FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[?] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission file number 010042
One Valley Bancorp, Inc.
(Exact name of registrant as specified in its charter)
West Virginia 55-0609408
State or other jurisdiction (I.R.S Employer
Of incorporation or organization Identification No.)
One Valley Square, Charleston, West Virginia 25326
(Address of principal executive offices)
(Zip Code)
(304) 348-7000
(Registrant's telephone number, including area code)
Not applicable _
(Former name, address, and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the Securities and
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant as required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES X No
The number of shares outstanding of each of the issuer's classes of common
stock as of September 30, 1998 was:
Common Stock, $10.00 par value -34,715,450 shares
<PAGE>
One Valley Bancorp, Inc.
Part I. Financial Information
Item 1. Financial Statements.
The unaudited interim consolidated financial statements of One Valley Bancorp,
Inc. (One Valley) or (Registrant) are included on pages 3 - 8 of this report.
These consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all the information and footnotes required by generally
accepted accounting principles for annual year-end financial statements. In
the opinion of management, all adjustments considered necessary for a fair
presentation have been included and are of a normal recurring nature.
Operating results for the nine-month period ended September 30, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1997.
The Private Securities Litigation Act of 1995 indicates that the disclosure of
forward-looking information is desirable for investors and encourages such
disclosure by providing a safe harbor for forward-looking statements by
corporate management. This Quarterly Report on Form 10-Q contains forward-
looking statements that involve risk and uncertainty. In order to comply with
the terms of the safe harbor, the corporation notes that a variety of factors
could cause One Valley's actual results and experience to differ materially
from the anticipated results or other expectations expressed in those forward-
looking statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Management's discussion and analysis of financial condition and results of
operations is included on pages 9 - 22 of this report.
<PAGE>
<TABLE>
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited in thousands)
<CAPTION>
September 30 December 31 September 30
1998 1997 1997
<S> <C> <C> <C>
ASSETS
Cash and Due From Banks $144,495 $127,012 $145,140
Interest Bearing Deposits With Other Banks 4,843 2,162 5,783
Federal Funds Sold 47,951 20,310 49,475
---------- ---------- ----------
Cash and Cash Equivalents 197,289 149,484 200,398
Securities
Available-for-Sale, at fair value 1,320,845 1,216,749 1,177,818
Held-to-Maturity (Estimated Fair Value,
September 30, 1998 - $264,816; December 31, 1997 -
$355,820; September 30, 1997 - $341,337) 255,264 352,272 334,558
Loans
Total Loans 3,902,448 3,302,536 3,227,413
Less: Allowance For Loan Losses 51,826 45,048 45,040
---------- ---------- ----------
Net Loans 3,850,622 3,257,488 3,182,373
Premises & Equipment - Net 101,781 90,397 90,376
Other Assets 130,621 95,096 88,312
---------- ---------- ----------
Total Assets $5,856,422 $5,161,486 $5,073,835
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non-interest Bearing $538,451 $465,227 $422,162
Interest Bearing 3,895,150 3,468,947 3,458,192
---------- ---------- ----------
Total Deposits 4,433,601 3,934,174 3,880,354
Short-term Borrowings
Federal Funds Purchased 42,925 22,581 54,750
Repurchase Agreements and Other Borrowings 697,391 600,899 540,191
---------- ---------- ----------
Total Short-term Borrowings 740,316 623,480 594,941
Long-term Borrowings 37,084 48,875 53,877
Other Liabilities 56,897 51,307 48,809
---------- ---------- ----------
Total Liabilities 5,267,898 4,657,836 4,577,981
Shareholders' Equity:
Preferred Stock-$10 par value; 1,000,000 shares authorized
but none issued 0 0 0
Common Stock-$10 par value; 70,000,000 shares authorized,
Issued 39,062,296 shares at September 30, 1998;
36,330,605 shares at December 31, 1997;
36,228,395 shares at September 30, 1997 390,623 363,306 362,284
Capital Surplus 94,019 71,782 71,834
Retained Earnings 189,425 157,730 146,658
Accumulated Other Comprehensive Income 9,552 5,927 4,929
Treasury Stock - 4,346,846 shares at September 30, 1998
and December 31, 1997; 4,211,746 shares
at September 30, 1997; at cost (95,095) (95,095) (89,851)
---------- ---------- ----------
Total Shareholders' Equity 588,524 503,650 495,854
---------- ---------- ----------
Total Liabilities and Shareholders' Equity $5,856,422 $5,161,486 $5,073,835
========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(unaudited in thousands, except per share data)
<CAPTION>
For The Three Months For The Nine Months
Ended September 30 Ended September 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans
Taxable $82,050 $70,020 $232,549 $205,790
Tax-Exempt 675 765 2,030 2,253
------- -------- -------- --------
Total 82,725 70,785 234,579 208,043
Interest on Investment Securities
Taxable 21,897 21,155 67,626 62,189
Tax-Exempt 3,118 2,990 9,239 8,988
-------- -------- -------- --------
Total 25,015 24,145 76,865 71,177
Other Interest Income 497 452 1,169 1,299
-------- -------- -------- --------
Total Interest Income 108,237 95,382 312,613 280,519
INTEREST EXPENSE
Deposits 41,356 37,713 119,316 110,156
Short-term Borrowings 9,681 6,756 27,801 18,226
Long-term Borrowings 632 880 2,037 2,543
-------- -------- -------- --------
Total Interest Expense 51,669 45,349 149,154 130,925
-------- -------- -------- --------
Net Interest Income 56,568 50,033 163,459 149,594
Provision For Loan Losses 2,593 1,999 7,481 5,291
-------- -------- -------- --------
Net Interest Income
After Provision For Loan Losses 53,975 48,034 155,978 144,303
OTHER INCOME
Trust Department Income 2,762 2,557 8,722 7,733
Service Charges on Deposit Accounts 5,051 3,834 14,087 11,359
