<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 17, 1994.
Marshall & Ilsley Corporation
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 0-1220 39-0968604
--------------- ------------ -------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
770 North Water Street
Milwaukee, Wisconsin 53202
--------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(414) 765-7801
<PAGE>
Item 5. Other Events.
Filed as an exhibit hereto and incorporated by
reference herein is Valley Bancorporation's Quarterly
Report on Form 10-Q for the period ended March 31,
1994.
Item 7. Financial Statements and Exhibits.
(c) Exhibit
-------
99 Valley Bancorporation - Quarterly Report on
Form 10-Q for the period ended March 31,
1994.
<PAGE>
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 hereunto duly authorized.
Dated: May 17, 1994
MARSHALL & ILSLEY CORPORATION
By: /s/ M.A. Hatfield
-------------------------
M.A. Hatfield
Senior Vice President,
Secretary and Treasurer
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit No. Description Page No.
99 Valley Bancorporation - Quarterly Report
on Form 10-Q for the period ended March
31, 1994.
<PAGE>
EXHIBIT 99
CONFORMED COPY
WITH EXHIBITS
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 10 - Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
-----------------------------------------
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 0-2453
---------------------------------------------
VALLEY BANCORPORATION
---------------------
(Exact name of registrant as specified in its charter)
Wisconsin 39-6047319
------------------------------ ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 W. Lawrence Street, P.O. Box 1061, Appleton, Wisconsin 54912-1061
- - ---------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (414) 738-3830
----------------------
No Change
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities 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 __________
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at May 1, 1994
----- --------------------------
Common Stock, $.50 par value 20,763,122 shares
<PAGE>
VALLEY BANCORPORATION
****
TABLE OF CONTENTS
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1994
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Page No.
Financial Highlights . . . . . . . . . . . . . . . 1
Quarterly Financial Summary . . . . . . . . . . . . 2
Consolidated Statements of Financial
Position as of March 31, 1994,
December 31, 1993 and March 31, 1993 . . . . . . . 3
Consolidated Statements of Income for
the Three Months Ended March 31,
1994 and 1993 . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Shareholders'
Equity for the Three Months Ended
March 31, 1994 and 1993 . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows
for the Three Months Ended March 31,
1994 and 1993 . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
<PAGE>
FORM 10-Q
PART 1 - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Financial Highlights*
Three Months Ended March 31 1994 1993 %
Change
- - -------------------------------------------------------------------------------
Interest income $ 75,841,032 $ 77,771,077 (2.48)
- - -------------------------------------------------------------------------------
Interest expense 31,728,586 35,115,169 (9.64)
- - -------------------------------------------------------------------------------
Net interest income 44,112,446 42,655,908 3.41
- - -------------------------------------------------------------------------------
Taxable equivalent adjustment 1,221,930 1,181,610 3.41
- - -------------------------------------------------------------------------------
Taxable equivalent net
interest income 45,334,376 43,837,518 3.41
- - -------------------------------------------------------------------------------
Provision for loan losses 2,181,000 2,164,700 .75
- - -------------------------------------------------------------------------------
Net income 10,338,977 10,893,654 (5.09)
- - -------------------------------------------------------------------------------
Per share .50 .54 (7.41)
- - -------------------------------------------------------------------------------
Weighted average shares 20,739,928 20,160,942 2.87
- - -------------------------------------------------------------------------------
Dividends per share .24 .23 4.35
===============================================================================
At March 31
- - -------------------------------------------------------------------------------
Assets $4,443,570,365 $4,277,488,684 3.88
- - -------------------------------------------------------------------------------
Investment securities 965,177,680 891,791,164 8.23
- - -------------------------------------------------------------------------------
Loans 3,154,346,748 3,011,518,170 4.74
- - -------------------------------------------------------------------------------
Reserve for loan losses 42,302,707 38,747,732 9.17
- - -------------------------------------------------------------------------------
Nonperforming loans 23,200,000 25,901,000 (10.43)
- - -------------------------------------------------------------------------------
Deposits 3,778,006,115 3,690,529,013 2.37
- - -------------------------------------------------------------------------------
Shareholders' equity 365,183,367 334,600,943 9.14
- - -------------------------------------------------------------------------------
Per share 17.60 16.55 6.34
===============================================================================
Other Information
- - -------------------------------------------------------------------------------
For the three month period
- - -------------------------------------------------------------------------------
Return on average equity 11.12% 13.15%
- - -------------------------------------------------------------------------------
Return on average assets .92% 1.02%
- - -------------------------------------------------------------------------------
Net yield on earning assets 4.34% 4.42%
- - -------------------------------------------------------------------------------
Efficiency ratio 69.35% 68.05%
- - -------------------------------------------------------------------------------
At March 31
- - -------------------------------------------------------------------------------
Shareholders' equity as a
percent of assets 8.22% 7.82%
- - -------------------------------------------------------------------------------
Total risk-based capital as a
percent of risk-weighted assets 11.65% 11.03%
- - -------------------------------------------------------------------------------
Reserve for loan losses as a
percent of loans 1.34% 1.29%
- - -------------------------------------------------------------------------------
Nonperforming loans as a
percent of loans .74% .86%
- - -------------------------------------------------------------------------------
Employees - full time equivalents 2,620 2,646
- - -------------------------------------------------------------------------------
Banking offices 160 154
===============================================================================
*Per share data has been restated for the three for two stock split effected
in the form of a 50% stock dividend distributed on August 27, 1993.
<PAGE>
Quarterly Financial Summary*
<TABLE>
<CAPTION>
Per Share (post-split basis)
--------------------------------------------
Share- Return on Stock Price Range**
holders' Average Average Net Net Book -------------------
Quarter End Assets Equity Assets Assets Income Income Dividends Value Low High
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, 1994 $4,444 $365 $4,507 .92% $10.339 $.50 $.2400 $17.60 $32.38 $39.75
- - ---------------------------------------------------------------------------------------------------------------------
Dec. 31, 1993 4,592 366 4,488 1.06 11.943 .58 .2350 17.65 35.00 39.63
- - ---------------------------------------------------------------------------------------------------------------------
Sept. 30, 1993 4,394 350 4,361 1.06 11.581 .57 .2350 17.23 28.25 38.00
- - ---------------------------------------------------------------------------------------------------------------------
June 30, 1993 4,337 343 4,307 1.07 11.485 .57 .2350 16.88 25.83 30.50
- - ---------------------------------------------------------------------------------------------------------------------
March 31, 1993 4,277 335 4,284 1.02 10.894 .54 .2350 16.55 24.83 29.50
- - ---------------------------------------------------------------------------------------------------------------------
Dec. 31, 1992 4,384 327 4,297 1.03 11.044 .55 .2125 16.24 23.00 26.00
- - ---------------------------------------------------------------------------------------------------------------------
Sept. 30, 1992 4,303 319 4,265 1.06 11.258 .57 .2125 15.91 22.17 26.50
- - ---------------------------------------------------------------------------------------------------------------------
June 30, 1992 3,957 281 3,884 .95 9.252 .50 .2125 15.21 20.00 22.50
- - ---------------------------------------------------------------------------------------------------------------------
March 31, 1992 3,898 275 3,873 .85 8.226 .45 .2125 14.92 18.00 21.67
=====================================================================================================================
</TABLE>
*Dollars in millions except per share data. Per share data has been restated
for three for two stock split effected in the form of a 50% stock dividend
distributed on August 27, 1993.
**High and low sales prices in the NASDAQ National Market System as reported
by NASDAQ.
<PAGE>
VALLEY BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31, March 31,
Assets 1994 1993 1993
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and due from banks $ 143,616,611 $ 202,369,683 $ 168,343,140
- - -------------------------------------------------------------------------------------------
Federal funds sold and securities
purchased under resale agreements 7,885,000 2,640,000 600,000
- - -------------------------------------------------------------------------------------------
Total Cash and cash equivalents 151,501,611 205,009,683 168,943,140
- - -------------------------------------------------------------------------------------------
Interest-bearing deposits with other banks 765,113 756,010 10,083,323
- - -------------------------------------------------------------------------------------------
Investments: (Note 5)
Investment securities available for sale
(market value $758,398,376, $772,580,974,
and $31,093,676, respectively) 758,398,376 765,825,981 30,675,623
- - -------------------------------------------------------------------------------------------
Investment securities held to maturity
(market value $207,308,558, $209,076,438,
and $875,825,726,respectively) 206,779,304 206,376,848 861,115,541
- - -------------------------------------------------------------------------------------------
Total investments 965,177,680 972,202,829 891,791,164
- - -------------------------------------------------------------------------------------------
Mortgages held for sale 14,813,679 60,420,582 32,374,629
- - -------------------------------------------------------------------------------------------
Loans:
- - -------------------------------------------------------------------------------------------
Commercial 723,062,131 723,941,280 738,440,745
- - -------------------------------------------------------------------------------------------
Real estate-construction 117,074,397 119,240,431 97,889,602
- - -------------------------------------------------------------------------------------------
Real estate-mortgage 1,696,927,013 1,611,402,801 1,670,105,401
- - -------------------------------------------------------------------------------------------
Installment (primarily simple interest) 644,104,819 650,376,812 563,785,022
- - -------------------------------------------------------------------------------------------
Total loans 3,190,485,536 3,011,518,170 3,154,346,748
- - -------------------------------------------------------------------------------------------
Reserve for loan losses (Note 7) (42,302,707) (40,410,907) (38,747,732)
- - -------------------------------------------------------------------------------------------
Total loans, net 3,112,044,041 3,150,074,629 2,972,770,438
- - -------------------------------------------------------------------------------------------
Premises and equipment, net 101,232,128 103,271,225 103,507,341
- - -------------------------------------------------------------------------------------------
Other assets 98,036,113 100,457,657 98,018,649
- - -------------------------------------------------------------------------------------------
Total assets $4,443,570,365 $4,592,192,615 $4,277,488,684
===========================================================================================
Liabilities and Shareholders' Equity
- - -------------------------------------------------------------------------------------------
Deposits:
- - -------------------------------------------------------------------------------------------
Noninterest-bearing $ 497,662,177 $ 571,750,622 $ 450,312,759
- - -------------------------------------------------------------------------------------------
Interest-bearing 3,280,343,938 3,406,358,245 3,240,216,254
- - -------------------------------------------------------------------------------------------
Total deposits 3,778,006,115 3,978,108,867 3,690,529,013
- - -------------------------------------------------------------------------------------------
Short-term borrowings (Note 8) 182,973,313 132,004,071 109,088,703
- - -------------------------------------------------------------------------------------------
Long-term borrowings 53,235,529 53,251,185 68,296,056
- - -------------------------------------------------------------------------------------------
Other liabilities 64,172,041 62,920,639 74,973,969
- - -------------------------------------------------------------------------------------------
Total liabilities 4,078,386,998 4,226,284,762 3,942,887,741
- - -------------------------------------------------------------------------------------------
Shareholders' equity:
- - -------------------------------------------------------------------------------------------
Preferred stock, cumulative, par value
$1 per share, 1,000,000 shares
authorized; none issued (Note 4) --- --- ---
- - -------------------------------------------------------------------------------------------
Common stock, par value $.50 per share,
40,000,000 shares authorized;
20,753,522, 20,725,790, and 13,479,849
shares issued and outstanding, respectively 10,376,761 10,362,895 6,739,925
- - -------------------------------------------------------------------------------------------
Capital surplus 213,812,701 213,230,599 206,114,576
- - -------------------------------------------------------------------------------------------
Net unrealized losses on securities (6,681,426) --- ---
available for sale, net of tax
- - -------------------------------------------------------------------------------------------
