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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to .
Commission file number 0-10042
ONE VALLEY BANCORP, INC.
(Exact name of registrant as specified in its charter)
WEST VIRGINIA 55-0609408
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE VALLEY SQUARE,
SUMMERS AND LEE STREETS,
P.O. BOX 1793
CHARLESTON, WEST VIRGINIA 25326
(Address of principal offices) (Zip Code)
Registrant's telephone number, including area code (304) 348-7000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which registered
NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK ($10.00 PAR VALUE)
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. YES [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
156 Total pages Continued
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State the aggregate market value of the voting stock held by
non-affiliates of the registrant. The aggregate market value shall be computed
by reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within 60 days prior to the
date of filing:
Aggregate of market value of voting stock Based upon reported closing price on
$677,784,595 MARCH 4, 1997
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of the latest practicable date.
Class Outstanding at March 4, 1997
COMMON STOCK ($10.00 PAR VALUE) 22,017,192
DOCUMENTS INCORPORATED BY REFERENCE
The following lists the documents which are incorporated by reference in
the Form 10-K Annual Report, and the Parts and Items of the Form 10-K into which
the documents are incorporated.
<TABLE>
<CAPTION>
Document Part of the Form 10-K into which the
Document is Incorporated
<S> <C>
Portions of One Valley Bancorp, Inc., 1996 Annual Report Part I, Item 1; Part II, Items 5, 6, 7 and 8;
to Shareholders for the year ended December 31, 1996 Part III, Item 13; and Part IV, Item 14
Portions of One Valley Bancorp, Inc., Proxy Statement Part III, Items 10, 11, 12 and 13
for the 1997 Annual Meeting of Shareholders
</TABLE>
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ONE VALLEY BANCORP, INC.
FORM 10-K
INDEX
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Part I
Item 1. Business.................................................................... 4
Item 2. Properties.................................................................. 12
Item 3. Legal Proceedings........................................................... 13
Item 4. Submission of Matters to a Vote of Security Holders......................... 13
Item 4A. Executive Officers of the Registrant........................................ 13
Part II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters............................................... 15
Item 6. Selected Financial Data..................................................... 15
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................................... 15
Item 8. Financial Statements and Supplementary Data................................. 15
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure....................................... 15
Part III
Item 10. Directors and Executive Officers of the Registrant.......................... 16
Item 11. Executive Compensation...................................................... 16
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................................ 16
Item 13. Certain Relationships and Related Transactions.............................. 16
Part IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K................................................... 17
Signatures .................................................................................. 19
Index to Exhibits................................................................................ 22
</TABLE>
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PART I
ITEM 1. BUSINESS
ONE VALLEY BANCORP, INC.
The Board of Directors of One Valley Bank, National Association, formerly
Kanawha Valley Bank, National Association ("One Valley Bank"), caused One Valley
Bancorp, Inc. ("One Valley"), a West Virginia corporation, to be formed, through
a corporate reorganization, as a single bank holding company holding all of the
common stock of One Valley Bank. On September 4, 1981, the effective date of the
reorganization, the shareholders of One Valley Bank exchanged their shares of
Kanawha Valley Bank common stock for shares of One Valley common stock, $10 par
value ("One Valley Common Stock"), and became shareholders of One Valley, and
One Valley Bank became a wholly-owned subsidiary of One Valley.
As of December 31, 1996, One Valley owned twelve operating banking
subsidiaries (the "Banking Subsidiaries") including: One Valley Bank, National
Association; One Valley Bank of Huntington, Inc.; One Valley Bank of Mercer
County, Inc.; One Valley Bank - East, National Association; One Valley Bank of
Oak Hill, Inc.; One Valley Bank of Ronceverte, National Association; One Valley
Bank, Inc.; One Valley Bank of Summersville, Inc.; One Valley Bank - North,
Inc.; One Valley Bank of Clarksburg, National Association; One Valley Bank,
F.S.B., a federally chartered savings bank; and One Valley Bank-Central
Virginia, a federally chartered savings bank. In addition, One Valley owns 100%
of the outstanding stock of One Valley Square, Inc., a Texas corporation, which
owns the office building in which One Valley Bank and One Valley are located.
(All of these subsidiaries, including the Banking Subsidiaries, are collectively
referred to as the "Subsidiaries".) One Valley's principal activities consist of
owning and supervising its Subsidiaries. At December 31, 1996, One Valley had
consolidated assets of $4,267,303,000, deposits of $3,406,016,000, and
shareholders' equity of $408,577,000.
One Valley has, from time to time, engaged in merger or acquisition
discussions with other banks and financial institutions both within and outside
of West Virginia, and it is anticipated that such discussions will continue in
the future.
HISTORY OF THE BANKING SUBSIDIARIES
One Valley Bank, the principal Banking Subsidiary of One Valley, was
incorporated in 1867 as a state bank under the laws of West Virginia, with the
name "The Kanawha Valley Bank". On February 10, 1975, Kanawha Valley Bank
converted from a state bank to a national banking association, and on September
1, 1987, adopted its present corporate name. The other Banking Subsidiaries were
incorporated or chartered as state or national banks in the years indicated in
the chart below. In September 1987, One Valley adopted a common corporate
identity, primarily to promote a single corporate image for One Valley's diverse
banking operations.
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<TABLE>
<CAPTION>
Year in Currently
Name Which Organized Chartered As
<S> <C> <C>
One Valley Bank, Inc. 1911 State
One Valley Bank of 1906 State
Mercer County
One Valley Bank of 1904 State
Oak Hill
One Valley Bank of 1956 State
Huntington
One Valley Bank of 1900 National
Ronceverte
One Valley Bank of 1910 State
Summersville
One Valley Bank - East 1865 National
One Valley Bank of 1903 National
Clarksburg
One Valley Bank - North 1903 State
One Valley Bank, FSB 1892 Federally-chartered
savings bank
One Valley Bank-Central Virginia 1914 Federally-chartered
savings bank
</TABLE>
OPERATIONS OF THE BANKING SUBSIDIARIES
The Banking Subsidiaries offer all services traditionally offered by
full-service commercial banks, including commercial and individual demand and
time deposit accounts, commercial and individual loans, credit card (MasterCard
and Visa) and drive-in banking services. In addition, One Valley Bank is active
in correspondent banking services. Trust services are offered on a statewide
basis. One Valley Securities Corporation, a wholly-owned subsidiary of One
Valley Bank, provides discount brokerage services and also sells, as agent,
mutual funds and annuities. No material portion of any of the Banking
Subsidiaries' deposits has been obtained from a single or small group of
customers, and the loss of any one customer's deposits or a small group of
customers' deposits would not have a material adverse effect on the business of
any of the Banking Subsidiaries.
Although the market areas of several of the Banking Subsidiaries
encompass a portion of the coal fields located in southern West Virginia, an
area of the State which has been economically depressed, the coal-related loans
in the loan portfolios of the Banking Subsidiaries constitute less than 5% of
One Valley's total loans outstanding. Seven of the twenty-three
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counties within One Valley's market areas rank among the State's top ten
counties in household income, and the Banking Subsidiaries generally serve the
stronger economic areas of the State.
The Banking Subsidiaries also offer services to customers at various
locations within their service areas by use of automated teller machines
("ATMs"). The ATMs allow customers to make deposits and withdrawals at
convenient locations. Customers may also borrow against their revolving lines of
credit or transfer funds between deposit accounts at those locations. Customers
of any Banking Subsidiary may conduct transactions at any One Valley ATM and, by
means of the MAC system, a regional ATM system, through the CIRRUS ATM network,
can conduct ATM transactions nationwide. Customers of any of the Banking
Subsidiaries may also make deposits or withdrawals at any of One Valley's 89
main office and branch locations.
On April 30, 1996, One Valley consummated its acquisition of Co-operative
Savings Bank, a federally-chartered savings bank headquartered in Lynchburg,
Virginia. Following consummation of the acquisition, the name of the federal
savings bank was changed to One Valley Bank - Central Virginia. This transaction
was One Valley's first interstate acquisition.
As of March 1, 1997, One Valley and its Subsidiaries had approximately
1900 full-time equivalent employees.
COMPETITION
Vigorous competition exists in all areas where One Valley and the Banking
Subsidiaries are engaged in business. The primary market areas served by the
Banking Subsidiaries are generally defined as West Virginia, Central Virginia,
and certain adjoining areas in Kentucky, Maryland, Ohio, Pennsylvania and
Virginia.
For most of the services which the Banking Subsidiaries perform, they
compete with commercial banks as well as other financial institutions. For
instance, savings banks, savings and loan associations, credit unions, finance
companies, stock brokers, and issuers of commercial paper and money market funds
actively compete for funds and for various types of loans. In addition,
insurance companies, investment counseling firms and other business firms and
individuals offer personal and corporate trust and investment counseling
services. The opening of branch banks within One Valley's market areas has
increased competition for the Banking Subsidiaries. Although federal and state
banking legislation has provided an opportunity for One Valley to acquire
banking subsidiaries in other attractive banking areas, it has
increased competition for One Valley in its market areas, and, with interstate
banking, One Valley faces additional competition in efforts to acquire other
subsidiaries throughout West Virginia and in neighboring states.
Until 1993, the various banks and bank-holding companies operating in
West Virginia were predominantly owned by shareholders in West Virginia and were
financed by operations arising principally in West Virginia. During 1993, Banc
One Corp., one of the largest bank holding companies in the United States,
consummated its acquisition of Key Centurion Bancshares Inc., and Huntington
Bankshares Incorporated consummated its acquisitions of Commerce Banc
Corporation and CB&T Financial Corp. It is possible that other large
out-of-state banks will, over time, expand their operations into West Virginia.
While One Valley believes that it can compete effectively with out-of-state
banks, One Valley will face larger competitors which have access to greater
capital resources and which have sophisticated marketing structures in place.
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As of December 31, 1996, there were 54 bank holding companies in the
State of West Virginia registered with the Federal Reserve System and the West
Virginia Board of Banking and Financial Institutions ("Board of Banking"). These
holding companies are headquartered in various West Virginia cities and control
banks throughout the State of West Virginia, including banks which compete with
the Banking Subsidiaries in their market areas. One Valley has actively competed
with some of these bank holding companies to acquire its Banking Subsidiaries.
SUPERVISION AND REGULATION
The following outline of the regulatory framework applicable to bank
holding companies and their subsidiaries is qualified by reference to the
particular statutory and regulatory provisions. A change in applicable statutes,
regulations or regulatory policy may have a material effect on the business of
One Valley.
GENERAL
Both federal and state laws extensively regulate various aspects of the
banking business, such as permissible types and amounts of loans and
investments, risk management and controls, permissible activities, rates of
interest and fees, and reserve requirements. These regulations are intended
primarily for the protection of depositors and customers rather than One
Valley's shareholders.
ACQUISITIONS AND ACTIVITIES
As a bank holding company, One Valley is subject to regulation by the
Board of Governors of the Federal Reserve System (the "FRB") under the Bank
Holding Company Act of 1956 (the "BHCA"), including examination and reporting
requirements. Under the BHCA, bank holding companies may not directly or
indirectly acquire the ownership or control of more than five percent of the
voting shares or substantially all the assets of a bank or any other company,
without the prior approval of the FRB, subject to certain exceptions.
The BHCA generally limits acquisitions by bank holding companies to
commercial banks and companies engaged in activities that the FRB has determined
to be so closely related to banking as to be a proper incident thereto. One
Valley's direct activities are similarly limited.
In reviewing applications under the BHCA, the FRB will consider, among
other things, the competitive effect of the transaction, financial and
managerial issues including the capital position of the combined organization,
and convenience and needs factors, including, in the case of a bank or thrift
acquisition, the applicant's record under the Community Reinvestment Act.
Effective September 29, 1995, the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 ("IBBEA") permitted bank holding companies to
acquire banks located in states other than the bank holding company's home state
without regard to whether the transaction is permitted under state law. In
addition, IBBEA provides that, commencing June 1, 1997, national banks and state
banks with different home states will be permitted to merge across state lines,
unless the home state of a participating bank enacts legislation prior to May
31, 1997 expressly prohibiting interstate mergers. IBBEA further provides that
states may enact a law
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permitting interstate bank merger transactions prior to June 1, 1997 and a law
permitting de novo interstate branching. On March 9, 1996, the West Virginia
Legislature adopted legislation pursuant to which interstate branching, both by
merger and also de novo, will become effective on and after May 31, 1997.
One Valley is also required to secure the approval of the West Virginia
Board of Banking before acquiring ownership or control of more than five percent
of the voting shares or substantially all of the assets of any institution,
including another bank. West Virginia banking law prohibits any bank holding
company from acquiring shares of a bank if the acquisition would cause the bank
holding company's consolidated deposits in the State of West Virginia to exceed
25% of the total deposits of all depository institutions in the State of West
Virginia. At December 31, 1996 the total deposits of the Banking Subsidiaries
were approximately 16% of the total deposits in the State of West Virginia.
Federal and state banking laws generally limit the activities of banks to
the business of banking. In recent years, a series of judicial decisions and
regulatory rulings have increased the range of services and products that can be
offered by bank holding companies and banks, and simplified the regulatory
process for acquisitions and the offering of new or additional products. Among
the new or expanded products and services are sales of annuities, sales of
insurance from places of 5000 or less and underwriting and dealing in
securities.
PAYMENT OF DIVIDENDS
One Valley is a legal entity separate and distinct from the Banking
Subsidiaries. A major portion of the revenues of One Valley result from
dividends paid by the Banking Subsidiaries. The Banking Subsidiaries are subject
to legal limitations on the amount of dividends they can pay. The prior approval
of the Comptroller of the Currency (the "Comptroller") is required if the total
of all dividends declared by a national bank in any calendar year will exceed
the sum of such bank's net profits for that year and its retained net profits
for the preceding two calendar years, less any required transfers to surplus.
Federal law also prohibits national banks from paying dividends which would be
greater than the bank's undivided profits after deducting statutory bad debt in
excess of the bank's allowance for loan losses. Similar restrictions on
dividends are in effect for the Banking Subsidiaries which are not national
banks.
Under the foregoing dividend restrictions, as of December 31, 1996, the
Banking Subsidiaries, without obtaining regulatory approvals, could pay
aggregate dividends of $14.4 million, plus retained net profits for the interim
periods through the date of declaration, to One Valley during 1997. During 1996,
the Banking Subsidiaries paid $51.3 million in cash dividends to One Valley.
In addition, both One Valley and the Banking Subsidiaries are subject to
various general regulatory policies and requirements relating to the payment of
dividends, including requirements to maintain adequate capital above regulatory
minimums. Regulatory authorities are authorized to determine that, under certain
circumstances, the payment of dividends would be an unsafe or unsound practice
and to prohibit payment thereof. The regulatory authorities have indicated that
banking organizations should generally pay dividends only out of current
operating earnings.
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BORROWINGS BY ONE VALLEY FROM THE BANKING SUBSIDIARIES
There are various legal restrictions on the extent to which One Valley
and its nonbank subsidiaries can borrow or otherwise obtain credit from the
Banking Subsidiaries. In general, these restrictions require that any such
extensions of credit must be secured by designated amounts of specified
collateral and are limited, as to One Valley or any one of such nonbank
subsidiaries, to ten percent of the lending bank's capital stock and surplus,
and as to One Valley and all such nonbank subsidiaries in the aggregate, to 20
percent of such lending bank's capital stock and surplus. These restrictions
also apply to the Banking Subsidiaries' purchases of assets from and investments
in One Valley and its nonbank subsidiaries.
CAPITAL
Bank regulators have adopted risk-based capital guidelines for bank
holding companies and banks. The minimum ratio of qualifying total capital to
risk-weighted assets and certain off-balance sheet items ("total capital ratio")
is 8%. At least half of the total capital is required to be comprised of common
stock, retained earnings, noncumulative perpetual preferred stock, minority
interests (and, for bank holding companies, a limited amount of qualifying
cumulative perpetual preferred stock), less goodwill and most other intangibles
("Tier 1 capital"). Other qualifying capital ("Tier 2 capital") may consist of
other preferred stock, certain other capital instruments, and limited amounts of
subordinated debt and allowance for loan losses.
In addition, the bank regulators have established minimum leverage ratio
requirements for bank holding companies and banks. These requirements provide
for a minimum leverage ratio of Tier 1 capital to adjusted average quarterly
assets ("leverage ratio") equal to three percent for bank holding companies and
banks that meet certain specified criteria, including having the highest
regulatory rating. All other bank holding companies and banks will generally be
required to maintain a leverage ratio of four to five percent.
Regulatory capital requirements also provide that bank holding companies
and banks experiencing internal growth or making acquisitions will be expected
to maintain strong capital positions substantially above the minimum supervisory
levels without significant reliance on intangible assets.
Federal banking agencies have issued regulations, which become effective
in 1998, that may require additional capital in respect of interest rate
exposure and other market risk. One Valley does not believe that these
modifications will have a significant impact on its capital position.
As of December 31, 1996, One Valley had a total capital ratio of 15.8%, a
Tier 1 capital ratio of 14.5% and a leverage ratio of 9.1%. Note R of Notes to
the Consolidated Financial Statements appearing at page 39 of One Valley's 1996
Annual Report to Shareholders is incorporated herein by reference.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), among other things, requires the federal banking agencies to take
"prompt corrective action" in respect of depository institutions that do not
meet minimum capital requirements. FDICIA establishes five capital categories:
"well capitalized", "adequately capitalized", "under-capitalized",
"significantly undercapitalized" and "critically undercapitalized".
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The banking regulators have adopted regulations relating to these capital
categories. The relevant capital measures are the total capital ratio, a Tier 1
capital ratio (Tier 1 capital to risk-weighted assets) and the leverage ratio.
Under the regulations, a bank will generally be: (i) "well capitalized" if it
has a total capital ratio of ten percent or greater, a Tier 1 capital ratio of
six percent or greater and a leverage ratio of five percent or greater; (ii)
"adequately capitalized" if it has a total capital ratio of eight percent or
greater, a Tier 1 capital ratio of four percent or greater and a leverage ratio
of four percent or greater (three percent in certain circumstances), and is not
"well capitalized"; (iii) "undercapitalized" if it has a total capital ratio of
less than eight percent, a Tier 1 capital ratio of less than four percent or a
leverage ratio of less than four percent (three percent in certain
circumstances); (iv) "significantly undercapitalized" if it has a total capital
ratio of less than six percent, a Tier 1 capital ratio of less than three
percent or a leverage ratio of less than three percent; and (v) "critically
undercapitalized" if its tangible equity is equal to or less than two percent
of average quarterly tangible assets.
As of December 31, 1996, One Valley and each of its Banking Subsidiaries
had capital levels that qualify them as being "well capitalized" under such
regulations.
Under FDICIA, a depository institution that is not "well capitalized" is
generally prohibited from accepting brokered deposits and offering interest
rates on deposits higher than the prevailing rate in its market. FDICIA
generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
"undercapitalized".
"Undercapitalized" depository institutions are subject to growth
limitations and are required to submit a capital restoration plan. The federal
banking agencies may not accept a capital plan without determining, among other
things, that the plan is based on realistic assumptions and is likely to succeed
in restoring the depository institution's capital. In addition, for a capital
restoration plan to be acceptable, the depository institution's parent holding
company must guarantee that the institution will comply with such capital
restoration plan. The aggregate liability of the parent holding company under
the guarantee is limited to the lesser of (i) an amount equal to five percent of
the depository institution's total assets at the time it became
"undercapitalized", and (ii) the amount which is necessary (or would have been
necessary) to bring the institution into compliance with all capital standards
applicable with respect to such institution as of the time it fails to comply
with the plan. If a depository institution fails to submit an acceptable plan,
it is treated as if it is "significantly undercapitalized".
"Significantly undercapitalized" depository institutions may be subject
to a number of requirements and restrictions, including orders to sell
sufficient voting stock to become "adequately capitalized", requirements to
reduce total assets and cessation of receipt of deposits from correspondent
banks. "Critically undercapitalized" institutions are subject to the appointment
of a receiver or conservator.
OBLIGATIONS IN RESPECT OF SUBSIDIARY BANKS
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") imposes liability on FDIC-insured depository institutions, such as
the Banking Subsidiaries, for losses incurred by the FDIC in connection with
assistance to an insured institution under common control.
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Under the National Bank Act, if the capital stock of a national bank is
impaired by losses or otherwise, the Comptroller is authorized to require
payment of the deficiency by assessment upon the bank's shareholders, pro rata,
and, if any such assessment is not paid by any shareholder after three months'
notice, to sell the stock of such shareholder to make good the deficiency.
Under FRB policy, One Valley is expected to act as a source of financial
strength to each of its Banking Subsidiaries and to commit resources to support
each of such subsidiaries. This support may be required at times when, absent
such FRB policy, One Valley may not find itself able to provide it.
Any capital loans by a bank holding company to any of its subsidiary
banks are subordinate in right of payment to deposits and to certain other
indebtedness of such subsidiary banks. In the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a federal bank
regulatory agency to maintain the capital of a subsidiary bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.
DEPOSITOR PREFERENCE STATUTE
Under federal law, deposits are afforded a priority over other general
unsecured claims against a depository institution, including federal funds and
letters of credit, in the liquidation or other resolution of such an institution
by a receiver.
FDIC ASSESSMENTS
The Banking Subsidiaries are subject to deposit insurance assessments by
the FDIC. Most of the deposits of the Banking Subsidiaries are insured by the
Bank Insurance Fund ("BIF"), but the deposits of One Valley Bank F.S.B., One
Valley Bank-Central Virginia, and an amount of deposits attributed to thrifts
acquired by other Banking Subsidiaries are insured by the Savings Association
Insurance Fund ("SAIF"). Effective January 1, 1996, the FDIC reduced the
insurance premiums it charged on bank deposits insured by the BIF to the
statutory minimum of $2,000 annually for banks which qualify for the highest
ranking under a risk-based system. On September 30, 1996, the Deposit Insurance
Funds Act of 1996 ("DIFA") was enacted and signed into law. DIFA
imposed a special assessment to recapitialize SAIF and reduced the
amount of FDIC insurance premiums for deposits insured by SAIF to the same
levels assessed for deposits insured by BIF. Paragraphs 3 and 5 of the Section
of Management's Discussion and Analysis captioned "Income Statement Analysis -
Non-Interest Income and Expense" appearing at page 21 of One Valley's 1996
Annual Report to Shareholders is incorporated herein by reference.
DIFA further provides, however, for assessments to be imposed on deposits
at all insured depository institutions to pay for the cost of the Financing
Corporation funding. Based on December 31, 1996 deposit levels, One Valley
estimates that insurance assessments will amount to approximately $750,000 in
1997.
MISCELLANEOUS
Under Section 106 of the 1970 Amendments to the Bank Holding Company Act
and the regulations of the FRB, the Banking Subsidiaries are prohibited from
engaging in certain tie-in arrangements in connection with any extension of
credit or any provision of credit, sale or lease of property or furnishing of
services.
One Valley is required to register annually with the Commissioner of
Banking of West Virginia ("Commissioner") and to pay a registration fee to the
Commissioner based on the total
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amount of bank deposits in banks with respect to which One Valley is a bank
holding company. Although legislation allows the Commissioner to prescribe the
registration fee, it limits the fee to
ten dollars per million dollars of deposits rounded off to the nearest million
dollars. One Valley is also subject to regulation and supervision by the
Commissioner.
GOVERNMENTAL POLICIES
In addition to the effect of general economic conditions, the earnings
and future business activities of the Banking Subsidiaries, both members and
non-members of the Federal Reserve, are affected by the fiscal and monetary
policies of the federal government and its agencies, particularly the FRB. The
FRB regulates the national money supply in order to mitigate recessionary and
inflationary pressures. The techniques used by the FRB include setting the
reserve requirements of member banks, establishing the discount rate on member
bank borrowings and conducting open market operations in United States
government securities to exercise control over the supply of money and credit.
The policies of the FRB have a direct and indirect effect on the amount
of bank loans and deposits, and the interest rates charged and paid thereon. The
impact of current economic problems and the policies of the FRB and other
regulatory authorities designed to deal with these economic problems upon the
future business and earnings of the Banking Subsidiaries cannot be accurately
predicted, but those policies can materially affect the revenues and income of
the Banking Subsidiaries.
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES
Statistical disclosures required by bank holding companies are included
in "Management's Discussion and Analysis of Financial Condition and Results of
Operations" set forth on pages five through 23 of One Valley's 1996 Annual
Report to Shareholders for the fiscal year ended December 31, 1996. That
information is incorporated herein by reference.
ITEM 2. PROPERTIES
ONE VALLEY AND ONE VALLEY BANK
One Valley Bank owns the site of One Valley Bank's current banking
quarters, One Valley Square in the City of Charleston, West Virginia. This
land is leased by One Valley Bank to One Valley Square, Inc. One Valley
Square, Inc., constructed a fifteen story (plus basement) office building on the
site, and One Valley Bank leases a portion of the basement and seven floors of
One Valley Square for its operations, consisting of approximately 130,000 square
feet. In addition, One Valley Bank subleases a portion of the seventh floor to
others. One Valley also conducts its operations from the space leased by One
Valley Bank in One Valley Square. The remaining space is leased to
non-affiliated tenants. Upon expiration of the land lease, all improvements will
revert to the owner of the land. One Valley Bank also conducts operations at its
operations center, also located in Charleston, and at 20 branch locations
throughout Kanawha, Putnam, Jackson, and Wood Counties.
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OTHER AFFILIATE BANKS
The properties owned or leased by the other Banking Subsidiaries consist
generally of 11 main bank offices, related drive-in facilities, 57 branch
offices and such other properties as are necessary to house related support
activities of those banks. All of the properties of the Banking Subsidiaries are
suitable and adequate for their current operations and are generally being fully
utilized.
ITEM 3. LEGAL PROCEEDINGS
Various legal proceedings are presently pending to which the Banking
Subsidiaries are parties; however, these proceedings are ordinary routine
litigation incidental to the business of the Banking Subsidiaries. There are no
material legal proceedings pending or threatened against One Valley or its
Subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of One Valley are:
<TABLE>
<CAPTION>
Name Age Banking Experience and Qualifications
<S> <C> <C>
Robert F. Baronner 70 1991 to Present, Chairman of the Board, One Valley.
1971 to 1991, One Valley Bank. Previously, President
and Chief Executive Officer, One Valley.
J. Holmes Morrison 56 1967 to present, One Valley Bank. Vice President and
Trust Officer, 1970; Senior Vice President and Senior
Trust Officer, 1978; Executive Vice President, 1982;
President and Chief Operating Officer, 1985; President
and Chief Executive Officer, 1988; Chairman of the
Board, 1991. Vice President, One Valley, 1982; Senior
Vice President, One Valley, 1984; Executive Vice
President, One Valley, 1990; President and Chief
Executive Officer, One Valley, 1991.
Phyllis H. Arnold 48 1973-1979, One Valley Bank. Credit Officer,
1974-1977; Vice President, 1977-1979. West Virginia
State Banking Commissioner, 1979-1983. Executive Vice
President, One Valley Bank, 1988; President and Chief
Executive Officer, One Valley Bank, 1991; Executive
Vice President, One Valley, 1994.
13
<PAGE>
Name Age Banking Experience and Qualifications
Frederick H. Belden, Jr. 58 1968 to present, One Valley Bank. Senior Vice
President and Senior Trust Officer, 1982; Executive
Vice President, 1986. Executive Vice President, One
Valley, 1994.
Laurance G. Jones 50 1969 to present, One Valley Bank. Controller, 1971;
Vice President, Controller and Treasurer, 1979; Senior
Vice President, 1980; Executive Vice President, 1992.
Treasurer, One Valley, 1981; Treasurer and Chief
Financial Officer, One Valley, 1984; Executive Vice
President, One Valley, 1994. Finance and Accounting.
James A. Winter 44 1975 to present, One Valley Bank. Vice President,
Controller and Assistant Treasurer, 1982. Senior Vice
President, 1991; Vice President and Chief Accounting
Officer, One Valley, 1989.
Robert E. Kamm, Jr. 45 1975 to 1978, One Valley Bank, Assistant Investment
Officer; 1982 to present, President One Valley Bank of
Summersville, Inc.; Senior Vice President, One Valley,
1996.
Kenneth R. Summers 51 1963 to 1988, One Valley Bank. Vice President, 1976;
Senior Vice President, 1985; 1988 to present,
President and Chief Executive Officer One Valley Bank,
Inc.; Senior Vice President, One Valley, 1996.
</TABLE>
14
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
During 1996, One Valley Common Stock was traded over the
counter on the Nasdaq National Market under the symbol "OVWV" by Merrill Lynch,
Pierce, Fenner & Smith, Inc.; Keefe, Bruyette & Woods, Inc.; Robinson-Humphrey
Co. Inc.; Legg, Mason, Wood, Walker, Inc.; Wheat First Securities, Inc.; Herzog,
Heine, Geduld, Inc.; McDonald & Company Sec., Inc.; Sandler O'Neill & Partners;
Prudential Securities, Inc.; and Friedman Billings Ramsey & Co. At March 4,
1997, the total number of holders of One Valley Common Stock was approximately
11,000, including shareholders of record and shares held in nominee name. The
information set forth in paragraphs number two and three in the subsection
captioned "Balance Sheet Analysis-Capital Resources" on page 18 of One Valley's
1996 Annual Report to Shareholders is incorporated herein by reference.
Notes D, F, Q and V of Notes to the Consolidated Financial Statements
appearing at pages 29, 30, 38 and 43 of One Valley's 1996 Annual Report to
Shareholders are incorporated herein by reference. Table 2 "Six-Year Selected
Financial Summary" on page six of One Valley's 1996 Annual Report to
Shareholders is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Table 2 "Six-Year Selected Financial Summary" on page six of One
Valley's 1996 Annual Report to Shareholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information contained on pages five through 23 of One Valley's 1996
Annual Report to Shareholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information contained on pages 24 through 44 of One Valley's 1996
Annual Report to Shareholders is incorporated herein by reference. See Item 14
for additional information regarding the financial statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
15
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth in the sections captioned "Election of
Directors", "Management Nominees to the Board of One Valley", "Directors
Continuing to Serve Unexpired Terms," and "Section 16(a) Beneficial Ownership
Reporting Compliance" on pages two through five and page 17 of One Valley's
definitive Proxy Statement dated March 21, 1997, is incorporated herein by
reference. Reference is also made to the information concerning One Valley's
executive officers provided in Part I, Item 4A, of this report.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth in the sections captioned "Executive
Compensation", "Change in Control Arrangements", and "Compensation of Directors"
on pages ten through 13 and page 17 of One Valley's definitive Proxy Statement
dated March 21, 1997, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information set forth in the sections captioned "Principal Holders
of Voting Securities" and "Ownership of Securities by Directors, Nominees and
Officers" on pages six through ten of One Valley's definitive Proxy Statement
dated March 21, 1997, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth in the sections captioned "Certain
Transactions with Directors and Officers and Their Associates" and "Compensation
Committee Interlocks and Insider Participation" on page 17 of One Valley's
definitive Proxy Statement dated March 21, 1997, and Notes H and J of the Notes
to the Consolidated Financial Statements appearing at pages 32 and 33 of One
Valley's 1996 Annual Report to Shareholders are incorporated herein by
reference.
16
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
1996 Annual Report
to Shareholders
Index Page(s)
<S> <C>
(a) 1. Financial Statements
Consolidated Financial Statements
of One Valley Bancorp, Inc. incorporated
by reference in Part II, Item 8 of this report.
Consolidated Balance Sheets at 24
December 31, 1996 and 1995
Consolidated Statements of Income 25
for the years ended December 31,
1996, 1995 and 1994
Consolidated Statements of Share- 26
holders' Equity for the years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows 27
for the years ended December 31, 1996,
1995 and 1994
Notes to Consolidated Financial 28-43
Statements
Report of Independent Auditors 44
(a) 2. Financial Statement Schedules
All schedules are omitted, as the required information is inapplicable
or the information is presented in the Consolidated Financial
Statements or related notes thereto.
(a) 3. Exhibits required to be Filed by Item 601 of Page(s)
Regulation S-K and Item 14(c) of Form 10-K Form 10-K
See Index to Exhibits 22
Reports on Form 8-K:
None
17
<PAGE>
(c) Exhibits
See Item 14(a)3 above.
(d) Financial Statement Schedules
See Item 14(a)2 above.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ONE VALLEY BANCORP, INC.
By: /s/ J. Holmes Morrison
J. Holmes Morrison,
President and
Chief Executive Officer
March 18, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and as of the date indicated.
</TABLE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Phyllis H. Arnold Director March 18, 1997
PHYLLIS H. ARNOLD
/s/ Charles M. Avampato Director March 18, 1997
CHARLES M. AVAMPATO
/s/ Robert F. Baronner Director March 18, 1997
ROBERT F. BARONNER
Director March ___, 1997
C. MICHAEL BLAIR
/s/ James K. Brown Director March 18, 1997
JAMES K. BROWN
/s/ Nelle Ratrie Chilton Director March 18, 1997
NELLE RATRIE CHILTON
/s/ R. Marshall Evans, Jr. Director March 18, 1997
R. MARSHALL EVANS, JR.
Director March ___, 1997
JAMES GABRIEL
19
<PAGE>
/s/ Phillip H. Goodwin Director March 20, 1997
PHILLIP H. GOODWIN
Director March ___, 1997
THOMAS E. GOODWIN
Director March ___, 1997
CECIL B. HIGHLAND, JR.
/s/ Bob M. Johnson Director March 25, 1997
BOB M. JOHNSON
/s/ Laurance G. Jones Treasurer and Chief March 17, 1997
LAURANCE G. JONES Financial Officer
(Principal Financial
Officer)
/s/ Robert E. Kamm, Jr. Director March 25, 1997
ROBERT E. KAMM, JR.
Director March ___, 1997
DAVID E. LOWE
Director March ___, 1997
JOHN D. LYNCH
/s/ Edward H. Maier Director March 18, 1997
EDWARD H. MAIER
/s/ J. Holmes Morrison Chief Executive March 18, 1997
J. HOLMES MORRISON Officer, Director
and President
Director March ___, 1997
CHARLES R. NEIGHBORGALL, III
/s/ Robert O. Orders, Sr. Director March 18, 1997
ROBERT O. ORDERS, SR.
/s/ John L. D. Payne Director March 18, 1997
JOHN L. D. PAYNE
/s/ Angus E. Peyton Director March 18, 1997
ANGUS E. PEYTON
Director March ___, 1997
LACY I. RICE, JR.
/s/ Brent D. Robinson Director March 21, 1997
BRENT D. ROBINSON
20
<PAGE>
Director March ___, 1997
JAMES W. THOMPSON
Director March ___, 1997
J. LEE VAN METRE, JR.
Director March ___, 1997
RICHARD B. WALKER
Director March ___, 1997
H. BERNARD WEHRLE, III
Director March ___, 1997
JOHN H. WICK, III
/s/ Thomas D. Wilkerson Director March 18, 1997
THOMAS D. WILKERSON
/s/ James A. Winter Vice President and March 18, 1997
JAMES A. WINTER Chief Accounting
Officer (Principal
Accounting Officer)
21
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description:
(3) Articles of Incorporation and Bylaws
Exhibit 3.1 Restated Articles of Incorporation of One Valley,
filed as part of One Valley's June 30, 1996,
Quarterly Report on Form 10-Q and incorporated herein
by reference.
Exhibit 3.2 Amendments to the Bylaws of One Valley dated
October 18 and December 20, 1995, and a complete copy
of One Valley's Bylaws as amended and filed as part
of One Valley's 1995 Annual Report on Form 10-K and
incorporated herein by reference.
Exhibit 4.1 Shareholder Protection Rights Agreement, filed as
a part of One Valley's current report on Form 8-K,
dated October 19, 1995, and incorporated herein by
reference.
(10) Material Contracts.
Exhibit 10.1 Indemnity Agreement between Resolution Trust
Corporation and One Valley, filed as part of One
Valley's Registration Statement on Form S-2,
Registration No. 33-43384, October 22, 1991, and
incorporated herein by reference.
Executive Compensation Plans and Arrangements.
Exhibit 10.2 Form of Change in Control Severance Agreements
between One Valley and certain of its officers, dated
as of October 16, 1996.
Exhibit 10.3 One Valley Bancorp, Inc., 1983 Incentive Stock
Option Plan, as amended, filed as part of One
Valley's Registration Statement on Form S-8,
Registration No. 33-3570, July 2, 1990, and
incorporated herein by reference.
Exhibit 10.4 One Valley Bancorp, Inc., 1993 Incentive Stock
Option Plan, filed as part of One Valley's Definitive
Proxy Statement, Registration No. 0-10042, and
incorporated herein by reference.
Exhibit 10.5 One Valley Bancorp, Inc., Management Incentive
Compensation Plan, as amended February, 1990, filed
as part of One Valley's 1992 Annual Report on Form
10-K and incorporated herein by reference.
Exhibit 10.6 One Valley Bancorp, Inc., Supplemental Benefit
Plan, as amended April, 1990, filed as part of One
Valley's 1992 Annual Report on Form 10-K and
incorporated herein by reference.
Exhibit 10.7 One Valley Bancorp, Inc., Executive Incentive
Compensation Plan, dated as of January 1, 1996.
22
<PAGE>
(11) Computation of Earnings Per Share -- found at page 77 herein.
(12) Statement Re Computation of Ratios -- found at page 78 herein.
(13) 1996 Annual Report to Security Holders -- found at page 79 herein.
(21) Subsidiaries of Registrant -- found at page 131 herein.
(23) Consent of Independent Auditors -- found at page 132 herein.
(27) Financial Data Statement -- Edgar filing only
(99) Proxy Statement for the 1997 Annual Meeting of One Valley -- found at
page 133 herein.
23
</TABLE>
<PAGE>
EXECUTIVE MANAGEMENT
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AGREEMENT is entered into as of the 16th day of October,
1996 by and between One Valley Bancorp, Inc. (the "Company"), and ______________
("Executive").
W I T N E S S E T H
WHEREAS, Executive currently serves as a key employee of the
Company and his services and knowledge are valuable to the Company in connection
with the management of one or more of the Company's principal operating
facilities, divisions, departments or Subsidiaries (as defined in Section 1);
and
WHEREAS, the Board (as defined in Section 1) has determined
that it is in the best interests of the Company and its stockholders to secure
the continued services, and to ensure the continued and undivided dedication and
objectivity, of the Company's executives in the event of any threat or
occurrence of, or negotiation or other action that could lead to, or create the
possibility of, a Change in Control (as defined in Section 1) of the Company;
and
WHEREAS, the Board has authorized the Compensation Committee
of the Board to cause the Company to enter into Change in Control severance
agreements with the Company's executives, and the Compensation Committee has
authorized the Company to enter into this Agreement with Executive.
