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 March 31, 2000
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 March 31, 2000 was:
Common Stock, $10.00 par value -33,678,012 shares
<PAGE>
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 - 6 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 three-month period ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000. 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, 1999.
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 - 15 of this report.
<PAGE>
<TABLE>
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited in thousands)
<CAPTION>
March 31 December 31 March 31
2000 1999 1999
<S> <C> <C> <C>
ASSETS
Cash and Due From Banks $158,280 $214,535 $157,688
Interest Bearing Deposits With Other Banks 3,672 5,720 2,601
Federal Funds Sold 168,000 185,590 0
---------- ---------- ----------
Cash and Cash Equivalents 329,952 405,845 160,289
Securities
Available-for-Sale, at fair value 1,228,560 1,288,853 1,271,366
Held-to-Maturity (Estimated Fair Value,
March 31, 2000 - $275,972; December 31, 1999 - $278,792;
March 31, 1999 - $282,896) 282,412 286,330 276,174
Loans
Total Loans 4,424,862 4,391,626 4,085,086
Less: Allowance For Loan Losses 55,250 54,156 52,645
---------- ---------- ----------
Net Loans 4,369,612 4,337,470 4,032,441
Premises & Equipment - Net 98,297 99,661 102,505
Other Assets 164,619 164,902 131,144
---------- ---------- ----------
Total Assets $6,473,452 $6,583,061 $5,973,919
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non-interest Bearing $589,190 $553,370 $567,385
Interest Bearing 4,050,656 4,020,065 3,985,476
---------- ---------- ----------
Total Deposits 4,639,846 4,573,435 4,552,861
Short-term Borrowings
Federal Funds Purchased 28,876 12,662 119,281
Repurchase Agreements and Other Borrowings 570,132 837,608 608,199
---------- ---------- ----------
Total Short-term Borrowings 599,008 850,270 727,480
Long-term Borrowings 590,532 541,824 54,512
Other Liabilities 69,871 58,803 58,246
---------- ---------- ----------
Total Liabilities 5,899,257 6,024,332 5,393,099
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 39,700,758 shares at March 31, 2000;
39,449,061 shares at December 31, 1999;
39,221,327 shares at March 31, 1999 397,008 394,491 392,213
Capital Surplus 101,198 96,817 94,412
Retained Earnings 259,199 247,394 211,908
Accumulated Other Comprehensive Income (27,511) (24,274) 556
Treasury Stock-6,022,746 shares at March 31, 2000
and December 31, 1999; 5,048,046 shares
at March 31, 1999; at cost (155,699) (155,699) (118,269)
---------- ---------- ----------
Total Shareholders' Equity 574,195 558,729 580,820
---------- ---------- ----------
Total Liabilities and Shareholders' Equity $6,473,452 $6,583,061 $5,973,919
========== ========== ==========
</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
Ended March 31
2000 1999
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans
Taxable $89,600 $81,768
Tax-Exempt 998 676
-------- --------
Total 90,598 82,444
Interest on Investment Securities
Taxable 20,851 20,049
Tax-Exempt 3,419 3,339
-------- --------
Total 24,270 23,388
Other Interest Income 688 134
-------- --------
Total Interest Income 115,556 105,966
INTEREST EXPENSE
Deposits 40,667 39,201
Short-term Borrowings 7,572 8,277
Long-term Borrowings 8,382 633
-------- --------
Total Interest Expense 56,621 48,111
-------- --------
Net Interest Income 58,935 57,855
Provision For Loan Losses 2,653 2,116
-------- --------
Net Interest Income
After Provision For Loan Losses 56,282 55,739
OTHER INCOME
Trust Department Income 3,569 3,227
Service Charges on Deposit Accounts 4,947 4,773
Real Estate Loan Processing & Servicing Fees 976 1,902
Other Service Charges and Fees 7,159 4,535
Other Operating Income 1,508 1,817
Securities Transactions 5 403
-------- --------
Total Other Income 18,164 16,657
OTHER EXPENSES
Salaries and Employee Benefits 23,047 21,925
Occupancy Expense - Net 2,299 2,284
Equipment Expenses 3,021 3,059
Outside Data Processing 2,581 2,525
Other Operating Expenses 12,702 12,748
-------- --------