Real Estate Loan Processing & Servicing Fees 2,289 1,508 6,300 4,281
Other Service Charges and Fees 3,796 2,774 10,236 8,020
Other Operating Income 1,163 1,818 3,940 3,926
Securities Transactions 266 230 989 377
-------- -------- -------- --------
Total Other Income 15,327 12,721 44,274 35,696
OTHER EXPENSES
Salaries and Employee Benefits 20,189 18,223 58,943 54,549
Occupancy Expense - Net 2,161 1,872 6,105 5,422
Equipment Expenses 2,955 2,348 8,494 6,851
Outside Data Processing 2,333 1,995 7,527 6,104
Other Operating Expenses 13,270 10,869 38,267 31,413
-------- -------- -------- --------
Total Other Expenses 40,908 35,307 119,336 104,339
-------- -------- -------- --------
Income Before Taxes 28,394 25,448 80,916 75,660
Applicable Income Taxes 9,409 8,709 27,401 25,876
-------- -------- -------- --------
NET INCOME $18,985 $16,739 $53,515 $49,784
======== ======== ======== ========
NET INCOME PER SHARE
Basic $ 0.56 $ 0.53 $ 1.63 $ 1.56
Diluted $ 0.55 $ 0.51 $ 1.60 $ 1.52
Average Shares Outstanding (in thousands)
Basic 34,058 31,799 32,891 31,973
Diluted 34,635 32,504 33,513 32,668
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(unaudited in thousands)
<CAPTION>
Accumulated
Other
Common Capital Retained Treasury Comprehensive
Stock Surplus Earnings Stock Income Total
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1997 $363,306 $71,782 $157,730 ($95,095) $5,927 $503,650
Nine Months Ended September 30, 1998
Comprehensive Income:
Net Income 0 0 53,515 0 0 53,515
Other Comprehensive Income, net of tax:
Net Unrealized Holding Gains on
Available-For-Sale Securities Arising
During The Period 0 0 0 0 4,218 4,218
Less: Reclassification Adjustment For
Gains Realized in Net Income 0 0 0 0 (593) (593)
--------
Other Comprehensive Income 3,625
--------
Comprehensive Income 57,140
Cash Dividends ($.66 per share) (21,820) (21,820)
FFVA Treasury Shares Reissued 7,087 19,274 0 0 0 26,361
Issuance of common stock (1,826,637) 18,264 2,260 20,524
Stock Options Exercised 1,966 703 0 0 0 2,669
-------- -------- -------- -------- -------- --------
Balance September 30, 1998 $390,623 $94,019 $189,425 ($95,095) $9,552 $588,524
======== ======== ======== ======== ======== ========
Balance December 31, 1996 $298,504 $66,641 $183,226 ($67,378) $2,065 $483,058
Nine Months Ended September 30, 1997
Comprehensive Income:
Net Income 0 0 49,784 0 0 49,784
Other Comprehensive Income, net of tax:
Net Unrealized Holding Gains on
Available-For-Sale Securities Arising
During The Period 0 0 0 0 3,090 3,090
Less: Reclassification Adjustment For
Gains Realized in Net Income 0 0 0 0 (226) (226)
--------
Other Comprehensive Income 2,864
--------
Comprehensive Income 52,648
Cash Dividends ($.59 per share) 0 0 (17,789) 0 0 (17,789)
Five for Four Stock Split 62,960 (62,960) -
FFVA Repurchase of Common Stock (1,795) 3,652 (5,603) 0 0 (3,746)
Treasury Shares Purchased 0 0 0 (22,473) 0 (22,473)
Stock Options Exercised 2,615 1,541 0 0 0 4,156
-------- -------- -------- -------- -------- --------
Balance September 30, 1997 $362,284 $71,834 $146,658 ($89,851) $4,929 $495,854
======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited in thousands)
<CAPTION>
For The Nine Months
Ended September 30
1998 1997
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $53,515 $49,784
Adjustments To Reconcile Net Income To Net Cash
Provided by Operating Activities:
Provision For Loan Losses 7,481 5,291
Depreciation 7,611 6,473
Amortization and Accretion 4,330 2,792
Net Gain From Sales of Assets (989) (363)
Increase (Decrease) Due to Changes In:
Accrued Interest Receivable (2,220) (694)
Accrued Interest Payable (2,671) 2,086
Other Assets and Other Liabilities 9,572 (2,842)
-------- --------
Net Cash Provided by Operating Activities 76,629 62,527
INVESTING ACTIVITIES
Proceeds From Sales of Securities Available for Sale 53,045 37,974
Proceeds From Maturities of Securities Available for Sale 391,849 238,639
Proceeds From Maturities of Securities Held to Maturity 25,062 24,470
Purchases of Securities Available for Sale (404,463) (387,425)
Purchases of Securities Held to Maturity (21,567) (59,178)
Net Increase In Loans (328,241) (95,004)
Acquisition of Branches and Subsidiary, Net of Cash Received 118,371 0
Purchases of Premises and Equipment (9,763) (6,401)
-------- --------
Net Cash Used in Investing Activities (175,707) (246,925)
FINANCING ACTIVITIES
Net Increase in Interest Bearing and Non-interest Bearing Deposits 34,857 75,288
Net Increase in Federal Funds Purchased 20,344 37,472
Net Increase in Other Short-term Borrowings 96,492 121,395
Proceeds From Long-term Borrowings 0 25,000
Repayment of Long-term Debt (12,018) (2,015)
Proceeds From Issuance of Common Stock 29,028 4,156
Repurchase of FFVA Common Stock 0 (3,746)
Purchase of Treasury Stock 0 (22,473)
Dividends Paid (21,820) (17,789)
-------- --------
Net Cash Provided by Financing Activities 146,883 217,288
-------- --------
Increase in Cash and Cash Equivalents 47,805 32,890
Cash And Cash Equivalents at Beginning of Year 149,484 167,508
-------- --------
Cash And Cash Equivalents, September 30 $197,289 $200,398
======== ========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation
The accounting and reporting policies of One Valley conform to generally
accepted accounting principles and practices in the banking industry. 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. All significant
intercompany accounts and transactions have been eliminated in consolidation.
The interim financial information included in this report is unaudited. In
the opinion of management, all adjustments necessary for a fair presentation
of the results of the interim periods have been made. These notes are
presented in conjunction with the Notes to Consolidated Financial Statements
included in the Annual Report of One Valley.
Note B - Accounting Change
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 128, "Earnings Per Share" (FAS 128) which supercedes APB Opinion
No. 15, "Earnings Per Share" (APB 15). FAS 128 is effective for financial
statements for both interim and annual periods ending after December 15, 1997.