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants and agreements herein contained, the Company and Executive
hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the respective meanings set forth
1
<PAGE>
below:
(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means (i) the willful and continued failure of
Executive to perform substantially his duties with the Company (other than any
such failure resulting from Executive's incapacity due to physical or mental
illness or any such failure subsequent to Executive being delivered a Notice of
Termination without Cause by the Company or delivering a Notice of Termination
for Good Reason to the Company) after a written demand for substantial
performance is delivered to Executive by the Board which specifically identifies
the manner in which the Board believes that Executive has not substantially
performed Executive's duties, (ii) the willful engaging by Executive in illegal
conduct or gross misconduct which is demonstrably and materially injurious to
the Company or its affiliates or (iii) the Executive's conviction of, or plea of
guilty or nolo contendere to, a felony involving moral turpitude. For purposes
of this paragraph (b) no act or failure to act by Executive shall be considered
"willful" unless done or omitted to be done by him not in good faith and without
reasonable belief that his action or omission was in the best interest of the
Company or its affiliates. The unwillingness of Executive to accept any
condition or event which would constitute Good Reason under Section 1(f) may not
be considered by the Board to be a failure to perform or misconduct by
Executive. Notwithstanding the foregoing, Executive shall not be deemed to have
been terminated for Cause for purposes of this Agreement unless and until there
shall have been delivered to him a copy of a resolution, duly adopted by a vote
of three-quarters (3/4) of the entire
2
<PAGE>
Board at a meeting of the Board called and held (after reasonable notice to
Executive and an opportunity for Executive and his counsel to be heard before
the Board). The Company must notify Executive of an event constituting Cause
within ninety (90) days following its knowledge of its existence or such event
shall not constitute Cause under this Agreement.
(c) "Change in Control" means the occurrence of any one of the
following events:
(i) individuals who, on October 16, 1996, constitute the Board
(the "Incumbent Directors") cease for any reason to constitute at least
a majority of the Board, provided that any person becoming a director
subsequent to October 16, 1996, whose election or nomination for
election was approved by a vote of at least three-quarters (3/4) of the
Incumbent Directors then on the Board (either by a specific vote or by
approval of the proxy statement of the Company in which such person is
named as a nominee for director, without objection to such nomination)
shall be an Incumbent Director; provided, however, that no individual
elected or nominated as a director of the Company initially as a result
of an actual or threatened election contest with respect to directors
or any other actual or threatened solicitation of proxies or consents
by or on behalf of any person other than the Board shall be deemed to
an Incumbent Director;
(ii) any "person" (as such term is defined in Section 3(a)(9)
of the Securities Exchange Act of 1934 (the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of
3
<PAGE>
the Company representing 50% or more of the combined voting power of
the Company's then outstanding securities eligible to vote for the
election of the Board (the "Company Voting Securities"); provided,
however, that the event described in this paragraph (i) shall not be
deemed to be a Change in Control by virtue of any of the following
acquisitions: (A) by the Company or any Subsidiary, (B) by any employee
benefit plan sponsored or maintained by the Company or any Subsidiary,
(C) by any underwriter temporarily holding securities pursuant to an
offering of such securities, (D) pursuant to a Non-Control Transaction
(as defined in paragraph (iii)), (E) pursuant to any acquisition by
Executive or any group of persons including Executive (or any entity
controlled by Executive or any group of persons including Executive);
or (F) a transaction (other than one described in (iii) below) in which
Company Voting Securities are acquired from the Company, if a majority
of the Incumbent Directors then on the Board approve a resolution
providing expressly that the acquisition pursuant to this clause (F)
does not constitute a Change in Control under this paragraph (i);
(iii) the consummation of a merger, consolidation, statutory
share exchange or similar form of corporate transaction involving the
Company or any of its Subsidiaries that requires the approval of the
Company's stockholders, whether for such transaction or the issuance of
securities in the transaction (a "Business Combination"), unless
immediately following such Business Combination: (A) more than 60% of
the total voting power of (x) the corporation resulting from such
Business Combination (the "Surviving Corporation"), or (y) if
applicable, the ultimate
4
<PAGE>
parent corporation that directly or indirectly has beneficial ownership
of 100% of the voting securities eligible to elect directors of the
Surviving Corporation (the "Parent Corporation"), is represented by
Company Voting Securities that were outstanding immediately prior to
such Business Combination (or, if applicable, shares into which such
Company Voting Securities were converted pursuant to such Business
Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company
Voting Securities among the holders thereof immediately prior to the
Business Combination, (B) no person (other than any employee benefit
plan sponsored or maintained by the Surviving Corporation or the Parent
Corporation), is or becomes the beneficial owner, directly or
indirectly, of 50% or more of the total voting power of the outstanding
voting securities eligible to elect directors of the Parent Corporation
(or, if there is no Parent Corporation, the Surviving Corporation) and
(C) at least a majority of the members of the board of directors of the
Parent Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) following the consummation of the Business
Combination were Incumbent Directors at the time of the Board's
approval of the execution of the initial agreement providing for such
Business Combination (any Business Combination which satisfies all of
the criteria specified in (A), (B) and (C) above shall be deemed to be
a "Non-Control Transaction"); or
(iv) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or a sale or
disposition of all or substantially all of the Company's assets.
5
<PAGE>
Notwithstanding the foregoing, a Change in Control of the
Company shall not be deemed to occur solely because any person acquires
beneficial ownership of more than 50% of the Company Voting Securities as a
result of the acquisition of Company Voting Securities by the Company which
reduces the number of Company Voting Securities outstanding; provided, that if
after such acquisition by the Company such person becomes the beneficial owner
of additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person, a
Change in Control of the Company shall then occur.
(d) "Date of Termination" means (i) the effective date on
which Executive's employment by the Company terminates as specified in a prior
written notice by the Company or Executive, as the case may be, to the other,
delivered pursuant to Section 10 or (ii) if Executive's employment by the
Company terminates by reason of death, the date of death of Executive.
(e) "Disability" means Executive's total and permanent
disability as defined by the Company's long-term disability plan (as in
existence immediately prior to the Change in Control).
(f) "Good Reason" means, without Executive's express written
consent, the occurrence of any of the following events after a Change in
Control:
(1) (A) any change in the duties or responsibilities
(including reporting responsibilities) of Executive that is
inconsistent in any material and adverse respect with Executive's
position(s), duties, responsibilities or status with the Company
immediately prior to such Change in Control (including any material
6
<PAGE>
and adverse diminution of such duties or responsibilities); provided,
however, that Good Reason shall not be deemed to occur upon a change in
duties or responsibilities that is solely and directly a result of the
Company no longer being a publicly traded entity and does not involve
any other event set forth in this paragraph (f) or (B) a material and
adverse change in Executive's titles or offices (including, if
applicable, membership on the Board) with the Company as in effect
immediately prior to such Change in Control;
(2) a reduction by the Company in Executive's rate of annual
base salary or annual target bonus opportunity (including any adverse
change in the formula for such annual bonus target) as in effect
immediately prior to such Change in Control or as the same may be
increased from time to time thereafter;
(3) any requirement of the Company that Executive (i) be based
anywhere more than fifty (50) miles from the facility where Executive
is located at the time of such Change in Control or (ii) travel on
Company business to an extent substantially greater than the travel
obligations of Executive immediately prior to such Change in Control;
(4) the failure of the Company to (A) continue in effect any
employee benefit plan, compensation plan, welfare benefit plan or
material fringe benefit plan in which Executive is participating
immediately prior to such Change in Control or the taking of any action
by the Company which would adversely affect Executive's participation
in or reduce Executive's benefits under
7
<PAGE>
any such plan, unless Executive is permitted to participate in other
plans providing Executive with substantially equivalent benefits in the
aggregate (at substantially equivalent cost with respect to welfare
benefit plans), or (B) provide Executive with paid vacation in
accordance with the most favorable vacation, policies of the Company
and its affiliated companies as in effect for Executive immediately
prior to such Change in Control, including the crediting of all service
for which Executive had been credited under such vacation policies
prior to the Change in Control; or
(5) the failure of the Company to obtain the assumption
agreement from any successor as contemplated in Section 9(b).
Notwithstanding the foregoing, an isolated and inadvertent
action taken in good faith and which is remedied by the Company within ten (10)
days after receipt of notice thereof given by Executive shall not constitute
Good Reason. Executive must notify the Company of an event constituting Good
Reason within one hundred and eighty (180) days following his knowledge of its
existence or such event shall not constitute Good Reason under this Agreement.
Notwithstanding anything herein to the contrary, Executive's termination of
employment for any reason (other than Cause) during the thirty (30) day period
immediately following the first anniversary of a Change in Control shall also
constitute Good Reason under this Agreement. Executive's termination of
employment under this Agreement for Good Reason shall in no event impair
Executive's ability to
8
<PAGE>
receive benefits under any retirement-based plans or programs for which
Executive is otherwise eligible as of Executive's Date of Termination.
(g) "Nonqualifying Termination" means a termination of
Executive's employment (1) by the Company for Cause, (2) by Executive for any
reason other than Good Reason, (3) as a result of Executive's death, or (4) as a
result of Disability.
(h) "Retirement" means termination of employment by Executive
in accordance with the Company's retirement plan generally applicable to
salaried employees (as in existence immediately prior to the Charge in Control),
or in accordance with any retirement arrangement established with respect to
Executive with Executive's written consent.
(i) "Subsidiary" means any corporation or other entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of the then outstanding securities of such
corporation or other entity entitled to vote generally in the election of
directors.
(j) "Termination Period" means the period of time beginning
with a Change in Control and ending two (2) years following such Change in
Control. Notwithstanding anything in this Agreement to the contrary, if (i)
Executive's employment is terminated prior to a Change in Control for reasons
that would have constituted a Qualifying Termination if they had occurred
following a Change in Control and (ii) Executive reasonably demonstrates that
such termination (or Good Reason event) was at the request or suggestion of a
third party who had indicated an intention or taken steps reasonably calculated
to effect a Change in Control then for purposes of this Agreement (and
notwithstanding whether a Change in Control occurs), the date immediately prior
to the
9
<PAGE>
date of such termination of employment or event constituting Good Reason
shall be treated as a Change in Control.
2. Obligations of Executive. In the event of a tender or
exchange offer, proxy contest, or the execution of any agreement which, if
consummated, would constitute a Change in Control, Executive agrees not to
voluntarily leave the employ of the Company, other than as a result of
Disability, Retirement (following age sixty (60)) or an event which would
constitute Good Reason if a Change in Control had occurred, until the Change in
Control occurs or, if earlier, such tender or exchange offer, proxy contest, or
agreement is terminated or abandoned; provided, however, that such obligation
shall not extend for a period exceeding one hundred and eighty (180) days from
the initial event resulting in the obligation under this Section 2.
3. Payments Upon Termination of Employment.
(a) If during the Termination Period the employment of
Executive shall terminate, other than by reason of a Nonqualifying Termination,
then the Company shall pay to Executive (or Executive's beneficiary or estate)
within ten (10) days following the Date of Termination, as compensation for
services rendered to the Company:
(1) a lump-sum cash amount equal to the sum of (A) Executive's
unpaid base salary from the Company and its affiliated companies through the
Date of Termination (without taking into account any reduction of base salary
constituting Good Reason), (B) any bonus payments which have become payable, to
the extent not theretofore paid, and (C) any compensation previously deferred by
Executive other than pursuant to a tax-qualified plan (together with any
interest thereon) and any unpaid accrued vacation, each to the extent not
theretofore paid;
10
<PAGE>
(2) to the extent not paid under the terms of such annual
incentive compensation plan, a lump-sum cash amount equal to the target award
for the Executive under the Company's annual incentive compensation plan for the
fiscal year in which his Date of Termination occurs, reduced pro rata for that
portion of the fiscal year not completed as of the end of the month in which
such Date of Termination occurs; and
(3) a lump-sum cash amount equal to three (3) times the sum of
(A) Executive's annual rate of base salary from the Company and its affiliated
companies in effect immediately prior to the Date of Termination (not taking
into account any reductions which would constitute Good Reason) plus (B) the
average annualized bonus earned by the Executive from the Company (or its
Subsidiaries) during the three fiscal years (or shorter annualized period if
Executive had not been employed for the full three-year period) ending
immediately prior to the year of the Change in Control.
(b) If during the Termination Period the employment of
Executive shall terminate, other than by reason of a Nonqualifying Termination,
then for a period of thirty-six (36) months following the Date of Termination,
the Company shall provide Executive (and Executive's dependents, if applicable)
with the same level of medical, dental, accident, disability, and life insurance
benefits upon substantially the same terms and conditions (including
contributions required from Executive to receive such benefits) as existed
immediately prior to Executive's Date of Termination (or, if more favorable to
Executive, as such benefits and terms and conditions existed immediately prior
to the Change in Control); provided, that, if Executive cannot continue to
participate in the Company plans providing such benefits, the Company shall
otherwise provide
11
<PAGE>
such benefits on the same after-tax basis as if continued participation had been
permitted. Notwithstanding the foregoing, if Executive becomes reemployed with
another employer and is eligible to receive welfare benefits from such employer,
the welfare benefits described herein shall be secondary to such benefits during
the period of Executive's eligibility, but only to the extent that the Company
reimburses Executive for any increased cost and provides any additional benefits
necessary to give Executive the benefits promised hereunder.
(c) If during the Termination Period the employment of
Executive shall terminate, other than by reason of a Nonqualifying Termination,
and Executive has attained age fifty (50) with ten (10) years of service with
the Company (or any of its affiliates) at the time of the Date of Termination,
Executive shall be eligible to receive retiree medical benefits from the Company
at the conclusion of the thirty-six (36) months of benefit coverage set forth in
Section 3(b). The retiree medical benefits (including contributions required
from Executive to receive such benefits) to be provided to Executive (and
Executive's eligible dependents) by the Company shall be no less favorable than
the benefits (and cost to Executive) under the retiree medical program as of
immediately prior to Executive's Date of Termination (or, if more favorable to
Executive, as of immediately prior to the Change in Control), and shall be
provided to Executive (and Executive's eligible dependents) notwithstanding any
amendment to, or termination of, the Company's retiree medical program.
(d) Any amount of severance paid pursuant to this Section 3
shall offset any other amount of severance to be received by Executive upon
termination of employment of Executive under any other severance plan or policy
of the
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Company, including any employment agreement.
(e) If during the Termination Period the employment of
Executive shall terminate by reason of a Nonqualifying Termination, then the
Company shall pay to Executive within ten (10) days following the Date of
Termination a lump sum cash amount equal to the sum of (i) Executive's unpaid
base salary from the Company through the Date of Termination, (ii) any bonus
payments which have become payable, to the extent not theretofore paid, and
(iii) any compensation previously deferred by Executive other than pursuant to a
tax-qualified plan (together with any interest thereon) and any unpaid accrued
vacation, each to the extent not theretofore paid.
4. Withholding Taxes. The Company may withhold from all
payments due to Executive (or his beneficiary or estate) hereunder all taxes
which, by applicable federal, state, local or other law, the Company is required
to withhold therefrom.
5. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment, award,
benefit or distribution (or any acceleration of any payment, award, benefit or
distribution) by the Company (or any of its affiliated entities) or any entity
which effectuates a Change in Control (or any of its affiliated entities) to or
for the benefit of Executive (whether pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 5) (the "Payments") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any interest or penalties are incurred by Executive with respect to
such excise tax (such excise tax,
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together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Company shall pay to Executive (or to
the Internal Revenue Service on behalf of Executive) an additional payment (a
"Gross-Up Payment") in an amount such that after payment by Executive of all
taxes (including any Excise Tax) imposed upon the Gross-Up Payment, Executive
retains an amount of the Gross-Up Payment equal to the sum of (x) the Excise Tax
imposed upon the Payments and (y) the product of any deductions disallowed
because of the inclusion of the Gross-up Payment in Executive's adjusted gross
income and the highest applicable marginal rate of federal income taxation for
the calendar year in which the Gross-up Payment is to be made. For purposes of
determining the amount of the Gross-up Payment, the Executive shall be deemed to
(i) pay federal income taxes at the highest marginal rates of federal income
taxation for the calendar year in which the Gross-up Payment is to be made, (ii)
pay applicable state and local income taxes at the highest marginal rate of
taxation for the calendar year in which the Gross-up Payment is to be made, net
of the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes and (iii) have otherwise allowable
deductions for federal income tax purposes at least equal to the Gross-up
Payment. Notwithstanding the foregoing provisions of this Section 5(a), if it
shall be determined that Executive is entitled to a Gross-Up Payment, but that
the Payments would not be subject to the Excise Tax if the Payments were reduced
by an amount that is less than 10% of the portion of the Payments that would be
treated as "parachute payments" under Section 280G of the Code, then the amounts
payable to Executive under this Agreement shall be reduced (but not below zero)
to the maximum amount that could be paid to Executive without giving rise to the
Excise Tax (the "Safe Harbor Cap"), and no Gross-Up Payment shall
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be made to Executive. The reduction of the amounts payable hereunder, if
applicable, shall be made by reducing first the payments under Section 3(a)(3),
unless an alternative method of reduction is elected by Executive. For purposes
of reducing the Payments to the Safe Harbor Cap, only amounts payable under this
Agreement (and no other Payments) shall be reduced. If the reduction of the
amounts payable hereunder would not result in a reduction of the Payments to the
Safe Harbor Cap, no amounts payable under this Agreement shall be reduced
pursuant to this provision.
(b) Subject to the provisions of Section 5(a), all
determinations required to be made under this Section 5, including whether and
when a Gross-Up Payment is required, the amount of such Gross-Up Payment, the
reduction of the Payments to the Safe Harbor Cap and the assumptions to be
utilized in arriving at such determinations, shall be made by the public
accounting firm that is retained by the Company as of the date immediately prior
to the Change in Control (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and Executive within fifteen (15)
business days of the receipt of notice from the Company or the Executive that
there has been a Payment, or such earlier time as is requested by the Company
(collectively, the "Determination"). In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting
the Change in Control (or if the Accounting Firm fails to make the
Determination), Executive may appoint another nationally recognized public
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company and the
Company shall enter into any agreement requested by the Accounting Firm in
connection with the performance of the
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services hereunder. The Gross-up Payment under this Section 5 with respect to
any Payments shall be made no later than thirty (30) days following such
Payment. If the Accounting Firm determines that no Excise Tax is payable by
Executive, it shall furnish Executive with a written opinion to such effect, and
to the effect that failure to report the Excise Tax, if any, on Executive's
applicable federal income tax return will not result in the imposition of a
negligence or similar penalty. In the event the Accounting Firm determines that
the Payments shall be reduced to the Safe Harbor Cap, it shall furnish Executive
with a written opinion to such effect. The Determination by the Accounting Firm
shall be binding upon the Company and Executive. As a result of the uncertainty
in the application of Section 4999 of the Code at the time of the Determination,
it is possible that Gross-Up Payments which will not have been made by the
Company should have been made ("Underpayment"), or consistent with the
calculations required to be made hereunder. In the event that the Executive
thereafter is required to make payment of any Excise Tax or additional Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment (together with interest at the rate provided
in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the Company to
or for the benefit of Executive. Executive shall cooperate, to the extent his
expenses are reimbursed by the Company, with any reasonable requests by the
Company in connection with any contests or disputes with the Internal Revenue
Service in connection with the Excise Tax.
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6. Reimbursement of Expenses. If any contest or dispute shall
arise under this Agreement involving termination of Executive's employment with
the Company or involving the failure or refusal of the Company to perform fully
in accordance with the terms hereof, the Company shall reimburse Executive, on a
current basis, for all legal fees and expenses, if any, reasonably incurred by
Executive in connection with such contest or dispute (regardless of the result
thereof), together with interest in an amount equal to the "prime rate" as set
forth in The Wall Street Journal from time to time in effect, but in no event
higher than the maximum legal rate permissible under applicable law, such
interest to accrue from the date the Company receives Executive's statement for
such fees and expenses through the date of payment thereof.
7. Term of Agreement. This Agreement shall continue in effect
for a term of three (3) years from the date hereof; provided, however, that
unless either party gives sixty (60) days' written notice prior to an
anniversary of the date of this Agreement, its term shall automatically be
extended by one (1) year on such anniversary date, so that, in the absence of
such notice, the term of this Agreement shall be three (3) years as of each
anniversary date. Notwithstanding the foregoing, upon a Change in Control, the
term of the Agreement shall, if less than two (2) years at such date, be
extended automatically to continue for at least two (2) years following such
Change In Control. This Agreement shall terminate in any event upon the first to
occur of (i) termination of Executive's employment with the Company prior to a
Change in Control (except as otherwise provided hereunder), (ii) a Nonqualifying
Termination or (iii) the end of the Termination Period.
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8. Scope of Agreement. Nothing in this Agreement shall be
deemed to entitle Executive to continued employment with the Company or its
Subsidiaries, and if Executive's employment with the Company shall terminate
prior to a Change in Control, Executive shall have no further rights under this
Agreement (except as provided specifically hereunder); provided, however, that
any termination of Executive's employment during the Termination Period shall be
subject to all of the provisions of this Agreement including, without
limitation, payment of amounts owed hereunder.
9. Successors; Binding Agreement.
(a) This Agreement shall not be terminated by any Business
Combination. In the event of any such Business Combination, the provisions of
this Agreement shall be binding upon the Surviving Corporation, and such
Surviving Corporation shall be treated as the Company hereunder.
(b) The Company agrees that in connection with any Business
Combination, it will cause any successor entity to the Company unconditionally
to assume, by written instrument delivered to Executive (or his beneficiary or
estate), all of the obligations of the Company hereunder. Failure of the Company
to obtain such assumption prior to the effectiveness of any such Business
Combination that constitutes a Change in Control shall constitute Good Reason
hereunder and shall entitle Executive to compensation and other benefits from
the Company in the same amount and on the same terms as Executive would be
entitled hereunder if Executive's employment were terminated following a Change
in Control other than by reason of a Nonqualifying Termination. For purposes of
implementing the foregoing, the date on which any such Business Combination
becomes effective shall be deemed the date Good Reason occurs, and shall be the
Date of Termination if requested by Executive.
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(c) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive shall die following the Date of Termination while any amounts would be
payable to Executive hereunder had Executive continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to such person or persons appointed in writing by
Executive to receive such amounts or, if no person is so appointed, to
Executive's estate.
10. Notice. (a) For purposes of this Agreement, all notices
and other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given when delivered or five (5) days after
deposit in the United States mail, certified and return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
If to the Company:
One Valley Bancorp, Inc.
One Valley Square, P.O. Box 1793
Charleston, WV 25326
Att: Corporate Secretary
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice of Executive's Date of Termination by the
Company or Executive, as the case may be, to the other, shall (i) indicate the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, set forth in reasonable detail the facts and
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circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated and (iii) specify the termination
date (which date shall be not less than thirty (30) nor more than sixty (60)
days after the giving of such notice).
11. Full Settlement; Resolution of Disputes. The Company's
obligation to make any payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against Executive or others. In no event shall Executive be
obligated to seek other employment or take other action by way of mitigation of
the amounts payable to Executive under any of the provisions of this Agreement
and, except as provided in Section 3(b) hereof, such amounts shall not be
reduced whether or not Executive obtains other employment.
12. Employment with Subsidiaries. Employment with the Company
for purposes of this Agreement shall include employment with any Subsidiary.
13. Governing Law; Validity. The interpretation, construction
and performance of this Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of West Virginia
without regard to the principle of conflicts of laws. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which other
provisions shall remain in full force and effect.
14. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and
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the same instrument.
15. Miscellaneous. No provision of this Agreement may be
modified or waived unless such modification or waiver is agreed to in writing
and signed by Executive and by a duly authorized officer of the Company. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. Failure by Executive or the Company to insist upon strict compliance with
any provision of this Agreement or to assert any right Executive or the Company
may have hereunder, including without limitation, the right of Executive to
terminate employment for Good Reason, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement. Except as
provided hereunder, the rights of and benefits payable to, Executive or
Executive's estate or beneficiaries pursuant to this Agreement are in addition
to any rights of, or benefits payable to, Executive or Executive's estate or
beneficiaries under any other employee benefit plan or compensation program of
the Company. This Agreement supersedes and overrides any employment or severance
agreement previously entered into between Executive and the Company.
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IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by a duly authorized officer of the Company and Executive has
executed this Agreement as of the day and year first above written.
ONE VALLEY BANCORP, INC.
By:__________________________
Title:_______________________
-----------------------------
[Executive]
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SENIOR MANAGEMENT
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AGREEMENT is entered into as of the 16th day of October,
1996 by and between One Valley Bancorp, Inc. (the "Company"), and ______________
("Executive").
W I T N E S S E T H
WHEREAS, Executive currently serves as a key employee of the
Company and his services and knowledge are valuable to the Company in connection
with the management of one or more of the Company's principal operating
facilities, divisions, departments or Subsidiaries (as defined in Section 1);
and
WHEREAS, the Board (as defined in Section 1) has determined
that it is in the best interests of the Company and its stockholders to secure
the continued services, and to ensure the continued and undivided dedication and
objectivity, of the Company's executives in the event of any threat or
occurrence of, or negotiation or other action that could lead to, or create the
possibility of, a Change in Control (as defined in Section 1) of the Company;
and
WHEREAS, the Board has authorized the Compensation Committee
of the Board to cause the Company to enter into Change in Control severance
agreements with the Company's executives, and the Compensation Committee has
authorized the Company to enter into this Agreement with Executive.
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants and agreements herein contained, the Company and Executive
hereby agree as follows:
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1. Definitions. As used in this Agreement, the following
terms shall have the respective meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means (i) the willful and continued failure of
Executive to perform substantially his duties with the Company (other than any
such failure resulting from Executive's incapacity due to physical or mental
illness or any such failure subsequent to Executive being delivered a Notice of
Termination without Cause by the Company or delivering a Notice of Termination
for Good Reason to the Company) after a written demand for substantial
performance is delivered to Executive by the Board which specifically identifies
the manner in which the Board believes that Executive has not substantially
performed Executive's duties, (ii) the willful engaging by Executive in illegal
conduct or gross misconduct which is demonstrably and materially injurious to
the Company or its affiliates or (iii) the Executive's conviction of, or plea of
guilty or nolo contendere to, a felony involving moral turpitude. For purposes
of this paragraph (b) no act or failure to act by Executive shall be considered
"willful" unless done or omitted to be done by him not in good faith and without
reasonable belief that his action or omission was in the best interest of the
Company or its affiliates. The unwillingness of Executive to accept any
condition or event which would constitute Good Reason under Section 1(f) may not
be considered by the Board to be a failure to perform or misconduct by
Executive. Notwithstanding the foregoing, Executive shall not be deemed to have
been terminated for Cause for purposes of this Agreement unless and until there
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shall have been delivered to him a copy of a resolution, duly adopted by a vote
of three-quarters (3/4) of the entire Board at a meeting of the Board called and
held (after reasonable notice to Executive and an opportunity for Executive and
his counsel to be heard before the Board). The Company must notify Executive of
an event constituting Cause within ninety (90) days following its knowledge of
its existence or such event shall not constitute Cause under this Agreement.
(c) "Change in Control" means the occurrence of any one of
the following events:
(i) individuals who, on October 16, 1996, constitute the Board
(the "Incumbent Directors") cease for any reason to constitute at least
a majority of the Board, provided that any person becoming a director
subsequent to October 16, 1996, whose election or nomination for
election was approved by a vote of at least three-quarters (3/4) of the
Incumbent Directors then on the Board (either by a specific vote or by
approval of the proxy statement of the Company in which such person is
named as a nominee for director, without objection to such nomination)
shall be an Incumbent Director; provided, however, that no individual
elected or nominated as a director of the Company initially as a result
of an actual or threatened election contest with respect to directors
or any other actual or threatened solicitation of proxies or consents
by or on behalf of any person other than the Board shall be deemed to
an Incumbent Director;
(ii) any "person" (as such term is defined in Section 3(a)(9)
of the Securities Exchange Act of 1934 (the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
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"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50%
or more of the combined voting power of the Company's then outstanding
securities eligible to vote for the election of the Board (the "Company
Voting Securities"); provided, however, that the event described in
this paragraph (i) shall not be deemed to be a Change in Control by
virtue of any of the following acquisitions: (A) by the Company or any
Subsidiary, (B) by any employee benefit plan sponsored or maintained by
the Company or any Subsidiary, (C) by any underwriter temporarily
holding securities pursuant to an offering of such securities, (D)
pursuant to a Non-Control Transaction (as defined in paragraph (iii)),
(E) pursuant to any acquisition by Executive or any group of persons
including Executive (or any entity controlled by Executive or any group
of persons including Executive); or (F) a transaction (other than one
described in (iii) below) in which Company Voting Securities are
acquired from the Company, if a majority of the Incumbent Directors
then on the Board approve a resolution providing expressly that the
acquisition pursuant to this clause (F) does not constitute a Change in
Control under this paragraph (i);
(iii) the consummation of a merger, consolidation, statutory
share exchange or similar form of corporate transaction involving the
Company or any of its Subsidiaries that requires the approval of the
Company's stockholders, whether for such transaction or the issuance of
securities in the transaction (a "Business Combination"), unless
immediately following such Business Combination: (A) more than 60% of
the total voting power of (x) the corporation resulting
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from such Business Combination (the "Surviving Corporation"), or (y) if
applicable, the ultimate parent corporation that directly or indirectly
has beneficial ownership of 100% of the voting securities eligible to
elect directors of the Surviving Corporation (the "Parent
Corporation"), is represented by Company Voting Securities that were
outstanding immediately prior to such Business Combination (or, if
applicable, shares into which such Company Voting Securities were
converted pursuant to such Business Combination), and such voting power
among the holders thereof is in substantially the same proportion as
the voting power of such Company Voting Securities among the holders
thereof immediately prior to the Business Combination, (B) no person
(other than any employee benefit plan sponsored or maintained by the
Surviving Corporation or the Parent Corporation), is or becomes the
beneficial owner, directly or indirectly, of 50% or more of the total
voting power of the outstanding voting securities eligible to elect
directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) and (C) at least a majority of
the members of the board of directors of the Parent Corporation (or, if
there is no Parent Corporation, the Surviving Corporation) following
the consummation of the Business Combination were Incumbent Directors
at the time of the Board's approval of the execution of the initial
agreement providing for such Business Combination (any Business
Combination which satisfies all of the criteria specified in (A), (B)
and (C) above shall be deemed to be a "Non-Control Transaction"); or
(iv) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the
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Company or a sale or disposition of all or substantially all of the
Company's assets.
Notwithstanding the foregoing, a Change in Control of the
Company shall not be deemed to occur solely because any person acquires
beneficial ownership of more than 50% of the Company Voting Securities as a
result of the acquisition of Company Voting Securities by the Company which
reduces the number of Company Voting Securities outstanding; provided, that if
after such acquisition by the Company such person becomes the beneficial owner
of additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person, a
Change in Control of the Company shall then occur.
(d) "Date of Termination" means (i) the effective date on
which Executive's employment by the Company terminates as specified in a prior
written notice by the Company or Executive, as the case may be, to the other,
delivered pursuant to Section 10 or (ii) if Executive's employment by the
Company terminates by reason of death, the date of death of Executive.
(e) "Disability" means Executive's total and permanent
disability as defined by the Company's long-term disability plan (as in
existence immediately prior to the Change in Control).
(f) "Good Reason" means, without Executive's express written
consent, the occurrence of any of the following events after a Change in
Control:
(1) (A) any change in the duties or responsibilities
(including reporting responsibilities) of Executive that is
inconsistent in any material and adverse respect with Executive's
position(s), duties,
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responsibilities or status with the Company immediately prior to such
Change in Control (including any material and adverse diminution of
such duties or responsibilities); provided, however, that Good Reason
shall not be deemed to occur upon a change in duties or
responsibilities that is solely and directly a result of the Company no
longer being a publicly traded entity and does not involve any other
event set forth in this paragraph (f) or (B) a material and adverse
change in Executive's titles or offices (including, if applicable,
membership on the Board) with the Company as in effect immediately
prior to such Change in Control;
(2) a reduction by the Company in Executive's rate of annual
base salary or annual target bonus opportunity (including any adverse
change in the formula for such annual bonus target) as in effect
immediately prior to such Change in Control or as the same may be
increased from time to time thereafter;
(3) any requirement of the Company that Executive (i) be based
anywhere more than fifty (50) miles from the facility where Executive
is located at the time of such Change in Control or (ii) travel on
Company business to an extent substantially greater than the travel
obligations of Executive immediately prior to such Change in Control;
(4) the failure of the Company to (A) continue in effect any
employee benefit plan, compensation plan, welfare benefit plan or
material fringe benefit plan in which Executive is participating
immediately prior to such Change in Control or the taking of any action
by the Company which would adversely affect Executive's
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<PAGE>
participation in or reduce Executive's benefits under any such plan,
unless Executive is permitted to participate in other plans providing
Executive with substantially equivalent benefits in the aggregate (at
substantially equivalent cost with respect to welfare benefit plans),
or (B) provide Executive with paid vacation in accordance with the most
favorable vacation, policies of the Company and its affiliated
companies as in effect for Executive immediately prior to such Change
in Control, including the crediting of all service for which Executive
had been credited under such vacation policies prior to the Change in
Control; or
(5) the failure of the Company to obtain the assumption
agreement from any successor as contemplated in Section 9(b).
Notwithstanding the foregoing, an isolated and inadvertent
action taken in good faith and which is remedied by the Company within ten (10)
days after receipt of notice thereof given by Executive shall not constitute
Good Reason. Executive must notify the Company of an event constituting Good
Reason within one hundred and eighty (180) days following his knowledge of its
existence or such event shall not constitute Good Reason under this Agreement.
Executive's termination of employment under this Agreement for Good Reason shall
in no event impair Executive's ability to receive benefits under any
retirement-based plans or programs for which Executive is otherwise eligible as
of Executive's Date of Termination.
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<PAGE>
(g) "Nonqualifying Termination" means a termination of
Executive's employment (1) by the Company for Cause, (2) by Executive for any
reason other than Good Reason (including Retirement if Good Reason does not
exist at such time), (3) as a result of Executive's death, or (4) as a result of
Disability.
(h) "Retirement" means termination of employment by Executive
in accordance with the Company's retirement plan generally applicable to
salaried employees (as in existence immediately prior to the Charge in Control),
or in accordance with any retirement arrangement established with respect to
Executive with Executive's written consent.
(i) "Subsidiary" means any corporation or other entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of the then outstanding securities of such
corporation or other entity entitled to vote generally in the election of
directors.
(j) "Termination Period" means the period of time beginning
with a Change in Control and ending two (2) years following such Change in
Control. Notwithstanding anything in this Agreement to the contrary, if (i)
Executive's employment is terminated prior to a Change in Control for reasons
that would have constituted a Qualifying Termination if they had occurred
following a Change in Control and (ii) Executive reasonably demonstrates that
such termination (or Good Reason event) was at the request or suggestion of a
third party who had indicated an intention or taken steps reasonably calculated
to effect a Change in Control then for purposes of this Agreement (and
notwithstanding whether a Change in Control occurs), the date immediately prior
to the date of such termination of employment or event constituting Good Reason
shall be treated as a Change in Control.
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2. Obligations of Executive. In the event of a tender or
exchange offer, proxy contest, or the execution of any agreement which, if
consummated, would constitute a Change in Control, Executive agrees not to
voluntarily leave the employ of the Company, other than as a result of
Disability, Retirement (following age sixty (60)) or an event which would
constitute Good Reason if a Change in Control had occurred, until the Change in
Control occurs or, if earlier, such tender or exchange offer, proxy contest, or
agreement is terminated or abandoned; provided, however, that such obligation
shall not extend for a period exceeding one hundred and eighty (180) days from
the initial event resulting in the obligation under this Section 2.
3. Payments Upon Termination of Employment.
(a) If during the Termination Period the employment of
Executive shall terminate, other than by reason of a Nonqualifying Termination,
then the Company shall pay to Executive (or Executive's beneficiary or estate)
within ten (10) days following the Date of Termination, as compensation for
services rendered to the Company:
(1) a lump-sum cash amount equal to the sum of (A) Executive's
unpaid base salary from the Company and its affiliated companies through the
Date of Termination (without taking into account any reduction of base salary
constituting Good Reason), (B) any bonus payments which have become payable, to
the extent not theretofore paid, and (C) any compensation previously deferred by
Executive other than pursuant to a tax-qualified plan (together with any
interest thereon) and any unpaid accrued vacation, each to the extent not
theretofore paid;
(2) to the extent not paid under the terms of such annual
incentive compensation plan, a lump-sum cash amount equal to the target award
for the Executive under the
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Company's annual incentive compensation plan for the fiscal year in which his
Date of Termination occurs, reduced pro rata for that portion of the fiscal year
not completed as of the end of the month in which such Date of Termination
occurs; and
(3) a lump-sum cash amount equal to two (2) times the sum of
(A) Executive's annual rate of base salary from the Company and its affiliated
companies in effect immediately prior to the Date of Termination (not taking
into account any reductions which would constitute Good Reason) plus (B) the
average annualized bonus earned by the Executive from the Company (or its
Subsidiaries) during the three fiscal years (or shorter annualized period if
Executive had not been employed for the full three-year period) ending
immediately prior to the year of the Change in Control.
(b) If during the Termination Period the employment of
Executive shall terminate, other than by reason of a Nonqualifying Termination,
then for a period of thirty-six (36) months following the Date of Termination,
the Company shall provide Executive (and Executive's dependents, if applicable)
with the same level of medical, dental, accident, disability, and life insurance
benefits upon substantially the same terms and conditions (including
contributions required from Executive to receive such benefits) as existed
immediately prior to Executive's Date of Termination (or, if more favorable to
Executive, as such benefits and terms and conditions existed immediately prior
to the Change in Control); provided, that, if Executive cannot continue to
participate in the Company plans providing such benefits, the Company shall
otherwise provide such benefits on the same after-tax basis as if continued
participation had been permitted. Notwithstanding the foregoing, if Executive
becomes reemployed with another
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<PAGE>
employer and is eligible to receive welfare benefits from such employer, the
welfare benefits described herein shall be secondary to such benefits during the
period of Executive's eligibility, but only to the extent that the Company
reimburses Executive for any increased cost and provides any additional benefits
necessary to give Executive the benefits promised hereunder.
(c) If during the Termination Period the employment of
Executive shall terminate, other than by reason of a Nonqualifying Termination,
and Executive has attained age fifty (50) with ten (10) years of service with
the Company (or any of its affiliates) at the time of the Date of Termination,
Executive shall be eligible to receive retiree medical benefits from the Company
at the conclusion of the thirty-six (36) months of benefit coverage set forth in
Section 3(b). The retiree medical benefits (including contributions required
from Executive to receive such benefits) to be provided to Executive (and
Executive's eligible dependents) by the Company shall be no less favorable than
the benefits (and cost to Executive) under the retiree medical program as of
immediately prior to Executive's Date of Termination (or, if more favorable to
Executive, as of immediately prior to the Change in Control), and shall be
provided to Executive (and Executive's eligible dependents) notwithstanding any
amendment to, or termination of, the Company's retiree medical program.
(d) Any amount of severance paid pursuant to this Section 3
shall offset any other amount of severance to be received by Executive upon
termination of employment of Executive under any other severance plan or policy
of the Company, including any employment agreement.
(e) If during the Termination Period the employment of
Executive shall terminate by reason of a
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<PAGE>
Nonqualifying Termination, then the Company shall pay to Executive within ten
(10) days following the Date of Termination a lump sum cash amount equal to the
sum of (i) Executive's unpaid base salary from the Company through the Date of
Termination, (ii) any bonus payments which have become payable, to the extent
not theretofore paid, and (iii) any compensation previously deferred by
Executive other than pursuant to a tax-qualified plan (together with any
interest thereon) and any unpaid accrued vacation, each to the extent not
theretofore paid.
4. Withholding Taxes. The Company may withhold from all
payments due to Executive (or his beneficiary or estate) hereunder all taxes
which, by applicable federal, state, local or other law, the Company is required
to withhold therefrom.