Retained Earnings 147,675,331 142,314,359 121,746,442
- - -------------------------------------------------------------------------------------------
Total shareholders' equity 365,183,367 365,907,853 334,600,943
- - -------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $4,443,570,365 $4,592,192,615 $4,277,488,684
===========================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE>
VALLEY BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three months ended
March 31,
-------------------------
Interest Income 1994 1993
- - --------------------------------------------------------------------
Interest and fees on loans $63,873,838 $64,984,137
- - --------------------------------------------------------------------
Interest on federal funds sold
and securities purchased under
resale agreements 50,706 53,704
- - --------------------------------------------------------------------
Interest on interest-bearing
deposits with other banks 4,979 74,018
- - --------------------------------------------------------------------
Interest on investment
securities-taxable 9,467,650 10,033,418
- - --------------------------------------------------------------------
Interest on investment
securities-nontaxable 2,443,859 2,625,800
- - --------------------------------------------------------------------
Total interest income 75,841,032 77,771,077
- - --------------------------------------------------------------------
Interest Expense
- - --------------------------------------------------------------------
Deposits 28,915,118 32,629,990
- - --------------------------------------------------------------------
Short-term borrowings 1,459,957 705,097
- - --------------------------------------------------------------------
Long-term borrowings 1,353,511 1,780,082
- - --------------------------------------------------------------------
Total interest expense 31,728,586 35,115,169
- - --------------------------------------------------------------------
Net Interest Income 44,112,446 42,655,908
- - --------------------------------------------------------------------
Provision for loan losses (Note 7) 2,181,000 2,164,700
- - --------------------------------------------------------------------
Net Interest Income
After Provision for Loan Losses 41,931,446 40,491,208
- - --------------------------------------------------------------------
Noninterest Income
- - --------------------------------------------------------------------
Service charges on deposit accounts 4,142,595 3,939,212
- - --------------------------------------------------------------------
Trust service fees 3,092,514 3,346,292
- - --------------------------------------------------------------------
Other service charges,
commissions and fees 3,079,593 3,058,693
- - --------------------------------------------------------------------
Insurance related 1,970,880 1,874,568
- - --------------------------------------------------------------------
Credit card 1,711,759 1,519,226
- - --------------------------------------------------------------------
Gain on sale of mortgage loans 1,026,863 1,127,347
- - --------------------------------------------------------------------
Net securities gains (losses) (21,700) 148,220
- - --------------------------------------------------------------------
Other 626,350 741,708
- - --------------------------------------------------------------------
Total noninterest income 15,628,854 15,755,266
- - --------------------------------------------------------------------
Noninterest Expense
- - --------------------------------------------------------------------
Salaries and wages 18,025,204 17,391,595
- - --------------------------------------------------------------------
Pensions and other employee benefits 6,010,807 5,560,267
- - --------------------------------------------------------------------
Equipment 4,256,603 4,170,512
- - --------------------------------------------------------------------
Net occupancy 3,612,026 3,326,183
- - --------------------------------------------------------------------
FDIC insurance 2,195,235 2,041,726
- - --------------------------------------------------------------------
Credit card 968,965 842,468
- - --------------------------------------------------------------------
Other 7,226,108 7,118,200
- - --------------------------------------------------------------------
Total noninterest expense 42,294,948 40,450,951
- - --------------------------------------------------------------------
Income Before Income Taxes 15,265,352 15,795,523
- - --------------------------------------------------------------------
Provision for income taxes 4,926,375 4,901,869
- - --------------------------------------------------------------------
Net Income $10,338,977 $10,893,654
====================================================================
- - --------------------------------------------------------------------
Net Income Per Share* (Note 6) $.50 $.54
====================================================================
The accompanying notes to consolidated financial statements are an integral
part of these statements.
*Per share data has been restated for the three for two stock split effected
in the form of a 50% stock dividend declared on August 27, 1993.
<PAGE>
VALLEY BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited)
<TABLE>
<CAPTION>
Net
unrealized
gains/(losses)
on securities
Common Stock available
----------------------- Capital for sale, net Retained
Shares Par Value Surplus of tax Earnings Total
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 13,414,513 $ 6,707,257 $204,642,969 $ --- $115,425,710 $326,775,936
- - -------------------------------------------------------------------------------------------------------------
Net income --- --- --- --- 10,893,654 10,893,654
- - -------------------------------------------------------------------------------------------------------------
Cash dividends --- --- --- --- (4,572,922) (4,572,922)
- - -------------------------------------------------------------------------------------------------------------
Common stock issued pursuant
to stock option plans 65,336 32,668 1,143,357 --- --- 1,176,025
- - -------------------------------------------------------------------------------------------------------------
Other --- --- 328,250 --- --- 328,250
- - -------------------------------------------------------------------------------------------------------------
Balance, March 31, 1993 13,479,849 $ 6,739,925 $206,114,576 $ --- $121,746,442 $334,600,943
=============================================================================================================
Balance, December 31, 1993 20,725,790 $10,362,895 $213,230,599 $ --- $142,314,359 $365,907,853
- - -------------------------------------------------------------------------------------------------------------
Net unrealized gain on
securities available for
sale, net of tax as of
January 1, 1994 --- --- --- 4,390,745 --- 4,390,745
- - -------------------------------------------------------------------------------------------------------------
Net income --- --- --- --- 10,338,977 10,338,977
- - -------------------------------------------------------------------------------------------------------------
Cash dividends --- --- --- --- (4,978,005) (4,978,005)
- - -------------------------------------------------------------------------------------------------------------
Common stock issued pursuant
to stock option plans 27,732 13,866 429,105 --- --- 442,971
- - -------------------------------------------------------------------------------------------------------------
Change in unrealized losses
on securities available for
sale, net of tax --- --- --- (11,072,171) --- (11,072,171)
- - -------------------------------------------------------------------------------------------------------------
Other --- --- 152,997 --- --- 152,997
- - -------------------------------------------------------------------------------------------------------------
Balance, March 31, 1994 20,753,522 $10,376,761 $213,812,701 $(6,681,426) $147,675,331 $365,183,367
=============================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE>
VALLEY BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three months ended
March 31,
------------------------------
1994 1993
- - -------------------------------------------------------------------------------
Operating Activities
- - -------------------------------------------------------------------------------
Net Income $ 10,338,977 $ 10,893,654
- - -------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash provided by operating activities:
- - -------------------------------------------------------------------------------
Provision for loan losses 2,181,000 2,164,700
- - -------------------------------------------------------------------------------
Origination of loans held for resale (88,518,000) (72,172,000)
- - -------------------------------------------------------------------------------
Proceeds from sale of loans held for resale 135,247,911 79,408,990
- - -------------------------------------------------------------------------------
Depreciation 3,543,231 3,433,842
- - -------------------------------------------------------------------------------
Amortization/accretion of intangibles 530,058 479,530
- - -------------------------------------------------------------------------------
Accretion of valuation adjustments (280,590) (386,176)
- - -------------------------------------------------------------------------------
Amortization of premium
on investment securities 2,237,659 2,339,008
- - -------------------------------------------------------------------------------
Accretion of discount
on investment securities (72,724) (77,682)
- - -------------------------------------------------------------------------------
Provision for (benefit of) deferred taxes 520,184 (100,978)
- - -------------------------------------------------------------------------------
Other, net 5,043,921 2,583,142
- - -------------------------------------------------------------------------------
Net cash provided by operating activities 70,771,627 28,566,030
- - -------------------------------------------------------------------------------
Investing Activities
- - -------------------------------------------------------------------------------
Proceeds from sales of
investment securities 136,057 2,675,210
- - -------------------------------------------------------------------------------
Proceeds from matured investment securities 125,978,042 206,443,725
- - -------------------------------------------------------------------------------
Purchases of investment securities (131,379,341) (187,702,171)
- - -------------------------------------------------------------------------------
Net decrease (increase) in time
deposits with other banks (9,103) (6,133,400)
- - -------------------------------------------------------------------------------
Net increase in loans 35,316,653 3,839,433
- - -------------------------------------------------------------------------------
Purchase of premises and equipment,
net of disposals (1,458,853) (3,439,276)
- - -------------------------------------------------------------------------------
Recoveries of loans charged off 574,074 605,723
- - -------------------------------------------------------------------------------
Net cash used by investing activities 29,157,529 16,289,244
- - -------------------------------------------------------------------------------
Financing Activities
- - -------------------------------------------------------------------------------
Net increase (decrease) in deposits (199,855,780) (141,670,152)
- - -------------------------------------------------------------------------------
Net increase in short-term borrowings 50,969,242 22,194,349
- - -------------------------------------------------------------------------------
Repayment of long-term borrowings (15,656) (14,378)
- - -------------------------------------------------------------------------------
Net proceeds from issuance of common stock 442,971 1,176,025
- - -------------------------------------------------------------------------------
Dividends paid (4,978,005) (4,572,922)
- - -------------------------------------------------------------------------------
Net cash provided (used) by
financing activities (153,437,228) (122,887,078)
- - -------------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents (53,508,072) (78,031,804)
- - -------------------------------------------------------------------------------
Cash and cash equivalents at
beginning of period 205,009,683 246,974,944
- - -------------------------------------------------------------------------------
Cash and cash equivalents at end of period $151,501,611 $168,943,140
===============================================================================
Supplemental Disclosure of Cash Flow Information
Cash Paid for:
- - -------------------------------------------------------------------------------
Interest (net of amount capitalized) $ 28,861,643 $ 33,206,779
- - -------------------------------------------------------------------------------
Income taxes 1,078,743 1,219,800
===============================================================================
Supplemental Disclosure of Non-Cash
Investing and Financing Activities:
- - -------------------------------------------------------------------------------
Loans charged off $ 863,274 $ 1,943,365
- - -------------------------------------------------------------------------------
Loans transferred to other real estate owned 577,985 1,089,323
===============================================================================
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE>
VALLEY BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these
condensed financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's
latest report on Form 10-K.
1. General:
The consolidated financial statements include the accounts
of Valley Bancorporation (Valley) and subsidiaries. All material
intercompany transactions and balances are eliminated in
consolidation. The accounting and reporting policies of Valley
conform to generally accepted accounting principles and to
general practice within the banking industry, applied on a
consistent basis. Valley has not changed its accounting and
reporting policies from those stated in its 1993 Form 10-K except
for adoption of SFAS No. 115 "Accounting for Certain Investments
in Debt and Equity Securities" (see footnote 5). The consolidated
statements included herein should be read in conjunction with the
consolidated financial statements and footnotes contained in
Valley's Form 10-K for the year ended December 31, 1993.
2. Interim Period Adjustments:
The consolidated financial statements contained herein
reflect all adjustments (which are of a normal recurring nature)
which are, in the opinion of the management, necessary for a fair
statement of the results of operations for the unaudited interim
periods. The results of operations for the interim periods are
not necessarily indicative of the results to be expected for the
entire year.
