FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission file number 010042
One Valley Bancorp, Inc.
(Exact name of registrant as specified in its charter)
West Virginia 55-0609408
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
One Valley Square, Charleston, West Virginia 25326
(Address of principal executive offices)
(Zip Code)
(304) 348-7000
(Registrant's telephone number, including area code)
Not applicable
(Former name, address, and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities and Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
YES XXX No
The number of shares outstanding of each of the issuer's classes of common stock
as of June 30, 1996 was:
Common Stock, $10.00 par value -- 18,024,668 shares
<PAGE>
One Valley Bancorp, Inc.
Part I. Financial Information
Item 1. Financial Statements.
The unaudited interim consolidated financial statements of One Valley Bancorp,
Inc. (One Valley) or (Registrant) are included on pages 3 - 8 of this report.
These consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all the information and footnotes required by generally
accepted accounting principles for annual year-end financial statements. In the
opinion of management, all adjustments considered necessary for a fair
presentation have been included and are of a normal recurring nature. Operating
results for the six month period ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Management's discussion and analysis of financial condition and results of
operations is included on pages 9 - 18 of this report.
<PAGE>
<TABLE>
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited in thousands)
<CAPTION>
June 30 December 31 June 30
1996 1995 1995
<S> <C> <C> <C>
ASSETS
Cash and Due From Banks $138,062 $140,617 $144,337
Interest Bearing Deposits With Other Banks 11,317 8,259 8,485
Federal Funds Sold 4,437 16,800 16,700
---------- ---------- ----------
Cash and Cash Equivalents 153,816 165,676 169,522
Securities
Available-for-Sale, at fair value 988,796 871,699 544,570
Held-to-Maturity (Estimated Fair Value,
June 30, 1996 - $204,085; December 31, 1995 - $212,040;
June 30, 1995 - $469,125) 207,749 205,153 465,004
Loans
Total Loans 2,758,272 2,511,962 2,438,786
Less: Allowance For Loan Losses 42,150 39,534 38,642
---------- ---------- ----------
Net Loans 2,716,122 2,472,428 2,400,144
Premises & Equipment - Net 85,861 80,688 81,618
Other Assets 89,434 62,652 63,033
---------- ---------- ----------
Total Assets $4,241,778 $3,858,296 $3,723,891
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non-interest Bearing $392,610 $389,514 $383,441
Interest Bearing 2,982,373 2,658,822 2,636,778
---------- ---------- ----------
Total Deposits 3,374,983 3,048,336 3,020,219
Short-term Borrowings
Federal Funds Purchased 17,443 54,005 48,639
Repurchase Agreements and Other Borrowings 389,184 335,775 255,239
---------- ---------- ----------
Total Short-term Borrowings 406,627 389,780 303,878
Long-term Borrowings 17,898 13,411 11,440
Other Liabilities 43,145 40,467 34,636
---------- ---------- ----------
Total Liabilities 3,842,653 3,491,994 3,370,173
Shareholders' Equity:
Preferred Stock-$10 par value; 1,000,000 shares authorized
but none issued 0 0 0
Common Stock-$10 par value; 40,000,000 shares authorized,
Issued 19,871,356 shares at June 30, 1996;
18,016,584 shares at December 31, 1995;
17,980,357 shares at June 30, 1995 198,714 180,166 179,804
Capital Surplus 73,220 34,603 34,244
Retained Earnings 185,954 168,625 152,323
Unrealized Gain (Loss) on Securities Available-for-Sale,
net of deferred taxes (6,434) 6,252 2,154
Treasury Stock - 1,846,688 shares at June 30, 1996,
954,200 shares at December 31, 1995;
680,500 shares at June 30, 1995; at cost (52,329) (23,344) (14,807)
---------- ---------- ----------
Total Shareholders' Equity 399,125 366,302 353,718
---------- ---------- ----------
Total Liabilities and Shareholders' Equity $4,241,778 $3,858,296 $3,723,891
========== ========== ==========
</TABLE>
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<TABLE>
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(unaudited in thousands, except per share data)
<CAPTION>
For The Three Months For The Six Months
Ended June 30 Ended June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans
Taxable $58,327 $53,990 $113,635 $106,020
Tax-Exempt 662 626 1,306 1,254
-------- -------- -------- --------
Total 58,989 54,616 114,941 107,274
Interest on Investment Securities
Taxable 15,963 12,701 29,997 24,641
Tax-Exempt 2,778 2,502 5,551 5,006
-------- -------- -------- --------
Total 18,741 15,203 35,548 29,647
Other Interest Income 144 923 245 1,123
-------- -------- -------- --------
Total Interest Income 77,874 70,742 150,734 138,044
INTEREST EXPENSE
Deposits 29,656 27,039 57,055 51,530
Short-term Borrowings 4,449 3,198 8,872 6,476
Long-term Borrowings 256 185 456 411
-------- -------- -------- --------
Total Interest Expense 34,361 30,422 66,383 58,417
-------- -------- -------- --------
Net Interest Income 43,513 40,320 84,351 79,627
Provision For Loan Losses 1,334 1,113 2,483 2,226
-------- -------- -------- --------
Net Interest Income
After Provision For Loan Losses 42,179 39,207 81,868 77,401
OTHER INCOME
Trust Department Income 2,488 2,123 4,680 4,027
Service Charges on Deposit Accounts 3,693 3,568 7,107 6,734
Real Estate Loan Processing & Servicing Fees 1,431 1,164 2,782 2,279
Other Service Charges and Fees 1,411 1,300 2,767 2,385
Other Operating Income 1,358 1,521 2,823 3,047
Securities Transactions 28 13 (266) 20
-------- -------- -------- --------
Total Other Income 10,409 9,689 19,893 18,492
OTHER EXPENSES
Salaries and Employee Benefits 16,358 15,438 32,674 31,881
Occupancy Expense - Net 1,673 1,572 3,410 3,100
Equipment Expenses 2,126 2,263 4,278 4,407
Federal Deposit Insurance 354 1,678 601 3,336
Outside Data Processing 1,333 1,147 2,556 2,216
Other Operating Expenses 9,534 8,364 18,076 15,886
-------- -------- -------- --------
Total Other Expenses 31,378 30,462 61,595 60,826
-------- -------- -------- --------
Income Before Taxes 21,210 18,434 40,166 35,067
Applicable Income Taxes 7,170 6,137 13,478 11,481
-------- -------- -------- --------
NET INCOME $14,040 $12,297 $26,688 $23,586
======== ======== ======== ========
NET INCOME PER COMMON SHARE $0.80 $0.71 $1.55 $1.37
======== ======== ======== ========
Based on Average Shares Outstanding of 17,588 17,354 17,191 17,217
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(unaudited in thousands)
<CAPTION>
Unrealized
Gain (Loss)
on Securities
Common Capital Retained Treasury Available
Stock Surplus Earnings Stock for Sale
<S> <C> <C> <C> <C> <C>
Balance December 31, 1995 $180,166 $34,603 $168,625 ($23,344) $6,252
Stock Issued for Acquisition 17,890 37,817 0 0 0
Six Months Ended June 30, 1996
Net Income 0 0 26,688 0 0
Cash Dividends ($.54 per share) 0 0 (9,359) 0 0
Change in Fair Value of Securities
Available for Sale, net of deferred taxes 0 0 0 0 (12,686)
Treasury Shares Purchased 0 0 0 (28,985) 0
Stock Options Exercised 658 800 0 0 0
-------- -------- -------- -------- --------
Balance June 30, 1996 $198,714 $73,220 $185,954 ($52,329) ($6,434)
======== ======== ======== ======== ========
Balance December 31, 1994 $175,384 $25,954 $137,437 ($10,373) ($6,535)
Stock Issued for Acquisition 4,116 8,130 0 0 0
Six Months Ended June 30, 1995
Net Income 0 0 23,586 0 0
Cash Dividends ($.50 per share) 0 0 (8,700) 0 0
Change in Fair Value of Securities 0 0 0 0 0
Available for Sale, net of deferred taxes 0 0 0 0 8,689
Treasury Shares Purchased 0 0 0 (4,434) 0
Stock Options Exercised 304 160 0 0 0
-------- -------- -------- -------- --------
Balance June 30, 1995 $179,804 $34,244 $152,323 ($14,807) $2,154
======== ======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited in thousands)
<CAPTION>
For The Six Months
Ended June 30
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $26,688 $23,586
Adjustments To Reconcile Net Income To Net Cash
Provided by Operating Activities:
Provision For Loan Losses 2,483 2,226
Depreciation 4,066 4,021
Amortization and Accretion 2,071 1,659
Net Loss (Gain) From Sales of Assets 352 (20)
Increase (Decrease) Due to Changes In:
Accrued Interest Receivable (902) (2,870)
Accrued Interest Payable 1,142 2,312
Other Assets and Other Liabilities 833 (454)
-------- --------
Net Cash Provided by Operating Activities 36,733 30,460
INVESTING ACTIVITIES
Proceeds From Sales of Securities Available for Sale 85,806 55,625
Proceeds From Maturities of Securities Available for Sale 100,345 140,917
Proceeds From Maturities of Securities Held to Maturity 3,150 14,409
Purchases of Securities Available for Sale (189,903) (152,337)
Purchases of Securities Held to Maturity (5,788) (34,702)
Net Increase In Loans (84,260) (54,127)
Acquisition of Subsidiary, Net of Cash Paid 10,866 4,454
Purchases of Premises and Equipment (4,016) (2,203)
-------- --------
Net Cash Used in Investing Activities (83,800) (27,964)
FINANCING ACTIVITIES
Net Increase in Interest Bearing and Non-interest Bearing Deposit 69,515 51,595
Net Decrease in Federal Funds Purchased (36,562) (4,506)
Net Increase (Decrease) in Other Short-term Borrowings 42,653 (66,955)
Repayment of Long-term Debt (3,513) (8,510)
Proceeds From Issuance of Common Stock 1,458 464
Purchase of Treasury Stock (28,985) (4,434)
Dividends Paid (9,359) (8,700)
-------- --------
Net Cash Provided by (Used in) Financing Activities 35,207 (41,046)
-------- --------
Decrease in Cash and Cash Equivalents (11,860) (38,550)
Cash And Cash Equivalents at Beginning of Year 165,676 208,072
-------- --------
Cash And Cash Equivalents, June 30 $153,816 $169,522
======== ========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of PresentationThe accounting and reporting policies of One
Valley conform to generally accepted accounting principles and practices in the
banking industry. The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
staements and accompanying notes. Actual results could differ from those
estimates. All significant intercompany accounts and transactions have been
eliminated in consolidation. The interim financial information included in this
report is unaudited. In the opinion of management, all adjustments necessary
for a fair presentation of the results of the interim periods have been made.