5. Limitations On Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment, award,
benefit or distribution (or any acceleration of any payment, award, benefit or
distribution) by the Company (or any of its affiliated entities) or any entity
which effectuates a Change in Control (or any of its affiliated entities) to or
for the benefit of Executive (whether pursuant to the terms of this Agreement or
otherwise) (the "Payments") would be subject to the excise tax (the "Excise
Tax") under Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), then the amounts payable to Executive under this Agreement shall be
reduced (reducing first the payments under Section 3(a)(ii), unless an
alternative method of reduction is elected by Executive) to the maximum amount
as will result in no portion of the Payments being subject to such excise tax
(the "Safe Harbor Cap"). For purposes of reducing the Payments to the Safe
Harbor Cap, only amounts payable under
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<PAGE>
this Agreement (and no other Payments) shall be reduced, unless consented to by
Executive.
(b) All determinations required to be made under this Section
5 shall be made by the public accounting firm that is retained by the Company as
of the date immediately prior to the Change in Control (the "Accounting Firm").
In the event that the Accounting Firm is serving as accountant or auditor for
the individual, entity or group effecting the Change in Control (or if the
Accounting Firm fails to make the Determination), Executive may appoint another
nationally recognized public accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). If payments are reduced to the Safe Harbor Cap, the Accounting
Firm shall provide a reasonable opinion to Executive that he is not required to
report any Excise Tax on his federal income tax return. All fees, costs and
expenses (including, but not limited to, the costs of retaining experts) of the
Accounting Firm shall be borne by the Company. The determination by the
Accounting Firm shall be binding upon the Company and Executive (except as
provided in Subsection (c) below).
(c) If it is established pursuant to a final determination of
a court or an Internal Revenue Service (the "IRS") proceeding which has been
finally and conclusively resolved, that Payments have been made to, or provided
for the benefit of, Executive by the Company, which are in excess of the
limitations provided in this Section 5 (hereinafter referred to as an "Excess
Payment"), such Excess Payment shall be deemed for all purposes to be a loan to
Executive made on the date Executive received the Excess Payment and Executive
shall repay the Excess Payment to the Company on demand, together with interest
on the Excess Payment at the applicable federal rate (as defined in
14
<PAGE>
Section 1274(d) of the Code) from the date of Executive's receipt of such Excess
Payment until the date of such repayment. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the determination, it is
possible that Payments which will not have been made by the Company should have
been made (an "Underpayment"), consistent with the calculations required to be
made under this Section 5. In the event that it is determined (1) by the
Accounting Firm, the Company (which shall include the position taken by the
Company, or together with its consolidated group, on its federal income tax
return) or the IRS or (2) pursuant to a determination by a court, that an
Underpayment has occurred, the Company shall pay an amount equal to such
Underpayment to Executive within ten (10) days of such determination together
with interest on such amount at the applicable federal rate from the date such
amount would have been paid to Executive until the date of payment.
6. Reimbursement of Expenses. If any contest or dispute shall
arise under this Agreement involving termination of Executive's employment with
the Company or involving the failure or refusal of the Company to perform fully
in accordance with the terms hereof, the Company shall reimburse Executive, on a
current basis, for all legal fees and expenses, if any, reasonably incurred by
Executive in connection with such contest or dispute (regardless of the result
thereof), together with interest in an amount equal to the "prime rate" as set
forth in The Wall Street Journal from time to time in effect, but in no event
higher than the maximum legal rate permissible under applicable law, such
interest to accrue from the date the Company receives Executive's statement for
such fees and expenses through the date of payment thereof.
15
<PAGE>
7. Term of Agreement. This Agreement shall continue in effect
for a term of three (3) years from the date hereof; provided, however, that
unless either party gives sixty (60) days' written notice prior to an
anniversary of the date of this Agreement, its term shall automatically be
extended by one (1) year on such anniversary date, so that, in the absence of
such notice, the term of this Agreement shall be three (3) years as of each
anniversary date. Notwithstanding the foregoing, upon a Change in Control, the
term of the Agreement shall, if less than two (2) years at such date, be
extended automatically to continue for at least two (2) years following such
Change In Control. This Agreement shall terminate in any event upon the first to
occur of (i) termination of Executive's employment with the Company prior to a
Change in Control (except as otherwise provided hereunder), (ii) a Nonqualifying
Termination or (iii) the end of the Termination Period.
8. Scope of Agreement. Nothing in this Agreement shall be
deemed to entitle Executive to continued employment with the Company or its
Subsidiaries, and if Executive's employment with the Company shall terminate
prior to a Change in Control, Executive shall have no further rights under this
Agreement (except as provided specifically hereunder); provided, however, that
any termination of Executive's employment during the Termination Period shall be
subject to all of the provisions of this Agreement including, without
limitation, payment of amounts owed hereunder.
9. Successors; Binding Agreement.
(a) This Agreement shall not be terminated by any Business
Combination. In the event of any such Business Combination, the provisions of
this Agreement shall be
16
<PAGE>
binding upon the Surviving Corporation, and such Surviving Corporation shall be
treated as the Company hereunder.
(b) The Company agrees that in connection with any Business
Combination, it will cause any successor entity to the Company unconditionally
to assume, by written instrument delivered to Executive (or his beneficiary or
estate), all of the obligations of the Company hereunder. Failure of the Company
to obtain such assumption prior to the effectiveness of any such Business
Combination that constitutes a Change in Control shall constitute Good Reason
hereunder and shall entitle Executive to compensation and other benefits from
the Company in the same amount and on the same terms as Executive would be
entitled hereunder if Executive's employment were terminated following a Change
in Control other than by reason of a Nonqualifying Termination. For purposes of
implementing the foregoing, the date on which any such Business Combination
becomes effective shall be deemed the date Good Reason occurs, and shall be the
Date of Termination if requested by Executive.
(c) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive shall die following the Date of Termination while any amounts would be
payable to Executive hereunder had Executive continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to such person or persons appointed in writing by
Executive to receive such amounts or, if no person is so appointed, to
Executive's estate.
10. Notice. (a) For purposes of this Agreement, all notices
and other communications required or permitted hereunder shall be in writing and
shall be deemed to have
17
<PAGE>
been duly given when delivered or five (5) days after deposit in the United
States mail, certified and return receipt requested, postage prepaid, addressed
as follows:
If to the Executive:
If to the Company:
One Valley Bancorp, Inc.
One Valley Square, P.O. Box 1793
Charleston, WV 25326
Att: Corporate Secretary
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice of Executive's Date of Termination by the
Company or Executive, as the case may be, to the other, shall (i) indicate the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the provision
so indicated and (iii) specify the termination date (which date shall be not
less than thirty (30) nor more than sixty (60) days after the giving of such
notice).
11. Full Settlement; Resolution of Disputes. The Company's
obligation to make any payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against Executive or others. In no event shall Executive be
obligated to seek other employment or take other action by way of mitigation of
the amounts payable to Executive under any of the
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<PAGE>
provisions of this Agreement and, except as provided in Section 3(b) hereof,
such amounts shall not be reduced whether or not Executive obtains other
employment.
12. Employment with Subsidiaries. Employment with the Company
for purposes of this Agreement shall include employment with any Subsidiary.
13. Governing Law; Validity. The interpretation, construction
and performance of this Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of West Virginia
without regard to the principle of conflicts of laws. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which other
provisions shall remain in full force and effect.
14. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
15. Miscellaneous. No provision of this Agreement may be
modified or waived unless such modification or waiver is agreed to in writing
and signed by Executive and by a duly authorized officer of the Company. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. Failure by Executive or the Company to insist upon strict compliance with
any provision of this Agreement or to assert any right Executive or the Company
may have hereunder, including without limitation, the right
19
<PAGE>
of Executive to terminate employment for Good Reason, shall not be deemed to be
a waiver of such provision or right or any other provision or right of this
Agreement. Except as provided hereunder, the rights of and benefits payable to,
Executive or Executive's estate or beneficiaries pursuant to this Agreement are
in addition to any rights of, or benefits payable to, Executive or Executive's
estate or beneficiaries under any other employee benefit plan or compensation
program of the Company. This Agreement supersedes and overrides any employment
or severance agreement previously entered into between Executive and the
Company.
20
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by a duly authorized officer of the Company and Executive has
executed this Agreement as of the day and year first above written.
ONE VALLEY BANCORP, INC.
By:__________________________
Title:_______________________
-----------------------------
[Executive]
<PAGE>
EXECUTIVE INCENTIVE COMPENSATION PLAN OF
ONE VALLEY BANCORP, INC.
JANUARY 1, 1996
<PAGE>
I. PURPOSE
The purpose of this Plan is to further the interests of One Valley Bancorp,
Inc., its participating subsidiaries and its shareholders by providing
selected members of senior management of the Corporation and its
subsidiaries who drive or otherwise participate in the decision making
process to materially alter & influence the strategic direction and
corporate results of the Company, with an opportunity to earn incentive
compensation awards. Such awards are designed to recognize and reward
outstanding performance and individual contributions and give the Plan
Participants an interest in One Valley parallel to that of the
shareholders, thus enhancing the proprietary and personal interest of the
Participants in One Valley's continued success and progress. This Plan is
also expected to enhance the likelihood of One Valley and its subsidiaries
to attract and retain key employees.
II. DEFINITIONS
a) Affiliate Bank - A banking subsidiary of One Valley Bancorp,
Inc.
b) Committee - Compensation Committee of the Board of Directors
of One Valley Bancorp.
c) Plan Earnings Per Share (EPS) - Plan Net Income divided by the
average number of shares of common stock of One Valley
outstanding during the Plan Year.
d) Effective Date - The date of inception of the Plan, January 1,
1996.
e) One Valley Bancorp, Inc.; also referred to as the Corporation,
the Company and as One Valley.
f) Participant - An employee of the Company or of a Participating
Employer who has been selected by the Committee to participate
in the Plan.
g) Participant Award Opportunity (PAO) - The percentage of Plan
Compensation that establishes each Participant's basis for
calculation of an award under the Plan.
h) Participating Employer - A participating subsidiary of the
Company.
i) Plan - The Executive Incentive Compensation Plan of One Valley
Bancorp, Inc.; also referred to as EICP.
j) Plan Compensation - The total base salary paid to a
Participant by the Company or by a Participating Employer for
a Plan Year. Compensation of a Participant who is at any time
simultaneously in the employ of more than one Participating
Employer shall be the sum of such compensation received by the
Participant from all such Participating Employers.
Compensation shall include amounts deferred pursuant to Code
Section 125.
k) Plan Year - A calendar year beginning January 1 and ending
December 31.
III. SELECTION OF PLAN PARTICIPANTS
The selection of Plan Participants will be made on an annual basis by the
Committee. One Valley executive management and senior management of all
Participating Employers of One Valley who hold positions, the impact of
which can significantly influence corporate strategy and performance of
One Valley, are eligible to be participants. The selection of the
Participants by the Committee shall be made on the recommendation of
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<PAGE>
the CEO of One Valley or on the recommendation of such other senior
officer(s) of the Corporation as the CEO may designate, but the
Committee shall have sole authority to act with respect to the
selection award opportunity and participation in the Plan.
IV. SUMMARY OF PLAN DESIGN
Specific objectives are established for a Plan Year. These objectives are
of two broad types: Corporate and Unit/Individual. Plan Participants have
a designated percentage of their award allocated to Corporate results (the
Corporate Component) and the balance (to 100%) allocated to
Unit/Individual performance (the Unit/Individual Component).
a) The Corporate Component is that portion of a participant's award
attributable to the financial performance of One Valley Bancorp
for the Plan Year as measured by EPS growth over the prior Plan
Year and One Valley's comparative performance relative to results
on selected financial measures by a peer group of comparable
banking organizations. The EPS growth goal, the peer group and
selected financial measures of the Corporate Component are
established by executive management of One Valley and approved by
the Compensation Committee.
b) The Unit/Individual Component is that portion of a Participant's
award attributable to the Participant's measured performance in
meeting Unit/Individual goals established for the Plan Year.
Unit/Individual goals are established by each Participant's
immediate supervisor and approved by One Valley senior management.
V. DETAILS OF PLAN DESIGN
A) THE CORPORATE COMPONENT
The Corporate Component incorporates two factors: 1)
One Valley's EPS growth over the prior year; and 2) relative
performance on six financial measures compared to a peer group
of comparable banking organizations.
EPS GROWTH. One Valley's long range plan establishes
a targeted EPS annual growth rate range. That range is divided
into three(3) mini-ranges to establish EPS growth achievement
levels upon which to measure this element of One Valley's
corporate performance. The Committee has the discretion to
alter the EPS growth target challenges from mirroring the long
range plan in a given year to react to significant events that
may cause the parameters of the long range plan to be
unrealistic for such year. The subdivision of the long range
plan growth target allows for several levels of achievement
and award. Earnings as reported to shareholders will be the
basis for calculating EPS. There is a minimum EPS growth
level, below which no award is paid under the Plan for the
Plan Year; except as may be permitted under Section VII., Item
G.
PEER GROUP. A peer group of banks (approximately 14 -
20) that are comparable to One Valley in asset size and lines
of business is established annually. The intent is to maintain
consistency from year to year among the identified group,
however one or more banks may fall out of the group (to be
replaced by others) at the annual review of comparable
financial information if a bank is no longer deemed to be
comparable to One Valley. The Committee approves the peer
group and the rationale for inclusion and/or exclusion of
banking organizations.
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<PAGE>
COMPARATIVE FINANCIAL MEASURES. Six financial
measures are used to benchmark One Valley's performance
against the cumulative average of the peer group for a defined
time period, which is the trailing 12 months ending September
30 of the then current Plan year. The following financial
measures are used:
- Net Operating Expenses / Average Assets
- Non Performing Assets / (Loans + OREO)
- Net Loan Chargeoffs / Average Loans
- Efficiency Ratio
- Return on Average Assets (ROA)
- Return on Average Equity (ROE)
CORPORATE PERFORMANCE AWARD GRID. At the completion
of a Plan Year, using the trailing 12 months ending September
30 data, each peer group bank is ranked on each of the six (6)
comparative financial measures. The relative rank of each bank
is then totaled to arrive at a sum of the ranks. The banks are
then ranked by their cumulative totals and divided into
quintile segments. The grid chart that follows is used to
establish the percentage payout under the Corporate Component
based on the EPS growth rate and the relative quintile
position of One Valley.
EXECUTIVE INCENTIVE COMPENSATION PLAN
CORPORATE PERFORMANCE PAYOUT GRID
One Valley Growth in EPS Over Prior Year
EPS Growth Ranges*
Performance
Quintile % Range A % Range B % Range C
5th 110% 120% 130%
One Valley Cumulative 4th 100% 110% 120%
Position Relative to Peer 3rd 50% 90% 110%
Group Based on 6 2nd ** 50% 90%
Performance Factors 1st ** ** 50%
THE PERCENTAGE INSIDE EACH GRID CELL REPRESENTS THE FACTOR
USED IN DETERMINING THE CORPORATE COMPONENT PAYOUT
* reflects One Valley long range plan except as may be revised by Compensation
Committee to adjust for a non-recurring annual situation.
** The Compensation Committee has discretion to approve a payout if there is
EPS growth for the current year over the prior year, but not at a level of
payout consistent with the grid
NO PAYOUT IF THERE IS NO INCREASE IN EPS FROM PRIOR YEAR
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<PAGE>
In no event will any award be made under this Plan if the prior year's EPS is
not achieved. The Compensation Committee has discretion to approve a payout if
there is EPS growth for the current year over the prior year, but not at a level
of payout consistent with the grid. Payout of the Corporate Component to a Plan
Participant is not an entitlement and a Participant must have an acceptable
level of overall performance for a payout to be approved. The Committee has the
final discretion, subject to executive management's recommendation, to approve
or deny payments from this Plan.
B) THE UNIT/INDIVIDUAL COMPONENT
The Unit/Individual Component incorporates goals
which reflect managements' expectation of a Participant's
performance achievement for the Plan Year. The goals are more
than a restatement of the forecast for the year and should
reflect "stretch" targets, at three levels...Good, Superior
and Outstanding. Three (3) to seven (7) such goals are the
norm, each of which will have a designated weighting within
the total Unit/Individual Component and each of which should
be as quantitative and/or objectively measurable as possible.
UNIT goals refer to the corporate operating entity in
which a Participant works. At the highest level after One
Valley Bancorp a "unit" is a company within One Valley
Bancorp, i.e. an affiliate bank or subsidiary. In a relatively
small affiliate or subsidiary, this may be the extent of the
unit goals. In a larger entity, unit goals may include goals
for divisions or departments. Goals for each affiliate entity,
the holding company unit and each non-banking subsidiary are
established annually and are incorporated into the EICP goals
of each Participant, as applicable.
It is expected that all Participants fully or principally
employed by a Participating Employer of One Valley Bancorp
will have one or more of their Unit/Individual goals pertinent
to the performance of the subject subsidiary unit. FOR
EXAMPLE, PLAN PARTICIPANTS EMPLOYED BY AN AFFILIATE BANK WILL
HAVE ONE OR MORE GOALS WHICH PERTAIN AT LEAST TO THE OVERALL
PERFORMANCE OF THE AFFILIATE BANK. PLAN PARTICIPANTS EMPLOYED
BY ONE VALLEY BANK, N.A. WILL HAVE A GOAL APPLICABLE TO THE
OVERALL PERFORMANCE OF THE BANK, AND UNIT GOALS WHICH RELATE
TO THE DEPARTMENT/DIVISION, ETC. IN WHICH THEY WORK.
INDIVIDUAL goals pertain more specifically to major targets
for individual accomplishment. All aspects of individual
performance cannot realistically be set out in the form of
goals, however the evaluation of an individual participant's
performance is to be an all inclusive evaluation considering
both specified goals and elements of performance and behavior
which may not be set out as specific goals.
Each Participant's performance on Unit/Individual goals is
evaluated on a scale of 70% to 130% achievement level (Good to
Outstanding). [Note: Certain positions deemed to have a more
intangible and less measurable impact on unit and/or corporate
results have a top end Unit/Individual payout ratio of 110%.
These positions and the applicable payout ratio are approved
by the Committee]. The ratings and score on each goal coupled
with the relative weight of each goal translates into a total
rating on Unit/Individual goals. The total is then subjected
to the influence of the less tangible, behavioral aspects of
performance for a final composite rating.
C) PARTICIPANT AWARD OPPORTUNITY
Each Participant has a Participant Award Opportunity (PAO),
which is a designated percentage of their Plan Compensation.
The PAO serves as the basis for calculation of the cash award
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<PAGE>
payout and is approved by the Compensation Committee for each
Participant. While this "percent of salary" sets up the
framework for award calculation, the ultimate award can exceed
the PAO to the extent that performance achievement levels
exceed 100%. The PAO will be the payout level if both the
Corporate and Unit/Individual payouts are at 100%, but to the
extent either one varies from 100%, over or under, the award
will vary similarly from the PAO.
D) COMPONENT OPPORTUNITY WEIGHTS
Each Participant has a percentage of his total award
opportunity allocated to Corporate results (the Corporate
Component) and the balance (to 100%) allocated to
Unit/Individual performance (the Unit/Individual Component).
The relative weights between the two Plan Components are
designed to reflect the influences and impact that each
Participant has over Corporate versus Unit/Individual results.
FOR EXAMPLE, THE CEO OF ONE VALLEY WOULD HAVE A 100% CORPORATE
COMPONENT WEIGHTING. A PARTICIPANT HEADING AN AFFILIATE BANK
MIGHT HAVE A 50% CORPORATE COMPONENT WEIGHTING AND A 50%
UNIT/INDIVIDUAL COMPONENT WEIGHTING, AND SO ON.
The Component Weights are established annually by the
Compensation Committee at the recommendation of the CEO of One
Valley. The relative weights are considered as an indication
of the desired emphasis to support the focus of the Plan
Participant on goal achievement.
E) COMPONENT PAYOUT RANGES
1) Corporate Component Payout Range
The Corporate Component Payout is based on a combination of
One Valley's growth in EPS over the 12 months ending September
30 of the current Plan year and One Valley's cumulative
position relative to the peer group bank on the six financial
measures. Based on where the combination of these two factors
positions One Valley in the EICP Corporate Performance Payout
Grid (see page 4), the award multiplier will vary from the
minimum of 50% to the maximum of 130%, assuming a payout is
made. This multiplier is applied to Corporate Component Weight
of each Participant to arrive at a payout for each.
2) Unit/Individual Component Payout Range
The Unit/Individual Component payout is subject to the refined
measure of rating performance against established goals for
each Participant, in the categories of Good, Superior, and
Outstanding.
Each Participant's performance on Unit/Individual goals is
evaluated on a scale of 70% to 130% achievement level (Range
of Awards from Good to Outstanding). [Note: Certain positions
deemed to have a more intangible and less measurable impact on
unit and/or corporate results have a top end Unit/Individual
payout ratio of 110%.] The Committee has full discretion to
approve the applied Range of Awards for any
position/Participant, however the determination is normally
consistent with the direct/indirect impact relationship of the
position on earnings and performance. Table 1 and Table 2 (on
page 7) set forth the performance levels and Range of Awards
in each instance.
6
<PAGE>
On any given Unit/Individual goal a manager performing a
Participant's evaluation may assign an achievement level of
less than 70% if the stated "Good" level of performance was
not achieved but extenuating circumstances are cause for
special consideration. While such an evaluation will factor in
to the overall award calculation providing an element of
credit for a special situation, no award will be paid to a
Participant having a consolidated Unit/Individual award
calculation of less than 70%.
<TABLE>
<CAPTION>
TABLE 1...DIRECT, TANGIBLE IMPACT:
RATING % RANGE OF AWARDS
<S> <C>
Outstanding... Performance consistently, 110% - 130%
decisively, and repeatedly
exceeds job requirements.
Superior...... Performance continually meets 90% - 110%
all job requirements and a
pattern of exceeding job
requirements exists.
Good.......... Performance reliably meets job 70% - 90%
requirements and occasionally
exceeds expected level.
Less Than Good No Payout
TABLE 2...INTANGIBLE, INDIRECT IMPACT:
RATING % RANGE OF AWARDS
Outstanding... Performance consistently, 100% - 110%
decisively, and repeatedly
exceeds job requirements.
Superior...... Performance continually meets 85% - 100%
all job requirements and a
pattern of exceeding job
requirements exists.
Good.......... Performance reliably meets job 70% - 85%
requirements and occasionally
exceeds expected level.
Less Than Good No Payout
</TABLE>
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<PAGE>
VI. CALCULATION OF AWARDS
STEPS
1. Determine the EPS growth for the Corporation for the Plan Year
and the company's performance on the six financial measures
against the peer group. Ensure that EPS meets or exceeds the
prior year's EPS. Using these two pieces of information, find
the appropriate cell on the EICP Corporate Performance Payout
Grid and determine the percentage.
2. Evaluate each Participant and determine that the Participant's
overall Unit/Individual Rating is at the Good level or better.
Establish a percentage within the applicable Range of Awards
for the Participant relative to his overall performance level.
Participant must have an acceptable level of overall
performance for a payout to be approved.
3. Ascertain each Participant's Plan Compensation, PAO, Corporate
Component weighting, and Unit/Individual weighting.
4. Determine each Participant's Corporate Component Payout:
a) Multiply each Participant's Plan Compensation by his PAO;
b) Multiply the product of Step 4a) by the Participant's
Corporate Component weighting percentage;
c) Multiply the product of Step 4b) by the percentage obtained
from the EICP Corporate Performance Payout Grid (determined in
Step 1);
d) The resultant of Steps a), b) and c) for each Participant
reflects each Participant's Corporate Component award. The sum
of this resultant for all Participants is the total Corporate
Component payout for all Participants for a Plan Year.
5. Determine each Participant's Unit/Individual Component payout:
a) Multiply each Participant's Plan Compensation by his PAO;
b) Multiply the product of Step 5a) by each Participant's
Unit/Individual Component weighting percentage;
c) Multiply the product of Step 5b) by each Participant's
overall Unit/Individual performance rating percentage
(determined in step 2);
d) The resultant of Steps a), b) and c) for each Participant
reflects each Participant's Unit/Individual award. The sum of
this resultant for all Participants is the total
Unit/Individual Component payouts for all Participants for a
Plan Year.
6. The sum of Steps 4 and 5 for each Participant reflects each
Participant's total EICP award, and as a total for all
Participants, the total EICP payouts for a Plan Year.
See example of an award calculation on page 9.
8
<PAGE>
EXAMPLE: CALCULATION OF AN EICP AWARD
Assume a participant has base pay for a calendar year of $80,000; and
has a 25% Participant Award Opportunity; a 40% Corporate Award Component; and a
60% Unit/Individual Award Component.
Assume:
- One Valley achieved a 7% growth in EPS over the prior Plan Year which
places the results in the second of the three mini-ranges. (See Performance Grid
on page 4).
- One Valley's cumulative performance on the six (6) performance
factors relative to the peer group was in the 4th quintile. (See Performance
Grid on page 4).
- Individual performance is rated at 105%.
CALCULATIONS
$80,000 Participant's Salary
x 25% Participant Award Opportunity (PAO)
$20,000 Dollar value of Participant's PAO
| |
40% 60%
| |
Corporate Award Unit/Individual Award
Component (40%): Component (60%):
$8,000 $12,000
x 110% Corporate EPS x 105% Individual Performance
-------------------- -----------
$8,800 Corporate $12,600 Unit/Individual
Component Award Component Award
TOTAL AWARD: $ 8,800
+ 12,600
$ 21,400 (which represents 26.75% of base pay)
9
<PAGE>
VII. ELIGIBILITY AND PAYOUT
A. Awards will be paid only to Participants who are actively
employed on December 31 of the Plan Year, except for those
Participants who terminate due to retirement in good standing,
death or disability, for whom an award may be made at the
discretion of the Committee.
B. All awards will generally be made within the first calendar
quarter following the completion of the Plan Year as soon as
all ratings and calculations can be made.
C. Awards are to be in cash; however, Participants may elect to
defer award compensation with the approval of the Committee.
Such deferrals shall be in accordance with the provisions of
the Deferred Compensation Plan of the Corporation.
D. A change in a Participant's position responsibilities during
the Plan Year may change his eligibility for awards subject to
a review and determination by the Committee.
E. No award is to be considered a mandatory obligation of the
Corporation or of a Participating Employer and all awards are
payable only at the full discretion of the Committee.
F. No award will be paid to any Participant whose overall
Unit/Individual performance rating is below the "Good" level.
G. In making the EPS calculations for award payout, the Committee
has the discretion to consider nonrecurring financial
transactions which might have occurred during the Plan Year.
In calculating Earnings Per Share for purposes of EICP awards
in any Plan Year, no EICP payments will be made if such
payments would reduce net income per share below the prior
years EPS level.
H. The Committee has discretion to reward outstanding performance
of a Participant even if the minimum EPS growth goal was not
achieved, however, in no event shall any award be made under
this Plan if the prior year's corporate EPS is not achieved.
VIII. CHANGES TO THE PLAN
The Board of Directors or the Compensation Committee of One Valley may at
any time alter, amend, revise, suspend or discontinue the Plan in their
absolute and sole discretion, but any changes, suspensions or terminations
shall not affect awards made prior thereto.
IX. RIGHT TO CONTINUE EMPLOYMENT AND INTEREST IN AWARDS
Neither the existence of this Plan nor any award granted pursuant to it
shall create any right to continued employment of any Participant by the
Corporation or any Participating Employer. No person, under any
circumstances, shall have any vested or contingent interest in any
particular property or asset of One Valley Bancorp or of any Participating
Employer that may be held either by One Valley Bancorp or by any
Participating Employer, by virtue of any award or any installment thereof.
10
<PAGE>
<TABLE>
Exhibit 11
Statement Re: Computation of Earnings per Share
<CAPTION>
For The Three Months For The Twelve Months
Ended December 31 Ended December 31
1996 1995 1996 1995
<S> <C> <C> <C> <C>
PRIMARY:
Average Shares Outstanding 22,238,000 21,326,000 21,896,000 21,468,000
Net effect of the assumed exercise
of stock options - based on the
treasury stock method 340,000 151,000 219,000 141,000
------------ ------------ ------------ ------------
Total 22,578,000 21,477,000 22,115,000 21,609,000
============ ============ ============ ============
Net Income $14,447,000 $13,191,000 $53,155,000 $49,106,000
Per Share Amount $0.64 $0.61 $2.40 $2.27
============ ============ ============ ============
FULLY DILUTED:
Average Shares Outstanding 22,238,000 21,326,000 21,896,000 21,468,000
Net effect of the assumed exercise
of stock options - based on the
treasury stock method 377,000 164,000 365,000 192,000
------------ ------------ ------------ ------------
Total 22,615,000 21,490,000 22,261,000 21,660,000
============ ============ ============ ============
Net Income $14,447,000 $13,191,000 $53,155,000 $49,106,000
Per Share Amount $0.64 $0.61 $2.39 $2.27
============ ============ ============ ============
</TABLE>
<PAGE>
Exhibit 12
Statement Re: Computation Ratios
ROA - Return on Average Assets: Return on Average Assets is defined as net
income divided by average total assets.
ROE - Return on Average Equity: Return on Average Equity is defined as net
income divided by average total equity.
Dividend Payout Ratio: The Dividend Payout Ratio is defined as declared annual
cash dividends per share divided by net income per share.
<PAGE>
One Valley
Bancorp
1996
ANNUAL REPORT
<PAGE>
SHAREHOLDER INFORMATION
STOCK LISTING
Current market quotations for the common stock of One Valley
Bancorp are available on the Nasdaq Stock Market electronic
quotation system under the symbol OVWV. Registered
Nasdaq market makers in One Valley stock include:
Friedman Billings Ramsey & Co.
Herzog, Heine, Geduld, Inc.
Keefe, Bruyette & Woods, Inc.
Legg, Mason, Wood, Walker, Inc.
McDonald & Company Sec., Inc.
Merrill Lynch, Pierce, Fenner & Smith, Inc.
Prudential Securities, Inc.
Robinson-Humphrey Co. Inc.
Sandler O'Neill & Partners
Wheat First Securities, Inc.
FINANCIAL STATEMENTS
During the year, One Valley distributes four interim quarterly
financial reports and an annual report. Additionally, One
Valley files an annual report with the Securities and Exchange
Commission on Form 10-K and quarterly reports on Form
10-Q. A copy of the reports may be obtained without charge
upon written request to:
Allen E. Davis, Financial Accountant
One Valley Bancorp
P.O. Box 1793
Charleston, West Virginia 25326
INDEPENDENT AUDITORS
Ernst & Young LLP
900 United Center
Charleston, West Virginia 25301
DIVIDEND REINVESTMENT PLAN
One Valley Bancorp maintains a dividend reinvestment plan.
Shareholders may increase their ownership in One Valley by
automatically reinvesting their quarterly dividends into
additional shares of common stock. There are no commission
costs or administration charges to the shareholder. Shareholders
can enroll in the Dividend Reinvestment Plan by contacting
Joan L. Schatz, Assistant Secretary, at (304) 348-7023.
STOCK TRANSFER AGENT
Harris Trust & Savings Bank
311 West Monroe Street
Chicago, Illinois 60606
CONTACTS
Analysts, portfolio managers, and others seeking financial
information about One Valley Bancorp should contact
Laurance G. Jones, Executive Vice President and Treasurer, at
(304) 348-7062.
News media representatives and others seeking general
information should contact Lloyd P. Calvert, Vice President -
Corporate Communications, at (304) 348-7207.
Shareholders seeking assistance should contact Joan Schatz,
Assistant Secretary, at (304) 348-7023.
NUMBER OF SHAREHOLDERS
At December 31, 1996, there were approximately 7,850
shareholders of record of One Valley Common Stock.
ONE VALLEY MARKETS
Affiliate banks
Affiliate branches
(A map of West Virginia and Virginia appears here depicting the locations of
One Valley Bank.)
<PAGE>
CONTENTS
Financial Highlights .............................................. 1
Report to Customers, Employees, Owners .............................2
Management's Discussion and Analysis................................5
Consolidated Financial Statements .................................24
Six-Year Financial Summaries ......................................45
One Valley Bancorp Directors.......................................48
One Valley Bancorp Senior Management ..............................48
Directors of Affiliate Banks....................... Inside Back Cover
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share data) 1996 1995 % CHANGE
<S> <C> <C> <C>
FOR THE YEAR
Net interest income....................... $ 172,868 $ 161,292 7.18%
Net income................................ 53,155 49,106 8.25
Average Balances
Total loans - net....................... 2,652,817 2,392,572 10.88
Total assets............................ 4,104,520 3,689,211 11.26
Deposits................................ 3,270,975 3,006,906 8.78
Equity.................................. 389,705 348,273 11.90
AT YEAR-END
Year-end Balances
Total loans - net....................... $ 2,768,467 $ 2,472,428 11.97%
Total assets............................ 4,267,303 3,858,296 10.60
Deposits................................ 3,406,016 3,048,336 11.73
Equity.................................. 408,577 366,302 11.54
PER SHARE
Net income................................ $ 2.43 $ 2.29 6.11%
Cash dividends............................ 0.92 0.83 10.84
Book value................................ 18.46 17.17 7.51
</TABLE>
<PAGE>
REPORT TO CUSTOMERS, EMPLOYEES, OWNERS
One Valley Bancorp continued its consistent growth in net income and
earnings per share in 1996 as reported net income increased for the fifteenth
consecutive year, and, more importantly, reported earnings per share increased
for the tenth consecutive year. As previously announced, One Valley also
reached record levels in assets, loans, deposits and shareholders' equity, while
maintaining its excellent asset quality.
Net income per share increased to $2.43 in 1996, a 6.1% increase over the
$2.29 in 1995, which reflects the September 18, 1996 five-for-four stock split
effected in the form of a 25% stock dividend. After taking into account a one-
time assessment in the third quarter of $2.3 million after tax (or $0.10 per
share) to recapitalize the Savings Association Insurance Fund (SAIF), net income
grew to $53.2 million from the $49.1 million earned in 1995. Return on average
assets amounted to 1.30% in 1996, while return on shareholders' equity was
13.64% as average shareholders' equity grew 11.9% to $389.7 million. Year-end
shareholders' equity rose to $408.6 million and the equity-to-assets ratio was
maintained at 9.5%, which was at the upper end of the long-range plan goal of
7.5% to 9.5%. One Valley's risk based capital ratio, a regulatory measure of
capitalization, was 15.8% versus the regulatory requirement of 8%. Cash
dividends per share declared in 1996 were $0.92, a 10.8% increase over the $0.83
declared in 1995, and represented the fifteenth consecutive annual increase in
cash dividends per share.
Due to an 11.7% growth in average earning assets, net interest income for
1996 rose 7.2% to $172.9 million compared to $161.3 million earned during 1995,
which was the primary contributor to the record earnings achieved by One Valley
in 1996. The increase in net interest income occurred in the face of a
declining net interest margin from 4.91% in 1995 to 4.72% in 1996 due to higher
rates paid on deposits and somewhat lower rates received on loans. Total non-
interest income for 1996 increased 8.6% over the prior year, primarily due to
increased trust revenues and real estate servicing fees. Non-interest expenses
increased by 7.4% due, in part, to the second quarter affiliation of CSB
Financial, a $336 million savings bank headquartered in Lynchburg, Virginia, and
the third quarter assessment to recapitalize the SAIF. Through focusing on the
realignment of internal processes to provide better service to customers, One
Valley continued to lower its efficiency ratio, which is a measure used to
evaluate operational efficiency, to 56.27% (excluding the SAIF charge) for the
year 1996 from 58.10% in 1995.
(Photo appears here with the following caption.)
J. HOLMES MORRISON, PRESIDENT AND CEO
One Valley's overall asset quality remained sound and among the best in the
industry in spite of some deterioration in the consumer loan portfolio. Net
charge-offs for the year increased slightly to $5.2 million, or 0.19% of average
total loans, compared to 0.16% in 1995. Non-performing assets plus loans 90
days past due at December 31, 1996 remained low and stable at $14.6 million or
0.52% of total loans compared to the 1995 ratio of 0.57%. The $14.6 million of
non-performing assets and loans past due was covered 286% by the $41.7 million
allowance for loan losses at year-end 1996, which continued to be a very strong
coverage ratio.
The "Management's Discussion and Analysis" section on pages 5 through 23
provides a thorough analysis of the financial condition and results of
operation of One Valley for 1996 and prior years, and should be read in its
entirety. Some of the highlights include:
o Net income grew at a 15.0% compound annual growth rate over the last five
years, while earnings per share grew at a 12.1% annual rate during this same
period. In addition, return on average assets averaged 1.22% over the past five
years and 1.31% over the past three years. Return on equity averaged 13.78%
during the past five years and 14.13% for the last three years.
2
<PAGE>
o Non-interest income (excluding securities transactions) had a five-year
compound annual growth rate of 10.8% while non-interest expense grew at a
compound rate of 6.9% during the same period.
o Other important components of the balance sheet also demonstrated the sound
fundamental growth of One Valley over the past five years with compound annual
growth rates as follows: average total assets 8.2%; average net loans 11.2%;
average deposits 6.9%; and average equity 12.6%.
o Over the past five years, One Valley has continued to have a strong capital
position as equity-to-average assets averaged 8.9%.
o Owners have benefited from One Valley's consistent growth as cash dividends
per share grew at a 13% compound annual rate for the five-year period ended
December 31, 1996.
Additional highlights during 1996 were as follows:
o One Valley's first interstate acquisition of the $336 million asset savings
bank, CSB Financial, in Lynchburg, Virginia.
o In April, U.S. Banker magazine ranked One Valley as the sixth best performing
bank of the 100 largest banks in the country based upon a composite quality
criteria of profitability, asset quality, operating efficiency and capital
adequacy.
o The third quarter five-for-four stock split effected in the form of a 25%
stock dividend.
o Owners realized a 53% total return on their investment in One Valley and a
22.25% compound annual rate of return over the past five years versus the S&P
500 return of 15.22%.
o One Valley's market capitalization reached $827 million during the year and
One Valley ranked as the 82nd largest bank in the country in terms of market
capitalization at year-end.
o Non-traditional investment products and trust assets, including proprietary
mutual funds, increased $255.5 million or 21% in 1996 reflecting One Valley's
strategy of selling comprehensive integrated financial products and services.
o The introduction of a One Valley VISA Check Card in September in which 59% of
the cards have been activated.
o Consistent with One Valley's goal of providing a complete range of financial
services that meet customer needs, One Valley introduced a new marketing slogan
and campaign - "Solutions You Can Trust."
o One Valley developed a three-year technology plan which identifies major
strategies and key intermediate term initiatives for telecommunications, optical
imaging for computer output, an ATM market plan, as well as initial contracts
for personal computer banking, telephone
(Bar graph appears here with the following plot points.)
NET INCOME AND DIVIDENDS PER SHARE
1991 1992 1993 1994 1995 1996
Net Income $1.37 $1.70 $1.76 $2.16 $2.29 $2.43
Dividends $0.50 $0.56 $0.67 $0.75 $0.83 $0.92
3
<PAGE>
REPORT TO CUSTOMERS, EMPLOYEES, OWNERS
banking, telephone bill payment and personal computer video conferencing to be
implemented in 1997.
As we move toward the next century, One Valley will continue to concentrate
on the basic financial fundamentals of profitability, asset quality, operational
efficiency, capital adequacy, liquidity and sound management of interest rate
risk that are intended to produce increased earnings and dividends per share for
our owners. It is a core tenet of One Valley's culture that consistently
increasing earnings per share and dividends per share will enhance long-term
shareholder value. While size is not a focus for One Valley, strategic
acquisitions that quickly become accretive to earnings will continue to be a
part of long-range planning. The continuing emphasis on sound fundamentals has
led to a number of major initiatives for 1997.