Statement 128 requires the reporting of basic and diluted net income per
common share. Basic net income per common share excludes any dilutive effects
of stock options and is computed by dividing net income by the average common
shares outstanding during the year. Diluted net income per common share is
computed by dividing net income by the average common shares outstanding
during the year adjusted for the dilutive effect of options under One Valley's
stock option plans. The effect of dilutive stock options on average shares
outstanding was 577,000 and 705,000 for the third quarter of 1998 and 1997
respectively, while the effect was 622,000 and 695,000 for the nine months
ended September 30, 1998 and 1997, respectively. Net income per common share
amounts for all periods presented have been restated to conform to Statement
128.
In June 1997, the FASB issued Statement No. 131, "Disclosures About Segments
of an Enterprise and Related Information," which is effective for fiscal years
beginning after December 15, 1997. This statement requires public companies
to disclose certain information about reportable operating segments in
complete sets of financial statements of the company and in interim condensed
financial statements. However, the provision of this statement do not require
the disclosure of segment information in interim financial statements in the
initial year of application, therefore, no such disclosures are required
herein. These disclosure requirements will have no effect on One Valley's
financial position or results of operations.
As of January 1, 1998, the One Valley adopted FASB Statement No. 130,
"Reporting Comprehensive Income" (FAS 130). FAS 130 establishes new rules for
the reporting and display of comprehensive income and its components; however,
the adoption of this Statement had no impact on One Valley's net income or
shareholders' equity. FAS 130 requires unrealized gains or losses on the One
Valley's available-for-sale securities, which prior to adoption were reported
separately in shareholders' equity, to be included in other comprehensive
income. Prior period financial statements have been reclassified to conform
to the requirements of FAS 130. During the third quarter of 1998 and 1997,
total comprehensive income amounted to $22,942 and $19,953, respectively.
As of January 1, 1998, One Valley adopted the provision of FASB Statement No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities," relating to repurchase agreements, securities
lending, and other similar transactions and pledged collateral, which had been
delayed by FASB statement 127 "Deferral of the Effective Date of Certain
Provisions of FASB Statement 125, an Amendment of FASB Statement 125." The
effect of adopting the additional provisions of Statement 125, as amended by
Statement 127, had no material impact on One Valley's financial position or
results of operations.
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities," (FAS 133) which requires all derivatives
to be recorded on the balance sheet at fair value and establishes "special"
accounting for fair value, cash flow, and foreign currency hedges. FAS 133 is
effective for years beginning after June 15, 1999 and the impact of adopting
this statement in year 2000 cannot be determined at this time.
Note C - Mergers and Acquisitions
At the close of business on March 30, 1998, One Valley acquired all of the
outstanding stock of FFVA Financial Corporation, in exchange for 5,518,668
shares of One Valley common stock. This combination was accounted for as a
pooling-of-interests. Accordingly, all prior period financial information has
been restated to reflect the merger of the two companies as though they had
always been combined.
At the close of business on August 7, 1998, One Valley acquired all of the
outstanding stock of Summit Bankshares, Inc., in exchange for 1,826,637 shares
of One Valley common stock. The transaction was accounted for as a pooling-
of-interests. However, the balances and results of operations of Summit
Bankshares have been included in the financial statements of One Valley only
from the date of acquisition due to the relative size of Summit to One Valley.
<PAGE>
One Valley Bancorp, Inc.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
September 30, 1998
INTRODUCTION AND SUMMARY
Net income for the third quarter of 1998 totaled $19.0 million, a 13.4%
increase over the $16.7 million earned in the same quarter of 1997. On a per
share basis, basic net income per share increased by 5.7% to $0.56 from the
$0.53 earned in the third quarter of 1997. The improvement in earnings during
the quarter is primarily due to higher net interest income and non-interest
income which more than offset the increase in non-interest expense.
Net income for the first nine months of 1998 totaled $53.5 million, a
7.5% increase over the $49.8 million earned in the first nine months of 1997.
On a per share basis, basic net income per share for the nine-month period was
$1.63, a 4.5% increase from the $1.56 reported for the first nine months of
1997. First quarter 1998 earnings were lowered by approximately $0.03 per
share due to the impact of one-time charges connected with the acquisition of
FFVA Financial Corporation in Lynchburg, Virginia.
Return on average assets (ROA) measures how effectively One Valley
utilizes its assets to produce net income. ROA was 1.28% for the first nine
months of 1998, a decrease from the 1.35% earned during the same period of
1997. Return on average equity (ROE) also decreased to 13.05% from the 13.64%
reported for the third quarter of 1997. The decline in ROA and ROE was
primarily the result of acquisition activity during 1998 as more fully
explained below.
The following discussion is an analysis of the financial condition and
results of operations of One Valley for the first nine months of 1998. This
discussion should be read in conjunction with the 1997 Annual Report to
Shareholders and the other financial information included in this report.
Acquisitions
At the close of business on February 19, 1998, One Valley acquired
fifteen branches in central Virginia. Through this purchase One Valley
acquired $124.9 million in loans and $283.2 million in deposits. This
transaction was treated as a purchase and accordingly, the balances and
results of the operations of the branches are included in the financial
statements of One Valley only from the date of purchase. Also, at the close
of business on March 30, 1998, One Valley Bancorp merged with FFVA Financial
Corporation, a $580.0 million bank headquartered in Lynchburg, Virginia.
Pursuant to the merger agreement, One Valley exchanged 1.05 shares of One
Valley Bancorp stock for each share of FFVA Financial common stock
outstanding. The combination was accounted for as a pooling-of-interests and
as a result, all prior financial results have been restated and reported on a
combined basis. In addition, on August 7, 1998, One Valley acquired Summit
Bankshares, Inc. a $199.7 million bank holding company operating nine branches
in Virginia with $148.7 million in total loans and $181.4 million in deposits.
The transaction was accounted for as a pooling-of-interest. However, the
balances and results of operations of Summit are included in the financial
statements of One Valley only from the date of acquisition due to the relative
size of Summit and One Valley.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income for the nine months ended September 30, 1998, was
$169.5 million on a fully tax-equivalent basis, an 8.9% increase over the
$155.6 million earned during the same period in 1997. This increase is
largely due to a $444.8 million or 14.1% increase in average total loans and a
$174.5 million or 12.0% increase in average securities during the first nine-
month comparison. In total, average earning assets increased by $609.1
million or 13.2% in the first nine months of 1998 over the same period in
1997, while average interest bearing liabilities increased by $503.7 million
or 12.6% in the same period. Both total interest income and total interest
expense increased from the prior year due to the increases in volume and
changes in the mix of assets and liabilities. Approximately one-third of the
growth in average earning assets was attributable to the acquisition activity
during 1998.