3. Business Combinations:
On November 6, 1993, Valley completed the cash acquisition
of the $112 million-asset Pierce County Bank and Trust Company
("Pierce County"). Pierce County serves western Wisconsin
markets through seven branch offices. This transaction was
accounted for as a purchase and therefore not included in
Valley's results of operations or statements of financial
position prior to the date of acquisition.
Valley and Marshall & Ilsley Corporation (M&I) have entered
into an Agreement and Plan of Merger, dated as of September 19,
1993 (the "Merger Agreement"), which provides for the combination
of the two companies through a merger of Valley into M&I (the
<PAGE>
"Merger"). Under the Merger Agreement, each share of Valley
common stock, par value $.50 per share ("Valley Common Stock"),
outstanding at the time the Merger is consummated (other than any
shares owned by M&I for its own account) will be converted into
the right to receive 1.72 (the "Exchange Rate") shares of M&I
common stock, par value $1.00 per share ("M&I Common Stock"), in
a tax-free reorganization to be accounted for as a pooling of
interests. Resulting fractional share interests will be paid in
cash in lieu of issuing fractional shares. Then outstanding
Valley employee and director stock options will be converted at
the Exchange Rate into options to acquire M&I Common Stock.
The consummation of the Merger is currently expected to
occur in the second quarter of 1994, and has been approved by the
shareholders of both companies and received all requisite
regulatory approvals. As a result of the merger various assets,
specifically computer and software have impaired value and will
be written off, subsequent to the merger. The current book value
of tax assets is approximately $11.6 million.
In connection with the Merger Agreement, the parties entered
into a Stock Option Agreement, dated as of September 19, 1993
(the "Stock Option Agreement"), by which Valley granted M&I an
option (the "Option") to purchase up to 4,045,795 newly issued
shares of Valley Common Stock (19.9% of the number of shares
outstanding and subject to adjustment to maintain that
percentage) at an exercise price of $35.75 per share, exercisable
upon the occurrence of certain events and subject to certain
conditions set forth in the Stock Option Agreement. The Stock
Option Agreement also provides M&I the right to receive a
termination fee to the extent that the Option has not been
exercised after the occurrence of an event which makes the Option
exercisable. The Option will expire upon consummation of the Merger.
4. Shareholder Rights Plan:
On October 21, 1988, Valley declared a distribution of one
preferred share purchase right (a "Right") for each outstanding
share of Valley Common Stock. As a result of the three for two
stock split on August 27, 1993, each outstanding share of Valley
Common Stock now evidences two-thirds of a Right. Detailed
provisions of the Rights are set forth in a Rights Agreement,
dated as of October 21, 1988, between Valley and The First
National Bank of Boston.
The Rights Agreement may be amended by the Valley Board of
Directors with the concurrence of a majority of the Board's
independent directors. As required by the Merger Agreement, the
Rights Agreement has been amended by Amendment No. 1 thereto,
dated as of September 19, 1993, to provide that (a) neither M&I
nor any affiliate of M&I shall be deemed an Acquiring Person, and
(b) the execution, delivery and performance of the Merger
Agreement and the Stock Option Agreement does not and will not
result in a Shares Acquisition Date or Distribution Date (as such
terms are defined in the Rights Agreement), provided that M&I and
its affiliates acquire Valley Common Stock only in the manner
specified. Under the Merger Agreement, the shares of M&I Common
Stock into which the outstanding shares of Valley Common Stock
will be converted in the Merger will be deemed to have been
issued in full satisfaction of all rights pertaining to such
shares of Valley Common Stock, including the Rights.
<PAGE>
5. Investment Securities:
The book and fair values of investment securities are as
follows:
5. Investment Securities:
The book and fair values of investment securities are as follows:
Note 5: Investment Securities
<TABLE>
<CAPTION>
Amortized Gross Unrealized Fair
March 31, 1994 Cost Gains (Losses) Value
- - --------------------------------------------------------------------------------------------------------------------------
Investment securities available for sale:
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government $419,262,794 $ 952,234 $( 6,482,113) $413,732,915
- - --------------------------------------------------------------------------------------------------------------------------
CMOs 185,983,555 205,427 ( 5,007,314) 181,181,668
- - --------------------------------------------------------------------------------------------------------------------------
Federal Agencies 122,993,366 725,238 ( 1,278,696) 122,439,908
- - --------------------------------------------------------------------------------------------------------------------------
Other 37,278,831 880,423 (600) 38,158,654
- - --------------------------------------------------------------------------------------------------------------------------
Corporates 2,885,231 --- --- 2,885,231
- - --------------------------------------------------------------------------------------------------------------------------
Total investment securities available for sale $768,403,777 $ 2,763,322 $(12,768,723) $758,398,376
- - --------------------------------------------------------------------------------------------------------------------------
Investment securities held to maturity:
- - --------------------------------------------------------------------------------------------------------------------------
State and political subdivisions $206,779,304 $ 1,159,783 $( 630,529) $207,308,558
- - --------------------------------------------------------------------------------------------------------------------------
Total investment securities
held to maturity $206,779,304 $ 1,159,783 $( 630,529) $207,308,558
- - --------------------------------------------------------------------------------------------------------------------------
Total investments $975,183,081 $ 3,923,105 $(13,399,252) $965,706,934
==========================================================================================================================
Amortized Gross Unrealized Fair
March 31, 1993 Cost Gains (Losses) Value
- - --------------------------------------------------------------------------------------------------------------------------
Investment securities available for sale:
- - --------------------------------------------------------------------------------------------------------------------------
Mortgage pass-throughs $ 20,441,747 $ 364,719 $ --- $ 20,806,466
- - --------------------------------------------------------------------------------------------------------------------------
Corporates 10,233,876 53,334 --- 10,287,210
- - --------------------------------------------------------------------------------------------------------------------------
Total investment securities available for sale $ 30,675,623 $ 418,053 $ --- $ 31,093,676
- - --------------------------------------------------------------------------------------------------------------------------
Investment securities held to maturity:
- - --------------------------------------------------------------------------------------------------------------------------
U.S. Government $309,900,573 $ 6,183,658 $ (33,147) $316,051,084
- - --------------------------------------------------------------------------------------------------------------------------
CMOs 230,732,050 2,282,754 (503,087) 232,511,717
- - --------------------------------------------------------------------------------------------------------------------------
Federal agencies 99,388,214 1,261,473 (222) 100,649,465
- - --------------------------------------------------------------------------------------------------------------------------
Other 44,180,288 1,143,348 --- 45,323,636
- - --------------------------------------------------------------------------------------------------------------------------
State and political subdivisions 176,914,416 4,425,592 (50,184) 181,289,824
- - --------------------------------------------------------------------------------------------------------------------------
Total investment securities held to maturity $861,115,541 $15,296,825 $ (586,640) $875,825,726
- - --------------------------------------------------------------------------------------------------------------------------
Total investments $891,791,164 $15,714,878 $ (586,640) $906,919,402
==========================================================================================================================
</TABLE>
<PAGE>
The book and fair values of investment securities at March
31, 1994, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with
or without call or prepayment penalties.
Investment securities
available for sale
---------------------------------------
Amortized Fair
March 31, 1994 Cost Value
- - ------------------------------------------------------------------------------
Due in 1 year or less $201,561,240 $204,619,939
- - ------------------------------------------------------------------------------
Due after 1 through 5 years 352,575,816 341,116,313
- - ------------------------------------------------------------------------------
Due after 5 through 10 years 12,841,847 20,211,340
- - ------------------------------------------------------------------------------
Due after 10 years 15,441,319 11,269,116
- - ------------------------------------------------------------------------------
Total excluding CMOs $582,420,222 $577,216,708
- - ------------------------------------------------------------------------------
CMOs 185,983,555 181,181,668
- - ------------------------------------------------------------------------------
Total $768,403,777 $758,398,376
==============================================================================
Investment securities
held to maturity
---------------------------------------
Amortized Fair
March 31, 1994 Cost Value
- - ------------------------------------------------------------------------------
Due in 1 year or less $ 56,645,895 $ 56,780,730
- - ------------------------------------------------------------------------------
Due after 1 through 5 years 102,061,831 102,757,705
- - ------------------------------------------------------------------------------
Due after 5 through 10 years 38,416,334 37,895,764
- - ------------------------------------------------------------------------------
Due after 10 years 9,655,244 9,874,359
- - ------------------------------------------------------------------------------
Total excluding CMOs $206,779,304 $207,308,558
- - ------------------------------------------------------------------------------
CMOs --- ---
- - ------------------------------------------------------------------------------
Total $206,779,304 $207,308,558
==============================================================================
Proceeds from sales of investments in the first three months
of 1994 were $136,057. Gross gains of $1,162 and gross losses of
$22,862 were realized on security transactions in the first three
months of 1994.
In May 1993, the FASB issued SFAS No. 115 "Accounting for
Certain Investments in Debt and Equity Securities." This
statement addresses the accounting and reporting for investments
in equity securities that have readily determinable fair values
and for all investments in debt securities. The statement calls
for classification and accounting for investments in three
categories; held-to-maturity to be accounted for at amortized
cost, trading securities to be accounted for at fair value with
unrealized gains and losses included in earnings, and available-
<PAGE>
for-sale securities to be accounted for at fair value with
unrealized gains and losses excluded from earnings and reported
in a separate component of shareholder's equity. Valley adopted
this statement on January 1, 1994, and shows a decrease to
shareholders' equity of $6.7 million as of March 31, 1994. If
this new standard had been adopted by Valley at December 31,
1993, the result would have increased shareholders' equity by the
net unrealized gain of $4,390,745, after tax.
6. Net Income Per Share:
Net income per share was computed based on the weighted
average number of common shares outstanding (20,739,928 in 1994
and 20,160,942 in 1993 post-split basis). A three for two stock
split effected in the form of a 50% stock dividend was declared
July 20, 1993, payable August 27, 1993 to shareholders of record
August 6, 1993. The common stock per share and average share
information for 1993 has been retroactively restated for the
stock split. The effect of outstanding stock options on net
income per share is not material.
7. Reserve for Loan Losses:
An analysis of the reserve for loan losses is as follows:
Note 7: Reserve for Loan Losses
March 31,
---------------------------------------
1994 1993
- - ------------------------------------------------------------------------------
Balance, beginning of year $40,410,907 $37,920,674
- - ------------------------------------------------------------------------------
Provision charged to expense 2,181,000 2,164,700
- - ------------------------------------------------------------------------------
Recoveries 574,074 605,723
- - ------------------------------------------------------------------------------
Loans charged off (863,274) (1,943,365)
- - ------------------------------------------------------------------------------
Net loans charged off (289,200) (1,337,642)
- - ------------------------------------------------------------------------------
Balance, end of period $42,302,707 $38,747,732
==============================================================================
<PAGE>
8. Short-Term Borrowings:
Short-term borrowings consisted of the following:
Note 8: Short-Term Borrowings
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1994 1993 1993
- - ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Security repurchase agreements $162,794,117 $ 73,048,347 $101,074,098
- - ---------------------------------------------------------------------------------------
U.S. Treasury demand notes 4,829,196 7,605,724 6,664,605
- - ---------------------------------------------------------------------------------------
Lines of credit 14,000,000 50,000,000 ---
- - ---------------------------------------------------------------------------------------
Other 1,350,000 1,350,000 1,350,000
- - ---------------------------------------------------------------------------------------
Total $182,973,313 $132,004,071 $109,088,703
=======================================================================================
</TABLE>
The average rates paid on these funds were 3.15%, 2.81% and
2.79% for the periods ending March 31, 1994, December 31, 1993
and March 31, 1993, respectively. The demand notes payable to
the U.S. Treasury accrue interest at .25% below the weekly
federal funds rate and are fully collateralized by subsidiary
banks' investment securities. Securities sold under repurchase
agreements are periodically borrowed on a short-term basis by
subsidiary banks at prevailing rates for these funds.