The 1997 initiatives are designed to fulfill our vision of "working
together to exceed our customers' expectations" in a network of supercommunity
banks. We will strive to provide comprehensive products and services that meet
our customers' needs while improving our operational efficiency through the
consolidation of those functions that are transparent to the customer. Based
upon an exhaustive study of our retail delivery system by an outside firm in
1996, we will begin implementation of a new retail strategy in 1997 using
technology and delivery systems tailored to each location. This branch
transformation will be supported by a more efficient operational network that
will enable transactions to flow quickly and conveniently for the customer.
In accordance with One Valley's retirement policy, John T. Chambers retired
from the Board in April 1996 at which time he was elected as an Honorary
Director for three years. Jack, who successfully has had two careers - one as a
medical doctor and one as a real estate entrepreneur - will be missed for his
keen insight and wise counsel to the Board, various Board committees and
management over the past twenty-three years.
Likewise, Cecil Highland, who is the Chairman of the Board of One Valley -
Clarksburg, will retire as a Director of One Valley in April 1997. Cecil has had
a multi-faceted career in the fields of banking, law and publishing to mention
just a few. This diversified background enabled him to bring a wealth of
experience and knowledge that clearly benefited One Valley.
In addition, David Lowe, who joined One Valley's Board when he was
President of Bell Atlantic of West Virginia, completes his term as member of the
Board. David, who brought his corporate management expertise to the Board and
its Compensation Committee, will continue as a Board Member of One Valley Bank,
N.A. in Charleston.
As in the past, One Valley will continue in 1997 to focus on serving its
three main constituencies of customers, employees and owners as well as the
communities it serves.
Respectfully yours,
J. Holmes Morrison
President and CEO
(Graph appears here with the following plot points.)
TEN-YEAR TOTAL RETURN TO SHAREHOLDERS*
December 31, 1986 $1,000
December 31, 1996 $5,032
*Assumes initial investment of $1,000 and reinvestment of all dividends.
Graph presents past performance and is not indicative of future results.
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
One Valley Bancorp, Inc. (One Valley) is a multi-bank holding company
headquartered in Charleston, West Virginia. It operates twelve bank subsidiaries
ranging in size from $63 million to $1.7 billion and includes four national
banks and two federal savings banks. Through these banks, One Valley serves 56
cities and towns with a full range of banking services in 89 locations
strategically located throughout West Virginia and central Virginia. 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 office
location of its lead bank. At December 31, 1996, One Valley had approximately
$4.3 billion in total assets, $2.8 billion in total loans, and $3.4 billion in
total deposits.
The accompanying consolidated financial statements have been prepared by
the management of One Valley in conformity with generally accepted accounting
principles. The audit committee of the Board of Directors engaged Ernst & Young
LLP, 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 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.
One Valley's Board of Directors declared a 25% stock dividend in September
1996. Since stock dividends increase the number of shares outstanding while
leaving the total dollar amount of equity invested in the company unchanged,
generally accepted accounting principles require that all previously published
per share information be restated to reflect the increase in the number of
shares of common stock outstanding. This restatement enables the reader to
compare all historical per share information with current operations and market
price quotations. Accordingly, all per share information in this discussion and
throughout this annual report reflects the increase in the number of shares
outstanding as a result of the 25% stock dividend.
(Line graph appears here with the following plot points.)
NET INCOME
Dollars in millions
Net
Year Income
1991 $26,392
1992 $36,638
1993 $37,954
1994 $46,211
1995 $49,106
1996 $53,155
<TABLE>
<CAPTION>
SUMMARY STATEMENT OF NET INCOME TABLE 1
(Dollars in thousands)
Increase (Decrease) From Prior Year
1996 1995 1994 1996 1995
AMOUNT PERCENT AMOUNT PERCENT
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income *........................ $312,153 $282,372 $251,383 $29,781 10.55 $30,989 12.33
Interest expense......................... 139,285 121,080 94,897 18,205 15.04 26,183 27.59
Net interest income...................... 172,868 161,292 156,486 11,576 7.18 4,806 3.07
Other operating income................... 41,205 37,639 37,445 3,566 9.47 194 0.52
Gross securities transactions............ (413) (65) (867) (348) 535.38 802 (92.50)
Total operating income .................. 213,660 198,866 193,064 14,794 7.44 5,802 3.00
Provision for loan losses................ 5,204 5,632 4,788 (428) (7.60) 844 17.63
Other operating expenses................. 128,415 119,591 120,156 8,824 7.38 (565) (0.47)
Income before taxes...................... 80,041 73,643 68,120 6,398 8.69 5,523 8.11
Income taxes ............................ 26,886 24,537 21,909 2,349 9.57 2,628 12.00
Net income............................... $ 53,155 $ 49,106 $ 46,211 $ 4,049 8.25 $ 2,895 6.26
* Fully tax-equivalent interest income using
the rate of 35%.......................... $319,632 $289,272 $258,073 $30,360 10.50 $31,199 12.09
</TABLE>
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
SUMMARY FINANCIAL RESULTS
One Valley earned $53.2 million in 1996, an 8.3% increase over the $49.1
million earned in 1995. The increase is primarily due to increased net interest
income which more than offset increased operating costs. This increase in
earnings follows an increase in 1995 of 6.3% over the $46.2 million earned in
1994. Earnings in 1996 were impacted by the April 1996 acquisition of CSB
Financial Corporation (CSB) discussed below. Earnings per share were $2.43 in
1996, an increase of 6.1% over the $2.29 earned in 1995, which compares to the
6.0% increase in 1995 over the $2.16 earned in 1994. As shown in Table 2, the
five-year compound growth rate in earnings per share since 1991 has been 12.1%.
Table 2, Six-Year Selected Financial Summary, presents summary financial
data for the past six years, 1991 through 1996, 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 growth rates in Equity, Assets, Net Income and Net Loans. The
management of One Valley believes balanced sustainable growth in its financial
position enhances shareholder value. A solid capital base is a key strength of
One Valley. As shown in Table 2, the average equity-to-assets ratio has
remained consistently strong over the past six years. This is a result of
record earnings performances and a judicious acquisition strategy. Table 1,
Summary Statement of Net Income, presents three years of comparative income
statement information.
Table 3 comparatively illustrates the components of ROA and ROE over the
previous five years. Return on average assets (ROA) measures how effectively
One Valley utilizes its assets to produce net income. One Valley's 1996 ROA of
1.30% was a slight decrease from the 1.33% ROA reported in 1995 and the 1.31%
ROA in 1994. As shown in Table 3, the decline in ROA is attributed primarily to
a decrease in net credit income. The decline in net credit income (net interest
income less the provision
<TABLE>
<CAPTION>
SIX-YEAR SELECTED FINANCIAL SUMMARY TABLE 2
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
5-Year
Compound
Growth
1996 1995 1994 1993 1992 1991 Rate
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income............................ $ 312,153 $ 282,372 $ 251,383 $ 247,699 $ 263,484 $ 242,792 5.15%
Interest expense .......................... 139,285 121,080 94,897 99,786 120,039 130,913 1.25
Net interest income........................ 172,868 161,292 156,486 147,913 143,445 111,879 9.09
Provision for loan losses ................. 5,204 5,632 4,788 5,788 11,389 6,671 (4.85)
Non-interest income........................ 41,205 37,639 37,445 39,192 36,801 24,703 10.77
Gross securities transactions ............. (413) (65) (867) 113 (35) (730)
Non-interest expense ...................... 128,415 119,591 120,156 125,150 115,538 92,046 6.89
Net income................................. 53,155 49,106 46,211 37,954 36,638 26,392 15.03
PER SHARE DATA
Net income.................................. $ 2.43 $ 2.29 $ 2.16 $ 1.76 $ 1.70 $ 1.37 12.14%
Cash dividends ............................. 0.92 0.83 0.75 0.67 0.56 0.50 12.97
Book value.................................. 18.46 17.17 15.14 14.16 13.03 11.86 9.25
SELECTED AVERAGE BALANCES
Net loans .................................. $2,652,817 $2,392,572 $2,199,686 $2,026,748 $1,926,773 $1,557,230 11.24%
Investment securities ...................... 1,152,981 997,269 1,050,980 1,074,467 1,049,459 834,820 6.67
Total assets ............................... 4,104,520 3,689,211 3,540,451 3,467,261 3,373,245 2,771,901 8.17
Deposits ................................... 3,270,975 3,006,906 2,930,555 2,895,131 2,829,263 2,343,404 6.90
Long-term borrowings........................ 18,602 11,416 22,931 36,088 25,703 15,653 3.51
Equity...................................... 389,705 348,273 315,724 294,733 269,007 215,273 12.60
SELECTED RATIOS
Average equity to assets.................... 9.49% 9.44% 8.92% 8.50% 7.97% 7.77%
Return on average assets ................... 1.30 1.33 1.31 1.09 1.09 0.95
Return on average equity ................... 13.64 14.10 14.64 12.88 13.62 12.26
Dividend payout ratio....................... 37.86 36.24 34.72 38.07 32.94 36.50
</TABLE>
6
<PAGE>
for loan losses) as a percent of average earning assets is due to two
factors. The current low interest rate environment tends to decrease the yield
on earning assets, while the increase in the competition for funds tends to
increase the cost of funding earning assets. The decline in the net credit
income ratio was partially offset by the consistent decline in net operating
costs. As a percent of average earning assets, both non-interest income and non-
interest expense have declined in years 1994 through 1996 from their previous
years' result. However, One Valley's net overhead ratio (non-interest expense
less non-interest income as a percent of average earning assets) has steadily
declined to 2.28% in 1996, down from 2.39% in 1995 and 2.52% in 1994.
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 1996 ROE was 13.64%, compared to the 14.10%
earned in 1995 and 14.64% reported in 1994. ROE declined in 1996, primarily due
to an 11.9% increase in average shareholders' equity resulting from One Valley's
strong earnings performance and the equity generated from the CSB acquisition.
ACQUISITION ACTIVITY
At the close of business on April 30, 1996, One Valley acquired CSB
Financial Corporation, a $336 million Federal Savings Bank holding company
headquartered in Lynchburg, Virginia. Pursuant to the merger agreement, One
Valley exchanged 0.6774 shares of One Valley common stock for each share of CSB
common stock. At the date of acquisition, CSB had total loans of $164 million,
investment securities of $136 million, and total deposits of $257 million. The
combination was accounted for under the purchase method of accounting.
Accordingly, consolidated results for 1996 include the operations of CSB only
from the date of acquisition. Comparisons of average balances and income
statement categories are all affected by the CSB acquisition.
The acquisition of CSB expands One Valley's presence into central Virginia,
a growing market for financial services which provides additional geographical
diversification for One Valley. Coinciding with the acquisition, One Valley
changed its company name from One Valley Bancorp of West Virginia, Inc. to One
Valley Bancorp, Inc., signifying its commitment to a multi-state presence.
<TABLE>
<CAPTION>
ANALYSIS OF RETURN ON ASSETS AND EQUITY TABLE 3
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
AS A PERCENT OF AVERAGE EARNING ASSETS:
Fully taxable-equivalent net
interest income *........................ 4.72% 4.91% 4.98% 4.77% 4.77%
Provision for loan losses.................. (0.14) (0.16) (0.15) (0.18) (0.37)
Net credit income........................ 4.58 4.75 4.83 4.59 4.40
Non-interest income........................ 1.07 1.10 1.12 1.22 1.19
Non-interest expense....................... (3.35) (3.49) (3.67) (3.91) (3.73)
Tax equivalent adjustment.................. (0.20) (0.20) (0.20) (0.15) (0.13)
Applicable income taxes.................... (0.71) (0.72) (0.67) (0.57) (0.54)
RETURN ON AVERAGE EARNING ASSETS .............. 1.39 1.44 1.41 1.18 1.19
Multiplied by average earning assets
to average total assets.................. 93.13 92.77 92.59 92.33 91.78
RETURN ON AVERAGE ASSETS....................... 1.30% 1.33% 1.31% 1.09% 1.09%
Multiplied by average assets
to average equity........................ 10.53X 10.59X 11.21X 11.76X 12.54X
RETURN ON AVERAGE EQUITY....................... 13.64% 14.10% 14.64% 12.88% 13.62%
*Fully tax-equivalent using the rate of 35% for 1996 through 1993 and
34% for 1992.
</TABLE>
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
BALANCE SHEET ANALYSIS
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. Effective management of these sources
and uses of funds is essential in attaining a financial institution's optimal
profitability while maintaining a minimum amount of interest rate and credit
risk. Information on rate-related sources and uses of funds for each of the
three years in the period ended December 31, 1996, is provided in Table 4,
Average Balance Sheet / Net Interest Income Analysis.
In 1996, average earning assets grew by 11.7% or $400.2 million over 1995,
following a 4.4% or $144.4 million increase in 1995 over 1994. Average interest
bearing liabilities, the primary source of funds supporting earning assets,
increased 12.3% or $361.2 million over 1995, which follows a $142.7 million or
5.1% increase in 1995 over 1994. Approximately one-half of the increases in
1996 were due to the purchase of CSB. The remaining increase in interest
bearing assets and liabilities was the result of increases in banking operations
as more fully explained below.
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEET / NET INTEREST INCOME ANALYSIS TABLE 4
(DOLLARS IN THOUSANDS)
1996 1995 1994
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.................. $2,650,425 $ 235,153 8.87% $2,397,405 $ 217,034 9.05% $2,202,716 $ 189,040 8.58%
Tax-exempt............... 43,740 4,328 9.89 33,977 3,774 11.11 34,430 3,618 10.51
Total loans............. 2,694,165 239,481 8.89 2,431,382 220,808 9.08 2,237,146 192,658 8.61
Less: Allowance for
losses................. 41,348 38,810 37,460
Total loans-net......... 2,652,817 9.03 2,392,572 9.23 2,199,686 8.76
Investment securities
Taxable.................. 948,239 62,447 6.59 810,089 50,693 6.26 874,901 48,881 5.59
Tax-exempt............... 204,742 17,040 8.32 187,180 15,941 8.52 176,079 15,497 8.80
Total securities........ 1,152,981 79,487 6.89 997,269 66,634 6.68 1,050,980 64,378 6.13
Federal funds sold &
other.................... 16,815 664 3.95 32,595 1,830 5.61 27,363 1,037 3.79
Total earning
assets................ 3,822,613 319,632 8.36 3,422,436 289,272 8.45 3,278,029 258,073 7.87
Other assets............... 281,907 266,775 262,422
Total assets............ $4,104,520 $3,689,211 $3,540,451
LIABILITIES AND EQUITY
Interest bearing
liabilities:
Interest bearing
demand
deposits................ $ 488,256 9,717 1.99 $ 480,528 11,018 2.29 $ 451,718 10,832 2.40
Savings deposits......... 668,836 18,407 2.75 695,603 19,349 2.78 816,739 22,021 2.70
Time deposits............ 1,729,066 91,741 5.31 1,449,779 76,126 5.25 1,250,082 52,368 4.19
Total interest
bearing
deposits............. 2,886,158 119,865 4.15 2,625,910 106,493 4.06 2,518,539 85,221 3.38
Short-term
borrowings............. 382,821 18,276 4.77 289,103 13,899 4.81 242,304 8,491 3.50
Long-term
borrowings............. 18,602 1,144 6.15 11,416 688 6.03 22,931 1,185 5.17
Total interest
bearing
liabilities........... 3,287,581 139,285 4.24 2,926,429 121,080 4.14 2,783,774 94,897 3.41
Demand deposits............ 384,817 380,996 412,016
Other liabilities.......... 42,417 33,513 28,937
Shareholders' equity....... 389,705 348,273 315,724
Total liabilities
and equity............ $4,104,520 $3,689,211 $3,540,451
Net interest earnings...... $ 180,347 $ 168,192 $ 163,176
Net yield on earning
assets................... 4.72% 4.91% 4.98%
(1) Fully tax-equivalent using the rate of 35%.
(2) Non-accrual loans are included in average balances.
</TABLE>
8
<PAGE>
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 69.4% of average earning assets during 1996.
One Valley continued to emphasize increasing its loan portfolio in 1996. Average
net loans increased by $260.2 million or 10.9% in 1996, following an 8.8% or
$192.9 million increase in 1995. Approximately 40% of the growth in loans
resulted from the CSB acquisition. The remaining increase in 1996 average loans
was fueled primarily by increases in residential and commercial real estate
loans. The increase in 1995 average loans was also due to increases in
residential and commercial real estate loans, as well as consumer installment
loans. As a result of these increases in loan activity, average net loans have
increased as a percentage of average earning assets, from 67.1% in 1994 to 69.4%
in 1996. Similarly, One Valley's loan-to-deposit ratio maintained its upward
trend in 1996, ending the year at 81.3%. This ratio compares to 81.1% at
December 31, 1995 and 79.8% at December 31, 1994. Internal growth, as well as
One Valley's carefully planned acquisition activity, have resulted in the
increase in the loan portfolio.
Total loans at December 31, 1996, increased by $298.3 million or 11.9% over
the total at December 31, 1995. This increase compares to a $139.0 million or
5.9% increase in 1995 over total loans at December 31, 1994. As mentioned above,
$164.4 million in loans was acquired through the CSB acquisition. The remaining
increase in lending was primarily from internal growth focused in real estate
loans. Residential real estate loans including revolving home equity loans
increased by $245.7 million or 21.4% during 1996, compared to a $95.9 million or
9.1% increase in 1995. Approximately one-half of the 1996 increase in
residential real estate loans was acquired through the CSB purchase. Commercial
real estate loans, including apartment buildings and complexes, increased by
$64.7 million or 15.8% in 1996, following a $60.6 million or 17.3% increase in
1995 from year-end 1994. Approximately 25% of the 1996 increase in that category
was acquired through the CSB acquisition. Commercial real estate loans have
historically averaged less than one-sixth of the total loan portfolio. This low
concentration of such loans has limited One Valley's exposure to swings in
commercial real estate values and the potential for related credit losses. Loans
for commercial purposes increased slightly in 1996 by $2.6 million or 0.8%. This
follows a decline during 1995 of $49.3 million or 12.4%. These fluctuations
partially reflect levels of credit line usage by large commercial customers.
Consumer installment loans decreased by $21.6 million or 3.9% in 1996 primarily
due to declines in automobile and student loans. This decrease follows a $28.5
million or 5.4% increase during 1995.
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 a
material volume of highly leveraged transaction lending. Over the past four
years, total loans have increased $812 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.
Loans secured by real estate, which in total constituted approximately 68%
of One Valley's loan portfolio at December 31, 1996, 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. One Valley also originates residential real estate
loans to be sold in the secondary market. In 1996, $62.9 million of loans were
originated to be sold in the secondary market. This compares to $52.4 million of
new loan volume originated for sale in the secondary market in 1995 and $50.8
million in 1994. This activity generates considerable processing and servicing
fee income for One Valley, as discussed further in the "Income Statement
Analysis" section of this report. Volumes of loans originated for sale fluctuate
inversely with mortgage interest rates. Due to a lower interest rate environment
in 1996, a higher volume of mortgage activity was realized when compared to 1995
and 1994.
AVERAGE EARNING ASSETS
Dollars in millions
(Bar graph appears here with the following plot points.)
1991 1992 1993 1994 1995 1996
Loans 1557 1927 2027 2200 2393 2653
Taxable Investments 888 1086 1074 902 843 965
Tax-exempt Investments 94 83 101 176 187 205
Combined 2539 3096 3201 3278 3422 3823
TOTAL LOANS
Dollars in millions
(Bar graph appears here with the following plot points.)
1991 1992 1993 1994 1995 1996
Commercial Financial & Other 339 345 370 442 396 405
Commercial Real Estate 290 329 362 349 410 474
Residential Real Estate 872 871 972 1,050 1,146 1,391
Consumer 433 454 465 532 561 539
Total 1,934 1,998 2,169 2,373 2,512 2,810
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
<TABLE>
<CAPTION>
LOAN SUMMARY TABLE 5
(DOLLARS IN THOUSANDS)
AS OF DECEMBER 31
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
SUMMARY OF LOANS BY TYPE
Commercial, financial,
agricultural, and other loans............... $ 351,409 $ 348,761 $ 398,105 $ 334,068 $ 301,155
Real estate:
Construction loans........................... 53,815 46,967 42,746 33,682 43,108
Revolving home equity........................ 152,006 128,754 113,142 102,648 93,092
Single family residentials................... 1,239,406 1,016,983 936,698 869,502 777,428
Apartment buildings and complexes............ 55,764 44,830 37,475 41,465 45,798
Commercial................................... 418,668 364,913 311,691 320,668 282,728
Bankers' acceptances.......................... 0 0 849 2,123 560
Consumer installment loans.................... 539,144 560,754 532,251 465,216 454,032
Subtotal..................................... 2,810,212 2,511,962 2,372,957 2,169,372 1,997,901
Less: Allowance for loan losses.............. 41,745 39,534 37,438 36,484 35,679
Net loans.................................... $2,768,467 $2,472,428 $2,335,519 $2,132,888 $1,962,222
PERCENT OF LOANS BY CATEGORY
Commercial, financial,
agricultural, and other...................... 12.50% 13.88% 16.78% 15.40% 15.07%
Real estate:
Construction loans........................... 1.92 1.87 1.80 1.55 2.16
Revolving home equity........................ 5.41 5.13 4.77 4.73 4.66
Single family residentials................... 44.10 40.49 39.46 40.09 38.91
Apartment buildings and complexes............ 1.98 1.78 1.58 1.91 2.29
Commercial................................... 14.90 14.53 13.14 14.78 14.15
Bankers' acceptances.......................... 0.00 0.00 0.04 0.10 0.03
Consumer installment loans.................... 19.19 22.32 22.43 21.44 22.73
Total........................................ 100.00% 100.00% 100.00% 100.00% 100.00%
NON-PERFORMING ASSETS
Non-accrual loans............................. $ 8.528 $ 7,174 $ 7,664 $ 8,819 $ 14,125
Other real estate owned....................... 1,791 1,565 1,436 3,124 8,853
Restructured loans............................ 0 0 552 597 131
Total non-performing assets.................. $ 10,319 $ 8,739 $ 9,652 $ 12,540 $ 23,109
Non-performing assets as a % of total loans... 0.37% 0.35% 0.41% 0.58% 1.16%
LOANS PAST DUE OVER 90 DAYS..................... $ 4,273 $ 5,582 $ 3,827 $ 3,180 $ 4,139
As a % of total loans......................... 0.15% 0.22% 0.16% 0.15% 0.21%
ALLOCATION OF LOAN LOSS RESERVE
BY LOAN TYPE
Commercial, financial, and
unallocated portion.......................... $ 16,939 $ 15,638 $ 14,765 $ 16,698 $ 13,899
Real estate construction loans................ 285 250 220 180 224
Real estate loans - other..................... 8,583 8,298 8,036 8,277 9,179
Consumer installment loans.................... 15,938 15,348 14,417 11,329 12,377
Total........................................ $ 41,745 $ 39,534 $ 37,438 $ 36,484 $ 35,679
</TABLE>
10
<PAGE>
In addition to the loans reported in Table 5, One Valley also offers certain
off-balance sheet products such as letters of credit, revolving credit
agreements, and other loan commitments. These products are offered under the
same credit standards as the loan portfolio and are included in the risk-based
capital ratios used by the Federal Reserve to evaluate capital adequacy.
Additional information on off-balance sheet commitments is contained in Note U
to the consolidated financial statements.
In spite of some deterioration in the consumer loan portfolio, overall asset
quality for the year was sound. Reported in Table 5 is a five-year comparison
of the level of non-performing assets and loans contractually past due over 90
days. 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 with restructured terms to enable a delinquent borrower
to repay, were $10.3 million or 0.37% of total loans at year-end 1996, a slight
increase over the percentage at December 31, 1995. While levels of non-
performing assets are susceptible to increases resulting from fluctuations in
the economy, One Valley diligently works to keep its level of non-performing
assets at a relatively low level as demonstrated in Table 5. The amount of
loans contractually past due over 90 days, but which continue to accrue
interest, declined in 1996. At year-end, these loans constituted 0.15% of total
year-end loans, a slight decrease from the 0.22% at December 31, 1995 and the
0.16% at December 31, 1994.
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
<TABLE>
<CAPTION>
COMPARATIVE LOAN LOSS INFORMATION TABLE 6
(DOLLARS IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES, BEGINNING OF PERIOD........................ $ 39,534 $ 37,438 $ 36,484 $ 35,679 $ 30,567
Charge-offs:
Commercial, financial, and agricultural loans................... 1,105 726 1,207 2,644 2,756
Real estate construction loans.................................. 0 0 0 0 0
Real estate loans - other....................................... 652 574 1,118 1,320 1,525
Consumer installment loans...................................... 5,281 4,311 3,660 3,417 4,280
Total charge-offs.............................................. 7,038 5,611 5,985 7,381 8,561
Recoveries:
Commercial, financial, and agricultural loans.................. 306 519 793 930 821
Real estate construction loans................................. 0 0 0 0 0
Real estate loans - other...................................... 315 224 274 373 394
Consumer installment loans..................................... 1,198 1,097 1,084 1,095 1,069
Total recoveries.............................................. 1,819 1,840 2,151 2,398 2,284
Net charge-offs....................................................... 5,219 3,771 3,834 4,983 6,277
Provision for loan losses............................................. 5,204 5,632 4,788 5,788 11,389
Balance of acquired subsidiaries...................................... 2,226 235 0 0 0
ALLOWANCE FOR LOAN LOSSES, END OF PERIOD.............................. $ 41,745 $ 39,534 $ 37,438 $ 36,484 $ 35,679
Average total loans................................................... $2,694,165 $2,431,382 $2,237,146 $2,063,680 $1,959,943
Total loans at year-end............................................... 2,810,212 2,511,962 2,372,957 2,169,372 1,997,901
AS A PERCENT OF AVERAGE
TOTAL LOANS:
Net charge-offs............................................... 0.19% 0.16% 0.17% 0.24% 0.32%
Provision for loan losses..................................... 0.19 0.23 0.21 0.28 0.58
Allowance for loan losses..................................... 1.55 1.63 1.67 1.77 1.82
AS A PERCENT OF TOTAL
LOANS AT YEAR-END:
Allowance for loan losses..................................... 1.49% 1.57% 1.58% 1.68% 1.79%
AS A MULTIPLE OF NET
CHARGE-OFFS:
Allowance for loan losses..................................... 8.00X 10.48X 9.76X 7.32X 5.68X
Income before tax and provision for loan losses............... 16.33 21.02 19.02 12.46 10.30
</TABLE>
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
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 $12.0
million or 7.7% in 1996 and $4.0 million or 2.6% in 1995.
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, the balance of the loan
is transferred to "Other Real Estate Owned" (OREO) and carried at the lower of
the outstanding loan balance or the fair market value of the property based on
current appraisals and other current market trends. If a writedown of the OREO
property is necessary at the time of foreclosure, the amount is charged off
against the allowance for loan losses. A quarterly review of the recorded
property value is performed in conjunction with normal loan reviews, and if
market conditions indicate that the recorded value exceeds the fair market
value, additional writedowns 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, 1996. During 1996, One Valley recognized less
than $0.1 million of interest on non-accrual loans, while approximately $0.8
million would have been recognized on these loans had they been current
throughout 1996 in accordance with their original terms. Similarly, during 1995,
less than $0.1 million was recognized on non-accrual loans, while approximately
$0.7 million would have been recognized in accordance with their original terms.
Effective January 1, 1995, One Valley adopted Financial Accounting
Standards Board (FASB) Statement No. 114, "Accounting by Creditors for
Impairment of a Loan," as amended by FASB Statement No. 118. 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. In determining whether a
loan is impaired, management considers such factors as past payment history,
recent economic events, current and projected financial condition and other
relevant information that is available. Impairment is determined on a
loan-by-loan basis and generally consists of large commercial loans. A loan is
categorized and reported as impaired when it is probable that the creditor will
be unable to pay all of the principal and interest amounts according to the
contractual terms of the loan agreement. The adoption of this standard did not
have a material effect on One Valley's financial position, results of
operations, accounting policies, or the determination of the adequacy of the
allowance for loan losses. Additional information on impaired loans is contained
in Note I to the consolidated 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 allowance include an individual assessment of risk on large
commercial credits, historical charge-off experience, levels of non-performing
and impaired loans, and an evaluation of current economic conditions. As a part
of the holding company structure, One Valley maintains a credit 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,
1996, the allowance for loan losses was $41.7 million or 1.49% of total year-end
loans. This ratio is a decrease from the prior year's 1.57% and the 1.58% at the
end of 1994. In management's opinion, the allowance for loan losses is adequate
to absorb the current estimated risk of loss in the existing loan portfolio. A
summary of the allowance for loan losses allocated by loan type is also included
in Table 5. Table 6, 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 1996 was $5.2 million, down slightly from
the $5.6 million provision in 1995 but up from the $4.8 million provision in
1994. One Valley continually evaluates the adequacy of its allowance for loan
losses and changes in the annual provision are based on the analyzed inherent
risk of the loan portfolio. While One Valley experienced considerable loan
growth during 1996, 1995 and 1994, the credit quality of the portfolio has
improved significantly
NON-PERFORMING ASSETS
AND LOANS 90 DAYS PAST DUE
Dollars in millions
(Bar graph appears here with the following plot points.)
Non-performing Assets
Loans 90 Days Past Due
Non- Loans 90
Performing Days
Assets Past Due
1991 1.59% 0.19%
1992 1.16% 0.21%
1993 0.58% 0.15%
1994 0.41% 0.16%
1995 0.35% 0.22%
1996 0.37% 0.15%
PROVISION FOR LOAN LOSSES
AND NET CHARGE-OFFS
Dollars in millions
(Bar graph appears here with the following plot points.)
Provision for Loan Losses and
Net Charge-Offs
Net
Charge
Offs Provision
1991 0.35% 0.42%
1992 0.32% 0.58%
1993 0.24% 0.28%
1994 0.17% 0.21%
1995 0.16% 0.23%
1996 0.19% 0.19%
12
<PAGE>
over years prior to 1994, as evidenced by the low level of non-performing
assets and the low level of net charge-offs during those years. Thus management
was able to lower the provision for loan losses for those years, compared to
earlier years, and still maintain a relatively high ratio of the allowance for
loan losses to non-performing assets.
Net charge-offs in 1996 increased by $1.4 million from 1995 net charge-offs,
largely due to a $1.0 million increase in consumer loan charge-offs and a $0.4
million increase in commercial charge-offs. However, net charge-offs as a
percentage of average total loans increased only slightly to 0.19%, compared to
0.16% in 1995 and 0.17% in 1994. In all three years, these ratios compare
favorably to peer group banks across the country. The increase in 1996 charge-
offs follows a slight decrease in 1995 from the level of 1994 net charge-offs.
Although the dollar amount of net charge-offs has remained historically low,
charge-offs could increase in the coming months due to the increase in the total
dollar amount of loans and adverse changes in economic conditions. These
factors are considered in determining the adequacy of the allowance for loan
losses, which at December 31, 1996, was sufficient to absorb nearly eight times
the amount of net charge-offs experienced during 1996.
INVESTMENT PORTFOLIO AND OTHER EARNING ASSETS
Investment securities averaged $1,153.0 million in 1996, a $155.7 million or
15.6% increase over the $997.3 million averaged in 1995. This increase follows
a 5.1% decrease from the $1,051.0 million averaged in 1994. Just over one-half
of the increase in 1996 was a result of the CSB purchase. The decrease in the
average balance during 1995 was primarily in response to the increased loan
demand during the year, as One Valley was able to place maturing investments
into its more profitable loan portfolio. The higher level in 1994 was due
largely to increases in sources of funds and a decline in the average balance of
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 securities will be
classified as available-for-sale or held-to-maturity. If classified as held-to-
maturity, securities are
<TABLE>
<CAPTION>
REMAINING MATURITIES OF LOANS TABLE 7
(DOLLARS IN THOUSANDS)
BALANCE PROJECTED MATURITIES*
DECEMBER 31 ONE YEAR ONE TO FIVE OVER FIVE
1996 OR LESS YEARS YEARS
<S> <C> <C> <C> <C>
Commercial, financial, and agricultural loans... $323,146 $158,510 $119,875 $ 44,761
Real estate construction loans.................. 93,815 67,639 14,816 11,360
Commercial real estate loans.................... 474,432 94,399 238,024 142,009
Loans with:
Floating rates................................. $426,082 $109,869 $226,326 $ 89,887
Predetermined rates............................ 425,311 170,679 146,389 108,243
*BASED ON SCHEDULED OR APPROXIMATE REPAYMENTS.
</TABLE>
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
recorded at historical cost and adjusted monthly over their remaining lives
for the accretion or amortization of the difference between the 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 securities with a wide variety of maturities.
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 the Statement, prior
period financial statements have not been restated to reflect the change in
accounting principle. The cumulative effect of adopting this Statement as of
January 1, 1994, was to increase the opening balance of shareholders' equity by
$4.8 million (net of $3.2 million in deferred income taxes) to reflect the net
unrealized holding gains on securities classified as available-for-sale
previously carried at amortized cost. Securities designated as available-for-
sale at January 1, 1994, approximated $630 million.
At year-end 1994, approximately 55% of the total investment portfolio was
classified as available-for-sale, while 45% was
<TABLE>
<CAPTION>
SECURITIES MATURITY AND YIELD ANALYSIS TABLE 8
(DOLLARS IN THOUSANDS)
AS OF DECEMBER 31, 1996
AVERAGE TAXABLE
AVAILABLE-FOR-SALE MARKET MATURITY EQUIVALENT
VALUE (Years/ Months) YIELD*
<S> <C> <C> <C>
U. S. TREASURY SECURITIES
Within one year........................................ $112,834 6.49%
After one but within five years........................ 132,677 6.52
After five but within ten years........................ 15,811 7.01
Over ten years......................................... 5,903 7.21
Total U.S. Treasury Securities....................... 267,225 2/0 6.55
U. S. GOVERNMENT AGENCIES SECURITIES
Within one year........................................ 45,029 6.58
After one but within five years........................ 194,942 6.17
After five but within ten years........................ 142,368 6.75
Over ten years......................................... 12,069 7.17
Total U.S. Government Agencies Securities............ 394,408 4/9 6.46
MORTGAGE-BACKED SECURITIES**
Within one year........................................ 1,659 7.85
After one but within five years........................ 12,684 7.45
After five but within ten years........................ 30,250 7.15
Over ten years......................................... 202,851 7.22
Total Mortgage-Backed Securities..................... 247,444 13/11 7.17
OTHER SECURITIES........................................ 43,831
TOTAL SECURITIES AVAILABLE-FOR-SALE..................... $952,908 6/7 6.37%
AS OF DECEMBER 31, 1996
AVERAGE TAXABLE
HELD-TO-MATURITY BOOK MATURITY EQUIVALENT
VALUE (Years/ Months) YIELD*
STATES AND POLITICAL SUBDIVISIONS SECURITIES
Within one year........................................ $ 3.073 9.54%
After one but within five years........................ 18,255 9.99
After five but within ten years........................ 71,385 7.74
Over ten years......................................... 124,161 8.06
Total States and Political Subdivisions
Securities......................................... 216,874 10/0 8.14
OTHER SECURITIES........................................ 448
TOTAL SECURITIES HELD-TO-MATURITY....................... $217,322 10/0 8.14%
*Fully tax-equivalent using the rate of 35%.
**Maturities for mortgage-backed securities are based on final maturity.
</TABLE>
14
<PAGE>
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 and 1996, approximately 81% of the total investment portfolio was
classified as available-for-sale, while 19% was classified as held-to-maturity.
As shown in Table 8, Securities Maturity and Yield Analysis, the average
maturity period of securities available-for-sale at December 31, 1996 was 6
years 7 months, lengthened primarily by the 13 year 11 month average final
maturity of the mortgage backed securities portfolio. Table 8 uses a final
maturity method to report the average maturity of mortgage-backed securities,
which excludes the effect of monthly payments and prepayments. Approximately 70%
of the securities available-for-sale are U.S. Government agency or Treasury
securities that have an average maturity of 2 years 10 months. The average
maturity period of securities held-to-maturity was 10 years 0 months at the end
of 1996. The average maturity of the investment portfolio is managed at a level
to maintain a proper matching with interest rate risk guidelines. During 1996,
One Valley sold a portion of the securities classified as available-for-sale as
part of its management of interest rate risk, as shown in the Statements of Cash
Flows. One Valley does not have any securities classified as trading and it has
no plans to establish such classification at the present time. Other information
regarding investment securities may be found in Table 8, and in Note G 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, declined in the years from
1986 to 1993. However, due to the lower interest rate environment, overall
yields on tax-exempt securities have become attractive once again. During 1996,
One Valley increased its tax-exempt securities by $12.2 million, or 6.0%, over
the level of tax-exempt securities held at December 31, 1995. This increase
followed an increase in 1995 of $25.3 million, or 14.1%, over the level held at
December 31, 1994. Future investments in tax-exempt securities will generally
depend upon comparisons to taxable yields and the liquidity needs of One Valley.
One Valley's average investment in federal funds sold and other short-term
investments decreased 48.4% in 1996. This follows a 19.1% increase in 1995.
Averaging $16.8 million in 1996, federal funds sold and other short-term
investments decreased $15.8 million from the $32.6 million averaged in 1995, and
was less than the $27.4 million averaged during 1994. 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 and in other sections of this report.
AVERAGE DEPOSITS
Dollars in millions
Demand Time Savings Savings Total
Deposits Deposits Regular Checking Deposits
1991 296 1,265 511 271 2,343
1992 373 1,401 692 363 2,829
1993 397 1,247 800 451 2,895
1994 412 1,453 614 452 2,931
1995 381 1,613 532 481 3,007
1996 385 1,729 669 488 3,271
<TABLE>
<CAPTION>
MATURITY DISTRIBUTION OF CERTIFICATES OF DEPOSIT TABLE 9
IN AMOUNTS OF $100,000 OR MORE
(DOLLARS IN THOUSANDS)
AS OF DECEMBER 31, 1996 AS OF DECEMBER 31, 1995
AMOUNT PERCENT AMOUNT PERCENT
<S> <C> <C> <C> <C>
Three months or less................................... $118,825 42.58% $ 91,277 42.71%
Three through six months............................... 45,256 16.21 29,405 13.76
Six through twelve months.............................. 48,863 17.51 45,922 21.49
Over twelve months..................................... 66,136 23.70 47,102 22.04
Total................................................ $279,080 100.00% $213,706 100.00%
</TABLE>
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
FUNDING SOURCES
In 1996, One Valley once again increased the rates paid on its interest
bearing deposits. The average rate paid on interest bearing liabilities
increased to 4.24% in 1996, up from the 4.14% average rate paid in 1995 and the
3.41% average rate paid in 1994. The increase in 1996 is largely due to a
$279.3 million or 19.3% increase in longer term but more costly time deposits
and a six basis point increase in the average rate paid on those deposits. A
little less than half of the increase in average time deposits was a result of
the CSB acquisition. 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. One Valley has
offered new core deposit products as well as periodic special rate products to
attract additional deposits. One Valley's deposits, on average, increased by
8.8% or $264.1 million in 1996. Approximately $173.4 million of this increase
was acquired through the CSB acquisition. The remaining 3.0% increase compares
to a 2.6% or $76.4 million increase in 1995 and a 1.2% or $35.4 million increase
in 1994. Excluding the CSB acquisition, during 1996, non-interest bearing
deposits remained relatively flat on average when compared to 1995, while
interest bearing deposits increased by 3.5% or $91.4 million over 1995. This
compares to a 7.5% decrease in average non-interest bearing deposits in 1995
from 1994 and a 4.3% increase in average interest bearing deposits during the
same period. These trends are reflective of customer trends to keep more funds
in interest bearing accounts, thus reducing their balances in checking and other
non-interest bearing deposit products, and the stiff competition for interest
bearing investments in a lower interest rate environment. One Valley
anticipates that similar trends will continue into the foreseeable future.
