22,937 $17,593
Other income 2,825 2,237 2,130
34,694 25,174 19,723
Expenses:
Salaries and employee benefits 5,279 4,504 3,769
Other expenses 5,940 4,374 2,381
Interest expense 54 512 609
11,273 9,390 6,759
Income before income taxes and equity in undistributed
earnings of subsidiaries 23,421 15,784 12,964
Applicable income tax (benefit) (3,074) (3,568) (2,557)
Income before equity in undistributed earnings of subsidiaries 26,495 19,352 15,521
Equity in undistributed earnings of subsidiaries 11,459 17,286 10,871
Net income $37,954 $36,638 $26,392
</TABLE>
20
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Operating activities:
Net income $37,954 $36,638 $26,392
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 430 853 445
Equity in undistributed earnings of subsidiaries (11,459) (17,286) (10,871)
Net change in other assets and other liabilities (188) 130 473
Net cash provided by operating activities 26,737 20,335 16,439
Investing activities:
Proceeds from maturities and sale of investment securities 2,520
Purchase of investment securities (78) (1,042)
Investment in subsidiaries (3,000) (33,660)
Purchase of equipment (142) (222) (130)
Proceeds from sale of other real estate 600
Net cash (used in) provided by investing activities (2,620) 1,256 (33,790)
Financing activities:
Proceeds from long-term borrowings 2,300
Repayment of long-term borrowings (1,326) (4,566) (409)
Proceeds from issuance of common stock 291 957 30,246
Proceeds from sale (purchases) of treasury stock by
Mountaineer 420 (41) (502)
Cash dividends paid (14,019) (11,451) (9,377)
Net cash (used in) provided by financing activities (14,634) (15,101) 22,258
Increase in cash and cash equivalents 9,483 6,490 4,907
Cash and cash equivalents at beginning of year 16,358 9,868 4,961
Cash and cash equivalents at end of year $25,841 $16,358 $ 9,868
</TABLE>
14. Restrictions On Subsidiary Dividends
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 $36,700, plus
retained net profits for the interim periods through the date of
declaration.
21
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
15. Commitments And Contingent Liabilities
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, approximate 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 $38,000 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 $360,000.
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.
22
<PAGE>
One Valley Bancorp of West Virginia, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
16. Other Income and Expenses
Included in other income are checkbook sales which approximated $2,957 in
1993, $3,115 in 1992, and $2,372 in 1991. Included in other expenses is
supplies expense which approximated $3,406 in 1993, $3,188 in 1992, and
$2,691 in 1991, postage expense which approximated $3,387 in 1993, $3,268 in
1992, and $2,084 in 1991, and professional fees which approximated $3,799 in
1993, $3,703 in 1992, and $2,268 in 1991.
17. Quarterly Financial Data (Unaudited)
Quarterly financial data for 1993 and 1992 is summarized below:
<TABLE>
<CAPTION>
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 $61,225 $62,200 $61,870 $62,404 $67,471 $66,947 $65,876 $63,190
Interest expense 25,755 25,146 24,467 24,418 32,576 30,747 29,388 27,328
Net interest income 35,470 37,054 37,403 37,986 34,895 36,200 36,488 35,862
Provision for loan losses 1,551 1,564 1,406 1,267 2,831 2,782 2,948 2,828
Net interest income after
provision for loan losses 33,919 35,490 35,997 36,719 32,064 33,418 33,540 33,034
Other income, excluding
securities gains (losses) 9,728 10,146 10,014 10,261 8,562 8,909 10,342 9,590
Securities transactions 58 119 (64) (50) (30) (12) 57
Other expenses 29,330 29,792 31,064 35,921 28,563 28,737 29,715 29,125
Income before income taxes 14,317 15,902 15,066 10,995 12,013 13,560 14,155 13,556
Applicable income taxes 4,479 5,243 5,299 3,305 3,641 4,273 4,599 4,133
Net income $ 9,838 $10,659 $ 9,767 $ 7,690 $ 8,372 $ 9,287 $ 9,556 $ 9,423
Average shares outstanding 17,228 17,237 17,237 17,246 17,197 17,211 17,218 17,219
Per share data:
Net income per share $ .57 $ .62 $ .57 $ .45 $ .49 $ .54 $ .56 $ .55
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>
23
<PAGE>
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 eleven
bank subsidiaries ranging in size from $95 million to $1.5 billion. Through
these banks, One Valley serves 50 cities and towns with a full range of banking
services in 79 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 $3.5
billion in assets, $2.2 billion in total loans, and $2.9 billion in total
deposits.
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 on January 28, 1994,
increases One Valley's market presence in the northern and eastern panhandle
regions of the State of West Virginia. This transaction has been accounted for
as a pooling-of-interests and, accordingly, all prior period financial
information has been restated, giving retroactive effect to the merger as though
it had been consummated in the earliest period presented.
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 38.8% 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.
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 herein. 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
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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.
Summary Financial Results
One Valley earned $38.0 million in 1993, a 3.6% increase over the $36.6
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.