Total Other Expenses 43,650 42,541
-------- --------
Income Before Taxes 30,796 29,855
Applicable Income Taxes 10,237 9,912
-------- --------
NET INCOME $20,559 $19,943
======== ========
NET INCOME PER SHARE
Basic $ 0.61 $ 0.58
Diluted $ 0.61 $ 0.57
Average Shares Outstanding (in thousands)
Basic 33,654 34,569
Diluted 33,890 34,940
</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, 1999 $394,491 $96,817 $247,394 ($155,699) ($24,274) $558,729
Three Months Ended March 31, 2000
Comprehensive Income:
Net Income 0 0 20,559 0 0 20,559
Other Comprehensive Income, net of tax:
Net Unrealized Holding Losses on
Available-For-Sale Securities Arising
During The Period 0 0 0 0 (3,234) (3,234)
Less: Reclassification Adjustment For
Gains Realized in Net Income 0 0 0 0 (3) (3)
--------
Other Comprehensive Income (3,237)
--------
Comprehensive Income 17,322
Cash Dividends ($.26 per share) (8,754) (8,754)
Issuance of Common Stock 2,120 4,081 6,201
Stock Options Exercised 397 300 0 0 0 697
-------- -------- -------- -------- -------- --------
Balance March 31, 2000 $397,008 $101,198 $259,199 ($155,699) ($27,511) $574,195
======== ======== ======== ======== ======== ========
Balance December 31, 1998 $391,352 $94,157 $200,174 ($96,600) $6,450 $595,533
Three Months Ended March 31, 1999
Comprehensive Income:
Net Income 0 0 19,943 0 0 19,943
Other Comprehensive Income, net of tax:
Net Unrealized Holding Losses on
Available-For-Sale Securities Arising
During The Period 0 0 0 0 (5,652) (5,652)
Less: Reclassification Adjustment For
Gains Realized in Net Income 0 0 0 0 (242) (242)
--------
Other Comprehensive Income (5,894)
--------
Comprehensive Income 14,049
Cash Dividends ($.24 per share) 0 0 (8,209) 0 0 (8,209)
Treasury Shares Purchased 0 0 0 (21,669) 0 (21,669)
Stock Options Exercised 861 255 0 0 0 1,116
-------- -------- -------- -------- -------- --------
Balance March 31, 1999 $392,213 $94,412 $211,908 ($118,269) $556 $580,820
======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited in thousands)
<CAPTION>
For The Three Months
Ended March 31
2000 1999
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $20,559 $19,943
Adjustments To Reconcile Net Income To Net Cash
Provided by Operating Activities:
Provision For Loan Losses 2,653 2,116
Depreciation 2,907 2,750
Amortization and Accretion 614 1,325
Net Gain From Sales of Assets (5) (403)
Increase (Decrease) Due to Changes In:
Accrued Interest Receivable (619) 1,005
Accrued Interest Payable 816 (432)
Other Assets and Other Liabilities 17,323 6,106
-------- --------
Net Cash Provided by Operating Activities 44,248 32,410
INVESTING ACTIVITIES
Proceeds From Sales of Securities Available for Sale 0 33,765
Proceeds From Maturities of Securities Available for Sale 79,692 181,621
Proceeds From Maturities of Securities Held to Maturity 5,434 8,498
Purchases of Securities Available for Sale (23,065) (189,864)
Purchases of Securities Held to Maturity (1,480) (4,905)
Net Increase In Loans (35,454) (95,184)
Acquisition of Subsidiary, Net of Cash Received 194 0
Purchases of Premises and Equipment (1,262) (2,392)
-------- --------
Net Cash Provided by (Used in) Investing Activities 24,059 (68,461)
FINANCING ACTIVITIES
Net Increase (Decrease) in Interest Bearing and Non-interest Bearing Deposits 66,411 (27)
Net Increase in Federal Funds Purchased 16,214 82,871
Net Decrease in Other Short-term Borrowings (267,476) (85,150)
Proceeds From Long-term Borrowings 75,000 19,150
Repayment of Long-term Debt (26,292) (118)
Proceeds From Issuance of Common Stock 697 1,116
Purchase of Treasury Stock 0 (21,669)
Dividends Paid (8,754) (8,209)
-------- --------
Net Cash Used in Financing Activities (144,200) (12,036)
-------- --------
Decrease in Cash and Cash Equivalents (75,893) (48,087)
Cash And Cash Equivalents at Beginning of Year 405,845 208,376
-------- --------
Cash And Cash Equivalents, March 31 $329,952 $160,289
======== ========
</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 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 236,000 and 371,000 for the first quarter of 2000 and 1999
respectively.