<TABLE>
<CAPTION>
COMPARATIVE RATE SENSITIVITY SUMMARY TABLE 10
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1996 0-3 MONTHS 3-6 MONTHS 6-12 MONTHS OVER 1 YEAR TOTAL
<S> <C> <C> <C> <C> <C>
Earning Assets
Loans................................. $ 967,954 $ 179,610 $ 338,070 $ 1,324,578 $2,810,212
Investments........................... 84,967 66,047 96,276 922,940 1,170,230
Other earning assets.................. 14,722 0 0 0 14,722
Total earning assets................. 1,067,643 245,657 434,346 2,247,518 3,995,164
Interest Bearing Liabilities
Interest bearing deposits............. 783,843 317,891 344,893 1,552,759 2,999,386
Short-term borrowings................. 369,360 2,675 4,848 1,190 378,073
Long-term borrowings.................. 3 3 7,006 21,880 28,892
Total interest bearing liabilities... 1,153,206 320,569 356,747 1,575,829 3,406,351
Interest sensitivity gap for period... (85,563) (74,912) 77,599 671,689 588,813
Cumulative interest sensitivity gap... (85,563) (160,475) (82,876) 588,813
Cumulative rate sensitivity ratio..... 0.93 0.89 0.95 1.17
DECEMBER 31, 1995
Earning Assets
Loans................................. $ 930,384 $ 168,482 $ 309,722 $ 1,103,374 $2,511,962
Investments........................... 62,785 25,870 153,004 835,193 1,076,852
Other earning assets.................. 25,059 0 0 0 25,059
Total earning assets................. 1,018,228 194,352 462,726 1,938,567 3,613,873
Interest Bearing Liabilities
Interest bearing deposits............. 682,321 218,587 342,733 1,415,181 2,658,822
Short-term borrowings................. 381,593 3,098 2,920 2,169 389,780
Long-term borrowings.................. 508 3,006 2,014 7,883 13,411
Total interest bearing liabilities... 1,064,422 224,691 347,667 1,425,233 3,062,013
Interest sensitivity gap for period... (46,194) (30,339) 115,059 513,334 551,860
Cumulative interest sensitivity gap... (46,194) (76,533) 38,526 551,860
Cumulative rate sensitivity ratio..... 0.96 0.94 1.02 1.18
Averages are used when period-end balances would produce distorted results.
This table includes various assumptions and estimates by management of maturity
and repayment patterns.
</TABLE>
16
<PAGE>
To supplement modest deposit growth, One Valley has increasingly turned to
short-term borrowings. Short-term borrowings increased, on average, by $93.7
million or 32.4% from 1995, following a 19.3% or $46.8 million increase in 1995
over 1994. Only $3.4 million of the increase was the result of the CSB purchase.
Repurchase agree-ments and other short-term borrowings increased, on average, by
$91.7 million or 34.6% in 1996, primarily to fund loan and investment growth.
This increase follows a $47.3 million or 21.8% increase in 1995. Increasingly,
One Valley has turned to short-term borrowings in local and national markets as
a resource to fund loan growth and investment strategies, as deposit growth has
not kept pace with the growth in loans.
Long-term borrowings, on average, increased by $7.2 million, or 62.9%, in
1996, following an $11.5 million or 50.2% decrease in 1995. The increase in 1996
was entirely the result of the CSB acquisition on April 30, 1996 and additional
borrowings at that affiliate during the year, as One Valley integrated the
acquisition into its existing asset/liability management strategy. As a result,
One Valley now has $28.9 million of long-term debt, primarily Federal Home Loan
Bank (FHLB) borrowings, with repayment schedules from one to seven years. Other
information regarding short-and long-term borrowings is contained in Note L 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. One Valley has
established an Asset/Liability Management Committee for the purpose of
monitoring and managing interest rate risk.
Interest rate risk is the earnings variation that could occur due to changes in
market interest rates.
One commonly used measure of interest rate risk is the gap report. A gap
report identifies the ratio of earning assets to interest bearing liabilities
that will mature or reprice within a given time period. A sensitivity ratio
greater than 1.00 (positive gap) indicates that more earning assets than
interest bearing liabilities will be subject to interest rate repricing during a
given 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. Table 10, Comparative Rate Sensitivity Summary, shows One
Valley's gap position as of December 31, 1996. The information presented in the
gap report represents a static view of One Valley and includes various
assumptions and estimates by management regarding maturity and repayment
patterns.
In addition to the gap report, One Valley uses computer simulations of
the next twelve months as a primary tool for analyzing interest rate risk and
modeling business strategies in a dynamic framework. The simulations begin with
the gap report information and use various assumptions, such as expected changes
in the interest rate environment; the shape of the yield curve; pricing
strategies for loans and deposits; the growth, volume and mix of interest
sensitive assets and liabilities; and potential hedging strategies. These
simulations assist management in minimizing risk and maintaining a conservative
sensitivity position. Based on current simulations, One Valley anticipates that
over the next twelve months a rising rate scenario would have a slight positive
influence on net interest income whereas decreasing rates would have a slight
negative influence on net interest income.
One Valley's investments have been limited to traditional investment
securities and it does not currently have any investments in derivative
instruments. However, One Valley continually evaluates all investment
alternatives in its management of interest rate risk and asset/liability
structure.
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.
RETURN ON AVERAGE ASSETS
(Line graph appears here with the following plot points.)
Return on
Assets
1991 0.95%
1992 1.09%
1993 1.09%
1994 1.31%
1995 1.33%
1996 1.30%
RETURN ON AVERAGE EQUITY
(Line graph appears here with the following plot points.)
Return on
Equity
1991 12.26%
1992 13.62%
1993 12.88%
1994 14.64%
1995 14.10%
1996 13.64%
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
One Valley generated $73.6 million of cash from operations in 1996, which
compares to $65.7 million in 1995 and $76.3 million in 1994. Additional cash of
$24.3 million was generated through net financing activities in 1996, which
compares to $57.9 million in 1995 and $120.3 million in 1994. These proceeds
along with proceeds from the sale and maturity of securities were used to fund
loans and purchase securities during the year. Net cash used in investing
activities totaled $102.7 million in 1996, which compares to $166.0 million in
1995 and $168.9 million in 1994. Details on the sources and uses of cash can be
found in the Consolidated Statements of Cash Flows in the consolidated financial
statements.
CAPITAL RESOURCES
One Valley's average equity-to-asset ratio increased to 9.49% during 1996,
up from 9.44% during 1995 and 8.92% in 1994. The increase in 1996 primarily
resulted from the record earnings performance of One Valley and the equity
generated through the CSB acquisition. At year-end 1996, One Valley's primary
capital ratio was 10.45% compared to 10.41% at year-end 1995. 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-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
1996, One Valley's risk adjusted capital-to-assets ratio was 15.8% compared to
16.1% at December 31, 1995. 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, 1996 was 9.1% compared to 9.1% at
December 31, 1995. 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 adverse 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 D
to the consolidated financial statements.
Simultaneous with the January 1996 announced merger agreement between One
Valley and CSB, the Board of Directors authorized management to purchase up to
2.2 million shares of One Valley Bancorp common stock in the open market.
During 1996, 1,599,610 shares (post 25% stock dividend) were repurchased under
this program. Simultaneous with the Point Bancorp purchase in March 1995, the
Board of Directors authorized management to purchase 411,600 shares of One
Valley Bancorp common stock in the open market. During 1995, 420,700 shares
were repurchased under this program and earlier authorizations. At December 31,
1996, One Valley held 2,792,360 shares in its treasury. Any additional
purchases under this or previous authorizations will depend upon future market
conditions.
18
<PAGE>
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 $180.3 million in 1996, up 7.2% over the 1995 level,
following a 3.1% increase in 1995 over 1994. 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 of 35%. The increase in net interest income in 1996 is largely due to
the increase in the volume of earning assets, primarily loans. As shown in Table
11, Rate Volume Analysis, increases in the volume of earning assets in both 1996
and 1995 have provided a significant increase in net interest income. In 1996,
the increase in the volume of earning assets increased interest income by $33.3
million. This increase was dampened somewhat by decreases in interest yields on
loans due to the lower overall interest rate environment on average for the
entire year. As a result, total interest income increased by $30.4 million in
1996 over 1995. Similarly in 1996, an increased volume of interest bearing
liabilities boosted interest expense by $15.7 million, and the higher cost of
interest bearing liabilities resulted in an overall increase in total interest
expense of $18.2 million. However, the increase in total interest income
exceeded the increase in overall interest expense by $12.2 million on a fully
tax-equivalent basis in 1996 over 1995. In 1995, increases in volumes of
interest sensitive assets and liabilities as well as higher interest rates
increased total interest income and total interest expense over the previous
year. However, as the increase in the volume of earning assets outpaced the
increase in interest bearing liabilities, net interest income increased by $5.0
million in 1995 over 1994. During both years, the increase in loan volume was
the most significant factor contributing to increased net interest income.
In 1996, even though net interest income increased due to higher volumes of
earning assets, the lower overall interest rate environment and increased
competition for deposits and other funds had a dampening effect on the net
interest margin percentage on a fully tax-equivalent basis. In 1996, a decrease
in the yield on loans was only partially offset by an increase in the yield on
the investment portfolio; thus the yield on all earning assets declined to 8.36%
in 1996, down from the 8.45% realized during 1995. At the same time, the stiff
competition for deposits and the use of short-term borrowings to fund loan and
investment growth, pushed the cost of all funds up to 4.24% in 1996, from the
4.14% average cost in 1995. As a result, the net interest margin in 1996
declined to 4.72%, down from the 4.91% earned in 1995 and the 4.98% earned in
1994. As shown in the Net Interest Margin graph, One Valley's net interest
margin has not fluctuated substantially, up or down, over the past six years.
Further discussion of net interest income is included in the section of this
report entitled "Balance Sheet Analysis."
NET INTEREST MARGIN
Percent of earning assets
Fully taxable equivalent
(Line graph appears here with the following plot points.)
Yield on Earning Assets Net Margin Cost of Funds
1991 9.76 4.60 5.16
1992 8.64 4.77 3.87
1993 7.88 4.77 3.11
1994 7.87 4.98 2.89
1995 8.45 4.91 3.54
1996 8.36 4.72 3.64
19
<PAGE>
MANAGEMENT'S DISCUSSION AND 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 increased by $3.2 million or 8.6% in 1996 compared to 1995,
which follows a 2.7% increase in 1995 over 1994. The increase is primarily due
to an increase in trust income, real estate loan servicing revenue and service
charges on deposit accounts. In 1996, trust income increased to $9.3 million, a
$1.1 million or 13.6% increase over 1995. This increase follows a 3.9% increase
in 1995 over 1994. Trust revenues are increasing primarily due to new business
over the past several years and favorable results in the bond and equity
markets. Approximately one-third of the increase in loan servicing revenue and
deposit service charges is the result of increased operations from the CSB
acquisition. Late in 1994, One Valley introduced a new fee structure for its
deposit accounts. As a result, service charges increased $0.5 million (excluding
CSB) or 3.5% in 1996, and increased $2.4 million or 21.3% in 1995 over 1994.
Also as a result, revenue from checkbook sales decreased 6.0% or $0.1 million in
1996 and by 20.4% or $0.6 million in 1995 over 1994.
Real estate servicing fees increased by $0.8 million or 16.9% in 1996, which
compares to a $0.4 million or 6.8% decrease in 1995 from the level earned in
1994. As mortgage loan activity and sales in the secondary market improved in
1996 due to lower mortgage interest rates, One Valley's processing and servicing
fees also increased. Over the previous three years, mortgage loan activity had
steadily declined, thus reducing servicing revenue. Credit/debit card fees
increased by $0.5 million or 23.3% in 1996, as One Valley introduced a new debit
card product late in the year. In 1996, One Valley realized $413,000 in losses
on securities sales. This compares to $65,000 in losses realized in 1995 and
$867,000 in losses realized in 1994. These securities were sold as part of a
plan to reinvest the proceeds in higher yielding investments. Other operating
income increased by $0.6 million or 11.4% in 1996 primarily due to increases in
ATM usage and the sale of alternative investment products. This compares to a
$1.8 million or $24.6% decrease in 1995 primarily due to a lower level of income
recognized on the disposition of other real estate owned and other loan payoffs.
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. In 1996, additional efficiencies were achieved
in the
<TABLE>
<CAPTION>
RATE VOLUME ANALYSIS OF CHANGES IN INTEREST INCOME AND EXPENSE TABLE 11
(DOLLARS IN THOUSANDS)
1996 VS 1995 1995 VS 1994
INCREASE (DECREASE) INCREASE (DECREASE)
IN NET INTEREST INCOME IN NET INTEREST INCOME
VOLUME RATE TOTAL VOLUME RATE TOTAL
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS
Loans:
Taxable................................ $ 22,521 $ (4,402) $ 18,119 $ 17,274 $ 10,720 $ 27,994
Tax-exempt............................. 999 (445) 554 (48) 204 156
Total loans.......................... 23,520 (4,847) 18,673 17,226 10,924 28,150
Investment Securities:
Taxable................................ 8,992 2,762 11,754 (3,787) 5,599 1,812
Tax-exempt............................. 1,468 (369) 1,099 956 (512) 444
Total investment securities.......... 10,460 2,393 12,853 (2,831) 5,087 2,256
Federal funds sold & other.............. (723) (443) (1,166) 225 568 793
Total earning assets................. 33,257 (2,897) 30,360 14,620 16,579 31,199
INTEREST BEARING LIABILITIES
Time and savings deposits............... 10,759 2,613 13,372 6,387 14,885 21,272
Short-term borrowings................... 4,475 (98) 4,377 1,848 3,560 5,408
Long-term borrowings.................... 442 14 456 (599) 102 (497)
Total interest bearing liabilities... 15,676 2,529 18,205 7,636 18,547 26,183
NET INTEREST EARNINGS..................... $ 17,581 $ (5,426) $ 12,155 $ 6,984 $ (1,968) $ 5,016
* Fully taxable equivalent using the rate of 35%.
Note - changes to rate/volume are allocated to both rate and volume on a
proportionate dollar basis.
</TABLE>
20
<PAGE>
operations of One Valley's affiliates by realigning processes and reallocating
resources. One Valley's 1996 net overhead ratio, or non-interest expense less
non-interest income excluding securities transactions to average earning assets,
was 2.28%, a decrease from the 2.39% realized in 1995, and down further still
from the 2.52% ratio realized in 1994. For the year 1996, net overhead was $87.2
million, an increase of $5.3 million or 6.4% above the 1995 overhead of $82.0
million. A large portion of the increase in 1996 was due to a $3.8 million
one-time assessment on certain financial institutions to recapitalize the
Savings Association Insurance Fund (SAIF). Also included in the increase in net
overhead was the cost of operations associated with the CSB purchase, which are
included in the consolidated financial statements only from the date of
acquisition. The current year increase follows a decrease in 1995 of 0.9% or
$0.8 million from the 1994 overhead of $82.7 million. A lower net overhead ratio
means more of the net interest margin flows through as net income. Over the past
five years, net overhead has grown by a compound rate of 5.3% whereas net
interest income has grown by 9.1%.
Total non-interest expense increased by $8.8 million, or 7.4% from 1995.
Approximately 70% of this increase was due to the operational costs of CSB. This
compares to a $0.6 million or 0.5% decrease in 1995 versus 1994. Total staff
costs increased by $2.5 million or 4.0% in 1996, compared to a 1.5% decrease in
1995. Staff costs increased in 1996 primarily due to the additional staff costs
from the CSB acquisition. Staff costs decreased in 1995 primarily due to fewer
employees and decreases in the cost of employee benefits due in large part to
lower pension expense. Additional information on employee benefits is discussed
in Note N to the consolidated financial statements.
Advertising expense increased by $1.2 million or 57.0% in 1996 due to the
launch of a new image campaign resulting from One Valley's expansion into
Virginia. Advertising expense decreased by 5.8% in 1995 and 15.0% in 1994
compared to prior years, primarily due to operating efficiencies after the
merger of Mountaineer Bankshares in 1994. FDIC insurance increased by $1.0
million or 25.6% in 1996 largely due to the $3.8 million one-time special
assessment on thrift based deposits to replenish the Savings Association
Insurance Fund. FDIC insurance decreased by 41.0% in 1995 as the rate assessed
on banking deposits was decreased during the middle of 1995 from 23.5 cents per
$100 of deposits to four cents. The lower rate on banking deposits continued
through 1996 but was substantially offset by the special SAIF assessment.
Net occupancy expense increased 9.2% in 1996. Approximately one-half of the
increase was the result of the CSB purchase while the other half was due to
increases in building depreciation expense resulting from improvements completed
in 1996 and 1995. This increase follows a 4.8% increase in 1995 from 1994.
Equipment expenses increased by 4.3% in 1996 primarily due to the CSB
acquisition and increased equipment depreciation due to technology improvements.
In 1995, equipment expense increased by 3.5%, primarily due to increases in
equipment rental and property taxes. Outside data processing costs increased by
7.7% in 1996 which compares to a 0.4% decrease in 1995 compared to 1994. The
increase in 1996 is largely due to the CSB acquisition and the cost associated
with the increased ATM activity mentioned above. Taxes not on income increased
by $0.5 million or 18.8% in 1996 compared to a $0.3 million or 12.6% increase in
1995, primarily due to increases in gross receipts and equity, which are taxed
at the local level. Supplies and postage expense increased by 2.1% in 1996
following an increase of 2.9% in 1995. Other expenses increased by $2.0 million
or 9.6% in 1996, primarily due to the CSB acquisition, increased collection
costs associated with the higher level of consumer charge-offs, and increased
amortization of mortgage servicing rights. This follows an increase of 11.1% in
1995, due to operating expenses associated with the new deposit products
introduced late in 1994.
An analysis of the allowance for loan losses and related provision for loan
losses is included in the Loan Portfolio section of the Balance Sheet Analysis
of this report.
APPLICABLE INCOME TAXES
Income tax expense in 1996 was $26.9 million compared to $24.5 million in
1995 and $21.9 million in 1994. The increase in 1996 was primarily due to an
increase in pretax earnings, which was compounded by an increase in
non-deductible goodwill amortization. One Valley's effective tax rate was 33.6%
in 1996, up from the 33.3% in 1995, and the 32.1% in 1994.
NET OVERHEAD RATIO
Net overhead as a % of average earning assets
(Line graph appears here with the following plot points.)
1991 1992 1993 1994 1995 1996
2.67% 2.56% 2.68% 2.52% 2.39% 2.28%
EFFICIENCY RATIO
Non-interest expense as a % of total adjusted revenues*
(Line graph appears here with the following plot points.)
1991 1992 1993 1994 1995 1996
65.03% 62.66% 65.27% 59.89% 58.10% 57.96%
*Tax-equivalent net interest income plus other income
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Additional information regarding income taxes is contained in Note M 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.
<TABLE>
<CAPTION>
NON-INTEREST INCOME AND EXPENSE TABLE 12
(DOLLARS IN THOUSANDS)
INCREASE (DECREASE) OVER PRIOR YEAR
1996 1995 1994 1996 1995
AMOUNT PERCENT AMOUNT PERCENT
<S> <C> <C> <C> <C> <C> <C> <C>
SERVICE CHARGES AND OTHER
OPERATING INCOME
Trust income.............. $ 9,322 $ 8,203 $ 7,892 $ 1,119 13.64 $ 311 3.94
Credit/debit card
income.................. 2,479 2,011 2,008 468 23.27 3 0.15
Service charges on
deposit accounts........ 14,572 13,877 11,441 695 5.01 2,436 21.29
Insurance service fees.... 975 998 840 (23) (2.30) 158 18.81
Real estate loan
processing & servicing
fees.................... 5,642 4,826 5,176 816 16.91 (350) (6.76)
Checkbook sales........... 2,095 2,228 2,798 (133) (5.97) (570) (20.37)
Securities
transactions............ (413) (65) (867) (348) (535.38) 802 92.50
Miscellaneous............. 6,120 5,496 7,290 624 11.35 (1,794) (24.61)
TOTAL NON-INTEREST
INCOME................. $ 40,792 $ 37,574 $ 36,578 $ 3,218 8.56 $ 996 2.72
STAFF AND OTHER OPERATING
EXPENSES
Salaries & wages.......... $ 49,951 $ 49,184 $ 49,149 $ 767 1.56 $ 35 0.07
Employee benefits......... 14,680 12,942 13,893 1,738 13.43 (951) (6.85)
Total staff
expenses............... 64,631 62,126 63,042 2,505 4.03 (916) (1.45)
Other Operating
Expenses
Advertising............. 3,389 2,159 2,293 1,230 56.97 (134) (5.84)
FDIC insurance......... 4,917 3,916 6,642 1,001 25.56 (2,726) (41.04)
Occupancy, net.......... 6,887 6,305 6,014 582 9.23 291 4.84
Equipment............... 9,137 8,761 8,468 376 4.29 293 3.46
Outside data
processing............ 5,692 5,285 5,304 407 7.70 (19) (0.36)
Taxes not on
income................ 3,400 2,861 2,542 539 18.84 319 12.55
Supplies and
postage............... 6,919 6,778 6,588 141 2.08 190 2.88
All other............... 23,443 21,400 19,263 2,043 9.55 2,137 11.09
Total other
operating expenses.... 63,784 57,465 57,114 6,319 11.00 351 0.61
TOTAL NON-
INTEREST EXPENSE...... $128,415 $119,591 $120,156 $ 8,824 7.38 $ (565) (0.47)
</TABLE>
<PAGE>
SUMMARY RESULTS OF OPERATIONS
FOURTH QUARTER 1996
Net income for the three months ended December 31, 1996 was $14.5 million,
an increase of 9.5% over the $13.2 million earned during the fourth quarter of
1995. On a per share basis, 1996 fourth quarter earnings were $0.65 compared to
$0.62 in 1995, an increase of 4.8%.
Net interest income increased by 8.4% when compared to the same three months
of 1995. The provision for loan losses decreased by $0.3 million when compared
to the fourth quarter of 1995. Non-interest income increased by $1.1 million or
12.0% as all categories of non-interest income increased, due to the April 1996
CSB acquisition plus growth in Trust, ATM and credit card income. Similarly,
non-interest expense increased by 10.4% when compared to the same quarter last
year. The increase was primarily due to higher overall costs due to the CSB
acquisition and higher FDIC expense because the fourth quarter of 1995 included
the reversal of a $1.4 million accrual for potential assessments on SAIF insured
deposits. The expense was accrued during the third quarter of 1995 in
anticipation of legislation requiring a one-time special assessment on SAIF
insured deposits. The actual assessment occurred in 1996 as discussed above.
Additional quarterly financial data is provided in Note V to the
consolidated financial statements.
LONG-RANGE PLAN
As part of achieving One Valley's mission "to establish mutually
beneficial relationships with its customers by offering a complete range of
services and products that meet or exceed their expectations; to share
responsibility as employees for the success of our company and ourselves by
committing to continuous improvement and self-development; and, to deliver long-
term value on the investment made by our owners," One Valley has developed a
long-range plan that outlines specific goals for the three years ending December
31, 1998. The long-range plan outlines goals for each of the constituencies
outlined in One Valley's mission statement, namely its customers, employees and
owners. Table 13 below lists the plan's owner objectives and how the 1996
financial results of One Valley compare to those objectives. The goals and
owner objectives under the plan are forward-looking statements and are strategic
goals One Valley hopes to achieve. They are not historical facts and involve
risks and uncertainties, including, but not limited to, the demand for One
Valley's products and services, the effect of economic conditions on borrowers'
ability to repay loans, changes in the general level of interest rates, and the
impact of continued competitive pressure from bank and non-bank providers of
traditional banking services.
1996 TO 1998 LONG RANGE PLAN TABLE 13
PLAN GOALS 1996
OWNER OBJECTIVES
PROFITABILITY:
Return on average assets................ 1.20% to 1.40% 1.30%
Return on average equity................ 13.00% to 15.00% 13.64%
Earnings per share growth rate.......... 6.00% to 10.00% 6.11%
ASSET QUALITY:
Loan delinquency ratio.................. 1.25% to 2.00% 1.38%
Non-performing assets to total assets... 0.50% to 0.90% 0.24%
Net charge-off to average total loans... 0.20% to 0.40% 0.19%
Allowance for loan losses as a % of
non-performing assets.................. 150% to 250% 405%
RESOURCE UTILIZATION:
Efficiency ratio........................ 55% or lower 57.96%
Net operating expenses to average assets 1.70% to 2.00% 2.12%
CAPITAL:
Average equity to total assets.......... 7.50% to 9.50% 9.49%
LIQUIDITY:
Loan to deposit ratio................... 78% to 84% 81.10%
Net loans to total assets............... 65% to 70% 64.63%
Wholesale funds to total assets......... 15% to 25% 11.71%
23
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
(Dollars in thousands)
DECEMBER 31
1996 1995
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 146,152 $ 140,617
Interest-bearing deposits in other banks.................... 9,897 8,259
Federal funds sold.......................................... 4,825 16,800
Cash and cash equivalents.................................. 160,874 165,676
Securities:
Available-for-sale, at fair value.......................... 952,908 871,699
Held-to-maturity (fair value approximated $219,841 and
$212,040 at December 31, 1996 and 1995).................. 217,322 205,153
Loans, net.................................................. 2,768,467 2,472,428
Premises and equipment...................................... 84,087 80,688
Accrued interest receivable................................. 34,129 32,307
Other assets................................................ 49,516 30,345
TOTAL ASSETS............................................ $4,267,303 $3,858,296
LIABILITIES
Deposits:
Non-interest bearing....................................... $ 406,630 $ 389,514
Interest bearing........................................... 2,999,386 2,658,822
Total deposits........................................... 3,406,016 3,048,336
Short-term borrowings:
Federal funds purchased.................................... 17,278 54,005
Securities sold under agreements to repurchase and
other.................................................... 360,796 335,775
Total short-term borrowings.............................. 378,074 389,780
Long-term borrowings........................................ 28,892 13,411
Other liabilities........................................... 45,744 40,467
TOTAL LIABILITIES....................................... 3,858,726 3,491,994
SHAREHOLDERS' EQUITY
Preferred Stock-$10 par value; authorized 1,000,000
shares; none issued
Common Stock-$10 par value; authorized 40,000,000 shares;
24,923,176 and 18,016,584 shares issued at December 31,
1996 and 1995, respectively, including 2,792,360 and
954,200 shares in treasury at December 31, 1996 and 1995.... 249,232 180,166
Capital surplus............................................. 73,834 34,603
Retained earnings........................................... 152,006 168,625
Unrealized gain on available-for-sale securities,
net of deferred income taxes.............................. 883 6,252
Treasury stock............................................. (67,378) (23,344)
TOTAL SHAREHOLDERS' EQUITY............................. 408,577 366,302
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............. $4,267,303 $3,858,296
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
(Dollars in thousands, except per share data)
YEAR ENDED DECEMBER 31
1996 1995 1994
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans:
Taxable...................................... $235,153 $217,034 $189,040
Tax-exempt................................... 2,813 2,453 2,352
Total.................................... 237,966 219,487 191,392
Interest and dividends on securities:
Taxable...................................... 62,447 50,693 48,881
Tax-exempt................................... 11,076 10,362 10,073
Total.................................... 73,523 61,055 58,954
Other.......................................... 664 1,830 1,037
Total interest income.................... 312,153 282,372 251,383
INTEREST EXPENSE
Deposits....................................... 119,865 106,493 85,221
Short-term borrowings.......................... 18,276 13,899 8,491
Long-term borrowings........................... 1,144 688 1,185
Total interest expense................... 139,285 121,080 94,897
NET INTEREST INCOME................................ 172,868 161,292 156,486
PROVISION FOR LOAN LOSSES.......................... 5,204 5,632 4,788
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES........................................... 167,664 155,660 151,698
OTHER INCOME
Trust Department............................... 9,322 8,203 7,892
Service charges on deposit accounts............ 14,572 13,877 11,441
Real estate loan processing and servicing
fees......................................... 5,642 4,826 5,176
Other service charges and fees................. 5,599 5,013 4,745
Securities losses.............................. (413) (65) (867)
Other.......................................... 6,070 5,720 8,191
Total other income....................... 40,792 37,574 36,578
OTHER EXPENSES
Salaries and employee benefits................. 64,631 62,126 63,042
Net occupancy.................................. 6,887 6,305 6,014
Equipment...................................... 9,137 8,761 8,468
Federal deposit insurance assessments.......... 4,917 3,916 6,642
Outside data processing........................ 5,692 5,285 5,304
Other.......................................... 37,151 33,198 30,686
Total other expenses..................... 128,415 119,591 120,156
INCOME BEFORE INCOME TAXES......................... 80,041 73,643 68,120
APPLICABLE INCOME TAXES............................ 26,886 24,537 21,909
NET INCOME......................................... $ 53,155 $ 49,106 $ 46,211
NET INCOME PER COMMON SHARE........................ $ 2.43 $ 2.29 $ 2.16
Average common shares outstanding
(in thousands) ................................ 21,896 21,468 21,415
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
(Dollars in thousands, except per share data)
UNREALIZED
GAIN
(LOSS) ON
AVAILABLE
COMMON CAPITAL RETAINED TREASURY FOR SALE
STOCK SURPLUS EARNINGS STOCK SECURITIES
<S> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1994.................................. $175,168 $ 25,830 $107,315 $ (3,129) $ 0
Adjustment at beginning of the year for change in accounting
method, net of deferred income taxes of $(3,177)............ 4,765
Change in unrealized gains and losses, net of
deferred income taxes of $7,533........................... (11,300)
Net income................................................... 46,211
Purchase of treasury stock (263,500 shares) ................. (7,244)
Stock options exercised (21,843 shares) and adjustment for
fractional shares......................................... 216 124
Cash dividends ($.75 per share).............................. (16,089)
Balances at December 31, 1994................................ 175,384 25,954 137,437 (10,373) (6,535)
Change in unrealized gains and losses, net of
deferred income taxes of $(8,524).......................... 12,787
Net income ............................................... 49,106
Issuance of common stock (411,602 shares).................... 4,116 8,130
Purchase of treasury stock (420,700 shares).................. (12,971)
Stock options exercised (66,614 shares) and
adjustment for fractional shares............................ 666 519
Cash dividends ($.83 per share).............................. (17,918)
Balances at December 31, 1995 ............................... 180,166 34,603 168,625 (23,344) 6,252
Change in unrealized gains and losses, net of
deferred income taxes of $3,585............................ (5,369)
Net income .............................................. 53,155
Issuance of common stock (1,789,000 shares) ................ 17,890 37,817
Purchase of treasury stock (1,318,988 shares)............... (44,034)
Five-for-four stock split in the form of a 25%
stock dividend.............................................. 49,746 (49,746)
Stock options exercised (144,958 shares) and
adjustment for fractional shares........................... 1,430 1,414
Cash dividends ($.92 per share)............................. (20,028)
BALANCES AT DECEMBER 31, 1996............................... $249,232 $ 73,834 $152,006 $ (67,378) $ 883
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
(Dollars in thousands)
YEAR ENDED DECEMBER 31
1996 1995 1994
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................................. $ 53,155 $ 49,106 $ 46,211
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses............................... 5,204 5,632 4,788
Depreciation............................................ 9,134 8,049 7,633
Amortization, net of accretion.......................... 2,368 3,544 2,776
Deferred income tax expense (benefit)................... 35 (9) (107)
Net losses (gains) from sales of assets................. 362 (270) 585
Loans originated for sale............................... (62,870) (52,440) (50,806)
Proceeds from loans sold................................ 63,932 49,523 66,067
Net change in accrued interest receivable............... 603 (3,727) (1,504)
Net change in accrued interest payable.................. (500) 4,738 1,497
Net change in other assets and other
liabilities........................................... 2,175 1,531 (852)
Net cash provided by operating activities............. 73,598 65,677 76,288
INVESTING ACTIVITIES
Proceeds from sales of available-for-sale securities....... 105,496 103,279 138,922
Proceeds from maturities of available-for-sale
securities............................................... 266,629 222,599 206,013
Purchases of available-for-sale securities................. (327,060) (338,306) (256,556)
Proceeds from maturities of held-to-maturity securities.... 8,574 30,141 61,742
Purchases of held-to-maturity securities................... (20,815) (55,796) (93,169)
Purchase of subsidiary, net of cash received............... 10,866 4,454
Net increase in loans...................................... (139,266) (127,053) (215,615)
Purchases of premises and equipment........................ (7,173) (5,301) (10,253)
Net cash used in investing activities................. (102,749) (165,983) (168,916)
FINANCING ACTIVITIES
Net change in deposits..................................... 100,548 79,712 (10,256)
Net change in federal funds purchased...................... (36,727) 860 39,133
Net change in other short-term borrowings.................. 14,265 13,581 117,786
Repayment of long-term borrowings.......................... (7,526) (11,539) (18,037)
Proceeds from long-term borrowings......................... 15,007 5,000 14,699
Proceeds from issuance of common stock..................... 2,844 1,185 340
Purchase of treasury stock................................. (44,034) (12,971) (7,244)
Cash dividends............................................. (20,028) (17,918) (16,089)
Net cash provided by financing activities............. 24,349 57,910 120,332
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS............ (4,802) (42,396) 27,704
Cash and cash equivalents at beginning of year.............. 165,676 208,072 180,368
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ 160,874 $ 165,676 $ 208,072
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES DECEMBER 31, 1996
(Dollars in thousands, except per share data)
NAME CHANGE NOTE A
Effective May 1, 1996, One Valley Bancorp of West Virginia, Inc. changed
its legal name to One Valley Bancorp, Inc.
SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES NOTE B
The accounting and reporting policies of One Valley Bancorp, Inc. and its
subsidiaries (One Valley) conform to generally accepted accounting principles
and to general practices within 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 statements and accompanying notes. Actual results
could differ from those estimates. The following is a summary of the more
significant accounting and reporting policies.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
One Valley Bancorp, 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.
SECURITIES
Management determines the appropriate classification of securities at the
time of purchase. Debt securities are classified as held-to-maturity when One
Valley has the positive intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at amortized cost.
Debt securities not classified as held-to-maturity are classified as
available-for-sale. Available-for-sale securities are stated at fair value with
the unrealized gains and losses, net of deferred income taxes, reported in a
separate component of shareholders' equity. Unrealized gains and losses
represent the difference between the estimated fair value and amortized cost of
available-for-sale securities.
The amortized cost of debt securities classified as held-to-maturity or
available-for-sale is adjusted for amortization of premiums and accretion of
discounts, which are recognized as adjustments to interest income.
The cost of securities sold is based on the specific identification method.
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 loans.
On January 1, 1995, One Valley adopted Financial Accounting Standards Board
(FASB) Statement No. 114, "Accounting by Creditors for Impairment of a Loan," as
amended by FASB Statement No. 118. Under this standard, the 1996 and 1995
allowance for loan losses related to loans that were identified for evaluation
in accordance with Statement No. 114 were based on discounted cash flows using
the loan's initial effective interest rate or the fair value of the collateral
for certain collateral dependent loans. The adoption of this standard did not
have a material effect on One Valley's financial position, results of
operations, accounting policies or the determination of the adequacy of the
allowance for loan losses.
INCOME TAXES
Income taxes have been provided using the liability method in which 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.
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.
28
<PAGE>
SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES-CONTINUED NOTE B
LOAN SERVICING
On January 1, 1996, One Valley adopted FASB Statement No. 122, "Accounting
for Mortgage Servicing Rights." This standard requires that mortgage servicing
rights be capitalized, regardless of how those rights were acquired. The
mortgage servicing rights are amortized in proportion to, and over the period
of, estimated net servicing revenues. Impairment of mortgage servicing rights
is assessed based on the fair value of those rights. The adoption of this
standard did not have a material effect on One Valley's financial statements.
FASB Statement No. 122 was superseded by FASB Statement No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities," however, the basic accounting principles of Statement No. 122
are included in Statement No. 125.
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.
RECLASSIFICATIONS
Certain amounts in the 1995 and 1994 financial statements have been
reclassified to conform to the 1996 presentation. Such reclassifications had no
impact on net income or shareholders' equity.
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 the
contractual payment of principal or interest has become 90 days past due. When
interest accruals are discontinued, unpaid interest recognized in income in the
current year is reversed, and interest accrued in prior years is charged against
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. Interest received on nonaccrual loans is either applied against
principal or reported as interest income, according to management's judgment as
to the collectibility of the remaining unpaid principal. Generally, a loan is
restored to accrual status when it is brought current, has performed in
accordance with the contractual terms for a reasonable period of time, and the
collectibility of the total contractual principal and interest is no longer in
doubt.
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 One Valley's
stock option plans are considered common stock equivalents for the purpose of
net income per common share data but are excluded from the computation because
they are immaterial.
RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS NOTE C
Bank subsidiaries are required to maintain average reserve balances with the
Federal Reserve Bank. The average amount of those reserve balances for the years
ended December 31, 1996, was approximately $25,500.
RESTRICTIONS ON SUBSIDIARY DIVIDENDS NOTE D
The primary source of funds for the dividends paid by One Valley Bancorp,
Inc. 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. At December 31, 1996, the retained net
profits available for distribution to One Valley Bancorp, Inc. as dividends
without regulatory approval approximated $14,400, plus retained net profits for
the interim periods through the date of declaration.
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
MERGERS AND ACQUISITIONS NOTE E
On April 30, 1996, One Valley acquired all of the outstanding stock of CSB
Financial Corporation, headquartered in Lynchburg, Virginia. Under terms of the
agreement, One Valley exchanged 0.6774 shares of its common stock for each share
of CSB Financial Corporation's common stock outstanding. This resulted in the
issuance of approximately 1,789,000 shares valued at approximately $55.7
million. This transaction was accounted for under the purchase method of
accounting. Accordingly, consolidated results include the operations of CSB
Financial Corporation only from the date of acquisition. CSB had $336 million of
total assets, $257 million in deposits, and $164 million in loans at April 30,
1996.
On March 15, 1995, One Valley acquired all of the outstanding stock of
Point Bancorp, Inc., the parent company of a $57 million Federal Savings Bank.
Pursuant to the merger agreement, One Valley exchanged 0.6 shares of its common
stock and $7.10 cash for each share of Point Bancorp common stock. A total of
411,602 shares were issued in this transaction. This combination was accounted
for under the purchase method of accounting. Accordingly, consolidated results
include the operations of Point Bancorp only from the date of acquisition.
Pro forma financial information is not presented because the above
transactions were immaterial to One Valley.
In years prior to 1994, One Valley acquired several financial institutions
accounted for using the purchase method of accounting. The purchase price of
these acquisitions was 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
$3,800 and $2,100 at December 31, 1996 and 1995. Deposit intangible amortization
approximated $900 in 1996, $600 in 1995, and $500 in 1994. 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 $18,000 and
$6,500 at December 31, 1996 and 1995. Goodwill amortization approximated $1,100
in 1996, $500 in 1995, and $300 in 1994.