These are partially offset by an increase in other expenses. This increase in
earnings follows an increase in 1992 of 38.8% over the $26.4 million earned in
1991. Earnings per share were $2.20 in 1993, an increase of 3.3% over the $2.13
earned in 1992, which compares to the 23.8% increase in 1992 over the $1.72
earned in 1991. As shown in Table 1, the five-year compound growth rate in
earnings per share since 1988 has been 11.6%. This compound growth rate is
within 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-average assets 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 remained constant in 1993 and
1992 at 1.09%, up from 0.95% in 1991. As shown in Table 3, Analysis of Return on
Assets and Equity, the rise in ROA is attributed primarily to the increase in
interest income and 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 4.59%, which compares to 4.40% in 1992 and 4.34% in
1991. 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 to 2.68%. While this is higher than the 2.54% ratio in 1992, it is
comparable to the 2.69% 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 was 12.88% compared to the 13.62% earned
in 1992 and 12.26% reported in 1991. Table 3 comparatively illustrates the
components of ROA and ROE over the previous five years.
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
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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 3.4% or $105.6 million over 1992,
following a 22.0% or $557.3 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 $45.9 million or 1.7% in 1993 when compared to 1992. This increase
follows a $472.3 million or 21.2% 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
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 profitable component of
average earning assets, totaling 63.3% of average earning assets. One Valley
continued to emphasize increasing its loan portfolio in 1993. Average net loans
increased by $100.0 million or 5.2% in 1993. The increase in 1993 average loans
was primarily attributable to an increase in residential real estate loans.
Average net loans increased by $369.5 million, or 23.7%, 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 61.3% in 1991, to 62.2% in 1992, to 63.3% in 1993. Similarly, One
Valley's loan-to-deposit ratio continued its upward trend in 1993, ending the
year at 72.6%. This ratio compares to 68.1% at December 31, 1992 and 67.3% 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.
Total loans at December 31, 1993, increased by $171.5 million or 8.6% over
the total at December 31, 1992, which compares to a $63.8 million or 3.3%
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 $101.6 million or
11.7% in 1993. One Valley also originated $163.8 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 $218.5 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 $11.2 million or 2.5% during 1993,
following a $21.1 million or 4.9% increase in 1992. Commercial loans increased
by $32.9 million or 10.9% during 1993, compared to a $2.0 million or 0.7%
increase in 1992. Commercial real estate loans, including apartment buildings
and complexes, increased by $33.6 million or 10.2% during 1993. This follows a
$63.2 million or 23.8% increase in 1992. As shown in Table 5, commercial real
estate loans have historically only averaged less than one-sixth of the total
loan portfolio, thus limiting One Valley's exposure to swings in commercial real
estate values.
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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. Additionally, 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 $767 million, a result of acquisitions and
internal growth. While loan growth has been substantial, One Valley imposes
underwriting and credit standards which are designed to maintain a quality loan
portfolio. One Valley completed 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 approximately 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.
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 15
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 $12.5 million or 0.58% of total loans at year-end 1993. This ratio
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.
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 0.15% of year-
end loans, a decrease from the 0.21% at December 31, 1992, and, as shown in
Table 5, a significant improvement over 1989 and 1990. 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 $10.1
million or 7.6% 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 repossession (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
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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 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 $0.3 million of interest on non-accrual loans, while
approximately $1.9 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 $0.3 million was recognized on non-
accrual loans, while approximately $1.8 million would have been recognized in
accordance with their original terms.
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.
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 $36.5
million or 1.68% of total year-end loans, which is sufficient to absorb over
seven times the amount of net charge-offs experienced during 1993. The 1.68%
ratio is a decrease from the prior year's 1.79% but is a substantial increase
over the 1.58% in 1991 and 1.38% 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 $5.8 million, down significantly
from the $11.4 million provision in 1992 but relatively close to the $6.7
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.
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Net charge-offs in 1993 decreased by $1.3 million or 20.6% from 1992 net
charge-offs. This decrease follows an increase in 1992 of 14.6% or $0.8 million
over 1991 net charge-offs. Net charge-offs as a percentage of average total
loans declined to 0.24%, which compares to 0.32% in 1992 and 0.35% 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.
Investment Portfolio and Other Earning Assets
Investment securities averaged $1,074.4 million in 1993, a 2.4% increase
from the $1,049.5 million averaged in 1992. This slight increase follows a 25.7%
increase over the $834.8 million averaged in 1991. The decrease in the average
balance growth rate 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.
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 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, management has
reevaluated its investment portfolio philosophies and assigned an additional
$492,809 of securities to the available-for-sale classification. Securities
designated as available-for-sale at December 31, 1993 approximated $632,380 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 $7,942. The remaining is classified as
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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 $4,765 (net of $3,177 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 4 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 $54.0 million, or 64.6%, 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 period of the investment portfolio, including longer
term mortgage-backed securities, was 4 years 8 months at the end of 1993. The
average maturity of the mortgage-backed securities was based on the contractual
maturity. 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 decreased
slightly over the past three years, averaging $93.2 million in 1993, a decrease
from the $111.2 million averaged during 1992, which was a slight increase over
the $108.5 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 3.63%, 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 2.3% or
$65.9 million in 1993. This increase follows a 20.7% increase in 1992, which is
largely due to the $525.2 million of deposits acquired through the Atlantic
transaction. During 1993, non-interest bearing deposits increased on average by
6.2% over 1992, while interest bearing deposits increased by only 1.7%. This
trend is reflective of an increased customer base in the use of checking and
other non-interest bearing deposit products, and the stiff competition for
interest bearing investments in a low interest rate environment.
