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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
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 Identification No.)
of incorporation or organization)
One Valley Square, Charleston, West Virginia 25326
(Address of principal executive offices)
(Zip Code)
(304) 348-7000
(Registrant's telephone number, including area code)
Not applicable
(Former name, address, and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the
Securities and Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
YES (x) No
The number of shares outstanding of each of the issuer's classes of
common stock as of June 30, 1999 was:
Common Stock, $10.00 par value -33,435,950 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 -
7 of this report.
These consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-Q and Rule 10-
01 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for annual year-end financial statements. In the opinion
of management, all adjustments considered necessary for a fair
presentation have been included and are of a normal recurring nature.
Operating results for the six month period ended June 30, 1999 are
not necessarily indicative of the results that may be expected for
the year ending December 31, 1999. For further information, refer to
the consolidated financial statements and footnotes thereto
incorporated by reference in the Registrant's Annual Report on Form
10-K for the year ended December 31, 1998.
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 8 - 19 of this report.
<PAGE>
<TABLE>
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited in thousands)
<CAPTION>
June 30 December 31 June 30
1999 1998 1998
<S> <C> <C> <C>
ASSETS
Cash and Due From Banks $159,479 $155,226 $155,574
Interest Bearing Deposits With Other Banks 3,519 3,150 1,990
Federal Funds Sold 0 50,000 47,042
---------- ---------- ----------
Cash and Cash Equivalents 162,998 208,376 204,606
Securities
Available-for-Sale, at fair value 1,456,371 1,307,825 1,386,666
Held-to-Maturity (Estimated Fair Value,
June 30, 1999 - $268,977; December 31, 1998 - $287,433;
June 30, 1998 - $247,966) 270,073 278,267 241,600
Loans
Total Loans 4,173,003 3,991,121 3,674,682
Less: Allowance For Loan Losses 53,407 52,272 48,907
---------- ---------- ----------
Net Loans 4,119,596 3,938,849 3,625,775
Premises & Equipment - Net 102,505 102,863 97,645
Other Assets 140,900 127,400 131,773
---------- ---------- ---------
Total Assets $6,252,443 $5,963,580 $5,688,065
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non-interest Bearing $576,115 $570,664 $541,430
Interest Bearing 3,988,230 3,982,224 3,706,848
---------- ---------- ---------
Total Deposits 4,564,345 4,552,888 4,248,278
Short-term Borrowings
Federal Funds Purchased 35,666 36,410 29,671
Repurchase Agreements and Other Borrowings 723,972 693,349 757,031
---------- ---------- ----------
Total Short-term Borrowings 759,638 729,759 786,702
Long-term Borrowings 330,369 35,480 41,862
Other Liabilities 50,717 49,920 59,201
---------- ---------- ---------
Total Liabilities 5,705,069 5,368,047 5,136,043
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 39,387,996 shares at June 30, 1999;
39,135,180 shares at December 31, 1998;
37,162,154 shares at June 30, 1998; 393,880 391,352 371,622
Capital Surplus 96,357 94,157 91,569
Retained Earnings 224,497 200,174 178,331
Accumulated Other Comprehensive Income (14,277) 6,450 5,595
Treasury Stock - 5,952,046 shares at June 30, 1999;
4,392,546 shares at December 31, 1998;
4,346,846 shares at June 30, 1998; (153,083) (96,600) (95,095)
---------- ---------- ---------
Total Shareholders' Equity 547,374 595,533 552,022
---------- ---------- ---------
Total Liabilities and Shareholders' Equity $6,252,443 $5,963,580 $5,688,065
========== ========== ==========
</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 Six Months
Ended June 30 Ended June 30
1999 1998 1999 1998
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans
Taxable $84,596 $77,370 $166,364 $150,499
Tax-Exempt $786 $675 1,462 1,355
-------- -------- -------- --------
Total 85,382 78,045 167,826 151,854
Interest on Investment Securities
Taxable 21,904 22,767 41,953 45,729
Tax-Exempt 3,434 2,997 6,773 6,121
-------- -------- -------- --------
Total 25,338 25,764 48,726 51,850
Other Interest Income 561 481 695 672
-------- -------- -------- --------
Total Interest Income 111,281 104,290 217,247 204,376
INTEREST EXPENSE
Deposits 39,137 39,522 78,338 77,960
Short-term Borrowings 8,155 9,150 16,432 18,120
Long-term Borrowings 4,059 700 4,692 1,405
-------- -------- -------- --------
Total Interest Expense 51,351 49,372 99,462 97,485
-------- -------- -------- --------
Net Interest Income 59,930 54,918 117,785 106,891
Provision For Loan Losses 2,339 2,294 4,455 4,888
-------- -------- -------- --------
Net Interest Income
After Provision For Loan Losses 57,591 52,624 113,330 102,003
OTHER INCOME
Trust Department Income 3,841 3,070 7,068 5,960
Service Charges on Deposit Accounts 5,370 4,868 10,143 9,036