As shown in the consolidated average balance sheets (page 22), the yield
on earning assets declined to 8.16% for the first nine months of 1998 from
8.31% earned during the same period in 1997. During the same period, the cost
of interest bearing liabilities increased five basis points to 4.44% from last
year's 4.39% level. The slight increase in cost of funds has resulted from a
planned increase in short-term borrowed funds. The cost of interest-bearing
deposits has not declined as rapidly as earning asset yields due to higher
costs to attract customer deposits in an increasingly competitive market.
Additional discussion of the changes in balance sheet mix is included later in
this report. With the lower yield earned on earning assets and the higher
cost of interest bearing liabilities, the net interest margin decreased to
4.34% during the first nine months of 1998, from the 4.51% during the first
nine months of 1997. Internal interest rate risk simulations indicate that
over the next twelve months a sharp rise in interest rates would have a slight
positive influence on net interest income; whereas, a sharp decline in rates
would have a slight negative influence on net interest income. Normal
fluctuations in market interest rates should not have a significant impact on
One Valley's net interest margin.
Credit Experience
The provision for loan losses was $7.5 million for the nine months ended
September 30, 1998, a $2.2 million increase from the provision made during the
same period of 1997. As a percentage of average total loans, the provision
for loan losses through the first nine months of 1998 was 0.28% on an
annualized basis, compared with 0.22% for the same period of 1997. The
increase in the provision for loan losses was based upon One Valley's
continual evaluation process of the adequacy of the allowance for loan losses
and to provide for the increase in the portfolio as a result of the loans
acquired through acquisitions in 1998. Net charge-offs as a percentage of
average total loans in the first nine months of 1998 decreased to 0.17% on an
annualized basis, down from an annualized 0.22% during the same period in
1997, and from the 0.24% charge-off ratio for the full year of 1997. The
decrease is primarily due to a lower volume of consumer installment charge-
offs.
Total non-performing assets at September 30, 1998, were 0.23% of period-
end loans, down from the 0.30% at December 31, 1997 and 0.38% at September 30,
1997. Non-accrual loans totaled $7.2 million at September 30, 1998, $3.6
million or 33.1% below last year's level resulting in a decline in total non-
performing assets from the level one year ago. The allowance for loan losses
is sufficient to absorb nearly six times the amount of those non-performing
assets. At September 30, 1998, loans past due over 90 days were 0.22% of
outstanding loans, up from the 0.19% at year-end 1997 and up from the 0.20% at
September 30, 1997. An analysis of the allowance for loan losses and non-
performing assets is included on page 21.
With the continued growth of loans outstanding, the allowance for loan
losses in relationship to loans outstanding has declined to 1.33% at September
30, 1998 compared to 1.36% at year-end and 1.40% one year ago. In
management's opinion, the allowance for loan losses is adequate to absorb the
current estimated risk of loss in the existing loan portfolio.
Non-Interest Income and Expense
The net overhead ratio (non-interest expense less non-interest income
excluding security transactions divided by average earning assets) is a
measure of One Valley's ability to control costs and equalizes the comparison
of various sized operations. As this ratio decreases, more of the net
interest margin flows to net income. One Valley's net overhead ratio for the
first nine months of 1998 was 1.94%, down from 2.09% during all of 1997 and
down slightly from the 2.00% for the first nine months of 1997. The
improvement in the net overhead ratio during the first nine months of 1998 was
the result of a 13.2% growth in average earning assets from one year ago while
net overhead increased by 10.2% from the same period in 1997. The increase in
net overhead is primarily due to the operations of the fifteen branches
purchased in February and the nine locations acquired through the merger of
Summit Bankshares along with the expenses related to the FFVA merger.
Total non-interest income excluding securities transactions was $43.3
million through the first nine months of 1998, up 22.6% from the $35.3 million
non-interest income earned during the same period in 1997. Trust income
increased by 12.8% from the same period last year due to new business and
increases in the market value of trust assets managed. Service charges on
deposit accounts increased by 24.0% in the first nine-month comparison mainly
due to a higher level of customer activity from the twenty-four new branches
(which include the fifteen purchased in February and the nine acquired through
the Summit merger in August) acquired in Virginia in 1998. Real estate loan
processing and service fees increased by 47.2% when compared to the first nine
months of 1997 due to a higher level of residential mortgage loans sold in the
secondary market and the increased refinancing activity by customers taking
advantage of the lower interest rate environment. Other service charges and
fees increased by 27.6% over the first nine months of 1997, primarily due to
increases in credit/debit card activity and other banking services provided to
customers.
Total non-interest expense was $119.3 million during the nine months
ended September 30, 1998, a 14.4% increase from the $104.3 million during the
same period in 1997. This increase is largely due to the operations of the
fifteen branches acquired during the first quarter, the nine branches acquired
through the Summit merger, and the one time expenses related to the
acquisition of FFVA. Staff costs increased by 8.1% from the level one-year
ago primarily due to the additional staff from the new branches and normal
salary and benefit increases. Occupancy expense increased by 12.6% from the
same period last year principally due to the increased facilities cost related
to the twenty-four new branches. Equipment expenses increased 24.0% from last
year's level primarily due to higher maintenance and depreciation costs
related to technology upgrades that occurred in 1997 and are continuing in
1998. Outside data processing expense increased by 23.3% from the same period
in 1997. This increase is due to conversion and processing costs associated
with the expansion of operations in Virginia and the processing costs related
to the increased activity of the Visa Checkcard and ATM products. Other
operating expenses increased by $6.9 million or 21.8% in the first nine months
of 1998. One-sixth ($1.1 million) of the increase was directly related to
one-time charges for investment banking and legal fees related to the FFVA
merger. The remainder was primarily due to increases in advertising expense
and other expenses associated with the operations of the twenty-four new
branches.
Income tax expense increased by $1.5 million, or 5.9%, for the first
nine months of 1998 compared with the same period in 1997. The increase in
taxes is primarily a result of the 6.9% growth in pretax earnings. One
Valley's effective income tax rate for the first nine months of 1998 was 33.9%
compared to 34.2% during the first nine months of 1997.