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Short-term borrowings decreased, on average, by $7.1 million or 3.2% from
1992, following a 31.9% increase in 1992 over 1991. Passthrough federal funds
purchased from correspondent banks increased, on average, by 0.7% 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 3.6% in
1993, primarily due to a lower level of public funds. The decrease follows a
40.5% increase in 1992 and a 22.4% increase in 1991, which are due primarily to
an emphasis on cross-selling of products to commercial customers. It should be
noted that no federal funds purchased nor repurchase agreements were assumed in
the Atlantic acquisition.
Long-term borrowings, on average, increased by 40.4% in 1993. As a result,
One Valley now has $22.8 million of long-term debt, with repayment schedules
from one to twenty-five years. Other information regarding short- and long-term
borrowings is contained in Notes 9 and 10 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 1.10 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 commitments, 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 7.97% during 1992 and 7.77% 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 9.62% compared to 9.13% at
year-end 1992. The Federal Reserve's risk-based capital guidelines and leverage
ratio measure the capital adequacy of banking institutions. The risk-based
capital guidelines weight balance sheet assets and off-
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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 14.7% compared to 15.7% 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 8.5% compared to 8.0% 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 14
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.
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 $152.6 million in 1993, up 3.4% over the 1992 level,
following a 26.3% 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 a significant increase in net interest income. In 1993, the increase in
the volume of earning assets increased interest income by $11.5 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 $15.3 million occurred in 1993. Similarly,
increased volume of interest bearing liabilities boosted interest expense by
$2.0 million, but the lower cost of interest bearing liabilities resulted in an
overall decline in total interest expense of $20.3 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 maintained its level when compared to
the prior year's 4.77% 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
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more rapidly in 1992 than did rates on total earning assets, One Valley's net
interest margin increased from the 4.60% margin realized in 1991 to 4.77% 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."
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 $2.9 million
or 7.7% in 1993 compared to 1992. This followed a 53.4% 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 $7.3 million, a $1.2 million or 20.4% increase over 1992. This
increase follows a 13.4% 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 4.4% 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 $730,000, 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. One Valley's 1993 net
overhead ratio, or non-interest expense less non-interest income excluding
securities transactions to average earning assets, was 2.68%, a slight increase
from the 2.54% ratio realized in 1992. For the year 1993, net overhead was $85.8
million, an increase of 9% over the 1992 net overhead of $78.8 million. By
comparison, net overhead totaled $68.1 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 2.68%, up slightly from 2.54% in 1992 but consistent with 2.68% in 1991.
Over the past five years, net overhead has grown by a compound rate of 8.75%
whereas average earning assets have grown by over 11.40%.
Total non-interest expense increased by $10.0 million, or 8.6% over 1992.
This compares to a 25.7% increase in 1992 versus 1991. Total staff costs rose by
10.9% in 1993, compared to a 19.9% 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
12 to the
10
<PAGE>
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 6.5% in 1993 compared to 1992, due to the leveling
off of an extensive advertising campaign in 1992. Advertising expense increased
by 46.1% 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 6.4% in 1993 due to normal deposit growth and 32.4% 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 43.7% in 1992 over 1991 as a result of operating fourteen
additional branch locations acquired in the Atlantic transaction. Equipment
expenses increased by 1.0% in 1993 versus 1992, which compares to a 19.9%
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
94.6% 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 increased by 26.1% 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 .9% in 1993 due to increases in equity based state
and county taxes. Supplies and postage expense increased by 5.2% in 1993 versus
1992 due to data processing conversion. Supplies and postage expense increased
by 35.2% 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 increased
by 4.3% in 1993, primarily due to expenses associated with the merger of One
Valley and Mountaineer. This increase follows a 34.1% increase in 1992 versus
1991, largely due to increased operating costs associated with the Atlantic
transaction.
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 $4.6 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 $18.3 million compared to $16.6 million in
1992 and $10.7 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-
11
<PAGE>
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 32.6%, up from 31.2% in 1992 and 28.9% in
1991. Additional information regarding income taxes is contained in Note 11 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. 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. Management's
efforts to meet these goals are described in other sections of this report.
Summary Results of Operations
Fourth Quarter 1993
Net income for the three months ended December 31, 1993 was $7.7 million,
down by 18.4% from the $9.4 million earned during the same period in 1992. On a
per share basis, fourth quarter earnings were $0.45 compared to $0.55 in 1992, a
decrease of 18.2%.
Net interest income increased by 5.9% when compared to the same three
months of 1992. Non-interest income, excluding securities gains (losses),
increased by 7.0%, primarily due to an increase in trust department revenue and
deposit account fee income. The provision for loan losses declined by 55.2% when
compared to the fourth quarter of 1992. These improvements more than offset a
23.3% 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 17 to the
consolidated financial statements.