<PAGE>
Item 2. Management Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion will cover results of operations,
asset quality, financial position and capital resources. The
information included in this discussion is intended to assist
readers in their analysis of, and should be read in conjunction
with, the consolidated financial statements presented elsewhere
in this report.
Results of Operations
Overview
In the first quarter of 1994, Valley reported net income of
$10.339 million, a decrease of $.555 million, or 5.1%, from the
$10.894 million in the first quarter of 1993. Earnings per share
in the first quarter of 1994 were $.50 compared with $.54
(adjusted for three for two stock split on August 27, 1993) in
the first quarter of 1993, a 7.4% decrease. Weighted average
shares outstanding in the first three months of 1994 increased to
20,739,928 compared with 20,160,942 (adjusted) in the first three
months of 1993.
Valley's earnings were lower than expected. Due to the
impending merger with Marshall & Ilsley Corporation ("M&I"),
Valley Senior Management, on its own initiative, began to
reconfigure Valley with a view towards realizing expected
efficiencies from the merger. This effort caused a diminution of
focus resulting in a negative impact on product sales and net
income.
Table 1 highlights the major factors affecting the changes
in earnings per share for the first three months of the last
three years.
<PAGE>
Table 1: Changes in Earnings and Earnings Per Share
<TABLE>
<CAPTION>
Three months ended March 31,
-----------------------------------------------------------------------------------
Income/Expense Change
-----------------------------------------------------------------------------------
1994 1993 1992 1994/1993 1993/1992
(dollars in thousands) Dollars Dollars Dollars Dollars Per Share** Dollars Per Share*
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income, prior period N/A N/A N/A $10,894 $.54 $ 8,226 $.45
- - ----------------------------------------------------------------------------------------------------------------------------
Increase(decrease) attributable to:
- - ----------------------------------------------------------------------------------------------------------------------------
Interest Income* $77,063 $78,952 $81,213 (1,889) (.09) (2,261) (.12)
- - ----------------------------------------------------------------------------------------------------------------------------
Interest Expense 31,729 35,115 41,121 3,386 .17 6,006 .33
- - ----------------------------------------------------------------------------------------------------------------------------
Net Interest Income 45,334 43,837 40,092 1,497 .08 3,745 .21
- - ----------------------------------------------------------------------------------------------------------------------------
Provision for loan losses 2,181 2,165 2,275 (16) --- 110 .01
- - ----------------------------------------------------------------------------------------------------------------------------
Noninterest Income:
- - ----------------------------------------------------------------------------------------------------------------------------
Service charges on deposit accounts 4,143 3,939 3,592 204 .01 347 .02
- - ----------------------------------------------------------------------------------------------------------------------------
Trust service fees 3,092 3,346 3,229 (254) (.01) 117 .01
- - ----------------------------------------------------------------------------------------------------------------------------
Other service charges,
commissions and fees 3,080 3,059 2,407 21 --- 652 .03
- - ----------------------------------------------------------------------------------------------------------------------------
Insurance related 1,971 1,875 1,747 96 --- 128 .01
- - ----------------------------------------------------------------------------------------------------------------------------
Credit card 1,712 1,519 1,348 193 .01 171 .01
- - ----------------------------------------------------------------------------------------------------------------------------
Net securities gains (22) 148 402 (170) (.01) (254) (.02)
- - ----------------------------------------------------------------------------------------------------------------------------
Other 1,653 1,869 800 (216) (.01) 1,069 .06
- - ----------------------------------------------------------------------------------------------------------------------------
Total noninterest income 15,629 15,755 13,525 (126) (.01) 2,230 .12
- - ----------------------------------------------------------------------------------------------------------------------------
Noninterest Expense:
- - ----------------------------------------------------------------------------------------------------------------------------
Salaries and wages 18,025 17,392 16,102 (633) (.03) (1,290) (.07)
- - ----------------------------------------------------------------------------------------------------------------------------
Pensions and other
employee benefits 6,011 5,560 5,027 (451) (.02) (533) (.03)
- - ----------------------------------------------------------------------------------------------------------------------------
Equipment 4,257 4,171 4,088 (86) (.01) (83) ---
- - ----------------------------------------------------------------------------------------------------------------------------
Net occupancy 3,612 3,326 2,893 (286) (.01) (433) (.02)
- - ----------------------------------------------------------------------------------------------------------------------------
FDIC Insurance 2,195 2,042 1,922 (153) (.01) (120) (.01)
- - ----------------------------------------------------------------------------------------------------------------------------
Credit card 969 842 736 (127) (.01) (106) (.01)
- - ----------------------------------------------------------------------------------------------------------------------------
Other 7,226 7,118 7,290 (108) --- 172 .01
- - ----------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 42,295 40,451 38,058 (1,844) (.09) (2,393) (.13)
- - ----------------------------------------------------------------------------------------------------------------------------
FTE income before taxes 16,487 16,976 13,284 (489) (.02) 3,692 .20
- - ----------------------------------------------------------------------------------------------------------------------------
Income taxes 4,926 4,901 3,235 (25) --- (1,666) (.09)
- - ----------------------------------------------------------------------------------------------------------------------------
Taxable equivalent adjustment 1,222 1,181 1,823 (41) (.01) 642 .03
- - ----------------------------------------------------------------------------------------------------------------------------
Additional shares outstanding --- --- --- --- (.01) --- (.05)
- - ----------------------------------------------------------------------------------------------------------------------------
Net change --- --- --- (555) (.04) 2,668 .09
- - ----------------------------------------------------------------------------------------------------------------------------
Net income, current period $10,339 $10,894 $ 8,226 $10,339 $.50 $10,894 $.54
============================================================================================================================
</TABLE>
* Income computed on a fully taxable equivalent basis.
** Per share data has been restated for the three for two stock split effected
in the form of a 50% stock dividend declared on August 27, 1993.
<PAGE>
Valley's return on average equity decreased in the first
three months of 1994 to 11.12%, down from the 13.15% reported in
1993. Return on average assets was .92% and 1.02% in the first
three months of 1994 and 1993. Table 2 highlights certain
relationships between significant financial ratios. The
remainder of this discussion provides a more detailed explanation
of factors affecting the change in results of operations and the
change in financial position of Valley for the reported periods.
Table 2: Financial Ratios
Three months Years ended
ended December 31,
March 31,
----------------------------------------------------------------------
1994 1993 1993 1992 1991
----------------------------------------------------------------------
Return on average
assets .92% 1.02% 1.05% .98% .82%
----------------------------------------------------------------------
Divided by
----------------------------------------------------------------------
Average equity as a %
of average assets 8.25 7.73 7.89 7.31 7.00
----------------------------------------------------------------------
Equals
----------------------------------------------------------------------
Return on average
equity (%) 11.12 13.15 13.33 13.35 11.68
----------------------------------------------------------------------
Multiplied by
----------------------------------------------------------------------
Earnings retained (%) 51.85 58.02 58.58 58.71 52.14
----------------------------------------------------------------------
Equals
----------------------------------------------------------------------
Internal capital
growth (%) 5.77 7.63 7.81 7.84 6.09
======================================================================
Net Interest Income
Net interest income is the most significant component of
earnings. For analytical purposes, interest earned on tax exempt
assets, such as industrial development revenue bonds and state
and municipal obligations, is adjusted to a fully-taxable
equivalent (FTE) basis. This adjustment is based upon the
federal corporate income tax rate of 35% for first quarter 1994
and 34% for first quarter 1993, and any interest expense which is
disallowed as a deduction in connection with carrying tax exempt
assets. This FTE adjustment facilitates a meaningful comparison
between taxable and nontaxable earning assets. Table 3 shows the
sources of interest income and expense between years and the
variances resulting from fluctuations in interest rate (rate) and
changes in the amount (volume) of earning assets and interest-
bearing liabilities.
Net interest income on an FTE basis increased to $45.334
million in the first three months of 1994, compared with $43.837
million in the first three months of 1993. This increase of
$1.497 million was due primarily to a greater increase in the
volume of average earning assets (a $217.472 million increase)
than in average interest-bearing liabilities (a $135.931 million
increase), which accounted for $3.908 million of the increase in
net interest income. Increased loans (a $146.304 million
increase) primarily accounted for the increase in average earning
assets. Approximately 44% of average earning asset growth was
<PAGE>
external, due to the Pierce County Bank & Trust Company ("Pierce
County") acquisition, while the remaining 56% was internally
generated. Average savings deposits (a $103.341 million
increase) comprised the majority of the increase in average
interest-bearing liabilities.
The continued extraordinary volume of mortgage loan
refinancings has negatively impacted Valley's net interest
income. The impact on earning assets from the declining rate
environment (a decrease of $6.020 million) was offset by
aggressive repricing of interest-bearing liabilities (a $3.608
million decrease). The resulting $2.411 million decrease in net
interest income was offset by a $3.908 million increase in net
interest income from increased average balances, resulting in the
$1.497 million increase in net interest income between the first
three months of 1994 and 1993. Valley's net interest margin
declined to 4.34% in the first three months of 1994, down from
4.42% for the first three months of 1993.