FINANCIAL CONDITION
Asset Structure
Total loans at September 30, 1998, exceeded September 30, 1997 levels by
20.9% or $675.0 million. Since year-end 1997, total loans have increased by
18.2% or $600.0 million. The consolidated loan-to-deposit ratio has increased
to 88.0% at September 30, 1998, compared to 83.2% at September 30, 1997.
Approximately $124.9 million in loans were acquired through the fifteen
branches purchased during the first quarter of 1998 and $148.7 million were
acquired through the merger with Summit Bankshares. The increase in total
loans is primarily in one-to-four family, home equity loans, commercial real
estate loans, and consumer auto loans.
Investment portfolio assets increased $7.1 million or 0.5% from the
level at year-end and by $63.7 million or 4.2% from the level one-year ago.
One Valley acquired approximately $108.2 million of investable funds through
the fifteen branches purchased. These funds were primarily invested in
government agency and mortgage backed securities. These investment decisions
were made in accordance with One Valley's asset/liability strategy, which
strives to minimize interest rate risk while enhancing the financial position
of the Company. Since that time, maturing investments have been used to fund
the strong loan growth.
Securities designated as available-for-sale at September 30, 1998, had a
historical cost of $1.305 billion, with an unrealized gain of approximately
$15.4 million. This unrealized gain increased shareholders' equity by $9.6
million, net of $5.8 million in deferred income taxes. At year-end December
31, 1997, and September 30, 1997, securities available-for-sale had a
historical cost of $1.207 billion and $1.170 billion, with an unrealized gain
of approximately $9.7 million at year-end, and an unrealized gain of
approximately $8.1 million at September 30, 1997. The unrealized gains
increased shareholders' equity by $5.9 million and $4.9 million, net of $3.8
and $3.2 million in deferred income taxes, respectively.
On March 30, 1998, in accordance with the provisions in FAS Statement
115, One Valley reclassified as available-for-sale approximately $96.2 million
of investments that were previously categorized as held-to-maturity by FFVA.
The reclassification enabled One Valley to incorporate FFVA's investment
portfolio into its own investment policy and asset/liability management
strategies. At the date of transfer, these securities had a carrying value of
$95.3 million with an unrealized gain of approximately $0.9 million.
Similarly, on August 7, 1998, One Valley reclassified as held-to-maturity
approximately $6.9 million of investments that were previously categorized as
available-for-sale by Summit Bankshares. The reclassification enabled One
Valley to incorporate Summit's investment portfolio into its own investment
policy and asset/liability management strategies. At the date of transfer,
these securities had a carrying value of $6.8 million with an unrealized gain
of approximately $0.1 million.
At the time of purchase, management determines the appropriate
classification of securities. Securities to be held for indefinite periods of
time and not intended to be held to maturity or on a long-term basis are
classified as available-for-sale and carried at fair value. The corresponding
difference between the historical cost and the current fair value of these
securities, the unrealized gain or loss, is an adjustment to shareholders'
equity, net of deferred income taxes. Securities available-for-sale include
securities that management intends to use as part of its asset/liability
management strategy and that may be sold in response to changes in interest
rates, resultant prepayment risk, and other related risk factors. If
management has the positive intent and One Valley has the ability at the time
of purchase to hold securities until maturity, they are classified as held-
for-investment and carried at amortized historical cost adjusted for
amortization of premiums and accretion of discounts, which are recognized as
adjustments to interest income.
In order to improve its fully tax equivalent net interest income and to
hedge against higher income tax rates, One Valley increased its holdings of
tax-exempt securities that were offering attractive yields over the last
several years. As shown on the consolidated average balance sheets (page 22),
average tax-exempt securities in the first nine months of 1998 increased by
4.9% or $11.0 million over the average during the first nine months of 1997.
One Valley will continue to monitor its investment opportunities and may
purchase additional tax-exempt securities of similar yield and quality.
Federal funds sold at September 30, 1998, were $48.0 million, up $27.6
million from year-end but down only slightly from one year ago. Fluctuations
in federal funds sold are normal and largely due to planned changes in the
Company's asset/liability structure in order to maximize the return on
investment in response to changes in the interest rate environment.
Liability Structure
Total deposits at September 30, 1998, increased by $499.4 million or
12.7% from the level at year-end and $553.2 million or 14.3% since September
30, 1997. Approximately $464.6 million of the increase in total deposits was
attributable to the acquisition activity in 1998. Over the past few years,
growth in banking deposits has been modest. Due to the current low interest
rate environment compared to the early 1990's, deposit customers are
shortening the maturities of their deposit reinvestments and seeking higher
yielding non-traditional investment alternatives. The majority of the growth
in One Valley's core deposits, exclusive of the new branches, has been in
money market and Valley index accounts. The average rate paid on interest
bearing deposits was 4.29% in the first nine months of 1998, relatively
unchanged from the 4.31% average rate paid for all of 1997, and the 4.30%
average rate paid in the first nine months of 1997. In an effort to meet
customer expectations for an integrated financial service delivery system, One
Valley also operates a fully licensed NASD Broker/Dealer subsidiary, an
Insurance Agency subsidiary and continues to expand other product lines.
Total short-term borrowings increased by $116.8 million or 18.7% from
the year-end level, and increased $145.4 million or 24.4% from the level at
September 30, 1997. Short-term borrowings consist of Federal funds purchased
from correspondent banks, repurchase agreements with large corporate and
public entities, advances on credit lines available to One Valley, and
commercial paper. The increased level of short-term borrowings has been used
to fund the loan growth and the higher level of investment portfolio assets as
planned under One Valley's asset/liability management program. The average
rate paid on these short-term borrowings has also increased from 4.85% during
the first nine months of 1997 to 5.14% during the same period of 1998.
Long-term borrowings decreased $16.8 million or 31.2% since September
30, 1997, primarily as a result of payments on long-term advances from the
Federal Home Loan Bank (FHLB). As a result, One Valley now has $37.1 million
of long-term borrowings, primarily FHLB borrowings, with repayment schedules
from one to six years.