12
<PAGE>
TABLE 1
Six Year Selected Financial Summary
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
5 year
Compound
1993 1992 1991 1990 1989 1988 Growth
Rate
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations
Interest Income $ 247,699 $ 263,484 $ 242,792 $ 234,025 $ 226,249 $ 194,119 5.00%
Interest Expense 99,786 120,039 130,913 134,462 131,335 106,760 (1.34)
Net Interest Income 147,913 143,445 111,879 99,563 94,914 87,359 11.11
Provision for Loan Losses 5,788 11,389 6,671 7,884 12,404 6,877 (3.39)
Non-Interest Income 40,149 37,403 25,086 19,670 17,199 15,840 20.44
Gross Securities Transactions 113 (35) (730) (37) 265 432 (23.52)
Non-Interest Expense 126,107 116,140 92,429 79,201 75,676 72,346 11.75
Net Income 37,954 36,638 26,392 23,709 19,101 19,601 14.13
Per Share Data
Net Income $ 2.20 $ 2.13 $ 1.72 $ 1.55 $ 1.25 $ 1.27 11.62%
Cash Dividends 0.84 0.70 0.62 0.59 0.56 0.50 10.93
Book Value 17.70 16.29 14.83 13.44 12.48 11.71 8.61
Average Balance Sheet Summary
Net Loans $2,026,748 $1,926,773 $1,557,230 $1,384,035 $1,346,884 $1,283,046 9.58%
Investment Securities 1,074,467 1,049,459 834,820 745,063 657,578 583,200 13.00
Total Assets 3,467,261 3,373,245 2,771,901 2,483,158 2,377,899 2,190,294 9.62
Deposits 2,895,131 2,829,263 2,343,404 2,101,377 2,018,646 1,876,584 9.06
Long-Term Borrowings 36,088 25,703 15,653 21,342 22,489 22,715 9.70
Equity 294,733 269,007 215,273 196,500 184,558 175,699 10.90
Selected Ratios
Equity to Average Assets 8.50% 7.97% 7.77% 7.91% 7.76% 8.02%
Return on Average Assets 1.09 1.09 0.95 0.95 0.80 0.89
Return on Average Equity 12.88 13.62 12.26 12.07 10.35 11.16
Dividend Payout Ratio 38.18 32.86 36.05 38.06 44.80 39.37
</TABLE>
<PAGE>
TABLE 2
Summary Statement of Net Income
(Dollars in Thousands)
<TABLE>
<CAPTION>
Increase (Decrease) From Prior Year
1993 1992 1991 1993 1992
Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income * $247,699 $263,484 $242,792 $(15,785) (5.99) $20,692 8.52
Interest expense 99,786 120,039 130,913 (20,253) (16.87) (10,874) (8.31)
Net interest income 147,913 143,445 111,879 4,468 3.11 31,566 28.21
Other operating income 40,149 37,403 25,086 2,746 7.34 12,317 49.10
Gross securities transactions 113 (35) (730) 14 (422.86) 695 (95.21)
Adjusted operating income 188,175 180,813 136,235 7,362 4.07 44,578 32.72
Provision for losses 5,788 11,389 6,671 (5,601) (49.18) 4,718 70.72
Other operating expenses 126,107 116,140 92,429 9,967 8.58 23,711 25.65
Income before taxes 56,280 53,284 37,135 2,996 5.62 16,149 43.49
Income taxes 18,326 16,646 10,743 1,680 10.09 5,903 54.95
Net income $ 37,954 $ 36,638 $ 26,392 $ 1,316 3.59 $10,246 38.82
* Fully taxable equivalent interest income
using the rate of 35% for 1993 and 34% for
1992 and 1991 $252,414 $267,630 $247,752 $(15,216) (5.69) $19,878 8.02
</TABLE>
<PAGE>
TABLE 3
Analysis of Return on Assets and Equity
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
As a percent of average earning assets:
Fully taxable-equivalent net interest income * 4.77% 4.77% 4.60% 4.62% 4.66%
Provision for loan losses (0.18) (0.37) (0.26) (0.35) (0.57)
Net credit income 4.59 4.40 4.34 4.27 4.09
Non-interest income 1.25 1.21 0.96 0.86 0.81
Non-interest expense (3.94) (3.75) (3.64) (3.47) (3.46)
Tax equivalent adjustment (0.15) (0.13) (0.20) (0.26) (0.32)
Applicable income taxes (0.57) (0.54) (0.42) (0.36) (0.25)
Return on average earning assets 1.18 1.19 1.04 1.04 0.87
Multiplied by average earning assets to average total assets 92.33 91.78 91.59 91.96 91.83
Return on average assets 1.09 1.09 0.95 0.95 0.80
Multiplied by average assets to average equity 11.82 12.47 12.88 12.63 12.95
Return on average equity 12.88% 13.62% 12.26% 12.07% 10.35%
* Fully tax-equivalent using the rate of 35% for 1993 and 34% for
earlier years.</TABLE>
<PAGE>
TABLE 4
Average Balance Sheet/Net Interest Income Analysis
(Dollars in Thousands)
<TABLE>
<CAPTION>
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 $2,032,527 $179,971 8.85% $1,929,592 $186,681 9.67% $1,549,386 $165,539 10.68%
Tax-exempt 31,153 3,255 10.45 30,351 3,133 10.32 32,443 3,866 11.92
Total loans 2,063,680 183,226 8.88 1,959,943 189,814 9.68 1,581,829 169,405 10.71