These notes are presented in conjunction with the Notes to Consolidated
Financial Statements included in the Annual Report of One Valley.
Note B - Accounting Change
In May 1995, the FASB issued Statement No. 122, "Accounting for Mortgage
Servicing Rights" which is applicable to One Valley in 1996. FAS 122 eliminates
the accounting inconsistencies that existed between mortgage servicing rights
that are acquired through loan origination acitivites and those acquired through
purchase transactions. As of January 1, 1996, One Valley adopted FAS 122, the
results of which are included in the first six months of operating results
presented for One Valley in this report and are immaterial.
In October 1995, the FASB issued Statement No. 123, "Accounting for Stock-Based
Compensation" which is applicable to One Valley in 1996. The Statement provides
companies with the option of accounting for stock-based compensation under APB
Opinion No. 25, "Accounting for Stock Issued to Employees" or applying the
provisions of Statement 123. As a result, One Valley has decided to continue to
apply the provisions of APB No. 25 to account for stock-based compensation.
Required disclosure will be made in the 1996 year-end financial statements for
One Valley.
In June 1996, the FASB issued Statement No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" which is
applicable to One Valley effective January 1, 1997. This statement establishes
standards for determining whether certain transfers of financial assets should
be considered sales of all or part of the assets or as secured borrowings. The
Statement also establishes standards surrounding settlements of liabilities
through the transfer of assets to a creditor or obtaining an unconditional
release and whether these settlements should prove the debt extinguished. One
Valley's management anticipates this statement to have an immaterial effect on
the financial results of the company for 1997.
Note C - Acquisitions and Name Change
At the close of business on April 30, 1996, One Valley Bancorp acquired all of
the outstanding stock of CSB Financial Corporation, headquartered in Lynchburg,
Virginia. Pursuant to the merger agreement, One Valley exchanged 0.6774 shares
of its common stock and for each share of CSB Financial's common stock. The
transaction was valued at approximately $55.7 million, or $21.08 per share of
CSB Financial common stock. The combination was accounted for under the
purchase method of accounting. Accordingly, consolidated results as of June 30,
1996, include the operations of CSB Financial only from the date of acquisition.
Coinciding with the close of that transaction, One Valley shareholders
previously voted to change the company name from One Valley Bancorp of West
Virginia, Inc. to One Valley Bancorp, Inc. This report refers to the registrant
as One Valley Bancorp, Inc.
Note D - Securities
One Valley adopted the provisions of FASB Statement No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" for investments held as of or
acquired after January 1, 1994. In accordance with Statement No. 115, One
Valley designates securities as available-for-sale or held-to-maturity based on
management's intent at the time the security is purchased. Securities
designated as available-for-sale at June 30, 1996, had an historical cost of
$999.5 million, with an unrealized loss of approximately $10.7 million, which
decreased shareholders' equity by $6.4 million, net of $4.3 million in deferred
income taxes. At year-end December 31, 1995, and June 30, 1995, securities
available-for-sale had a historical cost of $861.3 million and $540.9 million,
with an unrealized gain of approximately $10.4 million and $3.6 million,
respectively. The unrealized gains increased shareholders' equity by $6.3
million and $2.2 million, net of $4.2 and $1.4 million in deferred income taxes,
respectively.
One Valley Bancorp, Inc.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
June 30, 1996
Net income for the second quarter of 1996 totaled $14.0 million, a
14.2% increase over the $12.3 million earned in the same quarter of 1995. On a
per share basis, net income of $0.80 for the second quarter of 1996 increased
12.7% over the $0.71 earned during the same period in 1995. The improvement in
earnings during the quarter can primarily be attributed to higher net interest
income.
Net income for the first six months of 1996 totaled $26.7 million, a
13.2% increase over the first six months of 1995. Earnings per share during the
six month period were $1.55, up 13.1% from the $1.37 earned in the first six
months of 1995.
Return on average assets (ROA) measures how effectively One Valley
utilizes its assets to produce net income. ROA was 1.37% in the second quarter
of 1996, an increase from the 1.33% earned during the same period of 1995.
Return on average equity (ROE) also increased, from 14.10% for the second
quarter of 1995 to 14.50% earned in the second quarter of 1996.
The following discussion is an analysis of the financial condition and
results of operations of One Valley for the first six months of 1996. This
discussion should be read in conjunction with the 1995 Annual Report to
Shareholders and the other financial information included in this report.
Acquisitions and Name Change
At the close of business on April 30, 1996, One Valley Bancorp
acquired all of the outstanding stock of CSB Financial Corporation,
headquartered in Lynchburg, Virginia. Pursuant to the merger agreement, One
Valley exchanged 0.6774 shares of its common stock for each share of CSB
Financial's common stock. The transaction was valued at approximately $55.7
million, or $21.08 per share of CSB Financial common stock. The combination was
accounted for under the purchase method of accounting. Accordingly,
consolidated results as of June 30, 1996, include the operations of CSB
Financial only from the date of acquisition. Coinciding with the close of that
transaction, One Valley shareholders previously voted to change the company name
from One Valley Bancorp of West Virginia, Inc. to One Valley Bancorp, Inc.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income for the six months ended June 30, 1996, was $88.0
million on a fully tax-equivalent basis, a 6.1% increase over the $83.0 million
earned during the same period in 1995. This increase is largely due to a $200.6
million, or 8.4% increase in average total loans and a $149.5 million, or 15.2%
increase in average securities during the first six month comparison. In total,
average earning assets increased by 9.6% or $323.5 million in the first six
months of 1996 over the same period in 1995, while average interest bearing
liabilities increased by 9.8% or $284.7 million in the same period. Both total
interest income and total interest expense increased from the prior year due to
the increases in volume and changes in the mix of assets and liabilities.
Approximately thirty percent of this growth was attributable to the second
quarter acquisition of CSB Financial Corporation while the remainder was due to
internal growth.