Capital Structure and Liquidity
One Valley's equity-to-asset ratio was 10.0% at September 30, 1998, up
from the 9.8% at December 31, 1997 and at September 30, 1997. One Valley's
commitment to a strong capital ratio has facilitated the company's expansion
into the central Virginia markets thus increasing prospects for improving
long-term profitability and shareholder value. One Valley's cash dividend,
totaling $0.24 per share for the third quarter of 1998, was up 14.3% over the
$0.21 per share dividend during the same period in 1997. One Valley's
dividend policy, coupled with the continued growth in net income, demonstrates
management's commitment to a strong equity-to-asset ratio benefiting both the
investor and the customer in the local community. One Valley's risk based
capital ratio at September 30, 1998 was 15.33%, well above the 8.0% required,
while its Tier I capital ratio was 14.08%. One Valley's strong capital
position is demonstrated further by its leverage ratio of 9.01% compared to
regulatory guidance of 4.0% to 5.0%. The capital ratios of the banking
subsidiaries also remain strong and allow them to effectively serve the
communities in which they are located.
In order to account for the FFVA merger under the pooling-of-interests
method of accounting, FFVA Corporation reissued 675,000 treasury shares in a
private placement offering. As a result, approximately $26.4 million of
additional equity was raised in the first quarter of 1998.
The capital positions of the banks, coupled with proper asset/liability
matching and the stable nature of the primarily consumer base of core
deposits, results in the maintenance of a strong liquidity position. The
liquidity of the parent company is dependent upon dividends from its banking
subsidiaries, which, although restricted by banking regulations, are adequate
to meet its cash needs.
Effects of Changing Prices
The results of operations and financial condition presented in this
report are based on historical cost, unadjusted for the effects of inflation.
Inflation affects One Valley in two ways. One is that inflation can result in
increased operating costs, which must be absorbed or recovered through
increased prices for services. The second effect is on the purchasing power
of the corporation. Virtually all of a bank's assets and liabilities are
monetary in nature. Regardless of changes in prices, most assets and
liabilities of the banking subsidiaries will be converted into a fixed number
of dollars. Non-earning assets, such as premises and equipment, do not
comprise a major portion of One Valley's assets; therefore, most assets are
subject to repricing on a more frequent basis than in other industries. One
Valley's ability to offset the effects of inflation and potential reductions
in future purchasing power depends primarily on its ability to maintain
capital levels by adjusting prices for its services and to improve net
interest income by maintaining an effective asset/liability mix.
YEAR 2000 READINESS DISCLOSURE
Introduction
One Valley recognizes the significant potential risk associated with the
"Year 2000" (Y2K) issue and the challenge its poses. The Y2K problem arose
because many existing computer programs use only the last two digits to refer
to a year. Therefore, these computer programs do not properly recognize a
year that begins with 20XX instead of 19XX. Beginning January 1, 2000,
computer applications that use dates for computations, comparisons and sorting
may produce incorrect results or fail due to an invalid interpretation of the
date. The potential risk is not limited to computers and related software
applications, but extends to telephones, security systems, copiers, FAX
machines or any apparatus that utilizes computer technology. The full extent
of the potential impact of Y2K is not yet known, but it could adversely affect
national and global economies.
As a financial institution, the ability of One Valley to promptly and
accurately capture, record, process and communicate its customers' financial
transactions and related data is vital to its ongoing operations. The Y2K
problem could impede One Valley's ability to do so in several significant
respects. Recognizing this potential risk, One Valley has undertaken a
comprehensive project to address the Year 2000 issues that may affect One
Valley and its customers. One Valley's preparations began in late 1996 under
the guidance of Management and with oversight by the Board of Directors.
Project Overview
One Valley's project includes five phases: Awareness, Assessment,
Renovation (or remediation), Validation (or testing), and Implementation. The
Awareness Phase consisted of formal updates to One Valley management,
employees and the Board of Directors about the issues relating to Y2K. In
this stage management gathered information and attended conferences, appointed
a project steering team and coordinators, began preliminary discussions with
third party vendors, and distributed preliminary information to its employees
and customers. This phase was completed in October, 1997, however One Valley
continues on-going efforts to keep its customers and employees up to date.
In the Assessment Phase, One Valley identified its critical information
technology (IT) systems and performed a company-wide inventory of all systems,
software, hardware, equipment and components that potentially could be
affected by Y2K. During this phase, One Valley established project time
lines, allocated resources and established the methodology to monitor the Y2K
readiness of the IT systems provided by third parties, as well as its non-IT
systems. One Valley also determined the Y2K readiness of its in-house IT
systems and components, and reported progress to senior management and the
Board of Directors on a regular basis. During this phase, One Valley
identified four general areas of potential susceptibility to Y2K issues: Major
IT Systems provided by third parties, Internal IT Systems, Non-IT Systems,
including communications infrastructure and physical facilities, and customer
business interruption. The Assessment Phase was completed in the fourth
quarter of 1997.
In the Renovation Phase, One Valley's third-party IT providers
implemented program changes to accommodate the Y2K issues and conducted
internal testing, which was substantially completed in the third quarter of
1998. In addition, during this phase One Valley began reprogramming its
internal IT and non-IT systems to accommodate Y2K. It also focused on its
customers' readiness for and susceptibility to Y2K concerns. One Valley
anticipates this phase will be completed by the second quarter of 1999.
In the Validation Phase, One Valley and its third party IT providers
will perform testing on the renovated applications and components to make sure
they are Y2K ready. This phase is expected to be very active during late 1998
and early 1999. Once validated, One Valley and its service providers will
begin the Implementation Phase. During this phase, the applications, systems
and other components will be fine-tuned and final programs put into production
prior to January 1, 2000. The major portion of this final phase will not be
complete until the second quarter of 1999.
Project Status
Most of One Valley's major IT Systems are processed by the largest third
party service providers in the world, which have indicated to One Valley that
they have adequate resources to perform Y2K remediation, testing and
implementation, and are leading firms in their respective lines of business.
The major IT systems provided by third parties include mortgage loans, credit
cards, commercial and installment loans, and deposits. One Valley has been
informed by these third parties that these systems have each been renovated,
are in various stages of testing and implementation, and will be placed into
production at the earliest possible time. One Valley has continually
monitored the Y2K progress of these third parties and has determined that
progress to date is acceptable, with validation of these primary third party
systems anticipated to be completed by the first quarter of 1999. Two other
IT systems provided by third parties which provide investment and trust
services are substantially renovated, with testing and implementation
scheduled to occur during the first half of 1999.