Less: Allowance for losses 36,932 33,170 24,599
Total loans - net 2,026,748 9.04 1,926,773 9.85 1,557,230 10.88
Investment securities
Taxable 973,890 55,868 5.74 966,198 64,466 6.67 740,927 58,483 7.89
Tax-exempt 100,577 10,146 10.09 83,261 9,059 10.88 93,893 10,721 11.42
Total securities 1,074,467 66,014 6.14 1,049,459 73,525 7.01 834,820 69,204 8.29
Federal funds sold and other 100,270 3,104 3.10 119,696 4,290 3.58 146,612 9,142 6.24
Total earning assets 3,201,485 252,344 7.88 3,095,928 267,629 8.64 2,538,662 247,751 9.76
Other assets 265,776 277,317 233,239
Total assets $3,467,261 $3,373,245 $2,771,901
Liabilities and equity
Interest bearing liabilities
Int bearing demand
deposits $ 451,321 13,642 3.02 $ 401,804 14,304 3.56 $ 306,673 14,373 4.69
Savings deposits 799,784 25,505 3.19 691,897 27,548 3.98 482,193 23,991 4.98
Time deposits 1,247,315 51,660 4.14 1,362,074 67,861 4.98 1,258,191 82,073 6.52
Short-term borrowings 214,460 6,270 2.92 221,601 8,203 3.70 168,061 8,947 5.32
Long-term borrowings 36,088 2,709 7.51 25,703 2,123 8.26 15,653 1,529 9.77
Total interest bearing
liabilities 2,748,968 99,786 3.63 2,703,079 120,039 4.44 2,230,771 130,913 5.87
Demand deposits 396,711 373,488 296,347
Other liabilities 26,849 27,671 29,510
Shareholders' equity 294,733 269,007 215,273
Total liabilities and equity $3,467,261 $3,373,245 $2,771,901
Net interest earnings $152,558 $147,590 $116,838
Net yield on earning assets 4.77% 4.77% 4.60%
</TABLE>
(1) Fully taxable equivalent using the rate of 35% for 1993, and 34% for
1992 and 1991.
(2) Non-accrual loans are included in average balances.<PAGE>
TABLE 5
Loan Summary
(Dollars in Thousands)
<TABLE>
<CAPTION>
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 $ 334,068 $ 301,155 $ 274,436 $ 298,857 $ 298,291
Real estate:
Construction loans 33,682 43,108 37,307 25,713 18,679
Revolving home equity 102,648 93,092 70,927 57,539 43,719
Single family residentials 869,502 777,428 801,525 454,345 421,941
Apartment buildings 41,465 45,798 37,490 25,306 21,295
Commercial 320,668 282,728 252,557 207,511 194,801
Bankers' acceptances 2,123 560 26,887 0 0
Installment loans 465,216 454,032 432,941 395,739 403,656
Subtotal 2,169,372 1,997,901 1,934,070 1,465,010 1,402,382
Less: Allowance for loan losses 36,484 35,679 30,567 20,290 18,993
Net loans $2,132,888 $1,962,222 $1,903,503 $1,444,720 $1,383,389
Percent of loans by category
Commercial, financial, agricultural, and other loans 15.40% 15.07% 14.19% 20.40% 21.27%
Real estate:
Construction loans 1.55 2.16 1.93 1.76 1.33
Revolving home equity 4.73 4.66 3.67 3.93 3.12
Single family residentials 40.09 38.91 41.44 31.01 30.09
Apartment buildings 1.91 2.29 1.94 1.73 1.52
Commercial 14.78 14.15 13.06 14.17 13.89
Bankers' acceptances 0.10 0.03 1.39 0.00 0.00
Installment loans 21.44 22.73 22.38 27.00 28.78
Total 100.00% 100.00% 100.00% 100.00% 100.00%
Non-performing assets
Non-accrual loans $ 8,819 $ 14,125 $ 18,202 $ 14,263 $ 13,813
Other real estate owned 3,124 8,853 10,630 10,877 6,214
Restructured loans 597 131 1,964 0 0
Total non-performing assets $ 12,540 $ 23,109 $ 30,796 $ 25,140 $ 20,027
Non-performing assets as a % of total loans 0.58% 1.16% 1.59% 1.72% 1.43%
Loans past due over 90 days $ 3,180 $ 4,139 $ 3,628 $ 3,962 $ 4,063
Loans past due over 90 days as a% of total loans 0.15% 0.21% 0.19% 0.27% 0.29%
Allocation of loan loss reserve by loan type
Commercial, financial, and unallocated portion $ 16,698 $ 13,899 $ 12,873 $ 10,733 $ 9,765
Real estate construction loans 180 224 209 76 61
Real estate mortgage loans 8,277 9,179 7,411 2,263 1,987
Installment loans 11,329 12,377 10,074 7,218 7,180
Total $ 36,484 $ 35,679 $ 30,567 $ 20,290 $ 18,993
</TABLE>
<PAGE>
TABLE 6
Remaining Maturities of Loans
(Dollars in Thousands)
<TABLE>
<CAPTION>
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 $306,425 $150,848 $113,524 $ 42,053
Real estate construction loans 33,682 27,165 2,726 3,791
Commercial real estate loans 362,133 99,904 162,104 100,125
Loans with:
Floating rates $468,001 $197,253 $175,030 $ 95,718
Predetermined rates 232,836 80,664 103,324 48,848
</TABLE>
*Based on scheduled or approximate repayments.