As shown in the consolidated average balance sheets (page 18), the
yield on earning assets declined to 8.37% for the first six months of 1996 from
8.42% during the first six months of 1995. During the same period, the cost of
interest bearing liabilities increased 13 basis points to 4.20% from last year's
4.07% level. This increased cost has resulted from a combination of changes in
the mix of interest-bearing liabilities including a higher level of short-term
borrowed funds, as well as a higher cost to attract deposit funds into
certificates of deposit. Additional discussion of the changes in balance sheet
mix is included in a later section of this report. Due to the increase in the
cost of interest bearing liabilities, the net interest margin decreased to 4.77%
during the first six months of 1996, compared to 4.93% during the first six
months of 1995. Internal interest rate risk simulations indicate that over the
next twelve months a sharp rise in interest rates would have a slight positive
influence on net interest income whereas, a sharp decline in rates would have a
slight negative influence on net interest income. Normal fluctuations in market
interest rates should not have a significant impact on One Valley's net interest
margin.
Credit Experience
The provision for loan losses was $2.5 million for the six months
ended June 30, 1996, a $257,000 or 11.5% increase over the provision made in the
same period of 1995. As a percentage of average total loans, the provision for
loan losses through the first six months of 1996 was 0.19% annualized, which is
consistent with the rate for the first six months of 1995. The provision for
loan losses was based upon One Valley's continued evaluation process of the
adequacy of the allowance for loan losses. Net charge-offs as a percentage of
average total loans in the first six months of 1996 increased to 0.16% on an
annualized basis, up from an annualized 0.10% during the same period of 1995.
These charge-off rates compare to a 0.42% average for peer group banks during
1995.
Total non-performing assets at June 30, 1996, were 0.43% of period-end
loans, up from the 0.35% at year-end 1995 and the 0.40% at June 30, 1995. The
increase is primarily the result of including $900,000 in non-accrual loans from
CSB Financial and a $1.0 million increase in real estate secured non-accrual
loans. At June 30, 1996, loans past due over 90 days were 0.15% of outstanding
loans, a decrease from the 0.22% level at year-end 1995, and down from the 0.19%
at June 30, 1995. The dollar amounts of both non-performing assets and loans
past due over 90 days are summarized on page 17.
With the continued good credit quality of the loan portfolio, the
allowance for loan losses has remained relatively stable and no significant
losses are currently anticipated. At June 30, 1996, the allowance was 1.53% of
outstanding loans, as compared to the 1.57% at year-end and the 1.58% one year
ago.
Non-Interest Income and Expense
The net overhead ratio (non-interest expense less non-interest income
excluding security transactions divided by average earning assets) is a measure
of the company's ability to control costs and equalizes the comparison of
various sized operations. As this ratio decreases, more of the net interest
margin earned flows to net income. One Valley's net overhead ratio for the
first six months of 1996 was 2.24%, down from 2.39% during all of 1995 and down
from the 2.51% during the first six months of 1995. This improvement is a
result of growth in average earning assets and an actual decrease in net
overhead costs. Average earning assets increased 9.6% in the first six months
of 1996 when compared with the same period in 1995. Net overhead, however,
decreased by 2.2% during the same period due to an increase in non-interest
income coupled with a decline in FDIC insurance expense. These ratios reflect
the inclusion of CSB Financial only for the two months since its acquisition on
April 30, 1996.
Total non-interest income was $19.9 million through the first six
months of 1996, up 7.6% from the $18.5 million non-interest income earned during
the same period in 1995. Trust income increased by 16.2% from the first six
months of last year due to new business and an increase in market value of trust
assets managed during the first six months of 1996 when compared to the same
period of 1995. Service charges on deposit accounts increased by 5.5% in the
first six month comparison due to changes in the service charge fee structure.
Real estate loan processing and service fees increased by 22.1% when compared to
the first six months of 1995. This increase is due to a higher level of fees
from secondary mortgage loan activity combined with income recognized with the
adoption of FAS 122, "Accounting for Mortgage Servicing Rights." Other service
charges and fees increased by 16.0% over the first six months of 1995, primarily
due to increases in sales of mutual funds and other investment products and
increased sales of credit life commissions. Other operating income decreased by
7.4% due primarily to a lower level of income recognized on the disposition of
other real estate owned and other loan payoffs. Securities losses of $294,000
were taken in the first three months of 1996 as part of a restructing of a
portion of One Valley's investment portfolio.
In May 1995, the FASB issued Statement 122, Accounting for Mortgage
Servicing Rights. Statement 122 requires financial institutions to recognize
rights to service mortgage loans for others as separate assets. Mortgage
Servicing Rights can be purchased from a third party or retained from loans
originated internally and sold to third party investors. This statement was
adopted as of January 1, 1996. The adoption of this Statement has had no
material effect on One Valley's total financial results for the first six months
and is expected to be immaterial in future periods.
Total non-interest expense was $61.6 million during the six months
ended June 30, 1996, relatively unchanged from the $60.8 million during the same
period in 1995. Staff costs increased by 2.5% from the level one year ago.
Staffing levels have declined by 1.7% from June 30, 1995, as operations are
continually being streamlined and levels are reduced through normal attrition.
However, savings have been offset by normal salary and benefit increases.
Occupancy expense increased by 10.0% primarily due to an increase in
depreciation resulting from facility renovations coupled with utility and
maintenance costs associated with the harsh winter weather during the first
quarter. Outside data processing expense increased by 15.3% above the same
period in 1995 primarily due to the second and third quarter 1995 conversions of
newly acquired affiliates to a common external data processing system. Other
operating expenses increased 13.8% in the first six months of 1996 due to
increased expenditures in a number of miscellaneous categories including
advertising and promotions, maintenance and disposition of other real estate
owned, credit card fraud losses, taxes not on income, and intangible
amortization expense.
During the third quarter of 1995, the Federal Deposit Insurance
Corporation (FDIC) lowered its insurance assessment rates as part of the
nationwide funding of the Bank Insurance Fund (BIF). This rate change explains
the 82% decrease in Federal Deposit Insurance expense from the first six months
of 1995 to the first six months of 1996. The possibility of legislation to
boost the Savings Association Insurance Fund (SAIF) with a one time assessment
on thrift deposits remains uncertain. At June 30, 1996, One Valley had over
$665 million of SAIF assessable deposits resulting from prior acquisitions of
savings and loan institutions including CSB Financial. Accordingly, One Valley
will continue to pay premiums on these SAIF insured deposits at the level
experienced in the second quarter of 1996. If legislation currently considered
is enacted, One Valley would recognize a maximum one time assessment of
approximately $5.0 million in the period in which the law is enacted. On June
19, 1996, One Valley filed a lawsuit against the FDIC in United States District
Court for the Southern District of West Virginia seeking a determination that
the FDIC Assessment for certain deposits One Valley acquired in Oakar
transactions must be calculated using the BIF rate.
Income tax expense increased by $2.0 million, or 17.4%, for the first
six months of 1996 in comparison to the same period in 1995. The increase in
taxes is primarily a result of the 14.5% growth in pretax earnings. One
Valley's effective income tax rate for the first six months of 1996 was 33.6%
compared to 32.7% during the first six months of 1995.
FINANCIAL CONDITION
Asset Structure
Total loans continued to grow when compared to the first six months of
1995. At June 30, 1996, total loans exceeded June 30, 1995, levels by 13.1% or
$319.5 million. Approximately $167.8 million of the change in period-end loans
was attributable to the recent CSB Financial acquisition. The consolidated
loan-to-deposit ratio has also increased to 80.5% at June 30, 1996, compared to
79.5% at June 30, 1995. Since year-end 1995, total loans have increased by 9.8%
or $78.5 million, excluding the CSB transaction. This increase in total loans
has resulted from growth in the three major loan categories - commercial, real
estate, and consumer installment.
Investment portfolio assets increased $119.7 million or 11.1% from the
level at year-end and by $187.0 million or 18.5% from the level one year ago.
Approximately 64.7% of the increase in the investment portfolio over the 1995
level was due to the CSB Financial acquistion. Other increases in the
investment portfolio were due to One Valley's asset/liability strategy which
strives to minimize interest rate risk while enhancing the financial position of
the company.
Securities designated as available-for-sale at June 30, 1996, had an
historical cost of $999.5 million, with an unrealized loss of approximately
$10.7 million, which decreased shareholders' equity by $6.4 million, net of $4.3
million in deferred income taxes. At year-end December 31, 1995, and June 30,
1995, securities available-for-sale had a historical cost of $861.3 million and
$540.9 million, with an unrealized gain of approximately $10.4 million and $3.6
million, respectively. The unrealized gains increased shareholders' equity by
$6.3 million and $2.2 million, net of $4.2 and $1.4 million in deferred income
taxes, respectively.