SHAREHOLDER RIGHTS PLAN NOTE F
On October 18, 1995, the Board of Directors approved a Shareholder
Protection Rights Plan (the Plan). The Plan provides that each share of common
stock carries with it one right. The rights would be exercisable only if a
person or group, as defined, acquired 10% or more of One Valley's common stock,
or after a person commences a tender offer for such stock. If a person or group
acquires 10% or more of One Valley's common stock, holders of rights, other than
the 10% holder, could acquire shares of One Valley's common stock at half price
or the Board could exchange each such right for one share of common stock. In
addition, under certain circumstances, holders of rights could acquire shares
of common stock of the 10% holder at half price.
30
<PAGE>
SECURITIES NOTE G
The following is a summary of available-for-sale and held-to-maturity
securities:
<TABLE>
<CAPTION>
Available-for-Sale Held-to-Maturity
Estimated Estimated
Amortized Gross Unrealized Fair Amortized Gross Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1996
U.S. Treasury securities
and obligations of
U.S. government agencies
and corporations............... $662,302 $ 4,068 $ (4,738) $661,632 $ 0 $ 0 $ 0 $ 0
Obligations of states and
political subdivisions 216,874 3,596 (1,073) 219,397
Mortgage-backed securities....... 245,734 3,117 (1,407) 247,444
Other securities................. 43,400 508 (76) 43,832 448 0 (4) 444
Total securities................... $951,436 $ 7,693 $ (6,221) $952,908 $217,322 $3,596 $(1,077) $219,841
December 31, 1995
U.S. Treasury securities
and obligations of
U.S. government agencies
and corporations............. $627,471 $ 8,254 $ (570) $635,155 $ 0 $ 0 $ 0 $ 0
Obligations of states and
political subdivisions....... 204,694 7,334 (447) 211,581
Mortgage-backed securities....... 208,883 3,479 (940) 211,422
Other securities................. 24,919 203 25,122 459 1 (1) 459
Total securities............. $861,273 $11,936 $ (1,510) $871,699 $205,153 $7,335 $ (448) $212,040
December 31, 1994
U.S. Treasury securities
and obligations of
U.S. government agencies
and corporations............. $501,001 $ 409 $ (9,280) $492,130 $126,442 $ 206 $ (2,883) $123,765
Obligations of states and
political subdivisions....... 179,346 1,348 14,781) 165,913
Mortgage-backed securities....... 36,881 195 (2,234) 34,842 138,931 656 (7,315) 132,272
Other securities................. 14,210 19 14,229 439 10 (18) 431
Total securities............. $552,092 $ 623 $(11,514) $541,201 $445,158 $2,220 $ (24,997) $422,381
</TABLE>
Gross realized gains and losses on available-for-sale securities
approximated $83 and $496 in 1996, $87 and $152 in 1995, and $284 and $1,167 in
1994.
One Valley adopted the provisions of FASB No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," as of January 1, 1994. The
cumulative effect of adopting this Statement as of January 1, 1994, was 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. Securities designated as available-for-sale at January 1, 1994,
approximated $630,000.
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
SECURITIES-CONTINUED NOTE G
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 securities from held-to-maturity to available-
for-sale. At the date of transfer, the amortized cost of those securities was
$264,842 and the unrealized gain on those securities was $1,996 (net of $1,330
in deferred income taxes), which is included in shareholders' equity.
The amortized cost and estimated fair value of debt securities at December
31, 1996, by contractual maturity, are shown below. Expected maturities may
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Available-for-Sale Held-to-Maturity
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
<S> <C> <C> <C> <C>
Due in one year or less.................. $157,214 $157,863 $ 3,073 $ 3,103
Due after one year through five years.... 326,522 327,618 18,255 18,921
Due after five years through ten years... 160,632 158,179 71,385 72,359
Due after ten years...................... 17,934 17,972 124,161 125,014
662,302 661,632 216,874 219,397
Mortgage-backed securities............... 245,734 247,444 0 0
Other.................................... 43,000 43,832 448 444
Total securities....................... $951,436 $952,908 $217,322 $219,841
</TABLE>
At December 31, 1996 and 1995, securities carried at $600,400 and $450,200
were pledged to secure public deposits, repurchase agreements, and for other
purposes as required or permitted by law.
LOANS NOTE H
Loans are summarized as follows:
December 31
1996 1995
Commercial, financial
and agricultural................ $ 323,146 $ 319,432
Real estate:
Revolving home equity........... 152,006 128,754
Single family residential....... 1,239,406 1,016,983
Apartment buildings
and complexes............... 55,764 44,830
Commercial...................... 418,668 364,913
Construction.................... 53,815 46,967
Installment loans to individuals.... 539,144 560,754
Other .............................. 28,263 29,329
Total loans net of
unearned income............. 2,810,212 2,511,962
Less allowance for loan losses...... 41,745 39,534
Loans - net......................... $2,768,467 $2,472,428
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:
1996 1995
Balance, January 1..... $ 71,927 $ 73,493
Additions.............. 61,639 24,562
Amount collected....... (27,208) (26,128)
Balance, December 31... $106,358 $ 71,927
32
<PAGE>
LOANS-CONTINUED NOTE H
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, 1996, One Valley
held loans for sale of approximately $10,000 and had commitments to originate
and sell loans of approximately $10,500.
The mortgage loan portfolio serviced by One Valley for the benefit of
others approximated $902,300, $967,700, and $896,500 at December 31, 1996, 1995,
and 1994. Custodial escrow balances maintained in connection with the foregoing
loan servicing and One Valley's own mortgage loan portfolio were approximately
$8,400 and $9,600 at December 31, 1996 and 1995.
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. However, on October 30,
1996, the FASB agreed to defer the effective date for one year for the following
transactions: securities lending, repurchase agreements, dollar rolls and other
similar secured transactions. The delay in implementation was necessary to allow
companies to overcome technological problems in their systems which would create
control and accountability issues. Statement No. 125 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. Statement No. 125
also establishes standards for 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. The adoption of this standard is
not expected to have a material effect on One Valley's financial statements.
ALLOWANCE FOR LOAN LOSSES NOTE I
Changes in the allowance for loan losses for each of the three years in the
period ended December 31, 1996, were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Balance, January 1 ....................... $39,534 $37,438 $36,484
Charge-offs.................................... (7,038) (5,611) (5,985)
Recoveries ............................... 1,819 1,840 2,151
Net charge-offs................................ (5,219) (3,771) (3,834)
Provision for loan losses...................... 5,204 5,632 4,788
Balance of acquired subsidiary................. 2,226 235
Balance, December 31........................... $41,745 $39,534 $37,438
</TABLE>
At December 31, 1996 and 1995, the recorded investment in loans that are
considered to be impaired under FASB No. 114 was $8,900 and $10,100 (of which
$3,300 and $2,600 were on a nonaccrual basis). Included in these amounts are
$5,900 and $8,100 of impaired loans for which the related allowance for loan
losses is $500 and $200, and $3,000 and $2,000 of impaired loans that as a
result of writedowns or being well-secured do not have an allowance for loan
losses. The average recorded investment in impaired loans during the years ended
December 31, 1996 and 1995, was approximately $9,000 and $9,500. For the years
ended December 31, 1996 and 1995, One Valley recognized interest income on those
impaired loans of $880 and $780. The amount of interest income recognized in
1996 and 1995 included less than $100 of interest income recognized using the
cash basis method of income recognition.
DEPOSITS NOTE J
Included in interest-bearing deposits are various time deposit products.
Time deposits outstanding at December 31, 1996, have scheduled maturities of
$978,000 in 1997, $393,000 in 1998, $71,000 in 1999, $42,000 in 2000, $18,000
in 2001, and $2,000 thereafter.
As of December 31, 1996 and 1995, One Valley had deposits from related
parties of $72,600 and $53,300. Interest paid on deposits, short-term
borrowings, and long-term borrowings approximated $139,000 in 1996, $116,000 in
1995, and $93,000 in 1994.
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
PREMISES AND EQUIPMENT NOTE K
The major categories of premises and equipment and accumulated depreciation
are summarized as follows:
December 31
1996 1995
Land.............................. $ 18,245 $ 15,655
Buildings and improvements........ 83,686 76,993
Equipment......................... 58,971 56,193
Total............................. 160,902 148,841
Less accumulated depreciation... (76,815) (68,153)
Premises and equipment-net........ $ 84,087 $ 80,688
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 1997-$4,700;
1998-$3,800; 1999-$3,100; 2000-$3,000; and 2001-$2,900, with $2,400 of
commitments extending beyond 2001.
Total expense under these lease agreements, including cancelable and
noncancelable leases, was $3,500 in 1996, 1995, and 1994.
SHORT-TERM AND LONG-TERM BORROWINGS NOTE L
Federal funds purchased and securities sold under agreements to repurchase
represent borrowings with maturities primarily from overnight to 90 days. The
securities underlying the repurchase agreements are under the control of One
Valley. Additional details regarding short-term borrowings are set forth below:
Federal Repurchase
Funds Agreements
Purchased and Other
1996
Average amount outstanding during year.... $ 26,612 $ 359,667
Maximum amount outstanding at any month-end 71,563 468,966
Weighted average interest rate:
During year........................... 5.38% 4.74%
End of year........................... 5.40 4.67
1995
Average amount outstanding during year.... $ 24,642 $ 264,461
Maximum amount outstanding at any month-end 54,005 357,501
Weighted average interest rate:
During year........................... 5.89% 4.71%
End of year........................... 5.76 4.71
1994
Average amount outstanding during year.... $ 25,114 $ 217,190
Maximum amount outstanding at any month-end 84,638 322,193
Weighted average interest rate:
During year........................... 4.26% 3.34%
End of year........................... 5.02 3.97
Several of One Valley's banking subsidiaries are members of the Federal Home
Loan Bank (FHLB). A benefit of membership in the FHLB is the availability of
short-term and long-term borrowings, in the form of collateralized advances. The
advances are collateralized by U.S. Treasury and agency securities, residential
mortgage loans, and multi-family mortgage loans with an aggregate book value
approximating $57,000 at December 31, 1996. The available lines of credit for
short-term and long-term borrowings, at prevailing market interest rates, as of
December 31, 1996, approximate $895 million.
Long-term borrowings of $28,892 and $13,411 at December 31, 1996 and 1995,
primarily consist of FHLB advances. The advances mature as follows: 1997 -
$7,000; 1998 - $12,000; 1999 - $2,000; 2001 - $5,000; and $2,900 thereafter. The
weighted average interest rate of these advances at December 31, 1996, was
6.19%.
34
<PAGE>
INCOME TAXES NOTE M
The income tax provisions (benefits) included in the consolidated statements
of income are summarized as follows:
1996 1995 1994
Current:
Federal............................. $23,095 $20,822 $18,772
State............................... 3,756 3,724 3,244
Deferred Federal and State................ 35 (9) (107)
Total........................... $26,886 $24,537 $21,909
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>
1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Computed tax at statutory federal rate ........... $28,014 35.0% $25,775 35.0% $23,842 35.0%
Plus: State income taxes,
net of federal tax benefits................... 2,465 3.1 2,450 3.3 1,986 2.9
30,479 38.1 28,225 38.3 25,828 37.9
Increase (decrease) in taxes resulting from:
Tax-exempt interest... ....................... (4,861) (6.1) (4,484) (6.1) (4,348) (6.4)
Other-net..................................... 1,268 1.6 796 1.1 429 .6
Actual tax expense........................ $26,886 33.6% $24,537 33.3% $21,909 32.1%
</TABLE>
Significant components of One Valley's deferred tax assets and liabilities
are as follows:
December 31
1996 1995
Deferred tax assets:
Allowance for loan losses........... $15,484 $15,559
Accrued employee benefits........... 3,840 3,355
Other............................... 1,680 1,541
Total deferred tax assets....... 21,004 20,455
Deferred tax liabilities:
Loans............................... 6,026 5,909
Available-for-sale securities....... 583 4,168
Premises and equipment.............. 3,032 3,239
Other............................... 0 87
Total deferred tax liabilities.. 9,641 13,403
Net deferred tax assets....... $11,363 $ 7,052
Income taxes (benefit) related to securities losses approximated $(165),
$(26), and $(347) in 1996, 1995, and 1994. One Valley made tax payments of
approximately $25,000 in 1996, $26,000 in 1995, and $21,000 in 1994.
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
EMPLOYEE BENEFIT PLANS NOTE N
One Valley has a defined benefit pension plan covering substantially all of
its employees. The benefits are based on years of service and the employee's
compensation during the last five years of employment. The funding policy of One
Valley is to contribute annually the maximum amount that can be deducted for
income tax purposes. During 1996, the CSB Financial Corporation's defined
benefit plan was merged into One Valley's defined benefit pension plan.
The following table presents the funded status of the combined plans and
amounts recognized in the consolidated balance sheets at December 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Actuarial present value of accumulated benefit obligation,
including vested benefits of
$24,454 in 1996 and $23,921 in 1995....................... $ 26,951 $ 25,632
Actuarial present value of projected benefit obligation
for services rendered to date............................. $ (36,573) $ (34,944)
Plan assets at fair value, consisting primarily of cash,
listed stocks, and U.S. bonds............................. 33,080 27,851
Projected benefit obligation in excess of plan assets....... (3,493) (7,093)
Unrecognized net asset at November 1, 1987, net of
amortization.............................................. (1,873) (2,117)
Unrecognized net loss from past experience different from
that assumed and effects of changes in assumptions........ 2,843 6,662
Unrecognized prior service cost............................. 624 694
Accrued pension cost included in other liabilities.......... $ (1,899) $ (1,854)
</TABLE>
Following is a summary of the components of net periodic pension cost:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Service cost-benefits earned during the period... $ 2,133 $ 1,529 $ 1,883
Interest cost on projected benefit obligation.... 2,461 2,088 1,991
Actual (return) loss on plan assets.............. (2,674) (4,332) 1,524
Net amortization and deferral.................... 385 2,209 (3,249)
Net periodic pension cost...................... $ 2,305 $ 1,494 $ 2,149
</TABLE>
The weighted-average discount rate used in determining the actuarial present
value of projected benefit obligations was 7.5% and 7% at December 31, 1996 and
1995. The rate of increase in future compensation levels used in determining the
actuarial present value of projected benefit obligations was 5.5% in 1996 and
1995. The expected long-term rate of return on plan assets was 8.5% in 1996,
1995, and 1994. The unrecognized net loss decreased in 1996 due to the change in
the weighted-average discount rate.
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.
36
<PAGE>
EMPLOYEE BENEFIT PLANS-CONTINUED NOTE N
The following table presents the plan's funded status and amounts recognized
in the consolidated balance sheets at December 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Accumulated postretirement benefit obligation:
Active plan participants fully eligible for benefits...... $ 0 $ 0
Other active participants................................. (3,147) (3,064)
Current retirees.......................................... (2,598) (2,889)
(5,745) (5,953)
Plan assets................................................. 0 0
Accumulated postretirement benefit obligation in excess of
plan assets............................................... (5,745) (5,953)
Unrecognized transition obligation.......................... 3,496 3,714
Unrecognized prior service cost............................. 208 221
Unrecognized net loss from past experience different from
that assumed and effects of changes in assumptions........ (239) 401
Accrued postretirement benefit cost included in other
liabilities............................................. $ (2,280) $ (1,617)
</TABLE>
Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Service cost.......................................... $ 230 $ 188 $ 260
Interest cost......................................... 421 403 377
Amortization of transition obligation over 20 years... 231 230 230
Net periodic postretirement benefit cost............ $ 882 $ 821 $ 867
</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 9% for 1997 and is
assumed to decrease gradually to 5.5% 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, 1996 by $351
and the aggregate of the service and interest cost components of net periodic
postretirement benefit cost for 1996 by $58.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% and 7% at December 31, 1996 and 1995.
OTHER EXPENSES NOTE O
Included in other expenses are supplies expense which approximated $3,459 in
1996, $3,619 in 1995, and $3,447 in 1994 and postage expense which approximated
$3,460 in 1996, $3,162 in 1995, and $3,141 in 1994.
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
STOCK OPTION PLANS NOTE P
One Valley has nonqualified and incentive stock option plans for certain key
employees and directors. One Valley has elected to follow Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees," (APB 25) and
related Interpretations in accounting for its employee stock options instead of
applying FASB Statement No. 123, "Accounting for Stock-Based Compensation."
Under APB 25, because the exercise price of One Valley's employee stock
options equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
Pursuant to these plans, an aggregate maximum of 1,200,000 shares of common
stock were reserved for issuance, although no more than 120,000 shares, plus any
shares carried over from the prior year, may be issued in any calendar year. All
options granted have 10 year terms and vest immediately.
Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if One Valley had
accounted for its employee stock options under the fair value method of that
Statement. However, pro forma information has not been presented herein because
the effect of applying Statement 123's fair value method to One Valley's stock-
based awards in 1996 and 1995 results in net income and earnings per share that
are not materially different from amounts reported.
A summary of One Valley's stock option activity and related information for
the years ended December 31 follows:
<TABLE>
<CAPTION>
1996 1995
Weighted- Weighted-
Average Average
Exercise Exercise
Options Price Options Price
<S> <C> <C> <C> <C>
Outstanding at beginning of year...... 526,000 $18.86 489,000 $16.76
Balance of acquired subsidiary........ 206,000 12.98 0 0.00
Granted............................... 122,000 24.82 124,000 24.24
Exercised............................. (168,000) 16.04 (83,000) 14.23
Forfeited............................. 0 0.00 (4,000) 24.20
Outstanding at end of year.......... 686,000 18.57 526,000 18.86
Exerciseable at end of year......... 686,000 18.57 526,000 18.86
Weighted-average fair value of options
granted during the year............. $ 4.20 $ 3.75
</TABLE>
Exercise prices for options outstanding at December 31, 1996, ranged from
$8.22 to $28.00. The weighted-average remaining contractual life of those
options at December 31, 1996 was 7.5 years.
STOCK SPLITS AND STOCK DIVIDENDS NOTE Q
On September 18, 1996, One Valley's Board of Directors authorized a five-
for-four stock split of common shares effected in the form of a 25% stock
dividend to shareholders of record on September 30, 1996. Average shares
outstanding and per share amounts included in the consolidated financial
statements have been adjusted for the stock split.
38
<PAGE>
REGULATORY MATTERS NOTE R
One Valley and its banking subsidiaries are subject to various regulatory
capital requirements administered by the banking regulatory agencies. Failure to
meet minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could have
a direct material effect on One Valley's consolidated financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, One Valley and each of its banking subsidiaries must meet
specific capital guidelines that involve quantitative measures of One Valley and
each of its banking subsidiaries' assets, liabilities, and certain off-balance
sheet items as calculated under regulatory accounting practices. One Valley and
each of its banking subsidiaries' capital amounts and classifications are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require One Valley and each of its banking subsidiaries to maintain minimum
amounts and ratios of total and Tier I capital (as defined in the regulations)
to risk-weighted assets (as defined), and of Tier I capital (as defined) to
average assets (as defined). One Valley and each of its banking subsidiaries met
all capital adequacy requirements to which they were subject at December 31,
1996.
As of December 31, 1996, the most recent notifications from the banking
regulatory agencies categorized One Valley and each of its banking subsidiaries
as well-capitalized under the regulatory framework for prompt corrective action.
To be categorized as well-capitalized, One Valley and each of its banking
subsidiaries must maintain minimum total risk-based, Tier I risk-based, Tier I
leverage ratios as set forth in the table below. There are no conditions or
events since these notifications that management believes have changed the
institutions' category.
One Valley's and its significant banking subsidiaries', One Valley Bank,
National Association and One Valley Bank, Inc., actual capital amounts and
ratios are also presented in the following table.
<TABLE>
<CAPTION>
To Be Well
Minimum Capitalized Under
Required Prompt Corrective
Actual Regulatory Capital Action Provisions
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total Capital (to Risk Weighted Assets)
One Valley........................... $419,400 16% $212,500 8% $265,600 10%
One Valley Bank, National Association 150,100 14 84,200 8 105,300 10
One Valley Bank, Inc................. 47,100 14 27,300 8 34,100 10
Tier I Capital (to Risk Weighted Assets)
One Valley........................... 486,100 15% 106,200 4% 159,300 6%
One Valley Bank, National Association 136,900 13 42,100 4 63,200 6
One Valley Bank, Inc................. 42,800 13 13,700 4 20,500 6
Tier I Capital (to Average Assets)
One Valley........................... 386,100 9% 169,000 4% 211,200 5%
One Valley Bank, National Association 136,900 8 65,600 4 81,900 5
One Valley Bank, Inc................. 42,800 8 22,300 4 27,900 5
As of December 31, 1995
Total Capital (to Risk Weighted Assets)
One Valley........................... $380,100 16% $189,000 8% $236,200 10%
One Valley Bank, National Association 145,000 14 81,400 8 101,800 10
One Valley Bank, Inc................. 46,300 14 26,600 8 33,300 10
Tier I Capital (to Risk Weighted Assets)
One Valley........................... 350,600 15% 94,500 4% 141,700 6%
One Valley Bank, National Association 132,300 13 40,700 4 61,100 6
One Valley Bank, Inc................. 42,100 13 13,300 4 20,000 6
Tier I Capital (to Average Assets)
One Valley........................... 350,600 10% 147,600 4% 184,500 5%
One Valley Bank, National Association 132,300 8 63,400 4 79,300 5
One Valley Bank, Inc................. 42,100 8 21,100 4 26,300 5
</TABLE>
39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
PARENT COMPANY CONDENSED FINANCIAL INFORMATION NOTE S
CONDENSED BALANCE SHEETS
December 31
Assets 1996 1995
Repurchase agreement with a
subsidiary bank.............. $ 21,469 $ 26,130
Securities:
Available-for-sale........... 9,978 12,820
Held-to-maturity............. 0 883
Premises and equipment......... 893 750
Investment in subsidiaries:
Commercial and
federal savings banks...... 382,678 325,224
Non-banks.................... 6,391 6,027
Other assets................... 4,922 4,865
Total assets................. $426,331 $376,699
Liabilities
Short-term borrowings.......... $ 5,793 $ 0
Other liabilities.............. 11,961 10,397
Total liabilities............ 17,754 10,397
Shareholders' Equity
Common stock................... 249,232 180,166
Capital surplus................ 73,834 34,603
Retained earnings.............. 152,006 168,625
Unrealized gain................ 883 6,252
Treasury stock................. (67,378) (23,344)
Total shareholders' equity... 408,577 366,302
Total liabilities and
shareholders' equity....... $426,331 $376,699
CONDENSED STATEMENTS OF INCOME
Year Ended December 31
1996 1995 1994
Income:
Dividends from subsidiaries........ $51,258 $47,290 $35,426
Other income....................... 4,222 3,788 3,078
Total income..................... 55,480 51,078 38,504
Expenses:
Salaries and employee benefits..... 8,108 6,749 7,200
Other expenses..................... 4,804 5,028 3,268
Interest expense................... 280 18 14
Total expenses................... 13,192 11,795 10,482
Income before income taxes and
equity in undistributed earnings
of subsidiaries.................... 42,288 39,283 28,022
Applicable income tax (benefit)...... (3,403) (3,034) (2,927)
Income before equity in undistributed
earnings of subsidiaries........... 45,691 42,317 30,949
Equity in undistributed earnings
of subsidiaries.................... 7,464 6,789 15,262
Net income....................... $53,155 $49,106 $46,211
CONDENSED STATEMENTS OF CASH FLOWS
Year Ended December 31
1996 1995 1994
Operating Activities:
Net income........................ $ 53,155 $ 49,106 $ 46,211
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation & amortization..... 245 238 220
Equity in undistributed
earnings of subsidiaries...... (7,464) (6,789) (15,262)
Net change in other assets
and other liabilities......... 1,441 3,396 (3,531)
Net cash provided by
operating activities........ 47,377 45,951 27,638
Investing Activities:
Purchase of securities:
Available-for-sale.............. (8,028) (6,210) (5,108)
Held-to-maturity................ (912)
Proceeds from maturities and sales
of securities:
Available-for-sale.............. 10,982 196
Held-to-maturity................ 860
Investment in subsidiaries........ (5,139) (2,500)
Purchase of equipment............. (427) (292) (638)
Net cash provided by (used in)
investing activities.......... 3,387 (11,445) (9,158)
Financing Activities:
Net change in short-term
borrowings...................... 5,793
Proceeds from issuance of
common stock.................... 2,844 1,185 340
Purchase of treasury stock........ (44,034) (12,971) (7,244)
Cash dividends paid............... (20,028) (17,918) (16,089)
Net cash used in
financing activities.......... (55,425) (29,704) (22,993)
(Decrease) increase in
cash and cash equivalents......... (4,661) 4,802 (4,513)
Cash and cash equivalents at
beginning of year................. 26,130 21,328 25,841
Cash and cash equivalents at
end of year....................... $ 21,469 $ 26,130 $ 21,328
40
<PAGE>
FAIR VALUE OF FINANCIAL INSTRUMENTS NOTE T
The following methods and assumptions were used by One Valley in estimating
its fair value disclosures for financial instruments:
CASH AND CASH EQUIVALENTS
The carrying values of cash and cash equivalents approximate their fair
values.
SECURITIES
Fair values of securities are based on quoted market prices, where
available. If quoted market prices are not available, fair values are based on
quoted market prices of comparable instruments.
LOANS
The fair values of 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.
ACCRUED INTEREST
The carrying value of accrued interest approximates its fair value.
DEPOSITS
The fair values of demand deposits (i.e. interest and non-interest bearing
checking, regular savings, and other types of money market demand accounts) are,
by definition, equal to their carrying values. Fair values of certificates of
deposit are estimated using a discounted cash flow calculation that applies
interest rates currently being offered on certificates to a schedule of
aggregate expected monthly maturities of time deposits. 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 estimated fair value of total deposits at December 31, 1996
and 1995.
SHORT-TERM BORROWINGS
The carrying values of federal funds purchased and securities sold under
agreements to repurchase approximate their fair values.
LONG-TERM BORROWINGS
The fair values of long-term borrowings are estimated using discounted cash
flow analyses based on One Valley's current incremental borrowing rates for
similar types of borrowing arrangements.
COMMITMENTS
The fair values of commitments (standby letters of credit and loan
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, 1996 and 1995, approximate their carrying value.
The fair values of One Valley's financial instruments are summarized below:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Cash and cash equivalents..... $ 160,874 $ 160,874 $ 165,676 $ 165,676
Securities.................... 1,170,230 1,172,749 1,076,852 1,083,739
Loans......................... 2,768,467 2,780,519 2,472,428 2,502,771
Accrued interest receivable... 34,129 34,129 32,307 32,307
Deposits...................... 3,406,016 3,408,753 3,048,336 3,053,777
Short-term borrowings......... 378,074 378,074 389,780 389,780
Long-term borrowings.......... 28,892 28,802 13,411 13,449
Accrued interest payable...... 15,639 15,639 15,332 15,332
</TABLE>
41
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
COMMITMENTS AND CONTINGENT LIABILITIES NOTE U
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.
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 approximately $44,000 as of December 31, 1996. 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, 1996, the Bank had commitments outstanding to extend
credit at prevailing market rates approximating $479,000. 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
One Valley is contingently liable on certain loans previously sold by an
acquired company. At December 31, 1996, there was approximately $29,900 in
outstanding loans sold with recourse. Pursuant to the terms of an Indemnity
Agreement with the Federal Deposit Insurance Corporation (FDIC), successor to
the obligations of the Resolution Trust Corporation, the FDIC is obligated to
indemnify any and all costs, losses, liabilities and expenses, including legal
fees, resulting from certain third-party claims.
42
<PAGE>
QUARTERLY FINANCIAL DATA (UNAUDITED) NOTE V
Quarterly financial data for 1996 and 1995 is summarized below:
<TABLE>
<CAPTION>
1996 1995
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 ..................................... $72,860 $77,874 $80,463 $80,956 $67,301 $70,742 $71,817 $72,512
Interest expense .................................... 32,022 34,361 36,306 36,596 27,995 30,422 31,057 31,606
Net interest income................................. 40,838 43,513 44,157 44,360 39,306 40,320 40,760 40,906
Provision for loan losses ........................... 1,149 1,334 1,353 1,368 1,113 1,113 1,762 1,644
Net interest income after provision for loan losses . 39,689 42,179 42,804 42,992 38,193 39,207 38,998 39,262
Other income, excluding securities gains............. 9,778 10,381 10,408 10,638 8,796 9,676 9,666 9,501
Securities transactions ............................. (294) 28 (147) 0 7 13 (86) 1
Other expenses ...................................... 30,217 31,378 35,143 31,677 30,364 30,462 30,061 28,704
Income before income taxes........................... 18,956 21,210 17,922 21,953 16,632 18,434 18,517 20,060
Applicable income taxes.............................. 6,308 7,170 5,902 7,506 5,344 6,137 6,187 6,869
Net income........................................ $12,648 $14,040 $12,020 $14,447 $11,288 $12,297 $12,330 $13,191
Per Share Data:
Average shares outstanding (in thousands)........... 20,992 21,985 22,360 22,238 21,349 21,693 21,449 21,326
Net income per share .............................. $ .60 $ .64 $ .54 $ .65 $ .53 $ .57 $ .57 $ .62
Dividends per share ................................ .22 .22 .24 .24 .20 .20 .22 .22
High bid/share ..................................... 26.20 27.80 31.60 37.75 24.80 24.90 26.80 27.70
Low bid/share ...................................... 24.70 24.50 27.00 31.25 22.40 23.00 24.40 24.90
</TABLE>
43
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders
One Valley Bancorp, Inc.
We have audited the accompanying consolidated balance sheets of One Valley
Bancorp, Inc. and subsidiaries (One Valley) as of December 31, 1996 and 1995,
and the related consolidated statements of income, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of One Valley's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
One Valley Bancorp, Inc. and subsidiaries at December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
Charleston, West Virginia
January 21, 1997
/s/ Ernst & Young LLP
44
<PAGE>
<TABLE>
<CAPTION>
SIX-YEAR AVERAGE BALANCE SHEET SUMMARY
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
(Dollars in thousands)
1996 1995 1994 1993 1992 1991
% OF % OF % OF % OF % OF % OF
$ TOTAL $ TOTAL $ TOTAL $ TOTAL $ TOTAL $ TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans:
Taxable...................... 2,650,425 65 2,397,405 65 2,202,716 62 2,032,527 58 1,929,592 57 1,549,386 56
Tax-exempt................... 43,740 1 33,977 1 34,430 1 31,153 1 30,351 1 32,443 1
Total loans................. 2,694,165 66 2,431,382 66 2,237,146 63 2,063,680 59 1,959,943 58 1,581,829 57
Less: Allowance for losses... 41,348 1 38,810 1 37,460 1 36,932 1 33,170 1 24,599 1
Total loans-net............. 2,652,817 65 2,392,572 65 2,199,686 62 2,026,748 58 1,926,773 57 1,557,230 56
Investment Securities:
Taxable...................... 948,239 23 810,089 22 874,901 25 973,890 28 966,198 29 740,927 27
Tax-exempt................... 204,742 5 187,180 5 176,079 5 100,577 3 83,261 2 93,893 3
Total securities............ 1,152,981 28 997,269 27 1,050,980 30 1,074,467 31 1,049,459 31 834,820 30
Federal funds sold & other..... 16,815 0 32,595 1 27,363 1 100,270 3 119,696 4 146,612 5
Total earning assets........ 3,822,613 93 3,422,436 93 3,278,029 93 3,201,485 92 3,095,928 92 2,538,662 91
Other assets................... 281,907 7 266,775 7 262,422 7 265,776 8 277,317 8 233,239 9
Total assets.............. 4,104,520 100 3,689,211 100 3,540,451 100 3,467,261 100 3,373,245 100 2,771,901 100
LIABILITIES &
SHAREHOLDERS' EQUITY
Interest Bearing Liabilities:
Time & savings deposits...... 2,886,158 70 2,625,910 71 2,518,539 71 2,498,420 72 2,455,775 73 2,047,057 74
Short-term borrowings........ 382,821 9 289,103 8 242,304 6 214,460 6 221,601 6 168,061 6
Long-term borrowings......... 18,602 0 11,416 0 22,931 1 36,088 1 25,703 1 15,653 0
Total interest bearing
liabilities............... 3,287,581 79 2,926,429 79 2,783,774 78 2,748,968 79 2,703,079 80 2,230,771 80
Demand deposits................ 384,817 9 380,996 10 412,016 12 396,711 11 373,488 11 296,347 11
Other liabilities.............. 42,417 1 33,513 1 28,937 1 26,849 1 27,671 1 29,510 1
Total liabilities........... 3,714,815 89 3,340,938 90 3,224,727 91 3,172,528 91 3,104,238 92 2,556,628 92
Shareholders' equity........... 389,705 11 348,273 10 315,724 9 294,733 9 269,007 8 215,273 8
Total liabilities &
shareholders' equity...... 4,104,520 100 3,689,211 100 3,540,451 100 3,467,261 100 3,373,245 100 2,771,901 100
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
SIX-YEAR NET INTEREST INCOME SUMMARY
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
(Dollars in thousands)
1996 1995 1994 1993 1992 1991
% OF % OF % OF % OF % OF % OF
TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL
INTEREST INTEREST INTEREST INTEREST INTEREST INTEREST
$ INCOME $ INCOME $ INCOME $ INCOME $ INCOME $ INCOME
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income*:
Loans:
Taxable ........................ 235,153 73.6 217,034 75.0 189,040 73.2 179,971 71.3 186,681 69.7 165,539 66.8
Tax-exempt ..................... 4,328 1.3 3,774 1.3 3,618 1.4 3,255 1.3 3,133 1.2 3,866 1.6
Total loans .................. 239,481 74.9 220,808 76.3 192,658 74.6 183,226 72.6 189,814 70.9 169,405 68.4
Securities
Taxable ....................... 62,447 19.5 50,693 17.6 48,881 19.0 55,868 22.2 64,466 24.1 58,483 23.6
Tax-exempt .................... 17,040 5.4 15,941 5.5 15,497 6.0 10,146 4.0 9,059 3.4 10,721 4.3
Total securities ............. 79,487 24.9 66,634 23.1 64,378 25.0 66,014 26.2 73,525 27.5 69,204 27.9
Funds sold & other .............. 664 0.2 1,830 0.6 1,037 0.4 3,104 1.2 4,290 1.6 9,142 3.7
Total interest income........ 319,632 00.0 289,272 100.0 258,073 100.0 252,344 100.0 267,629 100.0 247,751 100.0
Interest Expense:
Deposits ....................... 119,865 37.5 106,493 36.8 85,221 33.0 90,807 36.0 109,713 41.0 120,437 48.6
Short-term borrowings ........... 18,276 5.7 13,899 4.8 8,491 3.3 6,270 2.5 8,203 3.1 8,947 3.6
Long-term borrowings............. 1,144 0.4 688 0.3 1,185 0.5 2,709 1.1 2,123 0.8 1,529 0.6
Total interest expense ........ 139,285 43.6 121,080 41.9 94,897 36.8 99,786 39.6 120,039 44.9 130,913 52.8
Tax equivalent
net interest income............. 180,347 56.4 168,192 58.1 163,176 63.2 152,558 60.4 147,590 55.1 116,838 47.2
Tax equivalent adjustment ........ 7,479 2.3 6,900 2.4 6,690 2.6 4,645 1.8 4,145 1.5 4,959 2.0
Net interest income............... 172,868 54.1 161,292 55.7 156,486 60.6 147,913 58.6 143,445 53.6 111,879 45.2
SUMMARY OF AVERAGE RATES
EARNED & PAID*
Taxable loans ................... 8.87% 9.05% 8.58% 8.85% 9.67% 10.68%
Tax-exempt loans ................ 9.89 11.11 10.51 10.45 10.32 11.92
Net loans ....................... 9.03 9.23 8.76 9.04 9.85 10.88
Taxable securities .............. 6.59 6.26 5.59 5.74 6.67 7.89
Tax-exempt securities............ 8.32 8.52 8.80 10.09 10.88 11.42
Total securities................ 6.89 6.68 6.13 6.14 7.01 8.29
Funds sold & deposits ........... 3.95 5.61 3.79 3.10 3.58 6.24
Total earning assets ........... 8.36% 8.45% 7.87% 7.88% 8.64% 9.76%
Time & savings deposits ......... 4.15 4.06 3.38 3.63 4.47 5.88
Short-term borrowings ........... 4.77 4.81 3.50 2.92 3.70 5.32
Long-term borrowings............. 6.15 6.03 5.17 7.51 8.26 9.77
Total interest cost ............ 4.24 4.14 3.41 3.63 4.44 5.87
Total cost of all funds ........ 3.64 3.54 2.89 3.11 3.87 5.16
Net interest margin............ 4.72% 4.91% 4.98% 4.77% 4.77% 4.60%
* INTEREST INCOME AND YIELDS ARE COMPUTED ON A FULLY TAXABLE EQUIVALENT BASIS
USING THE RATES OF 35% FOR 1996 THROUGH 1993 AND 34% FOR 1992 AND 1991.
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
SIX-YEAR OPERATING INCOME SUMMARY
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
(Dollars in thousands)
1996 1995 1994 1993 1992 1991
% OF % OF % OF % OF % OF % OF
ADJUSTED ADJUSTED ADJUSTED ADJUSTED ADJUSTED ADJUSTED
OPERATING OPERATING OPERATING OPERATING OPERATING OPERATING
$ INCOME $ INCOME $ INCOME $ INCOME $ INCOME $ INCOME
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income....................... 312,153 88.5 282,372 88.3 251,383 87.3 247,699 86.3 263,484 87.7 242,792 91.0
Interest expense ..................... 139,285 39.5 121,080 37.8 94,897 33.0 99,786 34.8 120,039 39.9 130,913 49.1
Net interest income................... 172,868 49.0 161,292 50.5 156,486 54.3 147,913 51.5 143,445 47.8 111,879 41.9
Provision for loan losses............. 5,204 1.5 5,632 1.8 4,788 1.7 5,788 2.0 11,389 3.8 6,671 2.5
Net interest income after
provision for loan losses .......... 167,664 47.5 155,660 48.7 151,698 52.6 142,125 49.5 132,056 44.0 105,208 39.4
Other Income:
Trust Department income ............. 9,322 2.7 8,203 2.5 7,892 2.7 7,272 2.5 6,041 2.0 5,327 2.0
Service charges on
deposit accounts ................... 14,572 4.1 13,877 4.3 11,441 4.0 11,963 4.2 11,281 3.7 8,981 3.4
Other service
charges and fees.................... 11,241 3.2 9,839 3.1 9,921 3.4 12,163 4.2 12,689 4.2 5,954 2.2
Other operating income .............. 6,070 1.7 5,720 1.8 8,191 2.8 7,794 2.8 6,790 2.3 4,441 1.7
Securities transactions ............. (413) (0.1) (65) (0.0) (867) (0.3) 113 0.0 (35) (0.0) (730) (0.3)
Total other income................. 40,792 11.6 37,574 11.7 36,578 12.6 39,305 13.7 36,766 12.2 23,973 9.0
Operating Expenses:
Salaries & benefits ................. 64,631 18.3 62,126 19.4 63,042 21.8 61,511 21.4 55,457 18.4 46,236 17.3
Occupancy expense.................... 6,887 2.0 6,305 2.0 6,014 2.1 6,206 2.2 6,199 2.1 4,315 1.6
Equipment expense.................... 9,137 2.6 8,761 2.7 8,468 2.9 10,604 3.7 10,503 3.5 8,759 3.3
External computer costs.............. 5,692 1.6 5,285 1.6 5,304 1.8 5,041 1.8 2,962 1.0 2,126 0.8
Other expense ....................... 42,068 11.9 37,114 11.6 37,328 13.1 41,788 14.5 40,417 13.5 30,610 11.5
Total operating expenses .......... 128,415 36.4 119,591 37.3 120,156 41.7 125,150 43.6 115,538 38.5 92,046 34.5
Income before tax .................... 80,041 22.7 73,643 23.1 68,120 23.5 56,280 19.6 53,284 17.7 37,135 13.9
Applicable income taxes .............. 26,886 7.6 24,537 7.7 21,909 7.6 18,326 6.4 16,646 5.5 10,743 4.0
Net income ........................... 53,155 15.1 49,106 15.4 46,211 15.9 37,954 13.2 36,638 12.2 26,392 9.9
</TABLE>
* ADJUSTED OPERATING INCOME EQUALS INTEREST INCOME PLUS OTHER INCOME.