<PAGE>
Table 3: Changes in Net Interest Income - Taxable Equivalent Basis
<TABLE>
<CAPTION>
Average Balances Average Rates Interest 1994-1993
--------------------- --------------------------------- ---------------------------
Three months ended Three months Three months
March 31, ended March 31, ended March 31, Income
---------------------- Increase/ --------------------------------- Expense Volume Rate
(dollars in thousands) 1994 1993 (Decrease) 1994 1993 1994 1993 Variance Variance Variance
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans(1) $3,192,336 $3,046,032 $146,304 8.00% 8.53% $63,874 $64,984 $(1,110) $3,037 $(4,147)
- - -----------------------------------------------------------------------------------------------------------------------------
Funds sold 6,577 8,827 (2,250) 3.10 2.45 51 54 (3) (16) 13
- - -----------------------------------------------------------------------------------------------------------------------------
Investment securities- 776,668 725,071 51,597 4.88 5.58 9,472 10,107 (635) 687 (1,322)
taxable(2)
- - -----------------------------------------------------------------------------------------------------------------------------
Investment securities- 205,751 183,930 21,821 7.13 8.28 3,666 3,807 (141) 423 (564)
nontaxable
- - -----------------------------------------------------------------------------------------------------------------------------
Total earning assets 4,181,332 3,963,860 217,472 7.37 7.97 77,063 78,952 (1,889) 4,131 (6,020)
- - -----------------------------------------------------------------------------------------------------------------------------
Reserve for loan losses (41,459) (38,798) (2,661)
- - --------------------------------------------------------------
Cash and due from banks 173,094 164,480 8,614
- - --------------------------------------------------------------
Premises and equipment 102,518 103,643 (1,125)
- - --------------------------------------------------------------
Other assets 91,538 90,425 1,113
- - --------------------------------------------------------------
Total assets $4,507,023 $4,283,610 $223,413
==============================================================
N.O.W. and money
market deposits $ 800,602 $ 773,698 $ 26,904 1.85 2.25 3,704 4,357 (653) 147 (800)
- - -----------------------------------------------------------------------------------------------------------------------------
Savings deposits 441,395 338,054 103,341 2.14 2.33 2,366 1,971 395 564 (169)
- - -----------------------------------------------------------------------------------------------------------------------------
Time deposits 2,090,005 2,153,459 (63,454) 4.37 4.89 22,845 26,302 (3,457) (757) (2,700)
- - -----------------------------------------------------------------------------------------------------------------------------
Short-term borrowings 185,372 101,136 84,236 3.15 2.79 1,460 705 755 653 102
- - -----------------------------------------------------------------------------------------------------------------------------
Long-term borrowings 53,244 68,340 (15,096) 10.17 10.42 1,354 1,780 (426) (385) (41)
- - -----------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 3,570,618 3,434,687 135,931 3.55 4.09 31,729 35,115 (3,386) 222 (3,608)
- - -----------------------------------------------------------------------------------------------------------------------------
Demand deposits 506,277 452,717 53,560
- - --------------------------------------------------------------
Accrued expenses and
other liabilities 58,284 64,907 (6,623)
- - --------------------------------------------------------------
Shareholders' equity 371,844 331,299 40,545
- - --------------------------------------------------------------
Total liabilities and
shareholders' equity $4,507,023 $4,283,610 $223,413
==============================================================
Rate spread 3.82 3.88
- - -----------------------------------------------------------------------------------------------------------------------------
Net interest margin/revenue 4.34% 4.42% $45,334 $43,837 $1,497 $3,908 $(2,411)
=============================================================================================================================
</TABLE>
Changes in interest due to volume and rate were defined as follows: Volume
variance-change in average balance multiplied by prior year rate; Rate
variance-change in rate multiplied by prior year average balance; and
Rate/Volume variance-change in average balance multiplied by the change in
rate. The change in interest due to both rate and volume has been allocated
proportionately to volume variance and rate variance based on the relationship
of the absolute dollar change in each.
(1) Nonperforming loans and mortgages held for sale are included in average
balances used to determine average rates.
(2) Includes time deposits with other banks and investment securities
available for sale.
<PAGE>
The net interest margin was affected not only by the
increase in average balances and declining interest rates, as
noted above, but also by changes in the mix of earning assets and
interest-bearing liabilities. Table 4 shows the sources and mix
of net interest income. As shown in this table, the mix of
nontaxable interest income to total interest on earning assets
declined significantly from 1992 to 1994. The decrease in the
level of nontaxable interest income resulted from Valley's use of
other investment alternatives in response to the decrease in the
FTE yields of "bank qualified" municipal obligations, in relation
to other taxable investment alternatives. Valley's commitment to
lending is evident in the increase in the relationship of
interest and fees on loans as a percent of total interest on
earning assets for the years shown.
Provision for Loan Losses
In the first three months of 1994, the provision for loan
losses amounted to $2.181 million compared with $2.165 million in
the first three months of 1993. The 1994 provision for the first
three months comprises two elements: 1) a general increase in the
reserve for loan losses from 1.27% of loans at December 31, 1993
to 1.34% at March 31, 1994
(amounting to $1.892 million); and 2) restoration of the reserve
for the first three months of 1994 net charge-offs (amounting to
$.289 million).
Noninterest Income
Total noninterest income amounted to $15.629 million in the
first three months of 1994 compared to $15.755 million in 1993
and $13.525 million in 1992, a .8% decrease in 1994 from 1993 and
a 16.5% increase in 1993 from 1992. All categories of
noninterest income reflect increases due to Valley's acquisitions
of United Savings and Loan Association ("United") in July 1992
and Pierce County in November 1993. Their results of operations
are included in Valley's from the dates of acquisition forward.
Table 5 shows the major categories of noninterest income for the
first three months of 1994, 1993 and 1992, and the percentage
change between years.
Major changes in noninterest income categories over the
periods shown include insurance related income, gain on sales of
mortgage loans and annuity commissions.
Service charges on deposit accounts make up the largest
portion of noninterest income. Service charges increased by
$.204 million, or 5.2% over the amounts recorded in the first
three months of 1993.
Valley recognized accretion of negative goodwill in the
amount of $.394 million in the first three months of 1994 and
1993, substantially all of which is attributable to the United
acquisition. The negative goodwill attributable to United is
being accreted over a 10 year period, in equal annual amounts of
$1.537 million.
Net securities losses amounted to $0.22 million in the first
three months of 1994 compared to net securities gains of $.148
million and $.402 million in 1993 and 1992, respectively. All
securities sold were classified as securities available for sale.
<PAGE>
Table 4: Sources of Net Interest Income
<TABLE>
<CAPTION>
Three months ended March 31,
---------------------------------------------------------------------------------
(dollars in thousands) 1994 Mix 1993 Mix 1992 Mix
- - ---------------------------------------------------------------------------------------------------------------------
Interest Income
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans (1) $63,874 82.9% $64,984 82.3% $63,623 78.4%
- - ---------------------------------------------------------------------------------------------------------------------
Funds sold 51 .1 54 .1 261 .3
- - ---------------------------------------------------------------------------------------------------------------------
Taxable securities (2) 9,472 12.3 10,107 12.8 11,455 14.1
- - ---------------------------------------------------------------------------------------------------------------------
Nontaxable securities 3,666 4.7 3,807 4.8 5,874 7.2
- - ---------------------------------------------------------------------------------------------------------------------
Total earning assets $77,063 100.0% $78,952 100.0% $81,213 100.0%
- - ---------------------------------------------------------------------------------------------------------------------
Interest Expense
- - ---------------------------------------------------------------------------------------------------------------------
N.O.W. & money market deposits $ 3,704 11.7% $ 4,357 12.4% $5,480 13.3%
- - ---------------------------------------------------------------------------------------------------------------------
Savings deposits 2,366 7.4 1,971 5.6 2,320 5.6
- - ---------------------------------------------------------------------------------------------------------------------
Time deposits 22,845 72.0 26,302 74.9 30,380 73.9
- - ---------------------------------------------------------------------------------------------------------------------
Short-term borrowings 1,460 4.6 705 2.0 1,017 2.5
- - ---------------------------------------------------------------------------------------------------------------------
Long-term borrowings 1,354 4.3 1,780 5.1 1,924 4.7
- - ---------------------------------------------------------------------------------------------------------------------
Total interest-bearing funds $31,729 100.0% $35,115 100.0% $41,121 100.0%
- - ---------------------------------------------------------------------------------------------------------------------
Net interest income --
taxable equivalent basis $45,334 $43,837 $40,092
=====================================================================================================================
Average Rates
- - ---------------------------------------------------------------------------------------------------------------------
Earning assets 7.37% 7.97% 9.14%
- - ---------------------------------------------------------------------------------------------------------------------
Interest-bearing funds 3.55 4.09 5.24
- - ---------------------------------------------------------------------------------------------------------------------
Net yield on earning assets 3.82 4.42 4.51
=====================================================================================================================
(1) Includes mortgages held for sale.
(2) Includes time deposits with other banks and investment securities
available for sale.
<PAGE>
Table 5: Noninterest Income
</TABLE>
<TABLE>
<CAPTION>
Three months ended March 31, % Increase (Decrease)
-------------------------------- -----------------------
(dollars in thousands) 1994 1993 1992 1994-1993 1993-1992
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Service charges on deposit accounts $ 4,143 $ 3,939 $ 3,592 5.2 9.7
- - --------------------------------------------------------------------------------------------------------
Trust service fees 3,092 3,346 3,229 (7.6) 3.6
- - --------------------------------------------------------------------------------------------------------
Other service charges,
commissions and fees 3,080 3,059 2,407 .1 27.1
- - --------------------------------------------------------------------------------------------------------
Credit card 1,712 1,519 1,348 12.7 12.7
- - --------------------------------------------------------------------------------------------------------
Insurance related 1,588 1,334 1,382 19.0 (3.5)
- - --------------------------------------------------------------------------------------------------------
Gain on sale of mortgage loans 1,027 1,127 598 (8.9) 88.5
- - --------------------------------------------------------------------------------------------------------
Accretion of negative goodwill 394 394 -- -- NMF
- - --------------------------------------------------------------------------------------------------------
Annuity commissions 383 541 365 (29.2) 48.2
- - --------------------------------------------------------------------------------------------------------
Other 232 348 202 (33.3) 72.3
- - --------------------------------------------------------------------------------------------------------
Subtotal 15,651 15,607 13,123 .3 18.9
- - --------------------------------------------------------------------------------------------------------
Net securities gains (22) 148 402 NMF (63.2)
- - --------------------------------------------------------------------------------------------------------
Total noninterest income $15,629 $15,755 $13,525 (.8) 16.5
========================================================================================================
</TABLE>
<PAGE>
Noninterest Expense
Total noninterest expense amounted to $42.295 million in the
first three months of 1994 compared to $40.451 million in 1993
and $38.058 million in 1992, a 4.6% increase in 1994 from 1993
and a 6.3% increase in 1993 from 1992. All categories of
noninterest expense reflect increases due to Valley's
acquisitions of United in July 1992 and Pierce County in November
1993. Their results of operations are included in Valley's from
the dates of acquisition forward. Table 6 shows the major
categories of noninterest expense for the first three months of
1994, 1993 and 1992, and the percentage change between years.
The largest component of noninterest expense is salaries and
wages. Salaries and wages increased to $18.025 million for the
first three months of 1994, up from $17.392 for the first three
months of 1993 and $16.102 million for the first three months of
1991. Pensions and other employee benefits totalled $6.011 in
the first quarter of 1994 compared to $5.560 million in the first
quarter of 1993 and $5.027 million for the first quarter of 1992.
These two categories make up over 56% of Valley's total
noninterest expense.
In 1992, the Financial Accounting Standards Board (FASB)
issued SFAS No. 112 "Employers' Accounting for Post Employment
Benefits." This statement requires accrual accounting for the
estimated cost of benefits provided to former employees after
employment, but before retirement. Valley is required to adopt
the new standard no later than 1994. Valley currently accrues
for severance benefits when identified and therefore, has
determined that adoption of the new standard will not have a
material impact.
Other expenses include a wide range of miscellaneous expense
types. Other expenses for the first three months of 1994 were
$1.026 million, $.802 million for the first three months of 1993,
and $1.352 million for the first three months of 1992.