At the time of purchase, management determines the appropriate
classification of securities. Securities to be held for indefinite periods of
time and not intended to be held to maturity or on a long-term basis are
classified as available-for-sale and carried at fair value. The corresponding
difference between the historical cost and the current fair value of these
securities, the unrealized gain or loss, is an adjustment to shareholders'
equity, net of deferred income taxes. Securities available-for-sale include
securities that management intends to use as part of its asset/liability
management strategy and that may be sold in response to changes in interest
rates, resultant prepayment risk, and other related risk factors. If management
has the positive intent and One Valley has the ability at the time of purchase
to hold securities until maturity, they are classified as held-for-investment
and carried at amortized historical cost adjusted for amortization of premiums
and accretion of discounts, which are recognized as adjustments to interest
income.
One Valley adopted the provisions of FASB Statement No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" for
investments held as of or acquired after January 1, 1994. At year-end 1994,
approximately 55% of the total investment portfolio was classified as available-
for-sale, while 45% was classified as held-to-maturity. On November 15, 1995,
the FASB staff issued a Special Report, "A Guide to Implementation of Statement
115 on Accounting for Certain Investments in Debt and Equity Securities." In
accordance with provisions in that Special Report, One Valley chose to
reclassify certain securities from held-to-maturity to available-for-sale and
thus increase the potential liquidity of the investment portfolio. At the date
of transfer, the amortized cost of those securities was $264.8 million and the
net unrealized holding gain on those securities was approximately $3.3 million.
As a result, at year-end 1995, approximately 81% of the total investment
portfolio was classified as available-for-sale, while 19% was classified as
held-to-maturity. At the end of the second quarter of 1996, those ratios have
changed only slightly from year-end but significantly from June one year ago.
At June 30, 1996, approximately 83% of the total investment portfolio was
classified as available-for-sale, while 17% was classified as held-to-maturity,
compared to 54% and 46%, respectively, for June 30, 1995.
In order to improve its fully tax equivalent net interest income and
to hedge against higher income tax rates, One Valley increased its holdings of
tax-exempt securities that were offering attractive yields in 1995. As shown on
the consolidated average balance sheets (page 18), average tax-exempt securities
in the first six months of 1996 increased by 14.2% or $25.5 million over the
average during the first six months of 1995. One Valley will continue to
monitor its investment opportunties and may purchase additional tax-exempt
securities of similar yield and quality.
Federal funds sold at June 30, 1996, were $4.4 million, down $12.4
million from year-end and down $12.3 million from one year ago. Fluctuations in
federal funds sold are normal and largely due to planned changes in the
company's asset/liability structure in order to maximize the return on
investment in response to changes in the interest rate environment.
Liability Structure
Total deposits at June 30, 1996, increased $326.6 million or 10.7%
from the level at year-end and $354.8 million or 11.7% since June 30, 1995.
Approximately $259.3 million of the change in total deposits was attributable to
the CSB Financial acquisition. Over the past few years growth in banking
deposits has been modest. Due to the low interest rate environment compared to
the early 1990's, deposit customers are shortening the maturities of their
deposit reinvestments and seeking higher yielding non-traditional investment
alternatives. The majority of the growth in One Valley's core deposits,
exclusive of the CSB acquisition, has been in certificates of deposit, which
have increased by 11.4% since June 1995. Other deposits, however, have
decreased by 1.6% during this time period. In 1995 through the second quarter
of 1996, One Valley offered more competitive rates on deposit accounts to its
customers. The average rate paid on interest bearing deposits increased to
4.11% in the first six months of 1996, up from the 4.06% average rate paid for
all of 1995, and the 3.99% average rate paid in the first six months of 1995.
In an effort to meet customer expectations for an integrated financial services
delivery system, One Valley operates a fully licensed NASD Broker/Dealer
subsidiary and continues to expand other product lines.
Total short-term borrowings increased by $16.8 million or 4.3% from
the year-end level, and increased $102.7 million or 33.8% from the level at June
30, 1995. Short-term borrowings, which consist of Federal funds purchased from
correspondent banks, repurchase agreements with large corporate and public
entities, advances on credit lines available to the company, and commercial
paper can fluctuate significantly depending upon loan demand and One Valley's
asset/liablility strategy. The increase from June one year ago includes a $50.0
million increase in national market repurchase agreements, a $62.0 million
increase in short-term borrowings with the Federal Home Loan Bank, a $24.5
million increase in Treasury, Tax and Loan borrowings, an $11.8 million decrease
in customer overnight repurchase agreements, and a $31.2 million decrease in
Federal Funds purchased. This increased level of short-term borrowings has been
used to fund loan growth as well as a higher level of investment portfolio
assets as planned under One Valley's asset/liability management program.
Long-term borrowings increased $4.5 million or 33.5% since year-end
1995 and $6.5 million or 56.5% since June 30, 1995. The increase since June one
year ago was the result of $8.0 million in FHLB advances acquired through the
CSB Financial transaction. Partially offsetting the debt acquired were $3.0
million in payments on long-term advances from the FHLB. The $17.9 million of
long-term borrowings at June 30, 1996, principally consists of FHLB advances
incurred prior to 1994 to fund investments in mortgage backed securites.
Approximately $4.0 million of these advances mature in the third and fourth
quarters of 1996 and $7.0 million will mature in 1997.
Capital Structure and Liquidity
One Valley's equity-to-asset ratio has decreased slightly since year-
end but remains strong compared to industry standards. At June 30, 1996, the
ratio was 9.41% compared to 9.49% at December 31, 1995, and 9.50% one year ago.
The decrease since year-end is primarily attributable to the repurchase of
common shares of One Valley Bancorp stock in the open market which was initiated
in conjunction with the CSB Financial acquisition and a $12.7 million swing in
unrealized gains and losses on securities available for sale.
The Board of Directors, prior to 1996, has authorized management to
repurchase shares of One Valley Bancorp common stock in the open market. In
January 1996, simultaneous with the announced merger agreement between One
Valley and CSB Financial, the Board of Directors authorized management to
repurchase an additional 1.8 million shares of One Valley common stock. As of
June 30, 1996, One Valley held 1.8 million shares of treasury stock and has
remaining Board authorization for the repurchase of 1.1 million additional
shares. Any purchases under this or previous authorizations will depend upon
future market conditions.
One Valley's cash dividends, totaling $0.54 per share through the
first six months of 1996, were up 8.0% over the $0.50 per share dividend during
the same period in 1995. One Valley's dividend policy coupled with the
continued growth in net income, demonstrates management's commitment to a strong
equity-to-asset ratio benefiting both the investor and the depositors of the
local community. One Valley's risk based capital ratio at June 30, 1996 was
16.03%, well above the 8.0% required, while its Tier I capital ratio was 14.78%.
One Valley's strong capital position is demonstrated further by its leverage
ratio of 9.06% compared to regulatory guidance of 4.0% to 5.0%. The capital
ratios of the banking subsidiaries also remain strong and allow them to
effectively serve the communities in which they are located.
The capital positions of the banks, coupled with proper
asset/liability matching and the stable nature of the primarily consumer base of
core deposits, results in the maintenance of a strong liquidity position. The
liquidity of the parent company is dependent upon dividends from its banking
subsidiaries which, although restricted by banking regulations, are adequate to
meet its cash needs.
Effects of Changing Prices
The results of operations and financial condition presented in this
report are based on historical cost, unadjusted for the effects of inflation.
Inflation affects One Valley in two ways. One is that inflation can result in
increased operating costs which must be absorbed or recovered through increased
prices for services. The second effect is on the purchasing power of the
corporation. Virtually all of a bank's assets and liabilities are monetary in
nature. Regardless of changes in prices, most assets and liabilities of the
banking subsidiaries will be converted into a fixed number of dollars. Non-
earning assets, such as premises and equipment, do not comprise a major portion
of One Valley's assets; therefore, most assets are subject to repricing on a
more frequent basis than in other industries. One Valley's ability to offset
the effects of inflation and potential reductions in future purchasing power
depends primarily on its ability to maintain capital levels by adjusting prices
for its services and to improve net interest income by maintaining an effective
asset/liability mix.