Real Estate Loan Processing & Servicing Fees 1,661 2,036 3,563 3,881
Other Service Charges and Fees 5,182 3,404 9,717 6,570
Other Operating Income 1,181 1,039 2,998 2,777
Securities Transactions 0 186 403 723
-------- -------- -------- --------
Total Other Income 17,235 14,603 33,892 28,947
OTHER EXPENSES
Salaries and Employee Benefits 21,768 19,423 43,693 38,754
Occupancy Expense - Net 2,423 2,065 4,707 3,944
Equipment Expenses 3,093 2,858 6,152 5,539
Outside Data Processing 2,714 2,893 5,239 5,194
Other Operating Expenses 13,985 12,922 26,733 24,997
-------- -------- -------- --------
Total Other Expenses 43,983 40,161 86,524 78,428
-------- -------- -------- --------
Income Before Taxes 30,843 27,066 60,698 52,522
Applicable Income Taxes 10,214 9,047 20,126 17,992
-------- -------- ------- -------
NET INCOME $20,629 $18,019 $40,572 $34,530
======== ======== ======== ========
NET INCOME PER SHARE
Basic $ 0.61 $ 0.55 $ 1.19 $ 1.07
Diluted 0.60 0.54 1.17 1.05
Average Shares Outstanding (in thousands)
Basic 33,876 32,754 34,220 32,298
Diluted 34,248 33,434 34,632 32,997
</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, 1998 $391,352 $94,157 $200,174 ($96,600) $ 6,450 $595,533
Six Months Ended June 30, 1999
Comprehensive Income:
Net Income 0 0 40,572 0 0 40,572
Other Comprehensive Income, net of tax:
Net Unrealized Holding Losses on
Available-For-Sale Securities Arising
During The Period 0 0 0 0 (20,485) (20,485)
Less: Reclassification Adjustment For
Gains Realized in Net Income 0 0 0 0 (242) (242)
-------
Other Comprehensive Income (20,727)
-------
Comprehensive Income 19,845
Cash Dividends ($.48 per share) (16,249) (16,249)
Treasury Shares Purchased (56,483) (56,483)
Stock Options Exercised 2,528 2,200 0 0 0 4,728
-------- -------- -------- ------- ------- --------
Balance June 30, 1999 $393,880 $96,357 $224,497 ($153,083) ($14,277) $547,374
======== ======== ======== ========= ========= ========
Balance December 31, 1997 $363,306 $71,782 $157,730 ($95,095) $5,927 $503,650
Six Months Ended June 30, 1998
Comprehensive Income:
Net Income 0 0 34,530 0 0 34,530
Other Comprehensive Income, net of tax:
Net Unrealized Holding Gains on
Available-For-Sale Securities Arising
During The Period 0 0 0 0 102 102
Less: Reclassification Adjustment For
Gains Realized in Net Income 0 0 0 0 (434) (434)
--------
Other Comprehensive Income (332)
--------
Comprehensive Income 34,198
Cash Dividends ($.42 per share) (13,929) 0 0 (13,929)
FFVA Treasury Shares Reissued 7,087 19,274 0 0 0 26,361
Stock Options Exercised 1,229 513 0 0 0 1,742
-------- -------- -------- -------- -------- ---------
Balance June 30, 1998 $371,622 $91,569 $178,331 ($95,095) $5,595 $552,022
======== ========= ======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited in thousands)
<CAPTION>
For The Six Months
Ended June 30
1999 1998
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $40,572 $34,530
Adjustments To Reconcile Net Income To Net Cash
Provided by Operating Activities:
Provision For Loan Losses 4,455 4,888
Depreciation 5,760 4,939
Amortization and Accretion 1,077 2,728
Net Gain From Sales of Assets (403) (723)
Increase (Decrease) Due to Changes In:
Accrued Interest Receivable 801 (3,394)
Accrued Interest Payable 624 (1,525)
Other Assets and Other Liabilities (4,368) 14,465
-------- --------
Net Cash Provided by Operating Activities 48,518 55,908
INVESTING ACTIVITIES
Proceeds From Sales of Securities Available for Sale 33,763 32,482
Proceeds From Maturities of Securities Available for Sale 349,498 235,512
Proceeds From Maturities of Securities Held to Maturity 16,105 22,308
Purchases of Securities Available for Sale (565,931) (330,719)
Purchases of Securities Held to Maturity (5,870) (19,620)
Net Increase In Loans (184,280) (248,369)
Acquisition of Branches, Net of Cash Received 0 111,920
Purchases of Premises and Equipment (5,402) (5,571)
-------- --------
Net Cash Used in Investing Activities (362,117) (202,057)
FINANCING ACTIVITIES
Net Increase in Interest Bearing and Non-interest Bearing Deposits 11,457 30,888
Net (Decrease) Increase in Federal Funds Purchased (744) 7,090
Net Increase in Other Short-term Borrowings 30,623 156,132
Proceeds From Long-term Borrowings 295,650 0
Repayment of Long-term Debt (761) (7,013)
Proceeds From Issuance of Common Stock 4,728 28,103
Purchase of Treasury Stock (56,483) 0
Dividends Paid (16,249) (13,929)
-------- --------
Net Cash Provided by Financing Activities 268,221 201,271
-------- --------
(Decrease) Increase in Cash and Cash Equivalents (45,378) 55,122
Cash And Cash Equivalents at Beginning of Year 208,376 149,484
-------- --------
Cash And Cash Equivalents, June 30 $162,998 $204,606
======== ========
</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 - 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 period. 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 372,000 and 680,000 for the second quarter of 1999 and 1998
respectively, while the effect was 412,000 and 699,000 for the six
months ended June 30, 1999 and 1998, respectively.