One Valley's Internal IT Systems are primarily used to capture and
prepare data to be transmitted to its third party IT Systems providers. One
Valley is in various stages of renovating, validating and implementing these
systems, with completion anticipated during the second quarter of 1999. In
addition, One Valley has a total of 280 ATMs in its network; all but 49 of
which have been validated. These will be upgraded for Y2K by the end of 1998.
One Valley's IT systems also include personal computers, network servers,
routers and related software. The upgrading or replacement of this
infrastructure is 80% to 90% complete and is expected to be finished by the
first quarter of 1999.
Another important part of One Valley's operations includes its non-IT
systems, primarily facilities and equipment. Basic utilities, such as
telephone, gas and electrical service, as well as heating and cooling systems
could be adversely affected by the Y2K. One Valley has performed a complete
inventory of its facilities and has tested or developed plans to test, to the
extent possible, applicable equipment for Year 2000 compliance. Outside
companies, primarily utilities, which provide these services, have indicated
to One Valley that they are Y2K ready, and to date One Valley is not aware of
any non-IT system provider with a Y2K issue that would materially impact One
Valley's operations. However, One Valley has no means of insuring or
verifying that these non-IT systems will be Y2K ready, and the impact of a
failure in these systems is not determinable.
Another area that could potentially impact One Valley is interruption of
its customers' business, which among other things could potentially affect the
ability of its commercial loan and other customers to repay loans from One
Valley, thus increasing One Valley's delinquency ratios, non-performing assets
and loans losses. To help minimize these problems and heighten customer
awareness, One Valley has established a Y2K Corporate Customer Action Plan.
As part of this plan, One Valley has mailed Year 2000 brochures to all
commercial customers, hosted Y2K information seminars featuring a nationally
known expert for its customers, made FDIC Year 2000 brochures available in the
lobby of all its branches, and published a Year 2000 questions and answer
sheet. One Valley has also incorporated a Y2K readiness assessment in its
credit risk evaluations of corporate borrowers. As of June 30, 1998,
corporate borrowers were preliminarily assessed as to their Year 2000
readiness. A full assessment of medium and high risk customers and industries
will be completed by the middle of the fourth quarter 1998. Those customers
and industries judged to be high risk will be closely monitored and estimated
loan losses resulting from potential Y2K exposure will be incorporated in the
evaluation of the adequacy of the loan loss reserve. Furthermore, credit
analyses on new and existing credits include evaluation of Year 2000
readiness.
Although One Valley has implemented and made significant progress toward
completing its Y2K project, there are uncertainties which, due to their
unprecedented nature, simply cannot be fully evaluated. For example, the
extent of interplay between payment systems is unclear, and it is not known
how the potential failure of one aspect of that complex system might adversely
impact other elements. In addition, although testing will be completed for
each significant system, it is not possible to independently verify each
vendor's vendor. It is unknown how a problem at one discrete point in the
chain of service could impact an entire system.
Management believes it has an effective project in place to resolve the
Y2K issue in a timely manner. In the event of a vendor or other Y2K failure,
the Company may be unable to perform some or all of the functions related to
its customers' financial transactions. The impact and duration of such
inability would depend upon the extent of the Y2K-related failure or failures.
While One Valley believes that it is taking the steps appropriate to prevent a
Y2K failure, in a matter such as this, certainty is not possible. In
addition, the potential for disruptions in the economy generally resulting
from Y2K issues remains unknown and could also materially adversely affect One
Valley. If system failures occur for any reason, One Valley could also be
subject to litigation. The likelihood of such events and their impact on One
Valley cannot be reasonably estimated at this time.
One Valley is in the process of developing its overall strategy for Y2K
contingency plans in the event that it does not complete all phases of the Y2K
project, or that Y2K issues at a vendor or customer affect One Valley. As
part of that process it will assess the potential business impact of the
failure of each of its important systems to determine the need for contingency
planning on a system by system basis. To date, some contingency plans have
been developed for mission critical applications and One Valley will continue
to develop similar plans as it finalizes evaluation of remaining systems.
Project Costs
Expenses directly related to Y2K have been incurred such as staff costs
and informational conferences and seminars for employees and customers,
however, these have been immaterial to date. Since One Valley utilizes third
party providers for most of its IT systems, One Valley has no direct expense
as a result of upgrades to those systems as a result of Y2K concerns, although
these vendors may attempt to recover some of their costs by way of future
price increases upon renewal of their respective contracts.
One Valley has been very aggressive in upgrading its internal IT Systems
infrastructure, most of which are capital improvements attributed to planned
upgrades in technology to modernize the way One Valley performs its day-to-day
operations, and not solely the result of Y2K concerns. One Valley plans to
replace systems which are not certified as Y2K ready, including its item
processing system, with equipment that is verified as Y2K ready.
The total cost of the Y2K project, consisting primarily of computer
upgrades for One Valley's IT Systems which were the result of or accelerated
by Y2K concerns, is estimated to be approximately $5.0 million. To date, One
Valley has incurred approximately $3.5 million of these total estimated
expenditures. One Valley does not separately track the internal costs incurred
for the Y2K project, which are principally payroll costs for its information
technology employees. Virtually all of the project costs are attributable to
the purchase of new software and operations equipment, which will be
capitalized.