<TABLE>
<CAPTION>
Per Share Summary
(in dollars, except average shares) 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Net income.......................... 2.43 2.29 2.16 1.76 1.70 1.37
Cash dividends...................... 0.92 0.83 0.75 0.67 0.56 0.50
Stock dividends..................... 25% 0 0 50%/20% 0 0
Average shares...................... 21,896,000 21,468,000 21,415,000 21,546,000 21,514,000 19,201,000
</TABLE>
47
<PAGE>
DIRECTORS OF ONE VALLEY BANCORP
Phyllis H. Arnold
EXECUTIVE VICE PRESIDENT,
ONE VALLEY BANCORP, INC.
PRESIDENT & CHIEF EXECUTIVE OFFICER,
ONE VALLEY BANK, N.A.
Charles M. Avampato
PRESIDENT, CLAY FOUNDATION, INC.
Robert F. Baronner
CHAIRMAN OF THE BOARD,
ONE VALLEY BANCORP, INC.
C. Michael Blair
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER,
ONE VALLEY BANK - NORTH
James K. Brown
ATTORNEY, JACKSON & KELLY
Nelle Ratrie Chilton
VICE PRESIDENT AND DIRECTOR, DICKINSON
FUEL COMPANY, INC. AND TERRA CO., INC.
Ray Marshall Evans, Jr.
PRESIDENT, DICKINSON COMPANY,
CHESAPEAKE MINING COMPANY AND
HUBBARD PROPERTIES, INC.,
VICE PRESIDENT, GEARY SECURITIES
James Gabriel
PRESIDENT & CEO, GABRIEL BROTHERS, INC.
Phillip H. Goodwin
PRESIDENT, CAMCARE AND
CHARLESTON AREA MEDICAL CENTER
Thomas E. Goodwin
CHAIRMAN OF THE BOARD,
ONE VALLEY BANK OF RONCEVERTE, N.A.
Cecil B. Highland, Jr.
CHAIRMAN OF THE BOARD,
ONE VALLEY BANK OF CLARKSBURG, N.A.,
PRESIDENT, CLARKSBURG PUBLISHING CO.
Bob M. Johnson
PRESIDENT & CHIEF EXECUTIVE OFFICER,
ONE VALLEY BANK - CENTRAL VIRGINIA
Robert E. Kamm, Jr.
PRESIDENT & CHIEF EXECUTIVE OFFICER,
ONE VALLEY BANK OF SUMMERSVILLE, INC.
David E. Lowe
EXECUTIVE VICE PRESIDENT,
CHARLES RYAN & ASSOCIATES
John D. Lynch
VICE PRESIDENT, DAVIS LYNCH GLASS CO.
Edward H. Maier
PRESIDENT, GENERAL CORPORATION
J. Holmes Morrison
PRESIDENT & CHIEF EXECUTIVE OFFICER,
ONE VALLEY BANCORP, INC.
CHAIRMAN OF THE BOARD,
ONE VALLEY BANK, N.A.
Charles R. Neighborgall, III
PRESIDENT, THE NEIGHBORGALL CONSTRUCTION CO.
Robert O. Orders, Sr.
CHIEF EXECUTIVE OFFICER,
ORDERS CONSTRUCTION COMPANY
John L. D. Payne
PRESIDENT, PAYNE-GALLATIN MINING CO.
Angus E. Peyton
ATTORNEY, BROWN & PEYTON
Lacy I. Rice, Jr.
VICE CHAIRMAN OF THE BOARD,
ONE VALLEY BANCORP, INC.,
ATTORNEY, BOWLES, RICE, MCDAVID
GRAFF & LOVE
Brent D. Robinson
PRESIDENT & CHIEF EXECUTIVE OFFICER,
ONE VALLEY BANK OF HUNTINGTON
James W. Thompson
CHAIRMAN OF THE BOARD,
ONE VALLEY BANK OF MERCER COUNTY
John L. Van Metre, Jr.
ATTORNEY, STEPTOE & JOHNSON
Richard B. Walker
CHAIRMAN OF THE BOARD AND CEO,
CECIL I. WALKER MACHINERY CO.
H. Bernard Wehrle, III
PRESIDENT, MCJUNKIN CORPORATION
John Henry Wick, III
VICE PRESIDENT,
DICKINSON FUEL COMPANY, INC.
Thomas D. Wilkerson
SENIOR AGENT,
NORTHWESTERN MUTUAL LIFE INSURANCE CO.
HONORARY MEMBERS
John T. Chambers
ONE VALLEY BANCORP SENIOR MANAGEMENT
J. Holmes Morrison
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Phyllis H. Arnold
EXECUTIVE VICE PRESIDENT
Frederick H. Belden, Jr.
EXECUTIVE VICE PRESIDENT AND ASSISTANT CORPORATE SECRETARY
Laurance G. Jones
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Robert E. Kamm, Jr.
SENIOR VICE PRESIDENT
William M. Kidd
SENIOR VICE PRESIDENT - CREDIT POLICY AND LOAN ADMINISTRATION
Merrell S. McIlwain II
SENIOR VICE PRESIDENT - GENERAL COUNSEL AND CORPORATE SECRETARY
Terry T. Puster
SENIOR VICE PRESIDENT
Kenneth R. Summers
SENIOR VICE PRESIDENT
<PAGE>
AFFILIATE DIRECTORS
ONE VALLEY BANK,
NATIONAL ASSOCIATION
ONE VALLEY SQUARE
CHARLESTON, WV 25326
Phyllis H. Arnold*
Charles M. Avampato
Robert F. Baronner
James K. Brown
Nelle Ratrie Chilton
Ray Marshall Evans, Jr.
Robert F. Goldsmith
Phillip H. Goodwin
O. Nelson Jones
Carl E. Little
David E. Lowe
Edward H. Maier
J. Holmes Morrison
Robert O. Orders, Sr.
John L. D. Payne
Angus E. Peyton
William A. Rice, Jr.
K. Richard C. Sinclair
James C. Smith
James R. Thomas, II
Edwin H. Welch
John Henry Wick, III
Thomas D. Wilkerson
James D. Williams
HONORARY MEMBERS
John T. Chambers
ONE VALLEY BANK OF
SUMMERSVILLE
811 MAIN STREET
SUMMERSVILLE, WV 26651
Roy V. Groves
W. H. Henderson, Jr.
Charles H. Hinkle
Robert E. Kamm, Jr.*
David Lackey
Glenn H. McMillion
Robert C. Rader
ONE VALLEY BANK
NORTH
414 JEFFERSON AVENUE,
MOUNDSVILLE, WV 26041
C. Michael Blair*
Earl G. Downs
Robert L. Fisher
Loren Gene Gray
Sidney E. Grisell
Carlos C. Jimenez
Helen E. Levenson
William Medovic
Shelley R. Moore
James P. Ovies
Charles E. Rexroad
Clinton Rogerson
Nick A. Sparachane
Bernard P. Twigg
Glenn Reed Whipkey
Bruce W. Wilson
ONE VALLEY BANK, INC.
496 HIGH STREET
MORGANTOWN, WV 26505
Iona L. Bucklew
Jeffrey B. Carpenter
Samuel Chico, Jr.
Otis G. Cox, Jr.
Laurence S. DeLynn
George R. Farmer, Jr.
Arthur Gabriel
Trevelyn F. Hall, II
Wendell G. Hardway
Benjamin H. Hayes
Kenneth Juskowich
James L. Laurita, Sr.
John D. Lynch
Paul F. Malone
David Moffa
D.J. Moore
Thomas M. Prendergast
Howard A. Shriver
James M. Stevenson
Paul T. Swanson
Kenneth R. Summers*
Robert H. Thompson
Bernard G. Westfall
Brian K. Wilson
HONORARY MEMBERS
Michael E. Basile
John R. Carpenter
Sarah L. Crayton
James R. McCartney
Jordan C. Pappas
Carl J. Snyder
Hays Webb
ONE VALLEY BANK OF
CLARKSBURG, N.A.
4TH AND MAIN STREETS
CLARKSBURG, WV 26302
Marcia Allen Broughton
Earl N. Flowers
John C. Hart
J. Cecil Jarvis
Cecil B. Highland, Jr.
C. William Johnson
William M. Kidd
Larry F. Mazza*
Ronald E. Ohl
Kenneth R. Summers
Leonard J. Timms, Jr.
ONE VALLEY BANK, FSB
610 VIAND STREET
POINT PLEASANT, WV 25550
Phyllis H. Arnold
Gary L. Brown*
Brian J. Fox
Laurance G. Jones
William M. Kidd
Bryan F. Stepp
ONE VALLEY BANK OF
OAK HILL
100 MAIN STREET
OAK HILL, WV 25901
John M. Frazier*
George W. Jones, III
James E. Lively
William E. Meador
Marilyn T. Montgomery
Donald C. Newell, Jr.
Roy Shrewsbury, II
N. M. Steen
HONORARY MEMBERS
Elizabeth M. Lewis
ONE VALLEY BANK OF
RONCEVERTE, N.A.
100 MAPLEWOOD AVENUE
RONCEVERTE, WV 24970
Gary M. Ambler
Thomas E. Goodwin
Norman O. Nutter
Michael O'Brien
Donald E. Parker, Jr.
Henry E. Riffe
John L. Robertson
Paul G. Robinson*
David Sebert
Marion Shiflet
ONE VALLEY BANK
EAST, N.A.
148 SOUTH QUEEN STREET
MARTINSBURG, WV 25401
Walter L. Butler
James W. Dailey, II
Deborah J. Dhayer
Conrad C. Hammann
Charles A. Hensell
James B. Hutzler
Robert A. McMillan
John M. Miller, III
Ellen M. Parsons
Bonn A. Poland, III
Lacy I. Rice, Jr.
Douglas M. Roach
William D. Stegall*
John L. Van Metre, Jr.
HONORARY MEMBERS
George E. Alter, Jr.
Guy R. Avey
Howard N. Carper, Jr.
Robert G. Criswell
Frank H. Fischer
N. Blaine Groves
T. Fred Hammond
Otho S. Lewis
Walter B. Ridenour
Robert A. Sanders
Philip T. Siebert
Clyde E. Smith, Jr.
Paul E. Tederick
C. Vincent Townsend
ONE VALLEY BANK OF
MERCER COUNTY
COURTHOUSE SQUARE
PRINCETON, WV 24740
Homer K. Ball
Jerry L. Beasley
Fred A. Bolton
J. Richard Copeland
H. Allen Griffith
A. Glendon Hill
M. D. Kirk, Jr.
Joseph F. Marsh
James L. Miller*
Charles W. Pace
Dewey W. Russell
James W. Thompson
Ted L. White
H. Elwood Winfrey
HONORARY MEMBERS
James W. Anderson
John C. Anderson
W. R. Cooke
Harry Finkelman
Richard V. Lilly
Fred McKenzie
Lawrence J. Pace
Guy B. Scyphers
Joseph C. Shaffer, Jr.
ONE VALLEY BANK OF
HUNTINGTON
SIXTH AVE. & FIRST ST.
HUNTINGTON, WV 25701
J. G. Call
W. Dan Egnor
Charlene Farrell
Stephen G. Fox
Henry M. Kayes
Sara H. Lowe
Charles R. Neighborgall, III
Stephen G. Roberts
Brent D. Robinson*
David P. Reed
J. Roger Smith
Kevin D. Thompson
ONE VALLEY BANK
CENTRAL VIRGINIA
2120 LANGHORNE ROAD
LYNCHBURG, VA 24501
Donald W. Britton
William J. Conner
Bob M. Johnson*
Laurance G. Jones
William M. Kidd
Robert M. O'Brian
William F. Overacre
Edgar J.T. Perrow
Jerry T. Price
George P. Ramsey, III
F. Rogers Vaden
* PRESIDENT AND CEO
<PAGE>
Exhibit 21
SUBSIDIARIES OF REGISTRANT
1) One Valley Bank, National Association, a national banking association
organized under the laws of the United States of America.
2) One Valley Bank of Huntington, Inc., a West Virginia banking
corporation.
3) One Valley Bank of Mercer County, Inc., a West Virginia banking
corporation.
4) One Valley Bank - East, National Association, a national banking
association organized under the laws of the United States of America.
5) One Valley Bank of Oak Hill, Inc., a West Virginia banking corporation.
6) One Valley Bank of Ronceverte, National Association, a national banking
association organized under the laws of the United States of America.
7) One Valley Bank, Inc., a West Virginia banking corporation.
8) One Valley Bank of Summersville, Inc., a West Virginia banking
corporation.
9) One Valley Bank - North, Inc., a West Virginia corporation.
10) One Valley Bank of Clarksburg, National Association, a national banking
association organized under the laws of the United States of America.
11) One Valley Bank, FSB, a federal savings bank.
12) One Valley Bank-Central Virginia, a federal savings bank.
13) One Valley Thrift, Inc., a West Virginia corporation.
14) One Valley Square, Inc., a Texas corporation.
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form
10-K) of One Valley Bancorp, Inc. of our report dated January 21, 1997,
included in the 1996 Annual Report to Shareholders of One Valley Bancorp, Inc.
We also consent to the incorporation by reference in the Registration
Statements pertaining to the Amended 1983 Incentive Stock Option Plan (Form S-8,
No. 2-90738) and pertaining to the 1993 Incentive Stock Option Plan (Form S-8,
No. 33-66700) of One Valley Bancorp, Inc. of our report dated January 21,
1997, with respect to the consolidated financial statements of One Valley
Bancorp, Inc. and Subsidiaries incorporated by reference in the Annual Report on
Form 10-K for the year ended December 31, 1996.
/s/ Ernst & Young LLP
Charleston, WV
March 26, 1997
<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
<RESTATED>
<MULTIPLIER> 1000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995 DEC-31-1994
<PERIOD-END> DEC-31-1996 DEC-31-1995 DEC-31-1994
<CASH> 146152 140617 178900
<INT-BEARING-DEPOSITS> 9897 8259 4297
<FED-FUNDS-SOLD> 4825 16800 24875
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 952908 871699 541201
<INVESTMENTS-CARRYING> 217322 205153 445158
<INVESTMENTS-MARKET> 219841 212040 422381
<LOANS> 2810212 2511962 2372957
<ALLOWANCE> 41745 39534 37438
<TOTAL-ASSETS> 4267303 3858296 3673241
<DEPOSITS> 3406016 3048336 2926479
<SHORT-TERM> 378074 389780 375339
<LIABILITIES-OTHER> 45744 40467 30106
<LONG-TERM> 28892 13411 19450
0 0 0
0 0 0
<COMMON> 249232 180166 175384
<OTHER-SE> 159345 186136 146483
<TOTAL-LIABILITIES-AND-EQUITY> 4267303 3858296 3673241
<INTEREST-LOAN> 237966 219487 191392
<INTEREST-INVEST> 73523 61055 58954
<INTEREST-OTHER> 664 1830 1037
<INTEREST-TOTAL> 312153 282372 251383
<INTEREST-DEPOSIT> 119865 106493 85221
<INTEREST-EXPENSE> 139285 121080 94897
<INTEREST-INCOME-NET> 172868 161292 156486
<LOAN-LOSSES> 5204 5632 4788
<SECURITIES-GAINS> (413) (65) (867)
<EXPENSE-OTHER> 128415 119591 120156
<INCOME-PRETAX> 80041 73643 68120
<INCOME-PRE-EXTRAORDINARY> 80041 73643 68120
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 53155 49106 46211
<EPS-PRIMARY> 2.43 2.29 2.16
<EPS-DILUTED> 2.43 2.29 2.16
<YIELD-ACTUAL> 4.72 4.91 4.98
<LOANS-NON> 8528 7174 7664
<LOANS-PAST> 4273 5582 3827
<LOANS-TROUBLED> 0 0 552
<LOANS-PROBLEM> 0 0 0
<ALLOWANCE-OPEN> 39534 37438 36484
<CHARGE-OFFS> 7038 5611 5985
<RECOVERIES> 1819 1840 2151
<ALLOWANCE-CLOSE> 41745 39534 37438
<ALLOWANCE-DOMESTIC> 41745 39534 37438
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
</TABLE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use of the
[X] Definitive Proxy Statement Commission on (as permitted
by Rule 14a-b(e)(21))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ONE VALLEY BANCORP, INC.
(Name of Registrant as Specified in Its Charter)
Elizabeth Osenton Lord
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
--------------------------------------------------------------------
(3) Per unit price other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:
--------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------
1
<PAGE>
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
--------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------------
(4) Date Filed:
--------------------------------------------------------------------
2
<PAGE>
ONE VALLEY BANCORP, INC.
CHARLESTON, WEST VIRGINIA
NOTICE OF REGULAR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 22, 1997
To the Shareholders:
The Regular Annual Meeting of Shareholders of One Valley Bancorp, Inc.,
("One Valley") will be held at the Charleston Town Center Marriott, 200 Lee
Street, East, in Charleston, West Virginia, at 10:00 a.m. on Tuesday, April 22,
1997, for the purpose of considering and voting upon proposals:
1. To elect ten directors - nine to serve for a term of
three years, and one to serve for a term of two years, and until
their successors are chosen and qualify.
2. To ratify the selection of Ernst & Young LLP by the Board of
Directors as independent Certified Public Accountants for the
year 1997.
3. To approve an amendment to the Articles of Incorporation to
update the indemnification provision of Article V.
4. To transact such other business as may properly be brought
before the meeting or any adjournment thereof.
Only those shareholders of record at the close of business on March 4,
1997, are entitled to notice of the meeting and to vote at the meeting. We hope
that you will attend this meeting.
By Order of the Board of Directors
J. Holmes Morrison
PRESIDENT
PLEASE SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE, WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. YOU MAY REVOKE YOUR PROXY AT ANY
TIME BEFORE IT IS VOTED AT THE ANNUAL MEETING.
MARCH 21, 1997
3
<PAGE>
(This Page intentionally left blank)
<PAGE>
ONE VALLEY BANCORP, INC.
ONE VALLEY SQUARE
CHARLESTON, WEST VIRGINIA
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS -- APRIL 22, 1997
This statement is furnished in connection with the solicitation of
proxies for use at the Annual Meeting of Shareholders of One Valley Bancorp,
Inc. ("One Valley"), to be held on Tuesday, April 22, 1997, at the time and for
the purposes set forth in the accompanying Notice of Regular Annual Meeting of
Shareholders. The approximate date on which this Proxy Statement and the form of
proxy are to be first mailed to shareholders is March 21, 1997. The mailing
address of the principal executive offices of One Valley is P. O. Box 1793,
Charleston, West Virginia 25326.
SOLICITATION OF PROXIES
The solicitation of proxies is made by management at the direction of
the Board of Directors of One Valley. These proxies enable shareholders to vote
on all matters which are scheduled to come before the meeting. If the enclosed
proxy is signed and returned, it will be voted as directed; or if not directed,
the proxy will be voted "FOR" the election of the ten management nominees as
directors for the terms specified, "FOR" the ratification of the selection of
Ernst & Young LLP as independent Certified Public Accountants and "FOR" the
amendment of One Valley's Articles of Incorporation to update the
indemnification provision of Article V. A shareholder executing the proxy may
revoke it at any time before it is voted by notifying One Valley in person, by
giving written notice to One Valley of the revocation of the proxy, by
submitting to One Valley a subsequently dated proxy or by attending the meeting
and withdrawing the proxy before it is voted at the meeting.
The expense for the solicitation of proxies will be paid by One Valley.
In addition to this solicitation by mail, officers and regular employees of One
Valley and its subsidiaries may, to a limited extent, solicit proxies personally
or by telephone or telegraph.
ELIGIBILITY OF STOCK FOR VOTING PURPOSES
Pursuant to One Valley's Bylaws, the Board of Directors has fixed March
4, 1997, as the record date for the purpose of determining the shareholders
entitled to notice of, and to vote at, the meeting or any adjournment thereof,
and only shareholders of record at the close of business on that date are
entitled to notice of and to vote at the Annual Meeting of Shareholders or any
adjournment thereof.
As of the record date for the Annual Meeting, 22,017,192 shares of
the common stock with a par value of ten dollars ($10.00) per share ("One Valley
Common Stock") of One Valley were issued and outstanding and entitled to vote.
One Valley's subsidiary banks hold of record as trustee, co-trustee, executor or
co-executor, but not beneficially, 3,986,330 shares of stock representing
18.11% of the shares of One Valley outstanding. Of these shares, the banks
hold 3,354,654 shares as co-trustee or co-executor and 631,676 shares as sole
trustee or sole executor (other principal holders of One Valley's stock are
discussed under "Principal Holders of Securities"). The 3,354,654 shares held as
co-trustee or co-executor are voted by the individual co-trustee(s) or
co-executor(s) and not by the banks. Of the remaining 631,676 shares held by the
banks as sole trustee or sole executor, 567,728 shares (or 2.58% of the total
shares outstanding) will be voted by the banks, as trustee or executor, "FOR"
the election of the ten management nominees as directors, "FOR" the
ratification of the selection of Ernst & Young LLP as independent Certified
Public Accountants, and "FOR" the amendment of One Valley's Articles of
Incorporation to update the indemnification provision of Article V. The
remaining 63,948 shares are held by the banks as sole trustee or sole executor
in personal trust and self-directed employee benefit accounts and will be voted
by the banks at the direction of the grantor, settlor or beneficiary of those
accounts.
4
<PAGE>
PURPOSE OF MEETING
1. ELECTION OF DIRECTORS
One Valley's Bylaws currently provide that the Board of Directors shall
consist of not fewer than six nor more than 33 members. The Bylaws also provide
that the exact number of directors within these minimum and maximum limits are
to be fixed and determined by resolution of the Board of Directors. There are
presently 29 directors on the Board, and at a meeting held February 18, 1997,
the Board's Executive Committee fixed at 29 the number of directors to
constitute the full Board of Directors of One Valley effective April 22, 1997.
The term of Mr. Cecil B. Highland, Jr. as a director of One Valley expires at
the 1997 Annual Meeting, and in accordance with One Valley's Directors
Retirement Policy, he will not stand for re-election. Mr. David E. Lowe has
completed his term of service and will not stand for re-election.
One Valley's Articles of Incorporation authorize classification of the
Board of Directors into three classes, each of which serves for three years,
with one class being elected each year. Pursuant to this arrangement nine
nominees have been nominated for three-year terms, and one nominee has been
nominated for a two-year term, and until their successors are chosen and
qualify. This will result in a Board composed of three classes with nine
directors in the class of 1998, eleven directors in the class of 1999 and nine
directors in the class of 2000.
MANAGEMENT NOMINEES TO THE BOARD OF ONE VALLEY
Unless otherwise directed, the proxies will be voted "FOR" the election
of the following ten directors to serve for terms expiring at the Annual
Meeting of Shareholders for the years indicated below and until their successors
are chosen and qualify.
<TABLE>
<CAPTION>
SERVED FAMILY
AS A RELATIONSHIP
DIRECTOR WITH DIRECTORS PRINCIPAL
OF ONE AND OTHER YEAR IN OCCUPATION
VALLEY NOMINEES WHICH TERM OR EMPLOYMENT
NOMINEES AGE SINCE EXPIRES LAST FIVE YEARS
<S> <C> <C> <C> <C> <C>
Dennis M. Bone 45 - None 2000 1995 to present - President and Chief
Executive Officer - Bell Atlantic-
West Virginia, Inc.; formerly Director,
Regulatory Planning - Bell Atlantic-
New Jersey, Inc., Charleston, WV
H. Rodgin Cohen 52 - None 2000 Attorney - Sullivan & Cromwell, New
York, NY
Bob M. Johnson 61 1996 None 2000 1996 to present - President and
Chief Executive Officer - One
Valley Bank - Central Virginia;
formerly President and Chief
Executive Officer - Co-operative
Savings Bank, FSB, Lynchburg, VA
Robert E. Kamm, Jr. 45 1987 None 2000 President and Chief Executive
Officer - One Valley Bank of
Summersville, Inc., Summersville, WV
Edward H. Maier 53 1983 None 2000 President - General Corporation,
Charleston, WV (Real Estate
Investment and Natural Gas
Production)
5
<PAGE>
SERVED FAMILY
AS A RELATIONSHIP
DIRECTOR WITH DIRECTORS PRINCIPAL
OF ONE AND OTHER YEAR IN OCCUPATION
VALLEY NOMINEES WHICH TERM OR EMPLOYMENT
NOMINEES AGE SINCE EXPIRES LAST FIVE YEARS
J. Holmes Morrison 56 1990 None 2000 President and Chief Executive Officer
- One Valley Bancorp, Inc., and
Chairman of the Board - One Valley Bank,
National Association, Charleston, WV
Angus E. Peyton (1) 70 1981 None 1999 Attorney - Brown and Peyton,
Charleston, WV
Lacy I. Rice, Jr. 65 1994 None 2000 Attorney - Bowles, Rice, McDavid,
Graff & Love; Vice Chairman of the
Board - One Valley Bancorp, Inc.,
Charleston, WV; Chairman of the
Board - One Valley Bank - East,
Martinsburg, WV; formerly Chairman
of the Board and Chief Executive
Officer - Mountaineer Bankshares of
W.Va., Inc.
Richard B. Walker 58 1991 None 2000 Chairman of the Board and Chief
Executive Officer - Cecil I. Walker
Machinery
Thomas D. Wilkerson 68 1981 None 2000 Senior Agent - Northwestern Mutual
Life Insurance Company, Charleston,
WV
</TABLE>
DIRECTORS CONTINUING TO SERVE UNEXPIRED TERMS
The following Directors will continue to serve until the expiration
of their terms:
<TABLE>
<CAPTION>
SERVED FAMILY
AS A RELATIONSHIP
DIRECTOR WITH DIRECTORS PRINCIPAL
OF ONE AND OTHER YEAR IN OCCUPATION
VALLEY NOMINEES WHICH TERM OR EMPLOYMENT
DIRECTORS AGE SINCE EXPIRES LAST FIVE YEARS
<S> <C> <C> <C> <C> <C>
Phyllis H. Arnold 48 1993 None 1999 President and Chief Executive Officer
- One Valley Bank, National Association,
Charleston, WV
Charles M. Avampato 58 1984 None 1999 President - Clay Foundation, Inc.,
Charleston, WV (Charitable
Foundation)
6
<PAGE>
SERVED FAMILY
AS A RELATIONSHIP
DIRECTOR WITH DIRECTORS PRINCIPAL
OF ONE AND OTHER YEAR IN OCCUPATION
VALLEY NOMINEES WHICH TERM OR EMPLOYMENT
DIRECTORS AGE SINCE EXPIRES LAST FIVE YEARS
Robert F. Baronner 70 1981 None 1998 Chairman of the Board - One Valley
Bancorp, Inc., Charleston, WV;
formerly President and Chief
Executive Officer - One Valley
Bancorp, Inc., Charleston, WV
C. Michael Blair 54 1994 None 1998 Chairman of the Board, President
and Chief Executive Officer - One
Valley Bank-North, Inc.; formerly
Chairman of the Board, President
and Chief Executive Officer -
Mercantile Banking and Trust
Company, Moundsville, WV
James K. Brown 67 1981 None 1998 Attorney - Jackson & Kelly,
Charleston, WV
Nelle Ratrie Chilton 57 1989 (2) 1998 Director and Vice President -
Dickinson Fuel Co., Inc.,
Charleston, WV; TerraCo., Inc.,
Charleston, WV; TerraCare, Inc.,
TerraSalis, Inc., TerraSod, Inc.,
Malden, WV (Landscaping)
R. Marshall Evans, Jr. 55 1984 (3) 1998 President - Dickinson Co., Quincy
Coal Co., and Chesapeake Mining
Co., Charleston, WV; Vice President
- Geary Securities, Charleston, WV;
President - Hubbard Properties,
Inc., Cheyenne, WY
James Gabriel 66 1993 None 1999 President and Chief Executive
Officer - Gabriel Brothers, Inc.,
Morgantown, WV (Retail Sales)
Phillip H. Goodwin 56 1989 None 1998 President - CAMCARE and Charleston
Area Medical Center, Charleston, WV
Thomas E. Goodwin 67 1985 None 1999 Chairman of the Board - One Valley
Bank of Ronceverte, National
Association, Ronceverte, WV
John D. Lynch 56 1986 None 1999 Vice President - Davis Lynch Glass
Company, Star City, WV
Charles R. 55 1987 None 1999 President - The Neighborgall
Neighborgall, III Construction Company, Huntington, WV
Robert O. Orders, Sr. 71 1989 None 1998 Chief Executive Officer - Orders
Construction Co., St. Albans, WV
John L. D. Payne 58 1981 (3) 1998 President - Payne-Gallatin Mining
Co., Charleston, WV
7
<PAGE>
SERVED FAMILY
AS A RELATIONSHIP
DIRECTOR WITH DIRECTORS PRINCIPAL
OF ONE AND OTHER YEAR IN OCCUPATION
VALLEY NOMINEES WHICH TERM OR EMPLOYMENT
DIRECTORS AGE SINCE EXPIRES LAST FIVE YEARS
Brent D. Robinson 49 1994 None 1998 1995 to present - President and
Chief Executive Officer - One
Valley Bank of Huntington,
Huntington, WV; 1993 to 1996 -
Executive Vice President, One
Valley Bancorp, Inc.; formerly
President, Chief Operating Officer
and Chief Financial Officer -
Mountaineer Bankshares of W.Va.,
Inc.
James W. Thompson 69 1983 None 1999 Chairman of the Board - One Valley
Bank of Mercer County, Inc.,
Princeton, WV
J. Lee Van Metre, Jr. 59 1986 None 1999 Attorney - Steptoe & Johnson;
Secretary of the Board - One Valley
Bank - East, National Association,
Martinsburg, WV
H. Bernard Wehrle, III 45 1991 None 1999 President - McJunkin Corporation,
Charleston, WV (Industrial
Wholesaler)
John H. Wick, III 51 1993 (2) 1999 1992 to present - Vice President -
Dickinson Fuel Co., Inc.,
Charleston, WV; 1980 to 1992 -
Harrison & Bates, Inc., Richmond,
VA (Commercial Realtor)
</TABLE>
(1) Angus E. Peyton is a member of the Board of Directors of American Electric
Power Company, Inc.
(2) Nelle Ratrie Chilton is the sister-in-law of John H. Wick, III.
(3) R. Marshall Evans, Jr. and John L. D. Payne are first cousins.
GENERAL
One Valley's Bylaws provide that in the election of directors, each
shareholder will have the right to vote the number of shares owned by that
shareholder for as many persons as there are directors to be elected, or to
cumulate such shares and give one candidate as many votes as the number of such
directors multiplied by the number of shares owned will equal, or to distribute
them on the same principle among as many candidates as the shareholder sees fit.
For all other purposes, each share is entitled to one vote. If any shares are
voted cumulatively for the election of directors, the Proxies, unless otherwise
directed, will have full discretion and authority to cumulate their votes and
vote for less than all such nominees. Directors are elected by a plurality of
votes cast, without regard to either broker non-votes or proxies as to which
authority to vote for one or more of the nominees being proposed is withheld.
One Valley's Bylaws provide that nominations for election to the Board
of Directors, other than those made by or on behalf of the existing management
of One Valley, must be made by a shareholder in writing delivered or mailed to
the President not less than 14 days nor more than 50 days prior to the meeting
called for the election of directors; provided, however, that if less than 21
days' notice of the meeting is given to shareholders, the nominations must be
mailed or delivered to the President not later than the close of business on the
7th day following the day on which the notice of meeting was mailed. To the
extent known, the notice of nomination must
8
<PAGE>
contain the following information: (a) name and address of proposed nominee(s);
(b) principal occupation of proposed nominee(s); (c) total shares to be voted
for each proposed nominee; (d) name and address of notifying shareholder; and
(e) number of shares owned by notifying shareholder. Nominations not made in
accordance with these requirements may be disregarded by the Chairman of
the meeting, in which case the votes cast for the proposed nominee will
likewise be disregarded.
One Valley commenced business on September 4, 1981, as a bank holding
company. The financial operations of One Valley in 1996 primarily related to the
ownership and the establishment of policies for the management and direction of
One Valley Bank, National Association; One Valley Bank of Huntington, Inc.; One
Valley Bank of Mercer County, Inc.; One Valley Bank of Ronceverte, National
Association; One Valley Bank, Inc.; One Valley Bank of Oak Hill, Inc.; One
Valley Bank of Summersville, Inc.; One Valley Bank - East, National
Association, One Valley Bank - North, Inc.; One Valley Bank of Clarksburg,
National Association; One Valley Bank, F.S.B.; and One Valley Bank - Central
Virginia.
COMMITTEES OF THE BOARD
One Valley has a standing Audit Committee, Compensation Committee and
Nominating Committee.
The Audit Committee of One Valley consists of five members, Charles M.
Avampato, Nelle Ratrie Chilton, Edward H. Maier, John L. D. Payne and Richard B.
Walker and met four times in 1996. This Committee reviews and evaluates
significant matters relating to audit and internal controls, reviews the scope
and results of audits by independent auditors, reviews the activities of the
internal audit staff, meets with the appropriate management personnel regarding
internal and external audit results and reports its findings to the Board of
Directors.
The Compensation Committee of One Valley consists of six members,
Charles M. Avampato, Nelle Ratrie Chilton, Phillip H. Goodwin, David E. Lowe,
John L. D. Payne and H. Bernard Wehrle, III, and met four times in 1996. The
Compensation Committee administers the One Valley Bancorp, Inc., 1983 and 1993
Incentive Stock Option Plans. It also approves compensation levels for the
executive management group of One Valley and its subsidiaries.
The Nominating Committee of One Valley consists of six members, Robert
F. Baronner, Nelle Ratrie Chilton, Phillip H. Goodwin, J. Holmes Morrison, John
L. D. Payne and Angus E. Peyton and met once in 1996. The Nominating Committee
recommends nominees to fill vacancies on the Board of Directors, although the
President of One Valley will also entertain nominations made in accordance with
One Valley's Bylaws previously described.
One Valley's Board met eight times in 1996, and there were numerous
meetings of the Committees of the Board. During 1996, Directors Phillip H.
Goodwin, Angus E. Peyton and H. Bernard Wehrle, III, attended fewer than 75% of
the aggregate of the total number of One Valley Board meetings and the total
number of meetings held by all Committees on which they served.
PRINCIPAL HOLDERS OF VOTING SECURITIES
John L. Dickinson and C. C. Dickinson, sons of John Q. Dickinson, one
of the original incorporators of One Valley Bank, National Association, formerly
Kanawha Valley Bank, National Association (hereinafter "One Valley Bank"), each
owned more than 10% of the issued and outstanding stock of One Valley Bank. Both
John L. and C. C. Dickinson are deceased, and much of the stock formerly held by
them is now held by family trusts created by them or their spouses. At the time
of One Valley's formation as a one-bank holding company holding 100% of the
stock of One Valley Bank, the shares of One Valley Bank were exchanged on a one
for one basis for shares of One Valley. The John L. Dickinson Family Trusts
collectively hold 1,612,227 shares, representing 7.32% of the issued and
outstanding stock of One Valley. The C. C. Dickinson Family Trusts collectively
hold 1,083,724 shares, representing 4.92% of the issued and outstanding
stock of One Valley. The following table sets forth the names and addresses of
those shareholders who own beneficially more than 5% of the outstanding One
Valley Common Stock as of March 4, 1997, the amount and nature of the beneficial
ownership and the percentage of outstanding voting securities represented by the
amount owned. The individuals named in the table are co-trustees of certain of
the Dickinson Family Trusts and most of the shares owned by them are owned in
their capacity as co-trustees.
9
<PAGE>
<TABLE>
<CAPTION>
TITLE OF NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) CLASS
----- ------------------- ------------------------ -----
<S> <C> <C> <C>
Common Stock Mary Price Ratrie 1,224,127(2) 5.56%
Kanawha Salines
Malden, WV 25306
Common Stock Charles C. Dickinson, III 1,126,498(3) 5.12%
1111 City National Building
Wichita Falls, Texas 76301
Common Stock R. Marshall Evans, Jr. 1,794,198(4) 8.15%
3401 Northside Parkway
Atlanta, GA 30327
</TABLE>
- -------
(1) This table includes a duplication of beneficial ownership of securities
in cases where the named individuals have overlapping co-trustee
relationships. These three individuals hold, excluding duplication, a
total of 3,061,099 shares, or 13.90% of the total 22,017,192 shares
of One Valley Common Stock outstanding as of the record date. Although
One Valley Bank, a subsidiary of One Valley, is a co-trustee of these
various trusts, in all instances, the named individual co-trustees vote
the stock of One Valley held in the trusts.
(2) Consists of 42,498 shares owned of record; 1,083,724 shares held as
co-trustee with Charles C. Dickinson, III, and One Valley Bank (in
which trusts Mary Price Ratrie has a one-third beneficial interest);
945 shares owned by J. Q. Dickinson & Co., a sole proprietorship owned
by Mary Price Ratrie; and 96,960 shares owned by Dickinson Property
Limited Partnership in which Mary Price Ratrie is a beneficial owner.
(3) Consists of 42,774 shares owned of record and 1,083,724 shares held as
co-trustee with Mary Price Ratrie and One Valley Bank (in which trusts
Mr. Dickinson has a one-fifth beneficial interest).
(4) Consists of 1,046,857 shares held as co-trustee with an individual
co-trustee and One Valley Bank; 175,575 shares held as co-trustee with
One Valley Bank and another individual co-trustee; 149,401 shares held
with One Valley Bank as co-trustee; 28,913 shares held by his wife as
trustee of trusts for the benefit of his children; 35,627 shares owned
of record; 7,227 shares owned of record by his wife; and 350,598 shares
owned by Dickinson Company, of which Mr. Evans is an executive officer.
Not included in this total amount are 18,301 shares held in a trust
from which Mr. Evans may, at the discretion of the co-trustees, receive
distributions of income and, under certain circumstances, distributions
of principal.