Note C - Accounting Pronouncements
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, as amended, for
years beginning after June 15, 2000 and the impact of adopting this
statement by One Valley in year 2000 cannot be determined at this
time.
<PAGE>
One Valley Bancorp, Inc.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
June 30, 1999
INTRODUCTION AND SUMMARY
Net income for the second quarter of 1999 totaled $20.6
million, a 14.5% increase over the $18.0 million earned in the same
quarter of 1998. On a diluted basis, net income per share rose by
11.1% to $0.60 from the $0.54 earned in the second quarter of 1998.
The improvement in earnings during the quarter is primarily due to
higher net interest income through balance sheet growth and an
increase in non-interest income due to growth in One Valley's
customer base. These increases more than offset the increase in non-
interest expense from the expanded branch network.
Net income for the first six months of 1999 totaled $40.6
million, a 17.5% increase over the first six months of 1998. On a
diluted basis, net income per share for the first six-month period
was $1.17, an 11.4% increase from the $1.05 reported for the first six months
of 1998.
Return on average assets (ROA) measures how effectively One
Valley utilizes its assets to produce net income. ROA was 1.34% for
the first six months of 1999, up from the 1.26% earned during the
same period of 1998. Return on average equity (ROE) also increased to 13.91%
from the 12.98% reported for the first six months of 1998.
On August 7, 1998, One Valley acquired Summit Bankshares,
Inc. (Summit), a bank holding company that operated nine branches in
and around Lexington, Virginia. As of August 7, 1998, Summit had $199
million in total assets, $149 million in total loans, and $181
million in total deposits. The transaction was accounted for as a
pooling-of-interests. However, due to the immaterial impact on One Valley's
financial statements, the balances and results of operations
of Summit are included in One Valley's financial statements only from
the date of acquisition.
The following discussion is an analysis of the financial
condition and results of operations of One Valley for the first six
months of 1999. This discussion should be read in conjunction with
the 1998 Annual Report to Shareholders and the other financial
information included in this report.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income for the six months ended June 30, 1999,
was $122.2 million on a fully tax-equivalent basis, a 10.2% increase
over the $110.9 million earned during the same period in 1998.
Average earning assets in the first six months of 1999, increased by
$580.2 million or 11.3% over the same period of 1998. During this
time period, net average loans increased by $583.5 while average
investments declined by $10.4 million.
To fund this loan growth, average interest bearing
liabilities increased by $475.0 million or 10.8% over the first six
months of 1998. The increase in interest bearing liabilities
resulted in a $2.0 million increase in interest expense. The
increase in interest expense was diminished by a decline in the
interest rates paid. The increase in average loans and deposits is
partially due to the acquisition of Summit Bankshares, Inc. in August
1998, while the remainder is attributed to internal growth.
As shown in the consolidated average balance sheets (page
19), the yield on earning assets declined to 7.82% for the first six
months of 1999, down from the 8.18% earned during the same period in
1998. Similarly, the cost of interest bearing liabilities dropped to
4.10% for the first six months of 1999, down from 4.45% reported for
the same period of 1998. Additional discussion of the changes in
balance sheet mix is included later in this report. With the decline
in the yield on earning assets exceeding the decline in the cost of
interest bearing liabilities, the net interest margin decreased to
4.30% from the 4.34% reported in the first six months of 1998.
Internal interest rate risk simulations indicate that over the next
twelve months a sharp rise or sharp decrease in interest 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 $4.5 million for the six
months ended June 30, 1999, a slight decrease from the provision
during the same period of 1998. The provision for loan losses was
based upon One Valley's continual evaluation process of the adequacy
of the allowance for loan losses. In management's opinion, the
allowance for loan losses remains adequate to absorb the current
estimated risk of loss in the existing loan portfolio. While net
charge-offs through the second quarter increased by $319,000 over the
June 1998, net charge offs as a percentage of average total loans
decreased to 0.16% on an annualized basis, down from an annualized
0.17% during the same period in 1998, and from the 0.18% charge-off
ratio for the full year of 1998.