Note C - Pending Merger
On February 6, 2000, One Valley and BB&T Corp. (BB&T), based in Winston-
Salem, North Carolina, executed an Agreement and Plan of Reorganization
providing for the merger of BB&T and One Valley, with BB&T surviving the
merger and thereby acquiring One Valley's bank and non-bank subsidiaries.
Pursuant to the Plan, One Valley shareholders would receive 1.28 shares of
BB&T stock in exchange for each share of One Valley. As part of the proposed
merger, BB&T has estimated one-time after tax charges of $48 million related
to consummating the merger and $29 million related to restructuring One
Valley's bond portfolio. The merger remains subject to the satisfaction of
certain conditions including shareholder and regulatory approval and is
expected to close during the third quarter of 2000. This transaction is
expected to be accounted for as a pooling-of-interests.
Note D - 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 2001 cannot be
determined at this time.
<PAGE>
One Valley Bancorp, Inc.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
March 31, 2000
INTRODUCTION AND SUMMARY
Net income for the first quarter of 2000 totaled $20.6 million, a 3.1%
increase over the $19.9 million earned in the same quarter of 1999. On a
diluted basis, net income per share increased by 7.0% to $0.61 from the $0.57
earned in the first quarter of 1999. The improvement in earnings during the
quarter is primarily due to an 11.7% increase in non-interest income and a
1.9% increase in net interest income.
Return on average assets (ROA) measures how effectively One Valley
utilizes its assets to produce net income. ROA was 1.29% for the first three
months of 2000, down from the 1.34% earned during the same period of 1999.
Return on average equity (ROE) increased to 14.35% from the 13.44% reported
for the first quarter of 1999.
The following discussion is an analysis of the financial condition and
results of operations of One Valley for the first three months of 2000. This
discussion should be read in conjunction with the 1999 Annual Report to
Shareholders and the other financial information included in this report.
Acquisitions
At the close of business on January 7, 2000, One Valley acquired Carson
Insurance Agency in Charleston, West Virginia. This transaction was treated
as a purchase and accordingly, the balances and results of the operations are
included in the financial statements of One Valley only from the date of
purchase.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income for the three months ended March 31, 2000, was $61.3
million on a fully tax-equivalent basis, a 2.2% increase over the $60.0
million earned during the same period in 1999. In total, average earning
assets increased by $391.2 million or 7.0% for the first three months of 2000
versus the first quarter 1999, primarily due to a $360.9 million or 9.1%
increase in average net loans. To fund this loan growth, average interest
bearing liabilities increased by $444.0 million or 9.4% over the first three
months of 1999. Approximately $385.9 million of the increase was the result
of borrowings, primarily long-term, while the remaining $58.1 resulted from
internal growth in interest bearing deposits.
As shown in the consolidated average balance sheets (page 14), the yield
on earning assets increased to 7.96% for the first three months of 2000, up
from the 7.84% earned during the same period in 1999. Similarly, the cost of
interest bearing liabilities increased to 4.39% for the first three months of
2000, up from the 4.11% cost of funds reported during the first quarter of
1999. Additional discussion of the changes in balance sheet mix is included
later in this report. With the increase in the cost of interest bearing
liabilities exceeding the increase in the yield on earning assets, the net
interest margin declined to 4.13% for the first three months of 2000 versus
4.33% for the same period in 1999. However, when compared to the fourth
quarter of 1999, the net interest margin rose 7 basis points from 4.06% to
4.13%. Internal interest rate risk simulations indicate that over the next
twelve months a rise of 300 basis points in interest rates would have a
negative influence on net interest income. Normal fluctuations in market
interest rates should not have a significant impact on One Valley's net
interest margin.