OWNERSHIP OF VOTING SECURITIES BY DIRECTORS, NOMINEES AND OFFICERS
The following tabulation sets forth the number of shares of One Valley
Common Stock beneficially owned by (i) each of the nominees and directors, (ii)
each of the executive officers listed in the Summary Compensation Table, and
(iii) the directors, nominees, and executive officers of One Valley as a group
as of March 4, 1997, and indicates the percentages of One Valley Common Stock so
owned. There is no other class of voting securities issued and outstanding.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP (1) CLASS
<S> <C> <C>
Phyllis H. Arnold 64,723 Direct (2) *
181 Indirect
Charles M. Avampato 24,529 Direct *
3,891 Indirect
Robert F. Baronner 12,454 Direct *
7,546 Indirect
10
<PAGE>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP (1) CLASS
Frederick H. Belden, Jr. 27,400 Direct (3) *
2,670 Indirect
C. Michael Blair 72,974 Direct (4) *
12,777 Indirect
Dennis M. Bone 200 Direct *
James K. Brown 2,016 Direct *
3,039 Indirect
Nelle Ratrie Chilton 54,298 Direct *
H. Rodgin Cohen 1,000 Direct *
R. Marshall Evans, Jr. 35,627 Direct 8.2%
1,758,571 Indirect (5)
James Gabriel 10,602 Direct *
1,625 Indirect
Phillip H. Goodwin 2,671 Direct *
Thomas E. Goodwin 9,277 Direct *
9,347 Indirect
Cecil B. Highland, Jr. 406,131 Direct 1.9%
9,697 Indirect
Bob M. Johnson 104,912 Direct (6) *
2,707 Indirect
Laurance G. Jones 20,975 Direct (7) *
4,500 Indirect
Robert E. Kamm, Jr. 329,570 Direct (8) 1.6%
24,064 Indirect
David E. Lowe 1,401 Direct *
John D. Lynch 26,250 Direct *
3,750 Indirect
Edward H. Maier 12,500 Direct
J. Holmes Morrison 74,411 Direct (9) *
10,427 Indirect
Charles R. Neighborgall, III 1,706 Direct *
3,375 Indirect
Robert O. Orders, Sr. 21,862 Direct *
John L. D. Payne 892 Direct 2.6%
571,849 Indirect (10)
Angus E. Peyton 44,125 Direct 1.1%
207,711 Indirect
11
<PAGE>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP (1) CLASS
Lacy I. Rice, Jr. 180,576 Direct *
Brent D. Robinson 33,256 Direct (11) *
852 Indirect
Kenneth R. Summers 34,980 Direct (12) *
James W. Thompson 18,721 Direct *
7,318 Indirect
J. Lee Van Metre, Jr. 4,105 Direct *
Richard B. Walker 2,372 Direct *
H. Bernard Wehrle, III 1,475 Direct *
John H. Wick, III 12,625 Direct *
49,401 Indirect
Thomas D. Wilkerson 2,250 Direct *
All Directors, Nominees
and Executive 1,671,181 Direct
Officers as a Group
(35 individuals) 2,241,352 Indirect 17.8%
</TABLE>
*Beneficial ownership does not exceed one percent of the class.
(1) Share totals of directors include 100 directors' qualifying shares,
which each director is required to own pursuant to One Valley's Bylaws.
Shares held indirectly include shares held by family members and shares
held through trusts or corporations which in turn hold shares of One
Valley.
(2) Includes options to purchase 13,925 shares pursuant to One Valley's
1983 Stock Option Plan. Includes options to purchase 27,050 shares
pursuant to One Valley's 1993 Stock Option Plan.
(3) Includes options to purchase 4,950 shares pursuant to One Valley's 1983
Stock Option Plan. Includes options to purchase 20,825 shares pursuant
to One Valley's 1993 Stock Option Plan.
(4) Includes options to purchase 11,937 shares pursuant to One Valley's
1993 Stock Option Plan. Includes options to purchase 9,140 shares
pursuant to Mountaineer Bankshares of W.Va., Inc., Stock Option Plan.
(5) See Note (4) to Principal Holders of Voting Securities.
(6) Includes options to purchase 4,375 shares pursuant to One Valley's 1993
Stock Option Plan. Includes options to purchase 54,426 shares pursuant
to CSB Financial Corporation Stock Option Plan.
(7) Includes options to purchase 19,975 shares pursuant to One Valley's
1993 Stock Option Plan.
(8) Includes options to purchase 4,031 shares pursuant to One Valley's 1983
Stock Option Plan. Includes options to purchase 15,212 shares pursuant
to One Valley's 1993 Stock Option Plan.
(9) Includes options to purchase 26,309 shares pursuant to One Valley's
1983 Stock Option Plan. Includes options to purchase 46,875 shares
pursuant to One Valley's 1993 Stock Option Plan.
(10) Consists of 117,003 shares held in nine trusts of which John L. D.
Payne is a co-trustee, 453,946 shares held by Dickinson Company,
Payne-Gallatin Mining Company and Horse Creek Land and Mining Company
(in which companies Mr. Payne is an executive officer), and 900 shares
owned by his children; does not include 110,037 shares held in or
through trusts in which John L. D. Payne, at the discretion of the
trustees, is an income beneficiary.
12
<PAGE>
(11) Includes options to purchase 14,750 shares pursuant to One Valley's
1993 Stock Option Plan.
(12) Includes options to purchase 11,700 shares pursuant to One Valley's
1983 Stock Option Plan. Includes options to purchase 18,412 shares
pursuant to One Valley's 1993 Stock Option Plan.
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation
for services in all capacities to One Valley for the fiscal years ended December
31, 1996, 1995, and 1994, of those persons who were, as of December 31, 1996,
(i) the chief executive officer and (ii) the four other most highly compensated
executive officers of One Valley.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Awards Payouts
Other Securities All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options Payouts sation(1)
Position Year ($) ($) ($) ($) (#) ($) ($)
-------- ---- ------- -------- --------- ---------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Holmes Morrison 1996 362,000 173,760 0 0 12,500 0 3,750
President & CEO 1995 340,000 140,080 0 0 11,875 0 3,750
1994 315,000 110,250 0 0 11,250 0 5,476
Phyllis H. Arnold 1996 218,000 93,696 0 0 7,500 0 3,750
Exec. Vice President 1995 205,000 78,925 0 0 6,875 0 3,750
1994 190,000 63,840 0 0 6,375 0 4,531
Frederick H. Belden, Jr.1996 174,000 60,030 0 0 5,625 0 3,750
Exec. Vice President 1995 164,000 54,858 0 0 5,250 0 3,750
1994 156,000 47,190 0 0 5,000 0 4,691
Laurance G. Jones 1996 171,000 58,995 0 0 5,625 0 3,750
Exec. Vice President 1995 160,000 49,440 0 0 5,250 0 3,750
1994 150,000 43,313 0 0 4,750 0 4,687
Kenneth R. Summers 1996 152,000 46,740 0 0 5,000 0 3,750
Sr. Vice President 1995 135,000 38,813 0 0 4,687 0 3,706
1994 130,000 35,750 0 0 4,375 0 3,539
</TABLE>
(1) The amounts included in "All Other Compensation" consist of One Valley's
contributions on behalf of the listed officers to the 401(k) Plan, pursuant
to which participating employees receive a matching contribution of 50%
from One Valley for up to 5% of pay contributed to the 401(k) Plan by the
employee, to a maximum of $3,750 which represents One Valley's matching
share times $150,000, the maximum compensation allowed for benefit
calculation in a qualified plan.
13
<PAGE>
The following table sets forth further information on grants of stock
options during 1996 to (i) the listed officers and (ii) all optionees as a group
pursuant to One Valley's 1993 Incentive Stock Option Plan. The number of shares
and exercise price reflect a 5 for 4 stock split effected in the form of a 25%
stock dividend declared on September 18, 1996. The table also provides
information concerning the potential gain to all shareholders at the designated
rate of appreciation. No stock appreciation rights ("SARs") were awarded by One
Valley.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Grant Date
Individual Grants Value(1)
Number of % of Total Potential Realizable Value
Securities Options at Assumed Annual Rates
Underlying Granted to Exercise of Stock Appreciation for
Options Employees or Base Expira- Ten-Year Option Term
Granted in Fiscal Price(2) tion 0% 5% 10%
Name (#) Year ($/Sh) Date ($) ($) ($)
------- ------- ---------- --------- -------- ----- -------- --------
<S>
<C> <C> <C> <C> <C> <C> <C>
J. Holmes Morrison 12,500 10.2% 24.70 04/29/06 0 194,500 492,500
Phyllis H. Arnold 7,500 6.1% 24.70 04/29/06 0 116,700 295,500
Frederick H. Belden, Jr. 5,625 4.6% 24.70 04/29/06 0 87,525 221,625
Laurance G. Jones 5,625 4.6% 24.70 04/29/06 0 87,525 221,625
Kenneth R. Summers 5,000 4.1% 24.70 04/29/06 0 77,800 197,000
25 Optionees (including
the five listed above) 118,062 96.4% 24.70 04/29/06 0 1,837,045 4,651,643
One Optionee 4,375 3.6% 28.00 08/05/06 0 77,044 195,256
All Shareholders - - - - 0 320,291,941 811,022,011
Optionee Gain as % of
All Shareholders' Gain - - - - 0 .60% .60%
</TABLE>
(1) The actual value, if any, an officer may realize depends on the
excess of the stock price over the exercise price on the date the
option is exercised.
(2) The exercise price is the fair market value of One Valley Common Stock
on the date the options were granted. Options are exercisable
immediately and terminate upon termination of employment for reasons
other than death or retirement, upon the expiration of three months
after the date of retirement, upon the expiration of one year from the
date of death or ten years from the option date.
14
<PAGE>
The following table sets forth information concerning (i) the value
realized upon the exercise of stock options during 1996 by the listed
officers, and (ii) the number of unexercised options held by each listed
officer as of December 31, 1996, and the market value of the underlying
shares if the options had been exercised on that date. The number of shares
reflect a 5 for 4 stock split effected in the form of a 25% stock dividend
declared on September 18, 1996. No SARs have been awarded by One Valley.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares Acquired Value FY-End (#) FY-End ($)
Name On Exercise (#) Realized ($)(1) Exercisable Exercisable
---- --------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
J. Holmes Morrison 4,378 92,965 77,184 1,377,877
Phyllis H. Arnold 1,600 45,200 40,975 700,251
Frederick H. Belden, Jr. 1,000 22,120 25,775 386,464
Laurance G. Jones 1,720 22,162 22,100 318,076
Kenneth R. Summers 1,410 29,532 30,112 532,060
</TABLE>
(1) Market value of underlying securities at exercise, minus the exercise
or base price.
Compensation covered by a qualified pension plan is based on total pay,
including all Incentive Compensation Plan payments, received during the sixty
consecutive months of employment which results in the highest total divided by
five. Such compensation is directly related to the total annual salary and bonus
set forth in the Summary Compensation Table except that compensation relative to
the benefit calculation cannot exceed $150,000. In 1996, this plan was amended
a) to provide for the merger of assets and participants from Co-operative
Savings Bank, FSB (now One Valley Bank - Central Virginia); b) to adopt a "Rule
of 87" under which early retirement benefits are unreduced if a participant's
age and credited service equals or exceeds 87; and c) to change the 5% early
retirement benefit reduction factor to lower the benefit using a calculation
based on age 62 rather than age 65 when an employee with 25 years of service or
more retires prior to age 62 (unless they meet the Rule of 87, in which case
there is no reduction). As of November 1, 1996, the credited years of service
under the retirement plan for the individuals named in the table shown under
Executive Compensation were: Phyllis H. Arnold, 20.667 years; J. Holmes
Morrison, 29.17 years; Frederick H. Belden, Jr., 29 years; Laurance G.
Jones, 27.417 years; and Kenneth R. Summers, 33.417 years.
In 1990, a Supplemental Employee Retirement Plan (SERP) was established
for certain members of senior management, including the individuals named in the
Summary Compensation Table, which provides for a benefit at normal retirement of
65% of final average compensation, less (i) the retirement benefit under the
Defined Benefit Pension Plan, (ii) any retirement benefits from a previous
employer, and (iii) the employee's Social Security benefit. The plan further
provides reduced early retirement benefit target objectives and a disability
retirement benefit target of 60% of final average compensation at the time of
disability, minus the benefits paid under the employer Long-Term Disability Plan
and the employee's Social Security benefit. In 1996, the SERP was amended: a)
to redefine a "disability" to be the inability of a participant to perform his
or her usual job function performed immediately preceding the onset of
disability; b) to revise the reduced early retirement benefit target objectives
to be consistent with the change in the 5% early retirement reduction factor
made in the Defined Benefit Pension Plan; and c) to cause the SERP to include
"non-compete" provisions which must be met for any participant to receive
benefits under that plan. During 1996, $318,705 was accrued for the SERP Trust.
15
<PAGE>
The following table indicates, for purposes of illustration, the
approximate annual retirement benefits (Qualified Plan and Supplemental Plan)
that would be payable to an employee retiring on November 1, 1996, at age 65 on
the full life annuity form under various assumptions as to salary and years of
service. Benefits are not subject to deduction for Social Security or other
offset amounts.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
HIGHEST CONSECUTIVE ESTIMATED ANNUAL PENSION FOR
FIVE-YEAR REPRESENTATIVE YEARS OF CREDITED SERVICE
AVERAGE COMPENSATION 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$125,000 $27,932 $37,242 $66,274 $66,274 $66,274
150,000** 33,932 45,242 82,524 82,524 82,524
175,000 33,932 45,242 98,774 98,774 98,774
200,000 33,932 45,242 115,024 115,024 115,024
250,000 33,932 45,242 147,524 147,524 147,524
300,000 33,932 45,242 180,024 180,024 180,024
400,000 33,932 45,242 245,024 245,024 245,024
500,000 33,932 45,242 310,024 310,024 310,024
600,000 33,932 45,242 375,024 375,024 375,024
</TABLE>
**IRS Maximum for Qualified Plan.
CHANGE IN CONTROL ARRANGEMENTS
In October 1996, One Valley entered into agreements with the officers
listed in the Summary Compensation Table and with certain other officers to
encourage those key officers not to seek other employment because of the
possibility that One Valley might be acquired by another entity, and to secure
the executives' continued service and dedication in the event of an actual or
threatened change in control. The Board of Directors determined that such an
arrangement was appropriate, especially in view of the volatile banking market
and the advent of full-scale interstate branching in June 1997; however, the
agreements were not undertaken in the belief that a change in control of One
Valley was imminent. The 1996 agreements supersede previous change in control
agreements.
In general, the agreements provide that, in the event there is a change
in control of One Valley (as described below), and during the two-year period
immediately following the change in control the executive is (i) terminated by
One Valley without cause, or (ii) terminates employment for good reason (as
defined in the agreements), or (iii) in the case of executives at the level of
Executive Vice President or above, voluntarily terminates employment during the
thirteenth month after a change in control, the executive shall receive a
lump-sum cash amount equal to either three (at the level of Executive Vice
President or above) or two times the sum of (i) the executive's base salary and
average bonus for the three years preceding the change in control, (ii) a pro
rata portion of the executive's target bonus for the year in which the change in
control occurs, (iii) the continuation of welfare benefits for a 36-month
period, and (iv) retiree medical benefits following such 36-month period if the
executive has attained age 50 with ten years of service as of the date of
termination. In the event change in control related payments are subject to a
20% excise tax under Section 4999 of the Internal Revenue Code, One Valley will
reimburse executives at the level of Executive Vice President or above in an
amount sufficient to enable the executive to retain his change in control
benefits as if the excise tax had not applied; provided, however, that the
reimbursement will not be made and severance payments will be capped so no
excise tax would be due if a reduction of the severance payments by an amount
equal to less than 10% of the change in control benefits would result in no
excise tax being due. If necessary, payments for other executives under the
severance agreements will be reduced so no excise tax would be due. Pursuant to
the severance agreements, the executives agree to not voluntarily terminate
employment during the 180-day period following the commencement of a tender or
exchange offer or proxy contest or execution of an agreement which would result
in a change in control, unless and until such offer, contest or agreement is
terminated or abandoned or a change in control occurs.
Under the severance agreements, a "change in control" is defined
generally to mean: (i) a person becomes the beneficial owner of 50% or more of
the voting power of One Valley; (ii) a change in a majority of the Board (or
their approved successors); (iii) the consummation of a reorganization, merger,
consolidation or sale of substantially all of the assets of One Valley (unless
One Valley's stockholders receive more than 60% of the voting stock of the
surviving or purchasing company, no person acquires more than 50% of such voting
stock, and One Valley's Board of Directors remains a majority of the continuing
board of directors of the surviving or purchasing company); or (iv) a
liquidation, dissolution or sale or disposition of all or substantially all the
assets of One Valley.
16
<PAGE>
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee ("Committee") of the Board of Directors
establishes compensation policies, plans and programs which are intended to
accomplish three objectives: to attract and retain highly capable and
well-qualified executives; to focus executives' efforts on increasing long-term
shareholder value; and to reward executives at levels which are competitive with
the marketplace for similar positions and commensurate with the performance of
each executive and of One Valley. The Committee has determined that to
accomplish these objectives, total compensation should be composed of base
salary, short-term incentive compensation and long-term incentive compensation.
The Committee meets several times annually with the Chief Executive
Officer and senior human resources executives to review, modify as appropriate,
and approve the compensation programs for executives utilizing the services of
outside compensation consultants when appropriate. In determining the salary
budget for 1996 and in fixing levels of executive compensation, the Committee
considered internal equity and external competitiveness of base compensation and
total compensation and One Valley's performance relative to its long-range
goals. In its evaluation of One Valley's corporate performance for the purpose
of fixing base salary levels, the Committee does not attempt to assign specific
weights to multiple factors which, taken together, constitute "corporate
performance." Consequently, its evaluation of corporate performance is
subjective to the extent that the Committee considers all aspects of corporate
performance, including but not limited to long-range plan goals for earnings,
asset quality, capital, liquidity and resource utilization; however, significant
emphasis is given to the annual increase in One Valley's earnings per share.
Base salaries for executive officers are determined first by an evaluation of
the officer's success as measured against annually established goals for
individual performance and the performance of the business unit(s) for which
they have responsibility. Second, base salaries are measured against market
place salaries of equivalent positions in financial institutions of comparable
size. Marketplace information is determined using data from several recognized
compensation survey services. In 1995 the Committee independently engaged a
third party consultant, Price Waterhouse LLP, to study the compensation and
benefits of the most senior executives of the corporation and to offer an
evaluation and recommendations for 1996.
In March 1996, Price Waterhouse LLP reported directly to the
Compensation Committee concerning annual cash compensation, total compensation,
an executive benefits analysis and recommendations concerning change in control
agreements. The Committee reviewed the findings and recommendations in detail
and determined that One Valley's level of executive compensation is appropriate
relative to a high performing peer group of banks. The percentage of
compensation at risk is competitive to the peer group banks. These compensation
levels are consistent with the philosophy of the Compensation Committee.
Currently, base compensation for One Valley's executives, while
competitive, is below the average for similar positions within comparable
financial institutions. The Committee believes, philosophically, that
compensation should, on the whole, be incentive driven; however, base
compensation should be reasonably competitive in the marketplace. To this end,
the Committee has set a base salary range target for executives at the 37.5
percentile of the marketplace average. The Committee believes that the
appropriate level of executive base compensation is primarily market-driven,
although base compensation is also dependent on corporate performance and on
each executive's progress toward individual goals.
The Committee believes that incentive compensation is an appropriate
adjunct to base compensation which, together with base compensation, should
approach the industry median for total compensation if established goals are
met. Short-term incentive compensation is provided to key executives, as
determined by the Compensation Committee pursuant to One Valley's Executive
Incentive Compensation Plan ("EICP"). Awards under EICP are granted based upon
individual and corporate performance. Corporate performance is measured by One
Valley's earnings per share growth relative to a target level set by the Board
of Directors, and One Valley's performance on six financial measures as compared
to a selected peer group. The comparative measures are: net operating expenses /
average assets; non-performing assets / (loans and OREO); net loan charge-offs /
average loans; efficiency ratio; return on assets; and return on equity. The
individual portion is based upon performance of the executive and the unit he or
she manages in meeting assigned objectives, and upon the executive's relative
position within One Valley. The level of annual performance of One Valley,
determined in a manner which emphasizes factors which should have a positive
impact upon total return to shareholders, has a significant impact upon total
executive compensation.
The Committee believes that shareholder value can be further enhanced
by closely aligning the financial interests of One Valley's key executives with
those of its shareholders. Awards of stock options pursuant to One Valley's
Incentive Stock Option Plan ("ISOP") are intended to meet this objective and
constitute the long-term incentive portion of executive compensation.
Participation in the ISOP is limited to approximately thirty employees of the
top management of One Valley and its affiliate banks who are deemed to have the
opportunity to most significantly affect corporate results. Under the ISOP, the
option price paid by the executive to exercise the option is the fair market
value of the One Valley Common Stock on the day the option is granted, and the
option is freely exercisable within a ten-year period. The options attain value
over that time only if the market price of the
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underlying stock increases, and the increase in value of the option is directly
tied to the increase in the value of the One Valley Common Stock. The Committee
believes the ISOP focuses the attention and efforts of executive management upon
increasing long-term shareholder value, and the Committee annually awards
options to key executives in amounts it believes are adequate to achieve the
desired objective. The total number of shares available for award in each plan
year is specified in the ISOP. These shares are generally allocated based upon
the Committee's subjective judgment, taking into account the historical levels
of awards and the relative positions with One Valley of the participants in the
ISOP. Price Waterhouse LLP reviewed long-term incentives as a part of total
compensation benchmarking. Total compensation refers to the aggregation of the
annual cash compensation and average long-term incentives. The level of One
Valley's total compensation package is competitive with the peer groups;
however, One Valley places slightly more emphasis on the long-term incentive
component of the compensation package than do the banks included in the peer
group.
Total compensation for the CEO is determined in essentially the same
way as for other executives, recognizing that the CEO has overall responsibility
for the performance of One Valley. Therefore, One Valley's performance has a
direct impact upon the CEO's compensation in that its earnings per share
determine the amount of base compensation increase and significantly impact the
EICP award; and, in addition, the market price of One Valley Common Stock
determines the value of options awarded during prior periods. The base
compensation of the CEO in 1996 was based in large measure on the corporate
results in 1995 relative to long-range plan goals for earnings, asset quality,
capital, liquidity and resource utilization. As discussed above, no attempt is
made by the Committee to assign relative weights to the various components of
corporate performance in fixing the CEO's base compensation.
The Compensation Committee reviewed the report of Price Waterhouse LLP
on executive benefits. On the whole, the executive benefits were found to be
adequate, although somewhat conservative. The Committee approved the
recommendation that executives be provided personal financial and estate
planning services. With respect to change in control strategies, Price
Waterhouse LLP recommended a complete study of One Valley's then current change
in control agreements, which it believed should be modified and expanded. (See
the subsection of this Proxy Statement captioned "Change in Control
Agreements.")
Recent revisions to the Internal Revenue Code disallow deductions in
excess of $1,000,000 for certain executive compensation. The Committee has not
adopted a policy in this regard since none of One Valley's executives receives
compensation approaching the $1,000,000 level. The report shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that One Valley
specifically incorporates this report by reference, and shall not otherwise be
filed under such Acts.
The report is submitted by the Compensation Committee, which consists of
Phillip H. Goodwin, Chairman
Charles M. Avampato
Nelle Ratrie Chilton
David E. Lowe
John L. D. Payne
H. Bernard Wehrle, III.
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PERFORMANCE GRAPH
The following graph compares the yearly percentage change in cumulative
total shareholder return on One Valley Common Stock for the five-year period
ending December 31, 1996, with the cumulative total return of the Standard &
Poor's 500 Stock Index and the Media General Industry Group Index - 04, which
consists of all banks and bank holding companies within the United States whose
stock has been publicly traded for at least six years. The graph assumes (i) the
reinvestment of all dividends and (ii) an initial investment of $100. There is
no assurance that One Valley's stock performance will continue in the future
with the same or similar trends as depicted in the graph. The graph shall not be
deemed incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities Act of 1933
or the Securities Exchange Act of 1934, except to the extent that One Valley
specifically incorporates this graph by reference, and shall not otherwise be
filed under such Acts.
FIVE-YEAR CUMULATIVE TOTAL RETURN COMPARISON
(Performance Graph appears here with the following plot points.)
FISCAL YEAR ENDING
1991 1992 1993 1994 1995 1996
One Valley Bancorp 100 155.61 148.48 154.95 177.21 271.27
All Publicly Traded Banks 100 119.14 140.83 133.61 188.94 261.26
Standard & Poor's 500 100 107.64 118.50 120.06 165.18 203.11
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COMPENSATION OF DIRECTORS
During 1996, each director who was not also an officer and full-time
employee of One Valley received $600 for each meeting of the Board of Directors
of One Valley attended. Non-employee directors who were members of the Board's
Audit Committee received $350 per meeting attended and $300 for other committee
meetings attended. In addition, Mr. Baronner received compensation in the amount
of $18,000 for serving as Chairman of the Board of Directors. During 1996, there
were no other arrangements pursuant to which any director of One Valley was
compensated for services as a director.
Directors of One Valley are eligible to defer fees pursuant to the One
Valley Deferred Compensation Plan, which was adopted in 1984, with respect to
fees received in 1984 and thereafter for services rendered as a director of One
Valley.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires One
Valley's directors and executive officers, and persons who beneficially own more
than ten percent of a registered class of One Valley's equity securities to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
One Valley. Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish One Valley with copies of all Section
16(a) forms they file.
To One Valley's knowledge, based solely upon review of the copies of
such reports furnished to One Valley and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners were complied
with.
CERTAIN TRANSACTIONS WITH DIRECTORS AND OFFICERS AND THEIR ASSOCIATES
One Valley and its various banking subsidiaries have had and expect to
have in the future transactions in the ordinary course of business with
directors, officers, principal shareholders and their associates. During 1996,
all of these transactions were made on substantially the same terms, including
interest rates, collateral and repayment terms on extensions of credit, as those
prevailing at the same time for comparable transactions with other unaffiliated
persons. One Valley's management believes that these transactions, which at
December 31, 1996, were, in the aggregate, 26.0% of total shareholders'
equity, did not involve more than the normal risk of collectibility or present
other unfavorable features.
Jackson & Kelly, a law firm in which Director James K. Brown is a
partner, Steptoe & Johnson, a law firm in which Director J. Lee Van Metre, Jr.,
is a partner, Bowles, Rice, McDavid, Graff & Love, a law firm in which Director
Lacy I. Rice, Jr., is a partner, McNeer, Highland & McMunn, a law firm in
which Director Cecil B. Highland, Jr., is of counsel, and Sullivan & Cromwell,
a law firm in which Nominee H. Rodgin Cohen is a partner, performed legal
services for One Valley and its subsidiaries in 1996. Based on information
provided by Messrs. Brown, Van Metre, Rice, Highland and Cohen, One Valley
believes that payments it made to these law firms were less than five percent of
each of those law firms' gross revenues in 1996. During 1996, The Neighborgall
Construction Co. received payments of $149,720 from One Valley's affiliate, One
Valley Bank of Huntington, Inc., for repair work to facilities owned by the
bank. In One Valley's opinion, these transactions were on terms as favorable to
One Valley as they would have been with third parties not otherwise affiliated
with One Valley.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, One Valley's affiliate banks and One Valley Square, Inc.,
paid $115,029 to TerraCare, Inc., for landscaping services. TerraCare, Inc., is
a wholly owned subsidiary of TerraCo, Inc. Mary Price Ratrie, a principal
shareholder of One Valley, is the principal shareholder and President of
TerraCo, Inc., and Director Nelle Ratrie Chilton is Vice President and director
of TerraCo, Inc. In the opinion of One Valley, these transactions were on terms
as favorable to One Valley as they would have been with third parties not
otherwise affiliated with One Valley. The members of One Valley's Compensation
Committee are Phillip H. Goodwin, Charles M. Avampato, Nelle Ratrie Chilton,
David E. Lowe, John L. D. Payne and H. Bernard Wehrle, III.
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2. RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the firm of Ernst & Young LLP to
serve as independent auditors for One Valley for 1997. Although the selection of
auditors does not require shareholder ratification, the Board of Directors has
directed that the appointment of Ernst & Young LLP be submitted to shareholders
for ratification. If the shareholders do not ratify the appointment of Ernst &
Young LLP, the Board of Directors will consider the appointment of other
independent auditors. One Valley is advised that no member of this accounting
firm has any direct or indirect material interest in One Valley, or any of its
subsidiaries. A representative of Ernst & Young LLP will be present at the
Annual Meeting to respond to appropriate questions and to make a statement if
desired. The enclosed proxy will be voted "FOR" the ratification of the
selection of Ernst & Young LLP unless otherwise directed. The affirmative vote
of a majority of the shares of One Valley Common Stock represented at the Annual
Meeting of Shareholders is required to ratify the appointment of Ernst & Young
LLP.
3. PROPOSAL TO AMEND INDEMNIFICATION PROVISION OF ARTICLES OF
INCORPORATION
The Board of Directors recommends that the shareholders approve an
amendment to Article V of the Articles of Incorporation of One Valley to revise
and update the obligation of One Valley to indemnify its directors and officers.
The text of Article V, in its current form, is attached as Exhibit A to this
Proxy Statement and incorporated herein by this reference. The text of proposed
Article V is attached as Exhibit B and is also incorporated herein by this
reference.
Background and Reasons for the Proposed Amendment: Indemnification is
the practice by which a corporation pays the expenses of directors and
officers who are named as defendants or otherwise involved in litigation
relating to their activities on behalf of the corporation. Virtually all
publicly-owned corporations provide indemnification. The laws of the State of
West Virginia expressly authorize indemnification, and since One Valley was
incorporated in 1981, Article V has provided indemnification for One Valley's
directors and officers. Since 1981, there have been numerous legal and other
developments concerning indemnification. The Board of Directors believes that
One Valley's current indemnification provision should be revised and updated
to reflect these developments and to be consistent with industry standards,
so as to attract and retain qualified directors and officers.
The current indemnification provision may leave some ambiguity as to
whether the standard of conduct required for indemnification has been
satisfied. Similarly, the current provision utilizes legal terms establishing
the standard of conduct of indemnification which, in light of the developments
since 1981, may be difficult to apply. The proposed provision is designed to
reduce ambiguity and uncertainty in favor of indemnification simply "to the
fullest extent authorized by law." In the opinion of the Board of Directors,
the use of the language "to the fullest extent authorized by law" makes the
provision consistent with existing law and potential future developments in
this area. In addition, the proposed indemnity provision more clearly specifies
the payments One Valley must make, the binding contractual nature of One
Valley's commitment to do so, and the procedure that an indemnified party may
use to obtain prompt payment. The Board of Directors believes that the
proposed amendment is consistent with the original intent of Article V when
it was adopted.
The proposed indemnity provision does not authorize indemnification
which is precluded by state or federal statutes or regulations. For example, the
federal securities laws or regulations of the Federal Deposit Insurance
Corporation may preclude indemnification for certain specified violations.
Other information: Although there is currently no litigation pending,
or, to One Valley's knowledge, threatened that will trigger either the existing
or the proposed indemnification provision, incumbent directors may be deemed
to have a direct and personal interest in approval of the proposed amendment
because of possible litigation in the future. One Valley maintains directors'
and officers' liability insurance which may offset part of the cost involved
in any indemnification claim. To the extent obligations under the proposed
indemnity provision of One Valley's Articles of Incorporation exceed any
proceeds of insurance (or if such coverage is discontinued or not available),
any indemnification payments made by One Valley could have an adverse effect
upon its earnings and assets.
The Board recommends that Article V of One Valley's Articles of
Incorporation be amended and restated in its entirety as set forth in Exhibit B.
An affirmative vote of a majority of the outstanding shares of One Valley Common
Stock is required to approve the amendment. Shares voted "ABSTAIN" and shares
not voted will have the same effect as if these shares were voted "AGAINST"
approval of the amendment.
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" APPROVAL OF THIS PROPOSAL. The enclosed proxy will be voted "FOR" the
approval of the proposed amendment to Article V of the Articles of Incorporation
unless otherwise directed.
FORM 10-K ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
Upon written request by any shareholder to Laurance G. Jones,
Treasurer, One Valley, P. O. Box 1793, Charleston, West Virginia 25326, a copy
of One Valley's 1996 Annual Report on Form 10-K will be provided without charge.
OTHER INFORMATION
If any of the nominees for election as directors are unable to serve as
directors by reason of death or other unexpected occurrence, proxies will be
voted for a substitute nominee or nominees designated by the Board of One Valley
unless the Board of Directors adopts a resolution pursuant to the Bylaws
reducing the number of directors. The Board of Directors is unaware of any other
matters to be considered at the meeting, but if any other matters properly come
before the meeting, persons named in the proxy will vote such proxy in
accordance with the recommendation of the Board of Directors.
SHAREHOLDER PROPOSALS FOR 1998
Any shareholder who wishes to have a proposal placed before the next
Annual Meeting of Shareholders must submit the proposal to Merrell S. McIlwain
II, Secretary of One Valley, at its executive offices, no later than November
18, 1997, to have it considered for inclusion in the proxy statement of the
Annual Meeting in 1998.
J. Holmes Morrison
PRESIDENT
Charleston, West Virginia
March 21, 1997
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EXHIBIT A
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.
EXHIBIT B
Proposed
ARTICLE V
---------
Provisions for the Regulation of the
Internal Affairs of the Corporation
A. Indemnification. Each person who was or is a party or is
threatened to be made a party to or is involved (including, without limitation,
as a witness or deponent) in any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative, investigative or
otherwise in nature ("Proceeding"), by reason of the fact that he or she, or a
person of whom he or she is the legal representative, is or was a director or
officer of the corporation or is or was serving at the written request of the
corporation's board of directors, president or their delegate as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether the basis of such Proceeding is alleged action or omission in an
official capacity as a director, officer, trustee, employee or agent or in any
other capacity, shall be indemnified and held harmless by the corporation to the
fullest extent authorized by law, including but not limited to the West Virginia
Code, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the corporation
to provide broader indemnification rights than said Code permitted the
corporation to provide prior to such amendment), against all expenses, liability
and loss (including, without limitation, attorneys' fees and disbursements,
judgments, fines, ERISA or other similar or dissimilar excise taxes or penalties
and amounts paid or to be paid in settlement) incurred or suffered by such
person in connection therewith; provided, however, that the corporation shall
indemnify any such person seeking indemnity in connection with a Proceeding (or
part thereof) initiated by such person only if such Proceeding (or part thereof)
was authorized by the Board of Directors of the corporation; provided, further,
that the corporation shall not indemnify any person for civil money penalties or
other matters, to the extent such indemnification is specifically not
permissible pursuant to federal or state statute or regulation, or order or rule
of a regulatory agency of the federal or state government with authority to
enter, make or promulgate such order or rule. Such right shall include the right
to be paid by the corporation expenses, including, without limitation,
attorneys' fees and disbursements, incurred in defending or participating in any
such Proceeding in advance of its final disposition; provided, however, that the
payment of such expenses in advance of the final disposition of such Proceeding
shall be made only upon delivery to the corporation of an undertaking, by or on
behalf of such director or officer, in which such director or officer agrees to
repay all amounts so advanced if it should be ultimately determined that such
person is not entitled to be indemnified under this Article or otherwise. The
termination of any Proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interest of the
corporation, or that such person did have reasonable cause to believe that his
conduct was unlawful.
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B. Right of Claimant to Bring Suit. If a claim under this
Article is not paid in full by the corporation within thirty days after a
written claim therefor has been received by the corporation, the claimant may at
any time thereafter bring suit against the corporation to recover the unpaid
amount of the claim and, if successful, in whole or in part, the claimant shall
be entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending or participating in any Proceeding in advance of
its final disposition where the required undertaking has been tendered to the
corporation) that the claimant has not met the standards of conduct which make
it permissible under the applicable law for the corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the corporation.
Neither the failure of the corporation (including its Board of
Directors, independent legal counsel, or its shareholders) to have made a
determination prior to the commencement of such action that indemnification or
reimbursement of the claimant is permitted in the circumstances because he or
she has met the applicable standard of conduct, nor an actual determination by
the corporation (including its Board of Directors, independent legal counsel, or
its shareholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
C. Contractual Rights: Applicability. The right to be
indemnified or to the reimbursement or advancement of expenses pursuant hereto
(i) is a contract right based upon good and valuable consideration, pursuant to
which the person entitled thereto may bring suit as if the provisions hereof
were set forth in a separate written contract between the corporation and the
director or officer, (ii) is intended to be retroactive and shall be available
with respect to events occurring prior to the adoption hereof, and (iii) shall
continue to exist after the rescission or restrictive modification hereof with
respect to events occurring prior thereto.
D. Requested Service. Any director or officer of the
corporation serving, in any capacity, (i) another corporation of which five
percent (5%) or more of the shares entitled to vote in the election of its
directors is held by the corporation, or (ii) any employee benefit plan of the
corporation or of any corporation referred to in clause (i), shall be deemed to
be doing so at the request of the corporation.
E. Non-Exclusivity of Rights. The rights conferred on any
person hereunder shall not be exclusive of and shall be in addition to any other
right which such person may have or may hereafter acquire under any statute,
provision of the Certificate of Incorporation, Bylaws, agreement, vote of
shareholders or disinterested directors or otherwise.
F. Insurance. The corporation may purchase and maintain
insurance, at its expense, to protect itself and any director, officer, employee
or agent of the corporation or another corporation, partnership, joint venture,
trust or other enterprise against such expense, liability or loss, whether or
not the corporation would have the power to indemnify such person against such
expense, liability or loss under West Virginia law.
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APPENDIX
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PROXY ONE VALLEY BANCORP, INC. PROXY
CHARLESTON, WEST VIRGINIA
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS, APRIL 22, 1997
Michael A. Albert, John R. Lukens and Louis S. Southworth, II, or any one
of them, are hereby authorized to represent and to vote stock of the undersigned
in One Valley Bancorp, Inc. at the Annual Meeting of Shareholders to be held
April 22, 1997, and any adjournment thereof.
Unless otherwise specified on this Proxy, the shares represented by this
Proxy will be voted "FOR" the propositions listed on the reverse side and
described more fully in the Proxy Statement of One Valley Bancorp, Inc.,
distributed in connection with this Annual Meeting. If any shares are voted
cumulatively for the election of Directors, the Proxies, unless otherwise
directed, shall have full discretion and authority to cumulate their votes and
vote for less than all such nominees. If any other business is presented at said
meeting, this Proxy shall be voted in accordance with recommendations of the
Board of Directors.
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
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ONE VALLEY BANCORP, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
The Board of Directors recommends a vote "FOR" the listed propositions.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1. Election of Directors for the terms specified in the FOR WITHHOLD FOR ALL
Proxy Statement.
(Except Nominees(s)written Below
Nominees: Dennis M. Bone, H. Rodgin Cohen, Bob M. [ ] [ ] [ ]
Johnson, Robert E. Kamm, Jr., Edward H. Maier, J.
Holmes Morrison, Angus E. Peyton, Lacy I. Rice,
Jr., Richard B. Walker and Thomas D. Wilkerson
2. Ratify the selection of Ernst & Young LLP as independent FOR AGAINST ABSTAIN
Certified Public Accountants for 1997. [ ] [ ] [ ]
3. Approve an amendment to Article V of the Articles of FOR AGAINST ABSTAIN
Incorporation to update the indemnification provision. [ ] [ ] [ ]
4. Transact such other business as may properly come before the FOR AGAINST ABSTAIN
meeting and any adjournment thereof. [ ] [ ] [ ]
</TABLE>
Dated:__________________, 1997
Signature(s)___________________________________
---------------------------------------------
When signing as attorney, executor,
administrator, trustee or guardian, please
give full title. If more than one trustee, all
should sign.
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26