Total non-performing assets at June 30, 1999, were 0.22% of
period-end loans, down from the 0.28% at June 30, 1998 and 0.24% from
December 31, 1998. Non-accrual loans totaled $8.3 million at June
30, 1999, $113,000 or 1.3% below last year's level, while foreclosed
properties totaled $811,000 or half of last year's level. At June
30, 1999, the allowance for loan losses was sufficient to absorb over
five times the amount of those non-performing assets. Loans past due
over 90 days were 0.16% of outstanding loans at June 30, 1999, down
from the 0.19% at year-end 1998 and unchanged from June 30, 1998. An
analysis of the allowance for loan losses and non-performing assets
is included on page 18. With the improved credit quality and the
continued growth of loans outstanding, the allowance for loan losses
as a percent of loans outstanding has declined to 1.28% at June 30,
1999 compared to 1.31% at year-end and 1.33% one year ago.
Non-Interest Income and Expense
The net overhead ratio (non-interest expense less non-
interest income excluding security transactions divided by average
earning assets) is a measure of 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 six months of 1999 was
1.86%, down from 1.95% during all of 1998 and 1.96% for the first six
months of 1998. The improvement in the net overhead ratio during the
first six months of 1999 was the result of a 11.3% growth in average
earning assets from one year ago while net overhead increased by only
5.6% from the same period in 1998. The increase in net overhead is
partially due to the cost of operating the nine locations acquired
through the merger with Summit Bankshares in August 1998.
Total non-interest income excluding securities transactions
was $33.5 million through the first six months of 1999, up 18.7% from
the $28.2 million non-interest income earned during the same period
in 1998. Trust income increased by 18.6% 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
12.3% in the first six-month comparison, due to the increased size of
One Valley's customer base and an increase in One Valley's fee
structure to reflect market rates. Other service charges and fees
increased by 48.0% over the first six months of 1999, primarily due
to increases in credit/debit card activity for both retail and
corporate customers, investment and insurance commissions, official
check processing fees, ATM fees, and other banking services provided
to customers.
Total non-interest expense was $86.5 million during the first
six months of 1999, a 10.3% increase over the $78.4 million during
the same period in 1998. This increase is partially due to the
operations of the nine branches acquired through the Summit merger
that occurred in August 1998. Staff costs increased by 12.7% 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 19.4% from the same period last year due to the
increased facilities cost related to the nine new branches, and an
increase in building depreciation expense from the remodeling of
other branch locations. Equipment expenses increased 11.1% from last
year's level primarily due to higher maintenance and depreciation
costs related to the new branches and technology upgrades that
occurred in 1998. Other operating expenses increased by $1.7 million
or 6.9% in the first six months of 1999, largely due to a $0.6
million increase in intangible amortization from the 1998 acquisition
activity, a $0.5 million increase in state and local taxes which is
partially offset by lower state net income taxes, and increase in
costs such as telephone, postage, and courier service associated with
the related increase in One Valley's customer base and branch
network.
Income tax expense increased by $2.1 million, or 11.9%, for
the first six months of 1999 compared with the same period in 1998.
The increase in taxes is primarily a result of the 15.6% growth in
pretax earnings. One Valley's effective income tax rate for the
first six months of 1999 was 33.2% compared to 34.3% during the first
six months of 1998. The slight decline in effective tax rate is
partially due to an increase in interest income from tax exempt
sources.
FINANCIAL CONDITION
Asset Structure
Total loans at June 30, 1999, were $4.2 billion, an increase
of $498.3 million or 13.6% above June 30, 1998. Approximately $148.7
million of the loans were acquired through the merger with Summit
Bankshares in August 1988, while the remaining increase is due to
strong loan demand over the past twelve months. As a result of the
additional loan growth, the consolidated loan-to-deposit ratio has
increased to 91.4% at June 30, 1999, compared to 86.5% at June 30,
1998. The increase in total loans is primarily in one-to-four family
residential mortgages, commercial loans primarily secured by real
estate, and consumer auto loans. During the second quarter of 1999,
One Valley securitized $82.9 million of residential mortgage loans.
Adjusting for the loan securitization, loans have increased by 6.6%
since year-end 1998.
Investment portfolio assets increased $140.4 million or 8.9%
from the level at year-end and by $98.2 million or 6.0% from the
level one-year ago. This increase includes the $82.9 million
securitization discussed above. At June 30, 1999 approximately 85%
of One Valley's investment portfolio was available-for-sale while the
remaining 15% consists of municipal securities to be held-to-
maturity. 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 the
ability at the time of purchase to hold securities until maturity, they are
classified as held-for-investment and carried at amortized
historical cost adjusted for amortization of premiums and accretion
of discounts, which are recognized as adjustments to interest income.