<PAGE>
TABLE 7
Comparative Loan Loss Summary
For the Year Ended December 31
(Dollars in Thousands)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Allowance for loan losses, beginning of period $ 35,679 $ 30,567 $ 20,290 $ 18,993 $ 16,518
Charge-offs:
Commercial, financial, and agricultural loans 2,644 2,756 2,801 2,570 2,321
Real estate construction loans 0 0 0 0 0
Real estate mortgage loans 1,320 1,525 961 1,589 3,113
Installment loans 3,417 4,280 3,826 4,276 6,462
Totals 7,381 8,561 7,588 8,435 11,896
Recoveries:
Commercial, financial, and agricultural loans 930 821 954 402 338
Real estate construction loans 0 0 0 16 0
Real estate mortgage loans 373 394 168 146 152
Installment loans 1,094 1,069 988 1,284 1,476
Totals 2,397 2,284 2,110 1,848 1,966
Net charge-offs 4,984 6,277 5,478 6,587 9,930
Provision for loan losses 5,788 11,389 6,671 7,884 12,405
Balance of acquired subsidiaries 0 0 9,084 0 0
Allowance for loan losses, end of period $ 36,483 $ 35,679 $ 30,567 $ 20,290 $ 18,993
Average total loans $2,063,680 $1,959,943 $1,581,829 $1,404,196 $1,367,234
Total loans at year-end 2,169,372 1,997,901 1,934,070 1,465,736 1,402,427
As a percent of average:
Total loans:
Net charge-offs 0.24% 0.32% 0.35% 0.47% 0.73%
Provision for loan losses 0.28 0.58 0.42 0.56 0.91
Allowance for loan losses 1.77 1.82 1.93 1.44 1.39
As a percent of total loans at year-end:
Allowance for loan losses 1.68% 1.79% 1.58% 1.38% 1.35%
As a multiple of net charge-offs:
Allowance for loan losses 7.32 X 5.68 X 5.58 X 3.08 X 1.91 X
Income before tax and provision for loan losses 12.46 10.30 8.00 6.06 3.73
</TABLE>
<PAGE>
TABLE 8
Investment Securities Analysis
<TABLE>
<CAPTION>
As of December 31, 1993
Average Taxable
Maturity Equivalent
Book Value (Years/Months) Yield (1)
<S> <C> <C> <C>
U.S. treasury securities:
Within one year $ 190,033 4.24%
After one but within five years 273,844 4.62
After five but within ten years 27,211 7.12
Over 10 years 21,351 7.06
Total U.S. treasury securities 512,439 1/10 4.71
U.S. government agencies securities:
Within one year 57,726 8.59
After one but within five years 83,749 5.36
After five but within ten years 55,315 6.88
Total government agencies securities 196,790 3/0 6.73
States and political subdivisions securities:
Within one year 16,531 10.86
After one but within five years 34,749 10.31
After five but within ten years 27,245 8.96
After ten years 59,129 7.84
Total state and political subdivisions securities 137,654 7/8 9.05
Mortgage-backed securities (2):
Within one year 8,297 6.60
After one but within five years 45,616 6.59
After five but within ten years 41,236 7.40
After ten years 102,295 7.35
197,444 10/8 7.15
Other securities 15,709
Total investment securities $1,060,036 4/8 6.05
</TABLE>
(1) Fully tax-equivalent using the rate of 35%.
(2) Maturities for the mortgage-backed securities are based on the
contractual due date with no prepayments.
<PAGE>
TABLE 9
Maturity Distribution of Certificates of Deposit
in Amounts of $100,000 or More
(Dollars in Thousands)
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
Amount Percent Amount Percent
<S> <C> <C> <C> <C>
Three months or less $ 65,875 38.36% $ 85,372 52.35%
Three through six months 32,655 19.01 26,517 16.26
Six through twelve months 28,556 16.63 15,927 9.76
Over twelve months 44,662 26.00 35,273 21.63
Total $171,748 100.00% $163,089 100.00%
</TABLE>
<PAGE>
TABLE 10
Comparative Rate Sensitivity Summary
(Dollars in Thousands)
<TABLE>
<CAPTION>
0-3 Months 3-6 Months 6-12 Months Over 1 Year Total
<S> <C> <C> <C> <C> <C>
December 31, 1993
Earning assets:
Loans $793,684 $126,920 $239,693 $1,009,075 $2,169,372
Investments 135,394 58,189 244,018 630,463 1,068,064
Other earning assets 31,145 0 0 0 31,145
Total earning assets 960,223 185,109 483,711 1,639,538 3,268,581
Interest bearing liabilities:
Interest bearing deposits 599,075 239,420 252,436 1,433,487 2,524,418
Short-term borrowings 194,497 6,374 13,091 4,458 218,420
Long-term borrowings 2,160 2,128 4,256 14,244 22,788
Total interest bearing liabilities 795,732 247,922 269,783 1,452,189 2,765,626
Interest sensitivity gap 164,491 (62,813) 213,928 187,349 502,955
Cumulative interest sensitivity gap 164,491 101,678 315,606 502,955
Cumulative rate sensitivity ratio 1.21 1.10 1.24 1.18
December 31, 1992
Earning assets:
Loans $746,500 $140,301 $243,228 $ 867,872 $1,997,901
Investments 94,447 119,876 270,503 552,240 1,037,066
Other earning assets 127,939 0 0 0 127,939
Total earning assets 968,886 260,177 513,731 1,420,112 3,162,906
Interest bearing liabilities:
Interest bearing deposits 653,644 230,250 205,902 1,392,039 2,481,835
Short-term borrowings 193,870 4,413 5,430 563 204,276
Long-term borrowings 1,414 1,415 2,853 24,536 30,218
Total interest bearing liabilities 848,928 236,078 214,185 1,417,138 2,716,329
Interest sensitivity gap 119,958 24,099 299,546 2,974 446,577
Cumulative interest sensitivity gap 119,958 144,057 443,603 446,577
Cumulative rate sensitivity ratio 1.14 1.13 1.34 1.16
</TABLE>
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.