<PAGE>
<TABLE>
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
Analysis of Loan Losses and Non-Performing Assets
(unaudited in thousands)
<CAPTION>
For The Three Months For The Six Months
Ended June 30 Ended June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES
Balance, Beginning of Period $39,836 $38,412 $39,534 $37,438
Loan Losses 1,603 1,365 2,861 2,405
Loan Recoveries 356 482 767 1,148
------- ------- ------- -------
Net Charge-offs 1,247 883 2,094 1,257
Balance of Acquired Subsidiary 2,227 0 2,227 235
Provision For Loan Losses 1,334 1,113 2,483 2,226
------- ------- ------- -------
Balance, End of Period $42,150 $38,642 $42,150 $38,642
======= ======= ======= =======
Total Loans, End of Period $2,758,272 $2,438,786
Allowance For Loan Losses As a % of Total Loans 1.53 1.58
========== ==========
NON-PERFORMING ASSETS AT QUARTER END
Non-Accrual Loans $10,140 $8,144
Foreclosed Properties 1,670 1,300
Restructured Loans 0 410
------- -------
Total Non-Performing Assets $11,810 $9,854
======= =======
Non-Performing Assets As a % of Total Loans 0.43 0.40
Loans Past Due Over 90 Days $4,263 $4,654
Loans Past Due Over 90 Days As a % of Total Loans 0.15 0.19
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Average Balance Sheets
(unaudited in thousands)
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
1996 1995 1996 1995
Amount Yield/Rate Amount Yield/Rate Amount Yield/Rate Amount Yield/Rate
(pct.) (pct.) (pct.) (pct.)
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
ASSETS
Loans
Taxable $2,635,552 8.90 $2,382,494 9.09 $2,558,637 8.93 $2,363,984 9.04
Tax-Exempt 41,759 9.81 34,352 11.25 40,661 9.94 34,700 11.21
---------- ---------- ---------- ----------
Total 2,677,311 8.92 2,416,846 9.12 2,599,298 8.95 2,398,684 9.08
Less: Allowance for Losses 41,472 38,741 40,596 38,278
---------- ---------- ---------- ----------
Net Loans 2,635,839 9.06 2,378,105 9.27 2,558,702 9.09 2,360,406 9.22
Securities
Taxable 970,658 6.58 805,027 6.31 926,312 6.48 802,284 6.14
Tax-Exempt 204,866 8.34 179,141 8.59 204,406 8.36 178,956 8.61
---------- ---------- ---------- ----------
Total 1,175,524 6.89 984,168 6.73 1,130,718 6.82 981,240 6.59
Federal Funds Sold & Other 15,104 3.83 60,819 6.09 13,878 3.55 38,152 5.94
---------- ---------- ---------- ----------
Total Earning Assets 3,826,467 8.37 3,423,092 8.48 3,703,298 8.37 3,379,798 8.42
Other Assets 287,132 263,755 271,465 264,844
---------- ---------- ---------- ----------
Total Assets $4,113,599 $3,686,847 $3,974,763 $3,644,642
========== ========== ========== ==========
LIABILITIES AND EQUITY
Interest Bearing Liabilities
Deposits $2,895,481 4.12 $2,642,699 4.10 $2,788,468 4.11 $2,606,666 3.99
Short-term Borrowings 379,996 4.71 266,605 4.81 375,267 4.75 273,336 4.78
Long-term Borrowings 16,789 6.13 12,925 5.74 14,993 6.12 14,060 5.89
---------- ---------- ---------- ----------
Total Interest
Bearing Liabilities 3,292,266 4.20 2,922,229 4.18 3,178,728 4.20 2,894,062 4.07
Non-interest Bearing Deposits 393,709 383,188 381,159 379,099
Other Liabilities 40,347 32,688 39,703 32,841
---------- ---------- ---------- ----------
Total Liabilities 3,726,322 3,338,105 3,599,590 3,306,002
Shareholders' Equity 387,277 348,742 375,173 338,640
---------- ---------- ---------- ----------
Total Liabilities & Equity $4,113,599 $3,686,847 $3,974,763 $3,644,642
========== ========== ========== ==========
Interest Income To Earning Assets 8.37 8.48 8.37 8.42
Interest Expense To Earning Assets 3.61 3.56 3.60 3.49
------ ------ ------ ------
Net Interest Margin 4.76 4.92 4.77 4.93
====== ====== ====== ======
<FN> Note: Yields are computed on a fully taxable equivalent basis using the rate of 35%.
</TABLE>
<PAGE>
One Valley Bancorp, Inc.
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders.
The Regular Annual Meeting of Shareholders of One Valley was held on April
23, 1996. At that meeting the matters set forth below were voted upon. The
number of votes cast for, against or withheld, as well as the number of
abstentions and broker non-votes concerning each matter and nominee are
indicated in the following tabulation.
1. Election of Directors
Withheld & Broker
Nominee For Against Abstentions Non-Votes
Arnold 14,436,204 0 69,225 0
Avampato 14,437,837 0 67,592 0
Gabriel 14,433,612 0 71,817 0
Goodwin 14,428,503 0 76,926 0
Lynch 14,434,930 0 70,499 0
Neighborgall 14,437,858 0 67,571 0
Thompson 14,428,841 0 76,588 0
VanMetre 14,431,522 0 73,907 0
Wehrle 14,435,802 0 69,627 0
Wick 14,437,236 0 68,193 0
2. Approve Selection of Auditors
Withheld & Broker
Nominee For Against Abstentions Non-Votes
Ernst & Young 14,421,332 18,364 65,733 0
3. Approve Amendment to the Articles of Incorporation to change the
corporate name of One Valley Bancorp of West Virginia, Inc. to One
Valley Bancorp, Inc.
Withheld & Broker
For Against Abstentions Non-Votes
14,360,231 64,741 80,456 0
One Valley Bancorp, Inc.
Part II. Other Information
Item 6. Exhibits and Reports on Form 10-Q
a.) Exhibits
3.(i) Articles of Incorporation of One Valley amended April 23, 1996.
11. Statement of Computation of Earnings per Share - page 36 attached.
27. Financial Data Schedule - electronic filing only.
b.) Reports on Form 8-K
April 30, 1996 - CSB Merger Announcement
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, Inc.
DATE August 14, 1996
BY /s/J. Holmes Morrison
J. Holmes Morrison
President and
Chief Executive Officer
BY /s/Laurance G. Jones
Laurance G. Jones
Executive Vice President and
Chief Financial Officer
<TABLE>
Exhibit 11
Statement Re: Computation of Earnings per Share
<CAPTION>
For The Three Months For The Six Months
Ended June 30 Ended June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
PRIMARY:
Average Shares Outstanding 17,588,000 17,354,000 17,191,000 17,217,000
Net effect of the assumed exercise
of stock options - based on the
treasury stock method 181,000 110,000 128,000 107,000
------------ ------------ ------------ ------------
Total 17,769,000 17,464,000 17,319,000 17,324,000
============ ============ ============ ============
Net Income $14,040,000 $12,297,000 $26,688,000 $23,586,000
Per Share Amount $0.79 $0.70 $1.54 $1.36
============ ============ ============ ============
FULLY DILUTED:
Average Shares Outstanding 17,588,000 17,354,000 17,191,000 17,217,000
Net effect of the assumed exercise
of stock options - based on the
treasury stock method 213,000 124,000 168,000 133,000
------------ ------------ ------------ ------------
Total 17,801,000 17,478,000 17,359,000 17,350,000
============ ============ ============ ============
Net Income $14,040,000 $12,297,000 $26,688,000 $23,586,000
Per Share Amount $0.79 $0.70 $1.54 $1.36
============ ============ ============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and statements of income on One Valley Bancorp as
well as supplemental schedules of the analysis of loan losses ans 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, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 138062
<INT-BEARING-DEPOSITS> 11317
<FED-FUNDS-SOLD> 4437
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 207749
<INVESTMENTS-CARRYING> 999520
<INVESTMENTS-MARKET> 988796
<LOANS> 2758272
<ALLOWANCE> 42150
<TOTAL-ASSETS> 4241778
<DEPOSITS> 3374983
<SHORT-TERM> 406627
<LIABILITIES-OTHER> 43145
<LONG-TERM> 17898
0
0
<COMMON> 198714
<OTHER-SE> 200411
<TOTAL-LIABILITIES-AND-EQUITY> 4241778
<INTEREST-LOAN> 114941
<INTEREST-INVEST> 35548
<INTEREST-OTHER> 245
<INTEREST-TOTAL> 150734
<INTEREST-DEPOSIT> 57055
<INTEREST-EXPENSE> 66383
<INTEREST-INCOME-NET> 84351
<LOAN-LOSSES> 2483
<SECURITIES-GAINS> (266)
<EXPENSE-OTHER> 61595
<INCOME-PRETAX> 40166
<INCOME-PRE-EXTRAORDINARY> 40166
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26688
<EPS-PRIMARY> 1.55
<EPS-DILUTED> 1.55
<YIELD-ACTUAL> 4.77
<LOANS-NON> 10140
<LOANS-PAST> 4263
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 39534
<CHARGE-OFFS> 2861
<RECOVERIES> 767
<ALLOWANCE-CLOSE> 42150
<ALLOWANCE-DOMESTIC> 42150
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
RESTATED
ARTICLES OF INCORPORATION
OF
ONE VALLEY BANCORP, INC.