Securities designated as available-for-sale at June 30, 1999
had a historical cost of $1.480 billion, with an unrealized loss of
approximately $23.4 million. Due to increases in market interest
rates in 1999, the market value of One Valley's securities available-
for-sale has declined by approximately $33.8 million since year-end
1998. This decline is expected to be temporary and no charges to
operations are anticipated. This unrealized loss lowered
shareholders' equity at June 30, 1999 by $14.3 million, net of $9.1
million in deferred income taxes. At year-end December 31, 1998, and
June 30, 1998, securities available-for-sale had a historical cost of
$1.297 billion and $1.400 billion, with an unrealized gain of
approximately $10.4 million and $9.3 million, respectively. The
unrealized gains increased shareholders' equity by $6.5 million and
$5.6 million, net of deferred income taxes.
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 19), average tax-exempt
securities in the first six months of 1999 increased by 10.9% or
$25.5 million over the average during the first six months of 1998.
One Valley will continue to monitor its investment opportunities and
may purchase additional tax-exempt securities of similar yield and
quality.
As of June 30, 1999, Federal funds sold were zero. When
compared to June 30, 1998, and December 31, 1998, Federal funds sold
deceased by $47.0 million and $50.0, respectively. On average,
Federal funds sold increased $7.1 million or 30.5% since June 1998.
Fluctuations in Federal funds sold are normal and largely due to
planned changes in One Valley's asset/liability structure in order to
maximize the return on investment in response to changes in the
interest rate environment.
Liability Structure
Total deposits at June 30, 1999, increased by $11.5 million
from year-end and $316.1 million or 7.4% since June 30, 1998.
Approximately $181.0 million in deposits were acquired through the
merger with Summit Bancshares in August 1998. Average deposits over
the last two quarters have increased at an annualized rate of 3.1%.
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 acquisitions, has been in
variable rate, index-based deposit accounts. One Valley has also been
able to attract non-interest bearing deposits by increasing customer
service and convenience through increased electronic banking service
and locations. The average rate paid on interest bearing deposits was
3.97% in the first six months of 1999, down from the 4.26% average
rate paid for all of 1998, and the 4.29% average rate paid in the
first six months of 1998. In an effort to meet customer expectations
for an integrated financial service delivery system, One Valley also
operates under a community banking structure a fully licensed NASD
Broker/Dealer, an Insurance Agency, and continues to expand other
product lines.
Total short-term borrowings increased by $29.9 million or
4.1% from the year-end level, but decreased $27.1 million or 3.4%
from the level at June 30, 1998. 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 from December 31, 1998, has
been used to fund loan growth and optimize the yield and duration of
the investment portfolio as planned under One Valley's
asset/liability management program. The average rate paid on these
short-term borrowings has decreased from 5.17% during the first six
months of 1998 to 4.56% during the same period of 1999. By
comparison, the yield on the investment portfolio during the same
time frame declined from 6.71% during the first six months of 1998 to
6.41% during the same period of 1999.
Long-term borrowings increased by $288.5 million since June
30, 1998 and $294.9 million since December 31, 1998. In April 1999,
One Valley borrowed $200.0 million in one-to-three year debt from the
Federal Home Loan Bank. The proceeds were used to purchase
investments with maturity dates in the fourth quarter of this year.
Upon maturity, the funds will be available to provide adequate
liquidity for customers' potential year-end cash needs. While there
was no material impact on net interest income, the borrowing lowered
One Valley's net interest margin by 15 basis points in the second
quarter and 8 basis points year-to-date. Also during 1999, One Valley
has borrowed $40.7 million in ten year amortizing fixed rate notes as
funding for certain long-term fixed rate loans. As a result, One
Valley now has $325.2 million of long-term FHLB borrowings with
repayment schedules from one to ten years.
To hedge against potential rising interest rates on its
indexed money market core deposit accounts, One Valley entered into
an interest rate swap agreement during 1998. During the first
quarter of 1999, One Valley entered into two additional rate swap
agreements as part of its asset/liability management strategy. The
effect of these derivative financial instruments on One Valley's
operating results has been immaterial to date.
Capital Structure and Liquidity
One Valley's equity-to-asset ratio was 8.8% at June 30, 1999,
down from the 10.0% at December 31, 1998 and the 9.7% at June 30,
1998. Yet, One Valley's risk based capital ratio at June 30, 1999
was 14.3%, well above the 8.0% required, while its Tier I capital
ratio was 13.0%. One Valley's strong capital position is
demonstrated further by its leverage ratio of 8.2% 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. 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.