<PAGE>
TABLE 11
Rate Volume Analysis of Changes
in Interest Income and Expense
(Dollars in Thousands)
<TABLE>
<CAPTION>
1993 vs 1992 1992 vs 1991
Increase (Decrease) in Increase (Decrease) in
Net Interest Income * Net Interest Income *
Volume Rate Total Volume Rate Total
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans:
Taxable $ 9,628 $(16,338) $(6,710) $37,859 $(16,717) $21,142
Tax-exempt 84 48 132 (239) (494) (733)
Total loans 9,712 (16,290) (6,578) 37,620 (17,211) 20,409
Investment securities:
Taxable 509 (9,107) (8,598) 15,949 (9,966) 5,983
Tax-exempt 1,788 (641) 1,147 (1,172) (490) (1,662)
Total securities 2,297 (9,748) (7,451) 14,777 (10,456) 4,321
Federal funds sold and other (644) (542) (1,186) (1,464) (3,388) (4,852)
Total earning assets 11,365 (26,580) (15,215) 50,933 (31,055) 19,878
Interest bearing liabilities:
Time and savings deposits 1,876 (20,782) (18,906) 21,414 (32,138) (10,724)
Short-term borrowings (257) (1,676) (1,933) 2,405 (3,149) (744)
Long-term borrowings 794 (208) 586 860 (266) 594
Total interest bearing liabilities 2,413 (22,666) (20,253) 24,679 (35,553) (10,874)
Net interest earnings $ 8,952 $ (3,914) $ 5,038 $26,254 $ 4,498 $30,752
</TABLE>
* 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.
<PAGE>
TABLE 12
Non-Interest Income and Expense
(Dollars in Thousands)
<TABLE>
<CAPTION>
Increase (Decrease) Over Prior Year
1993 1992 1991 1993 1992
Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C> <C>
Non-interest income:
Trust income $ 7,272 $ 6,041 $ 5,327 $1,231 20.38 $ 714 13.40
Credit card fees 2,749 2,055 1,433 694 33.77 622 43.41
Service charges on deposit accounts 11,963 11,281 8,981 682 6.05 2,300 25.61
Insurance service fees 819 990 940 (171) (17.27) 50 5.32
Real estate fees 8,080 8,453 2,423 (373) (4.41) 6,030 248.87
Checkbook sales 2,957 3,115 2,372 (158) (5.07) 743 31.32
Securities transactions 113 (35) (730) 148 (422.86) 695 (95.21)
Miscellaneous 6,309 5,468 3,610 841 15.38 1,858 51.47
Total non-interest income $ 40,262 $ 37,368 $24,356 $2,894 7.74 $13,012 53.42
Non-interest expense:
Salaries and wages $ 48,906 $ 45,436 $37,182 $3,470 7.64 $ 8,254 22.20
Employee benefits 12,605 10,021 9,054 2,584 25.79 967 10.68
Total staff expenses 61,511 55,457 46,236 6,054 10.92 9,221 19.94
Other operating expenses:
Advertising 2,697 2,884 1,974 (187) (6.48) 910 46.10
FDIC insurance 6,519 6,127 4,629 392 6.40 1,498 32.36
Occupancy, net 6,206 6,199 4,315 7 0.11 1,884 43.66
Equipment 10,604 10,503 8,759 101 0.96 1,744 19.91
Outside data processing 4,575 2,351 1,864 2,224 94.60 487 26.13
Taxes not on income 2,354 2,334 2,105 20 0.86 229 10.88
Supplies & postage 6,793 6,456 4,775 337 5.22 1,681 35.20
All other 24,848 23,829 17,772 1,019 4.28 6,057 34.08
Total other operating expenses 64,596 60,683 46,193 3,913 6.45 14,490 31.37
Total non-interest expense $126,107 $116,140 $92,429 $9,967 8.58 $23,711 25.65
</TABLE>
Item 7. Financial Statements, (Pro Forma) Financial Information and Exhibits
Exhibits
23.1 Consent of Ernst & Young LLP
23.2 Consent of Crowe, Chizek and Company
23.3 Consent of S.R. Snodgrass, A.C.
27 Financial Data Schedule
<PAGE>
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 January 10, 1995
BY /s/ Laurance G. Jones
Laurance G. Jones
(Chief Financial Officer)
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this Current Report (Form 8-K) of One
Valley Bancorp of West Virginia, Inc. of our report dated January 25, 1994,
except for Note 1, as to which the date is November 30, 1994, with respect
to the consolidated financial statements of One Valley Bancorp of West
Virginia, Inc. and Subsidiaries for the year ended December 31, 1993.