Credit Experience
The provision for loan losses was $2.7 million for the three months ended
March 31, 2000, a $537,000 increase from the provision during the first
quarter of 1999. 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. Net charge-offs for the first quarter were $1.6 million for the
three months ended March 31, 2000 down from the $1.7 million reported for the
first quarter of 1999. As a percentage of average total loans, net charge-
offs in the first three months of 2000 decreased to 0.14% on an annualized
basis, down from an annualized 0.17% during the same period in 1999 and for
the full year of 1999.
Total non-performing assets to period-end loans at March 31, 2000,
remained unchanged from one year ago at 0.24%, but down from December 31,
1999. Non-accrual loans totaled $9.4 million at March 31, 2000, $841,000 or
9.9% above last year's level, while foreclosed properties were $120,000 or
10.3% below last year's level. Loans past due over 90 days were 0.11% of
outstanding loans at March 31, 2000, down from the 0.13% at March 31, 1999 and
unchanged from year-end 1999. An analysis of the allowance for loan losses
and non-performing assets is included on page 13.
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 1.25% at March 31, 2000 compared to 1.29% one year ago but up
slightly from the 1.23% year-end 1999. In management's opinion, the allowance
for loan losses remains 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 three months of 2000 was 1.71%, down from 1.82% during all of 1999 and
down from the 1.89% for the first three months of 1999. The improvement in
the net overhead ratio during the first three months of 2000 was the result of
a 7.0% growth in average earning assets from one year ago while net overhead
costs actually decreased by 3.0% from the same period in 1999. The decrease in
net overhead is partially due to increased revenue from insurance fees
associated with the January 2000 purchase of Carson Insurance Agency.
Total non-interest income excluding securities transactions was $18.2
million through the first three months of 2000, up 11.7% from the $16.3
million non-interest income earned during the same period in 1999. Trust
income increased by 10.6% 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 3.6% over the first three months of 1999. Other
service charges and fees increased by 57.9% over the first three months of
1999, primarily due to increases in credit/debit card activity, investment
commissions, $1.4 million in insurance commissions from Carson Insurance
Agency, and other banking services provided to customers. The increased
revenue was partially offset with a decline in real estate processing fees
resulting from lower mortgage activity associated with a higher interest rate
environment.
Total non-interest expense was $43.7 million during the first three
months ended March 31, 2000, a 2.6% increase over the $42.5 million during the
same period in 1999. Staff costs increased by 5.1% from the level one-year
ago primarily due to the additional staff from the Carson Insurance Agency and
normal salary and benefit increases. All other expense categories remained
relatively unchanged from the prior year's level.
Income tax expense increased by $325,000, or 3.3%, for the first three
months of 2000 compared with the same period in 1999. The increase in taxes
is primarily a result of the 3.2% growth in pretax earnings. One Valley's
effective income tax rate for the first three months of 2000 was 33.2% and
remains unchanged from one year ago.
FINANCIAL CONDITION
Asset Structure
Total loans at March 31, 2000, were $4.4 billion, an increase of $339.8
million or 8.3% above March 31, 1999. As a result of this loan growth, the
consolidated loan-to-deposit ratio has increased to 95.4% at March 31, 2000,
compared to 89.7% at March 31, 1999. The increase in total loans is primarily
in one-to-four family residential mortgages, commercial loans primarily
secured by real estate, and home equity loans.
Investment portfolio assets decreased $64.2 million or 4.1% from the
level at year-end and by $36.6 million or 2.4% from the level one-year ago.
Investment maturities were used to fund loan growth and reduce total
borrowings. At March 31, 2000, approximately 81% of One Valley's investment
portfolio was available-for-sale while the remaining 19% consisted 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-to-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 March 31, 2000 had a
historical cost of $1.273 billion, with an unrealized loss of approximately
$44.7 million. This unrealized loss at March 31, 2000, lowered shareholders'
equity by $27.5 million, net of $17.2 million in deferred income taxes. At
year-end December 31, 1999, and March 31, 1999, securities available-for-sale
had a historical cost of $1.330 billion and $1.270 billion, with an unrealized
loss of approximately $39.6 million at year-end and an unrealized gain of
approximately $822,000 at March 31, 1999. The unrealized loss at year-end,
decreased shareholders' equity by $24.3 million and the unrealized gain from
one year ago increased shareholders' equity by $556,000, net of deferred
income taxes.