The decrease in the equity-to-asset ratio is the result of
the purchase of treasury shares, the equity effect of the market
value decline of the investment portfolio, and the additional
borrowings in 1999. In February 1999, One Valley's Board of Directors
authorized the repurchase of 1.5 million shares of One Valley common
stock. This purchase was completed by the end of the second quarter
at a cost of $56.5 million. In July 1999, the Board authorized the
repurchase of another 1.5 million shares of One Valley common stock.
Purchases under this plan may be made from time-to-time depending
upon market conditions.
One Valley's cash dividend, totaling $0.24 per share for the
second quarter of 1999, was up 14.3% over the $0.21 per share
dividend during the same period in 1998. 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. 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 or Y2K issue and the challenge it
poses. The Y2K problem arose because many existing computer programs
use only the last two digits to refer to a year. Consequently, 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 or 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. Each phase is described below. The phases indicate
the order and method of One Valley's approach to Year 2000 concerns.
Elements of different phases overlap, and different systems are at
varying levels of completion within each phase. Systems that are
mission critical have been addressed first.
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 interruption to customers' business. One
Valley also identified which systems were "mission critical" in terms
of its operations and customer service. 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 completed for all systems
defined as mission critical in 1998. In addition, during this phase
One Valley began reprogramming its internal IT and non-IT Systems to
accommodate Y2K. Most internal IT Systems and non-IT Systems have not
been designated as mission critical to One Valley. Those that were
deemed mission critical were renovated or replaced during 1998.
Renovation of systems that are not mission critical was completed
during the second quarter of 1999. During this phase, One Valley is
also focusing on its customers' readiness for and susceptibility to
Y2K concern.
In the Validation Phase, One Valley and its third party IT
providers test the renovated applications and components to make sure
they are Y2K ready. This phase was substantially completed at the end
of the second quarter of 1999.
The Implementation Phase began during the fourth quarter of
1998. During the first part of this phase, vendors completed
upgrading of the applications, systems and other components, and Y2K
ready programs for mission critical functions were put into
production at One Valley. The balance of this final phase was
completed during the second quarter of 1999.
Project Status
One Valley's major IT Systems are provided by the companies
which are among the largest service providers in the world and are
recognized as among the leading firms in their respective lines of
business. The major IT Systems provided by these third parties
consist of those which process mortgage loans, credit cards,
commercial and installment loans, deposits, investments, and trust
services. One Valley uses its Internal IT Systems to collect and
format data that is then sent to and processed by these third
parties. The resulting information is then available to One Valley.
The third party service providers, in some cases, also generate
statements for mailing directly to customers.
One Valley has continually monitored the Y2K progress of
these third parties and has determined that progress to date is
acceptable. These systems have each been renovated, tested by the
vendor, are in use by One Valley now, and are running on the
remediated Y2K software. The Y2K upgrading of all mission critical IT
Systems provided by third parties is complete. Because most of One
Valley's mission critical systems are supplied by third party
vendors, validation by the vendors occurred first. The up-graded
system was then put into production at One Valley and further testing
by One Valley will continue throughout 1999. One Valley has completed
time dimension testing of these third-party IT Systems, and all other
testing required by bank regulators, utilizing its own testing, proxy
testing, logical partition testing, or the most appropriate
combination thereof.
One Valley's Internal IT Systems are primarily used to
capture and prepare data to be transmitted to its third party IT
Systems providers. As part of a planned upgrade of its systems, One
Valley has replaced all of its personal computers with models that
are Y2K ready. In addition, One Valley has over 280 ATMs in its
network, all of which have been validated by the vendor and are using
Y2K compliant software. Testing of these ATMs by One Valley was
completed during the second quarter of 1999. One Valley's IT Systems
also include network servers, routers and related software. The
upgrading or replacement of One Valley's servers and routers and
related software was completed during the second 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 an inventory of its facilities and has
tested or developed plans to test, to the extent possible, applicable
equipment for Year 2000 compliance. One Valley has determined that
all of its vaults are Y2K ready. Outside companies, primarily
utilities, which provide these non-IT services, have indicated to One
Valley that they plan to be Y2K ready by the end of 1999, 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,
beyond these assurances, 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 falling within
certain parameters. As of June 30, 1998, corporate borrowers were
preliminarily assessed as to their level of Year 2000 risk based upon
their line of business, their degree of reliance on computer hardware
and software, and their historic response to strategic challenges. A
full assessment of medium and high-risk customers and industries was
undertaken, including a questionnaire and a site visit in some
instances. In addition, the results of One Valley's evaluations have
been analyzed by industry segment to provide Y2K risk profiles by
industry. Corporate borrowers in those industries with a significant
inherent Y2K risk receive greater scrutiny. One Valley plans to
monitor closely customers and industries judged to be high risk, and
credit analyses on new and existing credits include evaluation of
Year 2000 readiness.