We also consent to the incorporation by reference in the Registration
Statements pertaining to the Amended 1983 Incentive Stock Option Plan
(Form S-8, No. 2-90738) and pertaining to the 1993 Incentive Stock
Option Plan (Form S-8, No. 33-66700) of One Valley Bancorp of West
Virginia, Inc. of our report dated January 25, 1994, except for Note 1,
as to which the date is November 30, 1994, with respect to the consolidated
financial statements of One Valley Bancorp of West Virginia, Inc. and
Subsidiaries included in its Current Report on Form 8-K dated January 10, 1995.
/s/Ernst & Young LLP
Charleston, WV
January 9, 1995
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this Current Report (Form 8-K) of One
Valley Bancorp of West Virginia, Inc. of our report dated February 4, 1994,
with respect to the consolidated financial statements of Mountaineer
Bankshares of W. Va., Inc. for the year ended December 31, 1993.
We also consent to the incorporation by reference in the Registration
Statements pertaining to the Amended 1983 Incentive Stock Option Plan
(Form S-8, No. 2-90738) and pertaining to the 1993 Incentive Stock Option
Plan (Form S-8, No. 33-66700) of One Valley Bancorp of West Virginia, Inc.
of our report dated February 4, 1994, with respect to the consolidated
financial statements of Mountaineer Bankshares of W. Va., Inc., included
in this Current Report on Form 8-K dated January 10, 1995.
/s/ CROWE, CHIZEK and COMPANY
Columbus, Ohio
January 9, 1995
<PAGE>
CONSENT TO INDEPENDENT AUDITORS
We consent to the inclusion in this Current Report (Form 8-K) of
One Valley Bancorp of West Virginia, Inc., of our report dated
February 15, 1993, with respect to the consolidated financial
statements of Sunrise Bancorp, Inc., for the year ended
December 31, 1992.
We also consent to the incorporation by reference in the Registration
Statements pertaining to the Amended 1983 Incentive Stock Option Plan
(Form S-8, No. 2-90738) and pertaining to the 1993 Incentive Stock
Option Plan (Form S-8, No. 33-66700) of One Valley Bancorp of West
Virginia, Inc. of our report dated February 15, 1993, with respect to
the consolidated financial statements of Sunrise Bancorp, Inc., included
in this Current Report on Form 8-K dated January 10, 1995.
/s/S.R. SNODGRASS, A.C.
Wheeling, West Virginia
January 10, 1995
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and statements of income of One Valley Bancorp as
well as supplemental schedules of the analysis of loan losses and non-performing
assets and the consolidated average balance sheets and is qualified in its
entirety by reference to such financial statements and supplemental schedules.
</LEGEND>
<CIK> 0000351616
<NAME> ONE VALLEY BANCORP
<MULTIPLIER> 1000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1993 DEC-31-1992 DEC-31-1991
<PERIOD-END> DEC-31-1993 DEC-31-1992 DEC-31-1991
<CASH> 141,195 155,716 0
<INT-BEARING-DEPOSITS> 8,028 7,791 0
<FED-FUNDS-SOLD> 31,145 127,939 0
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 0 0 0
<INVESTMENTS-CARRYING> 1,060,036 1,029,275 0
<INVESTMENTS-MARKET> 1,081,742 1,051,762 0
<LOANS> 2,169,372 1,997,901 0
<ALLOWANCE> 36,484 35,679 0
<TOTAL-ASSETS> 3,512,876 3,427,587 0
<DEPOSITS> 2,936,735 2,881,612 0
<SHORT-TERM> 218,420 204,276 0
<LIABILITIES-OTHER> 29,749 30,943 0
<LONG-TERM> 22,788 30,218 0
<COMMON> 175,168 174,935 0
0 0 0
0 0 0
<OTHER-SE> 130,016 105,603 0
<TOTAL-LIABILITIES-AND-EQUITY> 3,512,876 3,427,587 0
<INTEREST-LOAN> 182,093 188,749 168,091
<INTEREST-INVEST> 62,502 70,445 65,559
<INTEREST-OTHER> 3,104 4,290 9,142
<INTEREST-TOTAL> 247,699 263,484 242,792
<INTEREST-DEPOSIT> 90,807 109,713 120,437
<INTEREST-EXPENSE> 99,786 120,039 130,913
<INTEREST-INCOME-NET> 147,913 143,445 111,879
<LOAN-LOSSES> 5,788 11,389 6,671
<SECURITIES-GAINS> 113 (35) (730)
<EXPENSE-OTHER> 126,107 116,140 92,429
<INCOME-PRETAX> 56,280 53,284 37,135
<INCOME-PRE-EXTRAORDINARY> 56,280 53,284 37,135
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 37,954 36,638 26,392
<EPS-PRIMARY> 2.20 2.13 1.72
<EPS-DILUTED> 2.20 2.13 1.72
<YIELD-ACTUAL> 4.77 4.77 4.60
<LOANS-NON> 8,819 14,125 18,202
<LOANS-PAST> 3,180 4,139 3,628
<LOANS-TROUBLED> 597 131 1,964
<LOANS-PROBLEM> 0 0 0
<ALLOWANCE-OPEN> 35,679 30,567 20,290
<CHARGE-OFFS> 7,381 8,561 7,588
<RECOVERIES> 2,397 2,284 2,110
<ALLOWANCE-CLOSE> 36,483 35,679 30,567
<ALLOWANCE-DOMESTIC> 36,483 35,679 30,567
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
<PAGE>
</TABLE>