ARTICLE I
The name of the Corporation shall be One Valley Bancorp, Inc.
ARTICLE II
The address of the principal office of said corporation will be One
Valley Square, in the City of Charleston, in the County of Kanawha and State
of West Virginia, 25326.
ARTICLE III
The purpose or purposes for which this corporation is formed are as
follows: To transact any or all lawful business for which corporations may be
incorporated under the corporation laws of the State of West Virginia.
ARTICLE IV
No shareholder or other person shall have any preemptive rights
whatsoever.
ARTICLE V
Provisions for the regulation of the internal affairs of the corporation
are:
Each director and officer of this corporation, or former director or
officer of this corporation, or any person who may have served at its request
as a director or officer of another corporation, his heirs and personal
representatives, shall be indemnified by this corporation against costs and
expenses at any time reasonably incurred by him arising out of or in
connection with any claim, action, suit or proceeding, civil or criminal,
against him or to which he may be made a party by reason of his being or
having been such director or officer except in relation to matters as to which
he shall be adjudged in such action, suit or proceeding to be liable for gross
negligence or willful misconduct in the performance of a duty to the
corporation. If in the judgment of the board of directors of this corporation
a settlement of any claim, action, suit or proceeding so arising be deemed in
the best interests of the corporation, any such director or officer shall be
reimbursed for any amounts paid by him in effecting such settlement and
reasonable expenses incurred in connection therewith. The foregoing right of
indemnification shall be in addition to any and all other rights to which any
director or officer may be entitled as a matter of law.
Article V.1. Board of Directors
(a) Number, election and terms. Except as otherwise fixed by or
pursuant to the provisions of Article VI hereof relating to the rights of the
holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation to elect additional directors under
specified circumstances, the number of the directors of the Corporation shall
be fixed from time to time by or pursuant to the Bylaws of the Corporation.
The directors, other than those who may be elected by the holders of any class
or series of stock having a preference over the Common Stock as to dividends
or upon liquidation, shall be classified, with respect to the time for which
they severally hold office, into three classes, as nearly equal in number as
possible, as shall be provided in the manner specified in the Bylaws of the
Corporation, one class to be originally elected for a term expiring at the
annual meeting of stockholders to be held in 1987, another class to be
originally elected for a term expiring at the annual meeting of stockholders
to be held in 1988, and another class to be originally elected for a term
expiring at the annual meeting of stockholders to be held in 1989, with each
class to hold office until its successor is elected and qualified. At each
annual meeting of the stockholders of the Corporation, the successors of the
class of directors whose term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders held in the
third year following the year of their election.
(b) Stockholder nomination of director candidates. Advance notice of
stockholder nominations for the election of directors shall be given in the
manner provided in the Bylaws of the Corporation.
(c) Newly created directorships and vacancies. Except as otherwise
provided for or fixed by or pursuant to the provisions of Article VI hereof
relating to the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to elect
directors under specified circumstances, newly created directorships resulting
from any increase in the number of directors and any vacancies on the Board of
Directors resulting from death, resignation, disqualification, removal or
other cause shall be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the
Board of Directors. Any director elected in accordance with the preceding
sentence to fill a vacancy resulting from death, resignation,
disqualification, removal or other cause shall hold office for the remainder
of the full term of the class of directors in which the vacancy occurred and
until such director's successor shall have been elected and qualified and
directors elected in accordance with the preceding sentence by reason of an
increase in the number of directors shall hold office only until the next
election of directors by the shareholders and until such director's successor
shall have been elected and qualified. No decrease in number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
(d) Removal. Subject to the rights of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation
to elect directors under specified circumstances, any director may be removed
from office, with or without cause, and only by the affirmative vote of the
holders of 80% of the combined voting power of the then outstanding shares of
stock entitled to vote generally in the election of directors, voting together
as a single class.
(e) Amendment, repeal, etc. Notwithstanding anything contained in these
Articles of Incorporation to the contrary, the affirmative vote of the holders
of at least 80% of the voting power of all shares of the Corporation entitled
to vote generally in the election of directors, voting together as a single
class, shall be required to alter, amend, or adopt any provision inconsistent
with or repeal this Article V.1.
Article V.2. Bylaw Amendments
The Board of Directors shall have power to make, alter, amend and repeal
the Bylaws of the Corporation (except so far as the Bylaws of the Corporation
adopted by the stockholders shall otherwise provide). Any Bylaws made by the
directors under the powers conferred hereby may be altered, amended or
repealed by the directors or by the stockholders. Notwithstanding the
foregoing and anything contained in these Articles of Incorporation to the
contrary, Article II, Sections 1, 4 and 13, Article III, Sections 2, 9, and
13, and Article XI of the Bylaws shall not be altered, amended or repealed and
no provision inconsistent therewith shall be adopted without the affirmative
vote of the holders of at least 80% of the voting power of all the shares of
the Corporation entitled to vote generally in the election of directors,
voting together as a single class. Notwithstanding anything contained in
these Articles of Incorporation to the contrary, except as otherwise provided
by law for separate class votes, the affirmative vote of the holders of at
least 80% of the voting power of all the shares of the Corporation entitled to
vote generally in the election of directors, voting together as a single
class, shall be required to alter, amend or adopt any provision inconsistent
with or repeal this Article V.2.
ARTICLE VI
The amount of total authorized capital stock of the corporation shall be
Forty-One Million shares, consisting of Forty Million shares of Common Stock
with a par value of Ten Dollars ($10.00) per share and One Million shares of
Preferred Stock with a par value of Ten Dollars ($10.00) per share.
The Board of Directors shall have the power and authority at any time and
from time to time to issue, sell or otherwise dispose of any unissued but
authorized shares of any class or classes of stock presently provided for in
the Certificate of Incorporation, or that may hereafter be provided for by a
subsequent amendment to the Certificate of Incorporation, to such persons or
parties, including the holders of Common Stock or Preferred Stock or of any
such other class of stock, for such considerations (not less than the par
value, if any, thereof) and upon such terms and conditions as the Board of
Directors in its discretion may deem to be in the best interests of the
Corporation. Except as expressly provided to the contrary hereinafter, such
issuance, sale or other disposition may be made without offering such shares,
or any part or class thereof, to the holders of Common Stock or Preferred
Stock or any such other class of stock, and no such holder shall have any
preemptive right to subscribe for any such shares.
Each holder of Common Stock of the Corporation entitled to vote shall
have one vote for each share thereof held.
The voting powers, designations, preferences, limitations, restrictions
and relative rights of the Preferred Stock are as follows:
(1) Issuance in Series. Preferred stock may be issued from time to time
in one or more series. All shares of Preferred Stock shall be of equal rank
and shall be identical, except in respect of the particulars that are fixed in
the Certificate of Incorporation or may be fixed by the Board of Directors as
hereinafter provided pursuant to authority which is hereby expressly vested in
the Board of Directors; and each share of Preferred Stock, whether of the same
or a different series, shall be identical in all respects with the other
shares of Preferred Stock, except as to the following relative rights and
preferences, as to which there may be variations between different series:
(a) the rate of dividends;
(b) whether shares may be redeemed and, if so, the redemption price
and the terms and conditions of redemption;
(c) the amount payable upon shares in event of voluntary and
involuntary liquidation;
(d) sinking fund provisions, if any, for the redemption or purchase
of shares;
(e) the terms and conditions, if any, on which shares may be
converted; and
(f) voting rights, if any.
The Board of Directors of the Corporation shall have all of the power and
authority with respect to the shares of Preferred Stock that the shareholders
may delegate to the Board of Directors pursuant to the terms and provisions of
Chapter 31, Article I, Sections 78 and 79 of the Code of West Virginia, as
amended, and shall exercise such power and authority by the adoption of a
resolution or resolutions as prescribed by law.