Although One Valley has implemented 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 has
been completed for each significant system, it is not possible to
independently verify each vendor's vendors. 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 issues within One Valley in a timely manner. In the
event of a vendor, governmental, utility, customer 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 on
its part, because One Valley's ability to perform is linked to the
performance of others, 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 and its customers. If system failures occur for any reason,
One Valley and its customers 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 has completed and tested the contingency plan for
the possibility of business disruption due to Y2K issues. The Y2K
contingency plan expands existing business continuity plans,
contemplating specific Y2K scenarios. As part of that process One
Valley has assessed the potential business impact of a failure of
each of its important systems and determined the need for contingency
planning on a system by system basis. One Valley's contingency plans
focus upon IT Systems failures by its vendors, as well as widespread
disruptions of telecommunications and electrical power, all of
varying duration. In addition to the contingency planning, One Valley
has begun the process of event planning. Event planning differs from
contingency planning in that is addresses areas beyond typical
business continuity. For example, as part of the event planning,
checklists and procedures are being developed for the New Year's
weekend with results to be reported to a central location. There can
be no assurance, however, that contingency and event planning will be
adequate for all possible events.
Project Costs
Expenses directly related to Y2K have been incurred, such as
staff costs and informational conferences and seminars for employees
and customers. These costs have been immaterial to date. Since third
party vendors provide most of One Valley's IT Systems under the terms
of fixed price contracts, One Valley has had to date, no material
direct expense as a result of vendor's upgrades to those systems as a
result of Y2K concerns. It is possible, however, that these vendors
may attempt to recover some of their Y2K-related 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.
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
$5.4 million, which includes estimated payroll costs of those with
significant responsibility for the Y2K project. To date, One Valley
has incurred over $4.5 million of these total estimated expenditures.
One Valley does not separately track all internal costs incurred for
the Y2K project, which are principally payroll costs for its
information technology employees and others involved in the Y2K
project. 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 Six Months
Ended June 30 Ended June 30
1999 1998 1999 1998
<S> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES
Balance, Beginning of Period $52,645 $47,871 $52,272 $45,048
Loan Losses 2,015 1,730 4,251 3,982
Loan Recoveries 438 472 931 981
------- ------- ------- -------
Net Charge-offs 1,577 1,258 3,320 3,001
Balance of Acquired Subsidiary 0 0 0 1,972
Provision For Loan Losses 2,339 2,294 4,455 4,888
------- ------- ------- -------
Balance, End of Period $53,407 $48,907 $53,407 $48,907
======= ======= ======= =======
Total Loans, End of Period $4,173,003 $3,674,682
Allowance For Loan Losses As a % of Total Loans 1.28 1.33
========== ==========
NON-PERFORMING ASSETS AT QUARTER END
Non-Accrual Loans $8,274 $8,387
Foreclosed Properties 811 1,798
------- -------
Total Non-Performing Assets $9,085 $10,185
======= =======
Non-Performing Assets As a % of Total Loans 0.22 0.28
Loans Past Due Over 90 Days $6,723 $5,864
Loans Past Due Over 90 Days As a % of Total Loans 0.16 0.16
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Average Balance Sheets
(unaudited in thousands)
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
1999 1998 1999 1998
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 $4,087,203 8.29 $3,550,720 8.73 $4,035,948 8.29 $3,451,938 8.77
Tax-Exempt 51,002 9.51 42,676 9.76 47,946 9.46 42,858 9.81
---------- ---------- ---------- ----------
Total 4,138,205 8.31 3,593,396 8.74 4,083,894 8.30 3,494,796 8.78
Less: Allowance for Losses 53,300 48,754 53,089 47,497
---------- ---------- ---------- ---------
Net Loans 4,084,905 8.42 3,544,642 8.86 4,030,805 8.41 3,447,299 8.90
Securities
Taxable 1,441,552 6.08 1,419,604 6.42 1,373,613 6.11 1,409,578 6.49
Tax-Exempt 256,182 8.25 230,284 8.01 259,476 8.03 233,942 8.05
---------- ---------- ---------- ----------
Total 1,697,734 6.41 1,649,888 6.64 1,633,089 6.41 1,643,520 6.71
Federal Funds Sold & Other 49,457 4.55 32,613 5.92 30,372 4.61 23,275 5.82
---------- ---------- ---------- ---------
Total Earning Assets 5,832,096 7.80 5,227,143 8.14 5,694,266 7.82 5,114,094 8.18
Other Assets 385,457 363,973 381,738 353,598
---------- ---------- ---------- ---------
Total Assets $6,217,553 $5,591,116 $6,076,004 $5,467,692
========== ========== ========== ==========
LIABILITIES AND EQUITY
Interest Bearing Liabilities
Deposits $3,996,438 3.93 $3,728,470 4.25 $3,980,903 3.97 $3,662,521 4.29
Short-term Borrowings 718,672 4.55 723,519 5.07 726,650 4.56 707,150 5.17
Long-term Borrowings 322,832 5.04 46,761 6.00 184,070 5.14 46,908 6.04
---------- ---------- ---------- ----------
Total Interest
Bearing Liabilities 5,037,942 4.09 4,498,750 4.40 4,891,623 4.10 4,416,579 4.45
Non-interest Bearing Deposits 559,427 499,195 551,138 472,263
Other Liabilities 47,021 45,963 49,841 46,826
---------- ---------- ---------- ----------
Total Liabilities 5,644,390 5,043,908 5,492,602 4,935,668
Shareholders' Equity 573,163 547,208 583,402 532,024
---------- ---------- ---------- ----------
Total Liabilities & Equity $6,217,553 $5,591,116 $6,076,004 $5,467,692
========== ========== ========== ==========
Interest Income To Earning Assets 7.80 8.14 7.82 8.18
Interest Expense To Earning Assets 3.53 3.79 3.52 3.84
------ ------ ------ ------
Net Interest Margin 4.27 4.35 4.30 4.34
====== ====== ====== ======
<FN> Note: Yields are computed on a fully taxable equivalent basis using the rate of 35%.