As of March 31, 2000, Federal funds sold were $168.0 million, compared to
zero one-year ago and $185.6 million at year end 1999. The higher amounts at
March 31, 2000 and December 31, 1999 were the result of Y2K liquidity planning
and the lingering effects of related asset/liability strategies. 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 March 31, 2000, increased by $66.4 million from year-
end and $87.0 million or 1.9% since March 31, 1999. Due to the current low
interest rate environment, 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 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 4.07% in
the first three months of 2000, up from the 3.98% average rate paid for all of
1999, and the 4.01% average rate paid in the first three months of 1999. 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 decreased from year-end and one year ago by
$251.3 million or 29.6% and $128.5 million or 17.7%, respectively. 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. In 1999, One
Valley utilized short and long-term borrowings to fund its loan growth and to
provide Y2K liquidity. During the first quarter of 2000, portions of these
borrowings became due and were repaid. The average rate paid on short-term
borrowings has increased 45 basis points from 4.57% during the first three
months of 1999 to 5.02% during the same period of 2000.
Long-term borrowings increased by $536.0 million since March 31, 1999
and $48.7 million since December 31, 1999. In the first quarter of 2000, One
Valley borrowed $75.0 million in FHLB advances with scheduled maturities of
one to ten years. During 1999, One Valley borrowed $200.0 million as a part
of a Y2K liquidity strategy and $310.7 million as part of its interest rate
risk management strategy. As a result, One Valley has $237.9 million of long-
term FHLB borrowings maturing within one year and the remaining $352.7 million
has scheduled maturities ranging from two to ten years.
Capital Structure and Liquidity
One Valley's risk based capital ratio at March 31, 2000 was 14.0%,
well above the 8.0% required, while its Tier I capital ratio was 12.8%. 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 equity-to-asset ratio was 8.9% at March 31, 2000, down from
the 9.7% at March 31, 1999, but up slightly from the 8.5% reported for year-
end. The decrease in the equity-to-asset ratio from March, 1999 was the
result of the purchase of treasury shares in 1999 and the equity effect of the
decline in the market value of the investment portfolio. 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 1999 at a cost of $56.5 million. All other authorizations
to repurchase shares have been rescinded and repurchases have been halted
pending acquisition by BB&T. The increase in the ratio since year-end is due
to One Valley's strong earnings performance and a slight reduction in the
overall asset size.
One Valley's cash dividend, totaling $0.26 per share for the first
quarter of 2000, was up 8.3% over the $0.24 per share dividend during the same
period in 1999. 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.
<PAGE>
<TABLE>
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
Analysis of Loan Losses and Non-Performing Assets
(unaudited in thousands)
<CAPTION>
For The Three Months
Ended March 31
2000 1999
<S> <C> <C>
ALLOWANCE FOR LOAN LOSSES
Balance, Beginning of Period $54,156 $52,272
Loan Losses 2,038 2,236
Loan Recoveries 479 493
------- -------
Net Charge-offs 1,559 1,743
Provision For Loan Losses 2,653 2,116
------- -------
Balance, End of Period $55,250 $52,645
======= =======
Total Loans, End of Period $4,424,862 $4,085,086
Allowance For Loan Losses As a % of Total Loans 1.25 1.29
========== ==========
NON-PERFORMING ASSETS AT QUARTER END
Non-Accrual Loans $9,360 $8,519
Foreclosed Properties 1,051 1,171
------- -------
Total Non-Performing Assets $10,411 $9,690
======= =======
Non-Performing Assets As a % of Total Loans 0.24 0.24
Loans Past Due Over 90 Days $4,954 $5,249
Loans Past Due Over 90 Days As a % of Total Loans 0.11 0.13
</TABLE>
<PAGE>
<TABLE>
ONE VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Average Balance Sheets
(unaudited in thousands)
<CAPTION>
Three Months Ended March 31
2000 1999
Amount Yield/Rate Amount Yield/Rate
(pct.) (pct.)