(2) Dividends. The holders of the Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors, out of any funds
legally available therefor, cumulative preferential dividends in cash, at the
rate per annum fixed for such series, and no more. Dividends on shares of the
Preferred Stock shall accrue from the date of the initial issue of shares of
such series, or from such other date as may be fixed by the Board of
Directors, shall be cumulative, and shall be payable quarterly on the last day
of March, June, September and December in each year to shareholders of record
on the fifteenth day of the calendar month in which such dividends are
payable, with the first dividend on the Preferred Stock being payable on the
respective dividend date which follows the first full calendar quarter after
the initial issue of shares. Each share of Preferred Stock shall rank on a
parity with each other share of Preferred Stock, irrespective of series, with
respect to preferential dividends at the respective rates fixed for such
series, and no dividend shall be declared or paid or set apart for payment for
the Preferred Stock of any series unless at the same time a dividend in like
proportion to the accrued and unpaid dividends upon the Preferred Stock of
each other series shall be declared or paid or set apart for payment, as the
case may be, on Preferred Stock of each other series then outstanding.
Accrued and unpaid dividends on the Preferred Stock shall not bear interest.
(3) Dividend Restriction on Junior Stock. So long as any shares of
Preferred Stock are outstanding, the Corporation shall not pay or declare any
cash dividends whatsoever on the Common Stock or any other class of stock
ranking junior to the Preferred Stock unless (a) all dividends on the
Preferred Stock of all series for all past dividend periods shall have been
paid, or declared and a sum sufficient for the payment thereof set apart, and
(b) there shall exist no default in respect of any sinking fund or purchase
fund for the redemption or purchase of shares of Preferred Stock of any series
or such default shall have been waived by the holders of at least a majority
of the then issued and outstanding shares of Preferred Stock of such series by
a vote at a meeting called for such purpose or by written waiver with or
without a meeting.
(4) Liquidation or Dissolution. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, then, before any distribution or payment shall be made to the
holders of the Common Stock or any other class of stock of the corporation
ranking junior to the Preferred Stock in respect of dividends or distribution
of assets upon liquidation, the holders of the Preferred Stock shall be
entitled to be paid in full, in the event of a voluntary or involuntary
liquidation, dissolution or winding up, the respective amounts fixed for such
series, plus in each case a sum equal to accrued and unpaid dividends thereon
to the date of payment thereof. After such payment shall have been made in
full to the holders of the Preferred Stock, the remaining assets and funds of
the Corporation shall be distributed among the holders of the stock of the
Corporation ranking junior to the Preferred Stock in respect of dividends or
distribution of assets upon liquidation according to their respective rights
and preferences and in each case according to their respective shares. In the
event that the assets of the Corporation available for distribution to holders
of Preferred Stock shall not be sufficient to make the payment herein required
to be made in full, such assets shall be distributed to the holders of the
respective shares of Preferred stock pro rata in proportion to the amounts
payable upon such share thereof. Neither the merger or consolidation of the
Corporation into or with another corporation nor the merger or consolidation
of any other corporation into or with the Corporation, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning
of this Section 4, but the sale, lease or conveyance of all or substantially
all of its assets shall be deemed to be a liquidation, dissolution or winding
up of the Corporation within the meaning of this Section 4.
(5) Status of Shares Redeemed or Retired. Preferred Stock redeemed or
otherwise retired by the Corporation shall, upon the filing of such statement
as may be required by law, assume the status of authorized but unissued
Preferred Stock and may thereafter be reissued in the same manner as other
authorized but unissued Preferred Stock.
(6) Amendments. Subject to such requirements as may be prescribed by
law or as may be expressly set forth in the foregoing provisions of this
Article VI or in any amendment to these Articles establishing and designating
a series of shares of Preferred Stock, any of the foregoing terms and
provisions of this Article VI may be altered, amended or repealed or the
application thereof suspended or waived in any particular case and changes in
any of the designations, preferences, limitations and relative rights of the
Preferred Stock may be made with the affirmative vote, at a meeting called for
that purpose, or the written consent with or without a meeting, of the holders
of at least two-thirds of the then issued and outstanding shares of Preferred
Stock; provided that neither the rate of dividend nor the amount payable upon
the redemption or in the event of voluntary or involuntary liquidation on any
share of Preferred Stock may be reduced without the consent of all of the
holders thereof.
Certain Business Combinations
Article VI.1. Vote Required for Certain Business Combinations
A. Higher Vote for Certain Business Combinations. In addition to any
affirmative vote required by law or these Articles of Incorporation, and
except as otherwise expressly provided in Section VI.2 of this Article VI:
(i) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with (a) any Interested Stockholder (as
hereinafter defined) or (b) any other corporation (whether or
not itself an Interested Stockholder) which is, or after such
merger or consolidation would be, an Affiliate (as hereinafter
defined) of any Interested Stockholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to
or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate Fair Market Value of $5,000,000
or more; or
(iii) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of transactions) of any
securities of the Corporation or any Subsidiary to any
Interested Stockholder or any Affiliate of any Interested
Stockholder in exchange for cash, securities or other property
(or a combination thereof) having an aggregate Fair Market Value
of $5,000,000 or more; or
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Interested Stockholder or any Affiliate of any Interested
Stockholder; or
(v) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or
any other transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate share of
the outstanding shares of any class of equity or convertible
securities of the Corporation or any Subsidiary which is
directly or indirectly owned by any Interested Stockholder or
any Affiliate of any Interested Stockholder;
shall require the affirmative vote of the holders of at least 80% of the
voting power of the then outstanding shares of capital stock of the
Corporation entitled to vote (the "Voting Stock"), voting together as a single
class (it being understood that for purpose of this Article VI, each share of
the Voting Stock shall have the number of votes granted to it pursuant to
Article VI of these Articles of Incorporation). Such affirmative vote shall
be required, notwithstanding the fact that no vote may be required, or that a
lesser percentage may be specified, by law or in any agreement with any
national securities exchange or otherwise.
B. Definition of "Business Combination". The term "Business
Combination" as used in this Article VI shall mean any transaction which is
referred to in any one or more of clauses (i) through (v) of paragraph A of
this Section VI.1.
Article VI.2. When Higher Vote is Not Required
The provisions of Section VI.1 of this Article VI shall not be applicable
to any particular Business Combination, and such Business Combination shall
require only such affirmative vote as is required by law and any other
provision of these Articles of Incorporation, if all of the conditions
specified in either of the following paragraphs A and B are met:
A. Approval by Disinterested Directors. The Business Combination shall
have been approved by a majority of the Disinterested Directors (as
hereinafter defined).
B. Price and Procedure Requirements. All of the following conditions
shall have been met:
(I) the aggregate amount of the cash and the Fair Market Value (as
hereinafter defined) as of the date of the consummation of the
Business Combination of consideration other than cash to be
received per share by holders of Common Stock in such Business
Combination shall be at least equal to the higher of the following:
(a) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Stockholder for any shares of
Common Stock acquired by it (1) within the two-year period
immediately prior to the first public announcement of the
proposal of the Business Combination (the "Announcement Date")
or (2) in the transaction in which it became an Interested
Stockholder, whichever is higher; and
(b) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested
Stockholder became an Interested Stockholder (such latter date
is referred to in this Article VI as the "Determination Date"),
whichever is higher.
(ii) The aggregate amount of the cash and the Fair Market Value as
of the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders of
shares of any other class of outstanding Voting Stock shall be at
least equal to the highest of the following (it being intended that
the requirements of this paragraph B(ii) shall be required to be met
with respect to every class of outstanding Voting Stock, whether or
not the Interested Stockholder has previously acquired any shares of a
particular class of Voting Stock):
(a) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Stockholder for any shares of such
class of Voting Stock acquired by it (1) within the two-year
period immediately prior to the Announcement Date or (2) in the
transaction in which it became an Interested Stockholder,
whichever is higher;
(b) (if applicable) the highest preferential amount per share to
which the holders of shares of such class of Voting Stock are
entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; and
(c) the Fair Market Value per share of such class of Voting Stock
on the Announcement Date or on the Determination Date,
whichever is higher.