</TABLE>
<PAGE>
One Valley Bancorp, Inc.
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders.
The Regular Annual Meeting of Shareholders of One Valley was held on
April 27, 1999. At that meeting the matters set forth below were
voted upon. The number of votes cast for, against or withheld, as
well as the number of abstentions and broker non-votes concerning
each matter and nominee are indicated in the following tabulation.
1. Elections of Directors
Witheld &
Nominee For Against Absentions
Arnold 26,939,676 82,153
Avampato 26,940,098 82,153
Candler 26,938,838 82,153
Davidson, Jr. 26,935,666 82,153
Lynch 26,940,098 82,153
Mork 26,910,450 82,153
Neighborgall, III 26,920,088 82,153
Rice, Jr. 26,939,959 82,153
Tucker, III 26,928,746 82,153
Van Metre, Jr. 26,914,839 82,153
Welch 26,932,854 82,153
Wick, III 26,940,098 82,153
2. Approve Selection of Auditors
Withheld &
Nominee For Against Absentions
Ernst & Young LLP 26,895,209 20,577 98,151
<PAGE>
Item 6. Exhibits and Reports on Form 10-Q
a) Exhibits
27. Financial Data Schedule - electronic filing only
b) Reports on Form 8-K
One Valley did not file any reports on Form 8-K during the
three months ended June 30, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
One Valley Bancorp, Inc.
DATE: August 13, 1999
BY /s/ Laurance G. Jones
Laurance G. Jones
Executive Vice President
and Chief Financial Officer
BY /s/ James A. Winter
James A. Winter
Senior Vice President
and Chief Accounting 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 schedule 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>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> JUN-30-1999 JUN-30-1998
<CASH> 159479 155574
<INT-BEARING-DEPOSITS> 3519 1990
<FED-FUNDS-SOLD> 0 47042
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 1456371 1386666
<INVESTMENTS-CARRYING> 270073 241600
<INVESTMENTS-MARKET> 268977 247966
<LOANS> 4173003 3674682
<ALLOWANCE> 53407 48907
<TOTAL-ASSETS> 6252443 5688065
<DEPOSITS> 4564345 4248278
<SHORT-TERM> 759638 786702
<LIABILITIES-OTHER> 50717 59201
<LONG-TERM> 330369 41862
0 0
0 0
<COMMON> 393880 371622
<OTHER-SE> 153494 180400
<TOTAL-LIABILITIES-AND-EQUITY> 6252443 5688065
<INTEREST-LOAN> 167826 151854
<INTEREST-INVEST> 48726 51850
<INTEREST-OTHER> 695 672
<INTEREST-TOTAL> 217247 204376
<INTEREST-DEPOSIT> 78338 77960
<INTEREST-EXPENSE> 99462 97485
<INTEREST-INCOME-NET> 117785 106891
<LOAN-LOSSES> 4455 4888
<SECURITIES-GAINS> 403 723
<EXPENSE-OTHER> 86524 78428
<INCOME-PRETAX> 60698 52522
<INCOME-PRE-EXTRAORDINARY> 60698 52522
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 40572 34530
<EPS-BASIC> 1.19 1.07
<EPS-DILUTED> 1.17 1.05
<YIELD-ACTUAL> 7.82 8.18
<LOANS-NON> 9085 10185
<LOANS-PAST> 6723 5864
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 52272 45048
<CHARGE-OFFS> 4251 3982
<RECOVERIES> 931 981
<ALLOWANCE-CLOSE> 53407 48907
<ALLOWANCE-DOMESTIC> 53407 48907
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