<PAGE>
Table 6: Noninterest Expense
<TABLE>
<CAPTION>
Three months ended March 31, % Increase (Decrease)
------------------------------- -----------------------
(dollars in thousands) 1994 1993 1992 1994-1993 1993-1992
- - ------------------------------------------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C>
Salaries and wages $18,025 $17,392 $16,102 3.6 8.0
- - ------------------------------------------------------------------------- -----------------------
Pensions and other employee benefits 6,011 5,560 5,027 8.1 10.6
- - ------------------------------------------------------------------------- -----------------------
Equipment 4,257 4,171 4,088 2.1 2.0
- - ------------------------------------------------------------------------- -----------------------
Net occupancy 3,612 3,326 2,893 8.6 15.0
- - ------------------------------------------------------------------------- -----------------------
FDIC insurance 2,195 2,042 1,922 7.5 6.2
- - ------------------------------------------------------------------------- -----------------------
Communication/Delivery 1,715 1,652 1,575 3.8 4.9
- - ------------------------------------------------------------------------- -----------------------
Professional services 1,438 1,386 1,256 3.8 10.4
- - ------------------------------------------------------------------------- -----------------------
Business development 1,199 1,554 1,413 (22.8) 10.0
- - ------------------------------------------------------------------------- -----------------------
Credit card 969 842 736 15.1 14.4
- - ------------------------------------------------------------------------- -----------------------
Processing costs 924 851 834 8.6 2.0
- - ------------------------------------------------------------------------- -----------------------
Intangible amortization 924 873 860 5.8 1.5
- - ------------------------------------------------------------------------- -----------------------
Other 1,026 802 1,352 27.9 (40.7)
- - ------------------------------------------------------------------------- -----------------------
Total noninterest expense $42,295 $40,451 $38,058 4.6 6.3
========================================================================= =======================
</TABLE>
<PAGE>
Income Taxes
Income tax expense was $4.926 million in the first three
months of 1994 compared to $4.901 million in the first three
months of 1993. The increase in tax expense in 1994 of $.025
million resulted primarily from two factors: 1) the federal
corporate tax rate increase from 34% to 35%; and 2) a decrease in
nontaxable interest income of $.182 million.
Financial Position
Total average assets were $4.507 billion in the first
quarter of 1994, an increase of $223 million over the first
quarter of 1993. Approximately $110 million of this growth was
due to the acquisition of Pierce County and $113 million was
internally generated. Average earning assets have consistently
accounted for over 90% of total average assets. Average earning
assets represented 92.8% of total average assets for the first
quarter of 1994 compared to 92.5% in the first quarter of 1993.
Average loans increased to $3.192 billion in the first quarter of
1994 compared to $3.046 billion in the first quarter of 1993.
Valley also produced approximately $129 million of real estate
loans in the first three months of 1994, not included in the
March 31, 1994 period end balances, which were packaged and sold
into the secondary market. Valley's general policy is not to
retain long-term fixed rate mortgages in its loan portfolio.
Loans as a percent of assets have increased to 71.0% at
March 31, 1994 compared to 69.5% at December 31, 1993 and 70.4%
at March 31, 1993. Table 7 shows the loan portfolio mix at March
31, 1994. Table 10 provides an analysis of average balances,
mix, interest, average rates and key ratios for the five most
recent quarters.
Valley adopted SFAS No. 107 "Disclosures About Fair Value of
Financial Instruments" in the fourth quarter of 1992. There have
been no changes to the methodology and assumptions used to
estimate fair values at December 31, 1993, and the relative mix
of financial instruments on the balance sheet as well as off-
balance sheet instruments have not significantly changed since
December 31, 1993. Management believes the estimated fair values
disclosed at December 31, 1993 continue to depict the
relationship of carrying value to estimated fair value for
financial instruments.
Asset Quality
The most significant risk of loss in a financial institution
is from its loan portfolio. Valley manages its loan portfolio to
limit risk through initial review of credit applications,
approval of loans by a review committee and loan documentation
and compliance procedures. Valley also has a corporate credit
administration and loan review staff. This staff performs loan
reviews at subsidiary banks. This review process assists banks
in early recognition of problem credits. This staff also
provides expertise in loan workouts to limit credit losses.
Valley's banks prepare quarterly problem loan action reports
(PLARs) to monitor nonperforming loans and determine the adequacy
of the reserve. All loans classified for regulatory purposes as
loss, doubtful or substandard are included in the PLARs. The
PLARs also include all loans classified as nonperforming.
<PAGE>
Table 7: Loan Portfolio Review
March 31,
------------------------
(dollars in thousands) 1994 MIX
- - --------------------------------------------------------------
Commercial real estate $ 824,663 26.1%
- - --------------------------------------------------------------
Real estate-mortgage (1st lien) 754,013 23.9
- - --------------------------------------------------------------
Commercial 592,692 18.8
- - --------------------------------------------------------------
Consumer 360,216 11.4
- - --------------------------------------------------------------
Agricultural 204,187 6.5
- - --------------------------------------------------------------
Real estate-mortgage (2nd lien) 154,751 4.9
- - --------------------------------------------------------------
Real estate-construction 117,074 3.7
- - --------------------------------------------------------------
Check credit and credit card 62,851 2.0
- - --------------------------------------------------------------
Student 66,287 2.1
- - --------------------------------------------------------------
Leasing 17,613 .6
- - --------------------------------------------------------------
Total loans 3,154,347 100.0%
- - --------------------------------------------------------------
Reserve for loan losses (42,303)
- - --------------------------------------------------------------
Total loans, net $3,112,044
==============================================================
Loans as a % of assets 70.9%
==============================================================
Senior management also reviews the PLARs quarterly with the
corporate credit administration and loan review staff to
determine if there are any trends or uncertainties which
management reasonably expects will materially impact future
operating results, liquidity, or capital resources. In addition,
senior management determines if there is any information
regarding large credits that may cause management to question the
ability of such borrowers to comply with loan repayment terms.
Valley's lending philosophy is to make high-quality loans to
Wisconsin consumers and businesses, allowing the banks to
efficiently monitor and control credit risk. The majority of the
portfolio is composed of loans to individuals and small and
medium-sized businesses. Consistent with its corporate-wide
lending and investment policies, Valley's banks' portfolios have
no foreign loans, energy loans or out-of-market credit card
balances. Valley's loan underwriting policies discourage the
making of out-of-market real estate loans and loans relating to
highly leveraged transactions. Valley's banks do not hold non-
investment grade debt securities in their investment portfolios
and Valley does not invest in any interest only or principal only
investment securities.
Loan loss exposure is also limited through industry
diversification. Valley's loan portfolio is well diversified
with no excessive concentration in any one industry.
Agricultural loans at Valley represent approximately 6.5% of the
portfolio at March 31, 1994, while loans to finance non-owner
occupied commercial real estate development amounted to
approximately $485 million, or 15.2% of December 31, 1993 loans
outstanding. Valley does a limited amount of equipment lease
financing, comprising mainly leases to individuals and small and
<PAGE>
medium businesses. Leases outstanding remained at $17.6 million
at March 31, 1994 compared to $17.6 million at March 31, 1993.
In accordance with regulatory standards, loans are placed in
nonaccrual status when they reach a prescribed delinquency stage,
generally when payments are 90 days past due or when other events
occur which make the collection of all principal and interest
owing on the loan questionable.
Nonperforming loans, which include nonaccrual loans, loans
past due 90 days or more and loans with restructured terms,
totalled $23.200 million at March 31, 1994 compared to $20.586
million and $25.901 million reported at December 31, 1993 and
March 31, 1993, respectively. Nonperforming loans as a percent
of loans outstanding decreased to .74% at March 31, 1994 as
compared to .65% and .86% at December 31, 1993 and March 31,
1993, respectively.
Nonperforming assets, which include nonperforming loans and
other real estate owned acquired in foreclosure, totaled $25.337
million at March 31, 1994, or .57% of total assets, compared to
$22.880 million or .50% of total assets and $30.233 million or
.71% of total assets at December 31, 1993 and March 31, 1993,
respectively. In addition to the loans classified as
nonperforming, there were other loans aggregating approximately
$66 million at March 31, 1994 and $60 million at March 31, 1993,
where management is closely following the borrowers' ability to
continue to comply with loan repayment terms. Current conditions
do not warrant classification of these loans as nonperforming,
nor is any loss of principal on these loans considered likely at
this time.
The reserve for loans losses (reserve) totaled $42.303
million or 1.34% of total loans at March 31, 1994 up from $38.748
million or 1.28% of total loans at March 31, 1993 and $40.411 or
1.27% of total loans at December 31, 1993. The level of reserve
is established based upon management's assessment of overall risk
in the loan portfolio. Valley uses a loan grading system to
continuously monitor problem credits. A loan is graded based
upon a number of factors, which include collateral values,
financial condition of borrowers and assessment of ultimate
collectibility. The reserve is based upon reasonable estimates,
from which actual losses may vary. Reserve estimates are
reviewed quarterly and evaluated based upon current conditions
relating to individual customers and the economy in general.
Adjustments to the reserve are reflected through the provision
for loan losses. Valley implemented a new method of establishing
and evaluating the reserve levels at all of its affiliate banks,
based upon current regulatory methodology, in the fourth quarter
of 1992. This method sets reserve requirements based upon a
combination of estimated potential losses plus an additional
percentage of the remaining balance of problem loans, and
establishes a general reserve based upon the loan composition of
the bank's loan portfolio.
Loans charged off, net of recoveries, totaled $.289 million
in the first three months of 1994 compared with $1.338 million in
the first three months of 1993. Net loans charged off as a
percent of average loans was .01% in the first three months of
1994 and .04% in the first three months of 1993.
<PAGE>
Valley has an environmental policy which establishes
procedures to limit the exposure for loss related to
environmental problems on any properties foreclosed upon or
properties securing extensions of credit by Valley. This policy
generally requires the borrower to complete an environmental
questionnaire and calls for an on site inspection of the real
estate securing the loan. The policy also requires that, prior
to taking title to any real property by foreclosure, an
investigation must be made of the property to determine if there
is any potential environmental liability.
Table 8 shows balances of nonperforming loans and assets,
reserve and key asset quality performance ratios.
Table 8: Nonperforming Assets and Reserve for Loan Losses
March 31, December 31, March 31,
(dollars in thousands) 1994 1993 1993
- - ------------------------------------------------------------------------------
Nonperforming Assets:
- - ------------------------------------------------------------------------------
Nonaccrual loans $19,139 $16,306 $21,359
- - ------------------------------------------------------------------------------
Restructured loans 2,054 2,068 3,128
- - ------------------------------------------------------------------------------
Loans past due 90 days or more 2,007 2,212 1,414
- - ------------------------------------------------------------------------------
Total nonperforming loans 23,200 20,586 25,901
- - ------------------------------------------------------------------------------
Other real estate owned 2,137 2,294 4,332
- - ------------------------------------------------------------------------------
Total nonperforming assets $25,337 $22,880 $30,233
- - ------------------------------------------------------------------------------
Nonperforming loans as a % of loans .74% .65% .86%
- - ------------------------------------------------------------------------------
Nonperforming assets as a % of assets .57% .50% .71%
- - ------------------------------------------------------------------------------
Reserve for Loan Losses:
- - ------------------------------------------------------------------------------
At period end $42,303 $40,411 $38,748
- - ------------------------------------------------------------------------------
As a % of loans 1.34% 1.27% 1.28%
- - ------------------------------------------------------------------------------
As a % of nonperforming loans 182.34% 196.30% 149.60%
- - ------------------------------------------------------------------------------
As a % of nonaccrual loans 221.03% 247.83% 181.41%
==============================================================================
Capital Resources
Shareholders' equity increased to $365.183 million at March
31, 1994 compared to $334.601 million at March 31, 1993. The
increase of $30.582 million between years was comprised mainly of
net earnings retained.
Table 9 shows Valley's consolidated capital structure and
risk-based capital ratios for March 31, 1994, December 31, 1993
and March 31, 1993. Valley's total capital ratio of 11.65% at
March 31, 1994 is well above the regulatory minimum of 8.00%.