(iii) The consideration to be received by holders of a particular
class of outstanding Voting Stock (including Common Stock) shall be in
cash or in the same form as the Interested Stockholder has previously
paid for shares of such class of Voting Stock. If the Interested
Stockholder has paid for shares of any class of Voting Stock with
varying forms of consideration, the form of consideration for such
class of Voting Stock shall be either cash or the form used to acquire
the largest number of shares of such class of Voting Stock previously
acquired by it. The price determined in accordance with paragraphs
B(i) and B(ii) of this Section VI.2 shall be subject to appropriate
adjustment in the event of any stock dividend, stock split,
combination of shares or similar event.
(iv) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business
Combination: (a) except as approved by a majority of the
Disinterested Directors, there shall have been no failure to declare
and pay at the regular date therefor any full quarterly dividends
(whether or not cumulative) on the outstanding Preferred Stock; (b)
there shall have been (1) no reduction in the annual rate of dividends
paid on the Common Stock (except as necessary to reflect any
subdivision of the Common Stock), except as approved by a majority of
the Disinterested Directors, and (2) an increase in such annual rate
of dividends as necessary to reflect any reclassification (including
any reverse stock split), recapitalization, reorganization or any
similar transaction which has the effect of reducing the number of
outstanding shares of the Common Stock, unless the failure so to
increase such annual rate is approved by a majority of the
Disinterested Directors; and (c) such Interested Stockholder shall
not have become the beneficial owner of any additional shares of
Voting Stock except as part of the transaction which results in such
Interested Stockholder becoming an Interested Stockholder.
(v) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages
provided by the Corporation, whether in anticipation of or in
connection with such Business Combination or otherwise.
(vi) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing such Act, rules or
regulations) shall be mailed to stockholders of the Corporation at
least 30 days prior to the consummation of such Business Combination
(whether or not such proxy or information statement is required to be
mailed pursuant to such Act or subsequent provisions).
Article VI.3. Certain Definitions
For the purposes of this Article VI:
A. A "person" shall mean any individual, firm, corporation or other
entity.
B. "Interested Stockholder" shall mean any person (other than the
Corporation or any Subsidiary) who or which:
(i) is the beneficial owner, directly or indirectly, of more than
10% of the voting power of the outstanding Voting Stock; or
(ii) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the
beneficial owner, directly, or indirectly, of 10% or more of the
voting power of the then outstanding Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any shares of
Voting Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by any
Interested Stockholder, if such assignment or succession shall have
occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act
of 1933.
C. A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns, directly or indirectly; or
(ii) which such person or any of its Affiliates or Associates has
(a) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise,
or (b) the right to vote pursuant to any agreement, arrangement or
understanding; or
(iii) which are beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
Voting Stock.
D. For the purposes of determining whether a person is an Interested
Stockholder pursuant to paragraph B of this Section VI.3, the number of shares
of Voting Stock deemed to be outstanding shall include shares deemed owned
through application of paragraph C of this Section VI.3 but shall not include
any other shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
E. "Affiliate" or "Associates" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on January 1, 1986.
F. "Subsidiary" means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Interested
Stockholder set forth in paragraph B of this Section VI.3, the term
"Subsidiary" shall mean only a corporation of which a majority of each class
of equity security is owned, directly or indirectly, by the Corporation.
G. "Disinterested Director" means any member of the Board of
Directors of the Corporation (the "Board") who is unaffiliated with the
Interested Stockholder and was a member of the Board prior to the time that
the Interested Stockholder became an Interested Stockholder, and any successor
of a Disinterested Director who is unaffiliated with the Interested
Stockholder and is recommended to succeed a Disinterested Director by a
majority of Disinterested Directors then on the Board; provided, however, that
all directors of the Corporation who are elected as directors at the 1986
annual meeting of shareholders of the Corporation shall be deemed to be
Disinterested Directors, notwithstanding the above provisions.
H. "Fair Market Value" means: (i) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape,
on the New York Stock Exchange, or, if such stock is not listed on such
Exchange, or the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing bid quotation
with respect to a share of such stock during the 30-day period preceding the
date in question on the National Association of Securities Dealers, Inc.
Automated Quotations System ("NASDAQ") or any system then in use, or if not
listed with NASDAQ, the average bid and ask prices available from brokerage
firms in Charleston, West Virginia, or if such information is not available,
the fair market value on the date in question of a share of such stock as
determined by the Board in good faith; and (ii) in the case of property other
than cash or stock, the fair market value of such property on the date in
question as determined by the Board in good faith.
I. In the event of any Business Combination in which the Corporation
survives, the phrase "other consideration to be received" as used in
paragraphs B(i) and (ii) of Section VI.2 of this Article VI shall include the
shares of Common Stock and/or the shares of any other class of outstanding
Voting Stock retained by the holders of such shares.
Article VI.4. Powers of the Board of Directors
A majority of the directors of the Corporation shall have the power and
duty to determine for the purposes of this Article VI, on the basis of
information known to them after reasonable inquiry, (A) whether a person is an
Interested Stockholder, (B) the number of shares of Voting Stock beneficially
owned by any person, (C) whether a person is an Affiliate or Associate of
another, (D) whether the assets which are the subject of any Business
Combination have, or the consideration to be received for the issuance or
transfer of securities by the Corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $5,000,000 or more. A
majority of the directors of the Corporation shall have the further power to
interpret all of the terms and provisions of this Article VI.
Article VI.5. No Effect on Fiduciary Obligations of Interested Stockholders
Nothing contained in this Article VI shall be construed to relieve any
Interested Stockholder from any fiduciary obligation imposed by law.
Article VI.6. Amendment, Repeal, etc.
Notwithstanding any other provisions of these Articles of Incorporation
or the Bylaws of the Corporation (and notwithstanding the fact that a lesser
percentage may be specified by law, these Articles of Incorporation or the
Bylaws of the Corporation), the affirmative vote of the holders of 80% or more
of the outstanding Voting Stock entitled to vote, voting together as a single
class, shall be required to amend or repeal, or adopt any provisions
inconsistent with this Article VI.
ARTICLE VII
The full name and address of the incorporator is:
NAME ADDRESS
Robert F. Baronner One Valley Square
Charleston, West Virginia 25326
ARTICLE VIII
The existence of this corporation is to be perpetual.
ARTICLE IX
The full name and address of the appointed person to whom notice or
process may be sent is: President, One Valley Bancorp, Inc., One Valley
Square, Charleston, West Virginia 25326.
ARTICLE X
The number of directors constituting the initial board of directors of
the corporation is twenty-one (21) and the names and addresses of the persons
who shall serve as directors until the first annual meeting of shareholders or
until their successors are elected and shall qualify are:
NAME ADDRESS
Robert F. Baronner 1520 Stonehenge Road
Charleston, West Virginia 25314
Elmer A. Braun 1507 Dogwood Road
Charleston, West Virginia 25314
James F. Brown, III 1701 Edgewood Drive
Charleston, West Virginia 25302
James K. Brown 1820 Devondale Circle
Charleston, West Virginia 25314
John T. Chambers, M.D. 888 Chappell Road
Charleston, West Virginia 25314
Lyell B. Clay 1230 Staunton Road
Charleston, West Virginia 25314
Hugh A. Curry 1553 Bridge Road
Charleston, West Virginia 25314
Edward I. Goldsmith 1272 Louden Heights Road
Charleston, West Virginia 25314
Frank A. Hardy Route 5, Box 33
Lewisburg, West Virginia 24901
Eugene F. Imbrogno, Jr. 3 Dreamview Lane
Charleston, West Virginia 25314
Charles T. Jones 1502 Hampton Road
Charleston, West Virginia 25314
Virgil W. O'Dell 1108 Kanawha Boulevard, East
Apartment 502
Charleston, West Virginia 25301
John L. D. Payne 1508 Connell Road
Charleston, West Virginia 25314
Angus E. Peyton 1401 Quincy Lane
Charleston, West Virginia 25314
Mary Price Ratrie Kanawha Salines
Malden, West Virginia 25306
Turner R. Ratrie, Jr. 1530 Bedford Road
Charleston, West Virginia 25314
James R. Thomas, II 820 Middle Road
Charleston, West Virginia 25314
C. Hyde Tucker 2029 Huber Road
Charleston, West Virginia 25314
Richard M. Venable, Jr. 925 Newton Road
Charleston, West Virginia 25314
John M. Wells, Sr. 888 Chester Road
Charleston, West Virginia 25302
Thomas D. Wilkerson 1015 Sand Hill Drive
St. Albans, West Virginia 25177