<S> <C> <C> <C> <C>
ASSETS
Loans
Taxable $4,325,328 8.32 $3,984,124 8.29
Tax-Exempt 66,697 9.26 44,856 9.40
---------- ----------
Total 4,392,025 8.33 4,028,980 8.30
Less: Allowance for Losses 55,003 52,876
---------- ----------
Net Loans 4,337,022 8.44 3,976,104 8.41
Securities
Taxable 1,292,273 6.45 1,304,919 6.15
Tax-Exempt 266,949 7.88 262,807 7.82
---------- ----------
Total 1,559,222 6.70 1,567,726 6.43
Federal Funds Sold & Other 49,885 5.55 11,075 4.91
---------- ----------
Total Earning Assets 5,946,129 7.96 5,554,905 7.84
Other Assets 426,997 377,977
---------- ----------
Total Assets $6,373,126 $5,932,882
========== ==========
LIABILITIES AND EQUITY
Interest Bearing Liabilities
Deposits $4,023,343 4.07 $3,965,195 4.01
Short-term Borrowings 606,969 5.02 734,717 4.57
Long-term Borrowings 557,372 6.05 43,766 5.87
---------- ----------
Total Interest
Bearing Liabilities 5,187,684 4.39 4,743,678 4.11
Non-interest Bearing Deposits 554,809 542,757
Other Liabilities 57,384 52,692
---------- ----------
Total Liabilities 5,799,877 5,339,127
Shareholders' Equity 573,249 593,755
---------- ----------
Total Liabilities & Equity $6,373,126 $5,932,882
========== ==========
Interest Income To Earning Assets 7.96 7.84
Interest Expense To Earning Assets 3.83 3.51
------ ------
Net Interest Margin 4.13 4.33
====== ======
<FN>
Note: Yields are computed on a fully taxable equivalent basis using the rate of 35%.
</FN>
</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. February 7, 2000 - One Valley Bancorp, Inc. announced the
agreement to combine with BB&T.
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: May 15, 2000
BY /s/ J. Holmes Morrison
J. Holmes Morrison
Chairman of the Board,
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 schedule 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>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-2000 DEC-31-1999
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 158280 157688
<INT-BEARING-DEPOSITS> 3672 2601
<FED-FUNDS-SOLD> 168000 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 1228560 1271366
<INVESTMENTS-CARRYING> 282412 276174
<INVESTMENTS-MARKET> 275972 282896
<LOANS> 4424862 4085086
<ALLOWANCE> 55250 52645
<TOTAL-ASSETS> 6473452 5973919
<DEPOSITS> 4639846 4552861
<SHORT-TERM> 599008 727480
<LIABILITIES-OTHER> 69871 58246
<LONG-TERM> 590532 54512
0 0
0 0
<COMMON> 397008 392213
<OTHER-SE> 177187 188607
<TOTAL-LIABILITIES-AND-EQUITY> 6473452 5973919
<INTEREST-LOAN> 90598 82444
<INTEREST-INVEST> 24270 23388
<INTEREST-OTHER> 688 134
<INTEREST-TOTAL> 115556 105966
<INTEREST-DEPOSIT> 40667 39201
<INTEREST-EXPENSE> 56621 48111
<INTEREST-INCOME-NET> 58935 57855
<LOAN-LOSSES> 2653 2116
<SECURITIES-GAINS> 5 403
<EXPENSE-OTHER> 43650 42541
<INCOME-PRETAX> 30796 29855
<INCOME-PRE-EXTRAORDINARY> 30796 29855
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 20559 19943
<EPS-BASIC> 0.61 0.58
<EPS-DILUTED> 0.61 0.57
<YIELD-ACTUAL> 7.96 7.84
<LOANS-NON> 10411 9690
<LOANS-PAST> 4954 5249
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 54156 52272
<CHARGE-OFFS> 2038 2236
<RECOVERIES> 479 493
<ALLOWANCE-CLOSE> 55250 52645
<ALLOWANCE-DOMESTIC> 55250 52645
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