<PAGE>
<TABLE>
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
Analysis of Loan Losses and Non-Performing Assets
(unaudited in thousands)
<CAPTION>
For The Three Months For The Nine Months
Ended September 30 Ended September 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES
Balance, Beginning of Period $48,907 $44,437 $45,048 $45,055
Loan Losses 2,066 2,301 6,048 7,118
Loan Recoveries 535 905 1,516 1,812
------- ------- ------- -------
Net Charge-offs 1,531 1,396 4,532 5,306
Balance of Acquired Subsidiaries 1,857 0 3,829 0
Provision For Loan Losses 2,593 1,999 7,481 5,291
------- ------- ------- -------
Balance, End of Period $51,826 $45,040 $51,826 $45,040
======= ======= ======= =======
Total Loans, End of Period $3,902,448 $3,227,413
Allowance For Loan Losses As a % of Total Loans 1.33 1.40
========== ==========
NON-PERFORMING ASSETS AT QUARTER END
Non-Accrual Loans $7,189 $10,740
Foreclosed Properties 1,852 1,632
Restructured Loans 0 0
------- ------
Total Non-Performing Assets $9,041 $12,372
======= =======
Non-Performing Assets As a % of Total Loans 0.23 0.38
Loans Past Due Over 90 Days $8,590 $6,409
Loans Past Due Over 90 Days As a % of Total Loans 0.22 0.20
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Average Balance Sheets
(unaudited in thousands)
<CAPTION>
Three Months Ended September 30 Nine Months Ended September 30
1998 1997 1998 1997
Amount Yield/Rate Amount Yield/Rate Amount Yield/Rate Amount Yield/Rate
(pct.) (pct.) (pct.) (pct.)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans
Taxable $3,775,930 8.64 $3,156,635 8.82 $3,561,122 8.72 $3,114,629 8.82
Tax-Exempt 42,520 9.69 44,414 10.51 42,744 9.77 44,477 10.42
---------- ---------- ---------- ----------
Total 3,818,450 8.66 3,201,049 8.84 3,603,866 8.74 3,159,106 8.86
Less: Allowance for Losses 50,954 44,869 48,662 45,209
---------- ---------- ---------- ----------
Net Loans 3,767,496 8.77 3,156,180 8.97 3,555,204 8.85 3,113,897 8.98
Securities
Taxable 1,374,818 6.37 1,270,328 6.66 1,397,864 6.45 1,234,370 6.72
Tax-Exempt 241,737 7.94 226,241 8.13 236,569 8.01 225,566 8.17
---------- ---------- ---------- ----------
Total 1,616,555 6.61 1,496,569 6.88 1,634,433 6.68 1,459,936 6.94
Federal Funds Sold & Other 36,465 5.41 35,324 5.08 27,720 5.64 34,416 5.05
---------- ---------- ---------- ----------
Total Earning Assets 5,420,516 8.10 4,688,073 8.28 5,217,357 8.16 4,608,249 8.31
Other Assets 375,658 322,832 361,032 317,996
---------- ---------- ---------- ----------
Total Assets $5,796,174 $5,010,905 $5,578,389 $4,926,245
========== ========== ========== ==========
LIABILITIES AND EQUITY
Interest Bearing Liabilities
Deposits $3,834,624 4.28 $3,454,301 4.33 $3,720,519 4.29 $3,426,045 4.30
Short-term Borrowings 752,854 5.10 544,098 4.93 722,552 5.14 502,761 4.85
Long-term Borrowings 41,685 6.02 57,876 6.03 45,148 6.03 55,751 6.10
---------- ---------- ---------- ----------
Total Interest
Bearing Liabilities 4,629,163 4.43 4,056,275 4.44 4,488,219 4.44 3,984,557 4.39
Non-interest Bearing Deposits 539,190 415,944 494,817 406,984
Other Liabilities 52,283 46,708 48,665 47,886
---------- ---------- ---------- ----------
Total Liabilities 5,220,636 4,518,927 5,031,701 4,439,427
Shareholders' Equity 575,538 491,978 546,688 486,818
---------- ---------- ---------- ----------
Total Liabilities & Equity $5,796,174 $5,010,905 $5,578,389 $4,926,245
========== ========== ========== ==========
Interest Income To Earning Assets 8.10 8.28 8.16 8.31
Interest Expense To Earning Assets 3.78 3.84 3.82 3.80
------ ------ ------ ------
Net Interest Margin 4.32 4.44 4.34 4.51
====== ====== ====== ======
<FN> Note: Yields are computed on a fully taxable equivalent basis using the rate of 35%.
</TABLE>
<PAGE>
One Valley Bancorp, Inc.
Part II. Other Information
Item 6. Exhibits and Reports on Form 10-Q
a) Exhibits
27. Financial Data Schedule - electronic filing only.
b) Reports on Form 8-K
1. July 30, 1998 - One Valley Bancorp, Inc. announced the new
closing date for the Summit Bankshares, Inc. merger.
2. August 7,1998 - One Valley Bancorp, Inc. announced the
completion of the Summit Bankshares, Inc. merger.
3. September 15, 1998 - One Valley Bancorp, Inc. announced third
quarter dividends.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
One Valley Bancorp, Inc.
DATE: November 13, 1998
BY /s/ J. Holmes Morrison
J. Holmes Morrison
President and
Chief Executive Officer
BY /s/ Laurance G. Jones
Laurance G. Jones
Executive Vice President
and Chief Financial Officer
<TABLE> <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 it
entirety by reference to such financial statements and supplemental schedules.
</LEGEND>
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> SEP-30-1998 SEP-30-1997
<CASH> 144495 145140
<INT-BEARING-DEPOSITS> 4843 5783
<FED-FUNDS-SOLD> 47951 49475
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 1320845 1177818
<INVESTMENTS-CARRYING> 255264 334558
<INVESTMENTS-MARKET> 264816 341337
<LOANS> 3902448 3227413
<ALLOWANCE> 51826 45040
<TOTAL-ASSETS> 5856422 5073835
<DEPOSITS> 4433601 3880354
<SHORT-TERM> 740316 594941
<LIABILITIES-OTHER> 56897 48809
<LONG-TERM> 37084 53877
0 0
0 0
<COMMON> 390623 362284
<OTHER-SE> 197901 133570
<TOTAL-LIABILITIES-AND-EQUITY> 5856422 5073835
<INTEREST-LOAN> 234579 208043
<INTEREST-INVEST> 76865 71177
<INTEREST-OTHER> 1169 1299
<INTEREST-TOTAL> 312613 280519
<INTEREST-DEPOSIT> 119316 110156
<INTEREST-EXPENSE> 149154 130925
<INTEREST-INCOME-NET> 163459 149594
<LOAN-LOSSES> 7481 5291
<SECURITIES-GAINS> 989 377
<EXPENSE-OTHER> 119336 104339
<INCOME-PRETAX> 80916 75660
<INCOME-PRE-EXTRAORDINARY> 80916 75660
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 53515 49784
<EPS-PRIMARY> 1.63 1.56
<EPS-DILUTED> 1.60 1.52
<YIELD-ACTUAL> 8.16 8.31
<LOANS-NON> 7189 10740
<LOANS-PAST> 8590 6409
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 45048 45055
<CHARGE-OFFS> 6048 7118
<RECOVERIES> 1516 1812
<ALLOWANCE-CLOSE> 51826 45040
<ALLOWANCE-DOMESTIC> 51826 45040
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