Valley's Tier I ratio of 10.40% at March 31, 1994 is also well
above the regulatory minimum of 4.00%.
<PAGE>
Table 9: Capital Resources
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1994 1993 1993
- - --------------------------------------------------------------------------------------------------------
Capital Structure
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Long-term debt $ 53,235,529 $ 53,251,185 $ 68,296,056
- - --------------------------------------------------------------------------------------------------------
Shareholders' equity 365,183,367 365,907,853 334,600,943
- - --------------------------------------------------------------------------------------------------------
Total capitalization $ 418,418,896 $ 419,159,038 $ 402,896,999
- - --------------------------------------------------------------------------------------------------------
Tangible equity $ 330,267,672 $ 330,653,918 $ 300,039,061
- - --------------------------------------------------------------------------------------------------------
Intangible Assets
- - --------------------------------------------------------------------------------------------------------
Goodwill - parent $ 17,113,345 $ 17,362,541 $ 18,110,135
- - --------------------------------------------------------------------------------------------------------
Core deposit premium - parent 1,259,607 1,512,782 2,290,553
- - --------------------------------------------------------------------------------------------------------
Subsidiaries:
- - --------------------------------------------------------------------------------------------------------
Goodwill 13,913,814 13,621,866 10,899,328
- - --------------------------------------------------------------------------------------------------------
Core deposit premium 2,419,361 2,514,175 2,799,095
- - --------------------------------------------------------------------------------------------------------
Other identifiable intangibles 209,568 242,571 462,771
- - --------------------------------------------------------------------------------------------------------
Total intangibles $ 34,915,695 $ 35,253,935 $ 34,561,882
========================================================================================================
Risk-Based Capital
- - --------------------------------------------------------------------------------------------------------
Tier I capital:
- - --------------------------------------------------------------------------------------------------------
Shareholders' equity $ 365,183,367 $ 365,907,853 $ 334,600,943
- - --------------------------------------------------------------------------------------------------------
Minority interest 155,102 330,030 164,895
- - --------------------------------------------------------------------------------------------------------
Less intangibles (34,915,695) (35,253,935) (34,203,956)
- - --------------------------------------------------------------------------------------------------------
Total Tier I capital $ 330,422,774 $ 330,983,948 $ 300,203,956
========================================================================================================
Tier II capital:
- - --------------------------------------------------------------------------------------------------------
Allowable reserve for
loan losses $ 42,302,707 $ 40,410,907 $ 38,747,732
- - --------------------------------------------------------------------------------------------------------
Qualifying long-term debt --- --- 3,000,000
- - --------------------------------------------------------------------------------------------------------
Total Tier II capital $ 42,302,707 $ 40,410,907 $ 41,747,732
========================================================================================================
Total capital $ 372,725,481 $ 371,394,855 $ 341,951,688
========================================================================================================
Risk-Weighted Assets $3,177,914,000 $3,294,529,000 $3,099,836,000
- - --------------------------------------------------------------------------------------------------------
Risk-based capital ratios:
- - --------------------------------------------------------------------------------------------------------
Tier I 10.40% 10.05% 9.68%
- - --------------------------------------------------------------------------------------------------------
Total 11.65% 11.27% 11.03%
- - --------------------------------------------------------------------------------------------------------
Tier I Leverage 7.56% 7.26% 7.08%
========================================================================================================
<PAGE>
Table 10: Quarterly Average Balances, Mix, Interest, Average Rates and
Key Ratios
</TABLE>
<TABLE>
<CAPTION>
First Quarter - 1994 Fourth Quarter - 1993
------------------------------------------ -----------------------------------------
Average Average Average Average
(dollars in thousands) Balance Mix Interest Rate Balance Mix Interest Rate
- - -------------------------------------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
- - -------------------------------------------------------------------------------- -----------------------------------------
Earning Assets:
- - -------------------------------------------------------------------------------- -----------------------------------------
Loans, net of unearned discount (1) $3,192,336 70.8 % $63,874 8.00 % $3,191,052 71.1 % $65,969 8.27 %
- - -------------------------------------------------------------------------------- -----------------------------------------
Funds sold 6,577 0.2 51 3.10 4,411 0.1 27 2.45
- - -------------------------------------------------------------------------------- -----------------------------------------
Investment securities
- - -------------------------------------------------------------------------------- -----------------------------------------
Taxable (2) 776,668 17.2 9,472 4.88 758,015 16.9 9,595 5.06
- - -------------------------------------------------------------------------------- -----------------------------------------
Nontaxable 205,751 4.6 3,666 7.13 202,845 4.5 3,806 7.50
- - -------------------------------------------------------------------------------- -----------------------------------------
Total investment securities 982,419 21.8 13,138 5.35 960,860 21.4 13,401 5.58
- - -------------------------------------------------------------------------------- -----------------------------------------
Total earning assets 4,181,332 92.8 77,063 7.37 4,156,323 92.6 79,397 7.64
- - -------------------------------------------------------------------------------- -----------------------------------------
Reserve for loan losses (41,459) -0.9 (40,215) -0.9
- - -------------------------------------------------------------------------------- -----------------------------------------
Cash and due from banks 173,094 3.8 180,769 4.0
- - -------------------------------------------------------------------------------- -----------------------------------------
Premises and equipment, net 102,518 2.3 102,982 2.3
- - -------------------------------------------------------------------------------- -----------------------------------------
Other assets 91,538 2.0 88,435 2.0
- - -------------------------------------------------------------------------------- -----------------------------------------
Total assets $4,507,023 100.0 % $4,488,294 100.0 %
================================================================================ =========================================
Liabilities and Shareholders' Equity
- - -------------------------------------------------------------------------------- -----------------------------------------
Interest-bearing liabilities:
- - -------------------------------------------------------------------------------- -----------------------------------------
N.O.W. and money market deposits $ 800,602 17.7 % $ 3,704 1.85 % $798,684 17.8 % $ 4,056 2.03 %
- - -------------------------------------------------------------------------------- -----------------------------------------
Savings deposits 441,395 9.8 2,366 2.14 437,181 9.7 2,660 2.43
- - -------------------------------------------------------------------------------- -----------------------------------------
Time deposits 2,090,005 46.4 22,845 4.37 2,121,063 47.3 24,177 4.56
- - -------------------------------------------------------------------------------- -----------------------------------------
Short-term borrowings 185,372 4.1 1,460 3.15 103,529 2.3 761 2.94
- - -------------------------------------------------------------------------------- -----------------------------------------
Long-term borrowings 53,244 1.2 1,354 10.17 53,150 1.1 1,352 10.17
- - -------------------------------------------------------------------------------- -----------------------------------------
Total interest-bearing liabilities 3,570,618 79.2 31,729 3.55 3,513,607 78.2 33,006 3.76
- - -------------------------------------------------------------------------------- -----------------------------------------
Demand deposits 506,277 11.2 541,159 12.1
- - -------------------------------------------------------------------------------- -----------------------------------------
Accrued expenses and other liabilities 58,284 1.3 74,707 1.7
- - -------------------------------------------------------------------------------- -----------------------------------------
Total liabilities 4,135,179 91.7 4,129,473 92.0
- - -------------------------------------------------------------------------------- -----------------------------------------
Shareholders' equity 371,844 8.3 358,821 8.0
- - -------------------------------------------------------------------------------- -----------------------------------------
Total liabilities and
shareholders' equity $4,507,023 100.0 % $4,488,294 100.0 %
================================================================================ =========================================
Taxable equivalent net interest
income and rate spread $45,334 3.82 % $46,391 3.88 %
- - --------------------------------------------------------------------------------- ----------------------------------------
Net yield on earning assets 4.34 % 4.45 %
================================================================================= ========================================
(1) Non-performing loans and mortgages held for sale are included in average
balances used to determine average rates.
(2) Includes time deposits with other banks and investment securities
available for sale.
Key Average Balances Ratios
- - --------------------------------------------------------------------------------- ----------------------------------------
Loans to assets 70.83 % 71.10 %
- - --------------------------------------------------------------------------------- ----------------------------------------
Earning assets to total assets 92.77 92.60
- - --------------------------------------------------------------------------------- ----------------------------------------
Reserve for loan losses to loans 1.30 1.26
- - --------------------------------------------------------------------------------- ----------------------------------------
Net loans charged off as a % of loans 0.01 0.10
- - --------------------------------------------------------------------------------- ----------------------------------------
Long-term borrowings to
shareholders equity 14.32 14.81
- - --------------------------------------------------------------------------------- ----------------------------------------
Shareholders' equity to total assets 8.25 7.99
- - --------------------------------------------------------------------------------- ----------------------------------------
</TABLE>
Table 10: Quarterly Average Balances, Mix, Interest, Average Rates and
Key Ratios
<TABLE>
<CAPTION>
Third Quarter - 1993 Second Quarter - 1993
------------------------------------------- ----------------------------------------
Average Average Average Average
(dollars in thousands) Balance Mix Interest Rate Balance Mix Interest Rate
- - --------------------------------------------------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
- - --------------------------------------------------------------------------------- -----------------------------------------
Earning Assets:
- - --------------------------------------------------------------------------------- -----------------------------------------
Loans, net of unearned discount (1) $3,123,147 71.6 % $65,667 8.41 % $3,086,578 71.7 % $65,643 8.51 %
- - --------------------------------------------------------------------------------- -----------------------------------------
Funds sold 8,329 0.2 39 1.88 2,137 0.1 12 2.25
- - --------------------------------------------------------------------------------- -----------------------------------------
Investment securities
- - --------------------------------------------------------------------------------- -----------------------------------------
Taxable (2) 714,578 16.4 9,328 5.22 718,727 16.7 9,620 5.35
- - --------------------------------------------------------------------------------- -----------------------------------------
Nontaxable 188,948 4.3 4,071 8.62 178,550 4.1 3,633 8.14
- - --------------------------------------------------------------------------------- -----------------------------------------
Total investment securities 903,526 20.7 13,399 5.93 897,277 20.8 13,253 5.91
- - --------------------------------------------------------------------------------- -----------------------------------------
Total earning assets 4,035,002 92.5 79,105 7.84 3,985,992 92.6 78,908 7.92
- - --------------------------------------------------------------------------------- -----------------------------------------
Reserve for loan losses (40,449) -0.9 (39,946) -0.9
- - --------------------------------------------------------------------------------- -----------------------------------------
Cash and due from banks 176,398 4.1 166,796 3.8
- - --------------------------------------------------------------------------------- -----------------------------------------
Premises and equipment, net 102,109 2.3 103,613 2.4
- - --------------------------------------------------------------------------------- -----------------------------------------
Other assets 88,076 2.0 90,309 2.1
- - --------------------------------------------------------------------------------- -----------------------------------------
Total assets $4,361,136 100.0 % $4,306,764 100.0 %
================================================================================= =========================================
Liabilities and Shareholders' Equity
- - --------------------------------------------------------------------------------- -----------------------------------------
Interest-bearing liabilities:
- - --------------------------------------------------------------------------------- -----------------------------------------
N.O.W. and money market deposits $ 774,879 17.8 % $ 4,103 2.12 % $ 757,764 17.6 % $ 4,131 2.18 %
- - --------------------------------------------------------------------------------- -----------------------------------------
Savings deposits 414,966 9.5 3,085 2.97 455,898 10.6 2,602 2.28
- - --------------------------------------------------------------------------------- -----------------------------------------
Time deposits 2,064,502 47.3 23,780 4.61 2,038,633 47.3 24,803 4.87
- - --------------------------------------------------------------------------------- -----------------------------------------
Short-term borrowings 133,059 3.1 920 2.76 102,948 2.4 711 2.76
- - --------------------------------------------------------------------------------- -----------------------------------------
Long-term borrowings 63,256 1.4 1,811 11.45 68,330 1.6 1,780 10.42
- - --------------------------------------------------------------------------------- -----------------------------------------
Total interest-bearing liabilities 3,450,662 79.1 33,699 3.91 3,423,573 79.5 34,027 3.98
- - --------------------------------------------------------------------------------- -----------------------------------------
Demand deposits 501,348 11.5 473,705 11.0
- - --------------------------------------------------------------------------------- -----------------------------------------
Accrued expenses and other liabilities 61,931 1.4 70,186 1.6
- - --------------------------------------------------------------------------------- -----------------------------------------
Total liabilities 4,013,941 92.0 3,967,464 92.1
- - --------------------------------------------------------------------------------- -----------------------------------------
Shareholders' equity 347,195 8.0 339,300 7.9
- - --------------------------------------------------------------------------------- -----------------------------------------
Total liabilities and
shareholders' equity $4,361,136 100.0 % $4,306,764 100.0 %
================================================================================= =========================================
Taxable equivalent net interest
income and rate spread $45,406 3.93 % $44,881 3.94 %
- - --------------------------------------------------------------------------------- -----------------------------------------
Net yield on earning assets 4.50 % 4.50 %
- - --------------------------------------------------------------------------------- -----------------------------------------
(1) Non-performing loans and mortgages held for sale are included in average
balances used to determine average rates.
(2) Includes time deposits with other banks and investment securities
available for sale.
Key Average Balances Ratios
- - --------------------------------------------------------------------------------- -----------------------------------------
Loans to assets 71.61 % 71.67 %
- - --------------------------------------------------------------------------------- -----------------------------------------
Earning assets to total assets 92.52 92.55
- - --------------------------------------------------------------------------------- -----------------------------------------
Reserve for loan losses to loans 1.30 1.29
- - --------------------------------------------------------------------------------- -----------------------------------------
Net loans charged off as a % of loans 0.06 0.05
- - --------------------------------------------------------------------------------- -----------------------------------------
Long-term borrowings to
shareholders equity 18.22 20.14
- - --------------------------------------------------------------------------------- -----------------------------------------
Shareholders' equity to total assets 7.96 7.87
- - --------------------------------------------------------------------------------- -----------------------------------------
</TABLE>
Table 10: Quarterly Average Balances, Mix, Interest, Average Rates and
Key Ratios
<TABLE>
<CAPTION>
First Quarter - 1993
-------------------------------------------
Average Average
(dollars in thousands) Balance Mix Interest Rate
- - ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
- - ---------------------------------------------------------------------------------
Earning Assets:
- - ---------------------------------------------------------------------------------
Loans, net of unearned discount (1) $3,046,032 71.1 % $64,984 8.53 %
- - ---------------------------------------------------------------------------------
Funds sold 8,827 0.2 54 2.45
- - ---------------------------------------------------------------------------------
Investment securities
- - ---------------------------------------------------------------------------------
Taxable (2) 725,071 16.9 10,108 5.58
- - ---------------------------------------------------------------------------------
Nontaxable 183,930 4.3 3,807 8.28
- - ---------------------------------------------------------------------------------
Total investment securities 909,001 21.2 13,915 6.12
- - ---------------------------------------------------------------------------------
Total earning assets 3,963,860 92.5 78,953 7.97
- - ---------------------------------------------------------------------------------
Reserve for loan losses (38,798) -0.9
- - ---------------------------------------------------------------------------------
Cash and due from banks 164,480 3.9
- - ---------------------------------------------------------------------------------
Premises and equipment, net 103,643 2.4
- - ---------------------------------------------------------------------------------
Other assets 90,425 2.1
- - ---------------------------------------------------------------------------------
Total assets $4,283,610 100.0 %
=================================================================================
Liabilities and Shareholders' Equity
- - ---------------------------------------------------------------------------------
Interest-bearing liabilities:
- - ---------------------------------------------------------------------------------
N.O.W. and money market deposits $773,698 18.1 % $4,357 2.25 %
- - ---------------------------------------------------------------------------------
Savings deposits 338,054 7.9 1,971 2.33
- - ---------------------------------------------------------------------------------
Time deposits 2,153,459 50.3 26,302 4.89
- - ---------------------------------------------------------------------------------
Short-term borrowings 101,136 2.3 705 2.79
- - ---------------------------------------------------------------------------------
Long-term borrowings 68,340 1.6 1,780 10.42
- - ---------------------------------------------------------------------------------
Total interest-bearing liabilities 3,434,687 80.2 35,115 4.09
- - ---------------------------------------------------------------------------------
Demand deposits 452,717 10.6
- - ---------------------------------------------------------------------------------
Accrued expenses and other liabilities 64,907 1.5
- - ---------------------------------------------------------------------------------
Total liabilities 3,952,311 92.3
- - ---------------------------------------------------------------------------------
Shareholders' equity 331,299 7.7
- - ---------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $4,283,610 100.0 %
=================================================================================
Taxable equivalent net interest
income and rate spread $43,838 3.88 %
- - ---------------------------------------------------------------------------------
Net yield on earning assets 4.42 %
- - ---------------------------------------------------------------------------------
(1) Non-performing loans and mortgages held for sale are included in average
balances used to determine average rates.
(2) Includes time deposits with other banks and investment securities
available for sale.
Key Average Balances Ratios
- - ---------------------------------------------------------------------------------
Loans to assets 71.11 %
- - ---------------------------------------------------------------------------------
Earning assets to total assets 92.54
- - ---------------------------------------------------------------------------------
Reserve for loan losses to loans 1.27
- - ---------------------------------------------------------------------------------
Net loans charged off as a % of loans 0.04
- - ---------------------------------------------------------------------------------
Long-term borrowings to
shareholders equity 20.63
- - ---------------------------------------------------------------------------------
Shareholders' equity to total assets 7.73
- - ---------------------------------------------------------------------------------
</TABLE>
<PAGE>
PART II-OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
As previously reported, the Agreement and Plan of Merger
between Valley Bancorporation ("Valley") and Marshall & Ilsley
Corporation ("M&I") dated as of September 19, 1993 (the "Merger
Agreement") was approved at the special meeting of Valley
shareholders held on February 15, 1994. Of the 20,721,290
outstanding shares of Valley Common Stock entitled to vote on the
Merger Agreement, the Inspector of Election certified that
16,635,928 shares, or approximately 80.3%, were voted for such
approval, 612,406 shares were voted against, and there were
147,365 abstentions. There were no broker non-votes.
The Merger Agreement provides for the combination of the two
companies through a merger of Valley with and into M&I (the
"Merger"). The Merger Agreement was also approved at a special
meeting of M&I shareholders held on February 15, 1994.
On April 11, 1994, the Board of Governors of the Federal
Reserve System approved the Merger. The Merger is presently
expected to be consummated on May 31, 1994.
See Note 3 of Notes to Consolidated Financial Statements in
Item 1 of Part I of this report.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
See Exhibit Index following the Signature page in this
report, which is incorporated herein by reference.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter
for which this report is filed.
<PAGE>
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.
VALLEY BANCORPORATION
----------------------
Date May 11, 1994 By /s/ Peter M. Platten, III
----------------- -------------------------
Peter M. Platten, III
President and
Chief Executive Officer
Date May 11, 1994 By /s/ Gary A. Lichtenberg
----------------- -------------------------
Gary A. Lichtenberg
Senior Vice President/
Chief Financial Officer
and Secretary
<PAGE>
VALLEY BANCORPORATION
(the "Registrant")
(Commission File No. 0-2453)
*****
EXHIBIT INDEX
TO
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1994
Incorporated Sequential
Exhibit Herein By Filed Page
Number Description Reference To Herewith No.
4.3 (d) March 11, 1994 letter X
agreement extending
"Revolving Termination
Date" under Amended
and Restated Credit
Agreement, dated as of
September 30, 1989,
between Registrant and
Continental Bank, N.A.
to June 30, 1994
11.1 Computation of Net X
Income Per Common Share
<PAGE>
Exhibit 4.3(d)
(3/31/94 10-Q)
[Continental Bank Letterhead]
231 South LaSalle Street
Chicago, Illinois 60697
312 828 4682
FAX: 312 967 6982
Continental Bank
Jennings F. Werner
Vice President
Financial Institutions
March 11, 1994
Mr. Gary A. Lichtenberg
SVP & CFO
Valley Bancorporation
100 W. Lawrence Street
Appleton, WI 54912
RE: Credit Agreement dated September 30, 1989 between VALLEY BANCORPORATION
and CONTINENTAL BANK, N.A.
Dear Gary:
Pursuant to the terms of the above captioned Credit Agreement, the undersigned
hereby approves and agrees to an extension of the "REVOLVING TERMINATION DATE"
from March 31, 1994, to June 30, 1994.
Please acknowledge your Agreement of the new "REVOLVING TERMINATION DATE" by
signing and returning a copy of this letter.
Regards,
/s/ Jennings F. Werner
APPROVED & AGREED
----------------------------
BY: /s/ GARY A. LICHTENBERG
----------------------------
PRINT: GARY A. LICHTENBERG
----------------------------
TITLE: SVP - CFO
----------------------------
DATE: 3/15/94
----------------------------
<PAGE>
Exhibit 11.1
(3/31/94 10-Q)
VALLEY BANCORPORATION
COMPUTATION OF NET INCOME PER COMMON SHARE
Three Months Ended
March 31,
--------------------------
1994 1993
--------------------------
PRIMARY:
Weighted average common shares
outstanding during each period 20,739,928 20,160,942
Incremental shares relating to:
Dilutive stock options outstanding
at end of each period (1) 287,869 176,487
Impact of 1993 3:2 stock split 0 88,243
--------------------------
21,027,797 20,425,672
--------------------------
FULLY DILUTED:
Weighted average common shares
outstanding during each period 20,739,928 20,160,942
Incremental shares relating to:
Dilutive stock options outstanding
at end of each period (2) 288,999 251,305
Impact of 1993 3:2 stock split 0 125,653
--------------------------
21,028,927 20,537,900
--------------------------
NET INCOME FOR EACH PERIOD $10,339,000 $10,893,654
PER COMMON SHARE AMOUNTS:
Primary $0.49 $0.53
Fully diluted $0.49 $0.53
As presented in statement of income
based on weighted average common
shares outstanding $0.50 $0.54
% DILUTIVE (PRIMARY) 1.3690% 1.2961%
% DILUTIVE (FULLY DILUTIVE) 1.3743% 1.8354%
Notes:
(1) Based on treasury stock method using average market price.
(2) Based on treasury stock method using period-end market price, if higher
than average market price.
_________________________
The effect of stock options on primary earnings per share and on fully
diluted earnings per share for each of the years is less than 3%, and
therefore, is not considered materially dilutive in computing earnings per
share as presented in the Consolidated Statements of Income.
