SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995 Commission file no. Q-15729
PREMIER BANKSHARES CORPORATION
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1377250
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
29 College Drive
P. O. Box 1199
Bluefield, Virginia 24605-1199
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(540) 322-2242
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - $2 Par Value
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates of
the registrant based on the average bid and asked price as of March 11,
1996:
Common Stock, $2 par value - $105,794,266
The number of shares outstanding of the issuer's classes of common stock,
as of March 11, 1996:
Common Stock, $2 par value - 6,650,083 Shares
DOCUMENTS INCORPORATED BY REFERENCE:
Registrant's proxy statement for the annual shareholders meeting to
be held April 11, 1996 is incorporated by reference into Part III, Items
10, 11, 12 and 13.
PREMIER BANKSHARES CORPORATION
1995 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
PAGE
Item 1. Business 3
Item 2. Properties 5
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
Executive Officers of the Registrant 7
PART II
Item 5. Market for the Registrant's Common Stock
and Related Security Holder Matters 8
Item 6. Selected Financial Data 8
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation 9
Item 8. Financial Statements and Supplementary Data 32
Item 9. Disagreements on Accounting and Financial Disclosure 59
PART III
Item 10. Directors and Executive Officers of the Registrant 64
Item 11. Executive Compensation 64
Item 12. Security Ownership of Certain Beneficial Owners and
Management 64
Item 13. Certain Relationships and Related Transactions 64
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 65
Signatures 66
PART I
ITEM 1. BUSINESS
Premier Bankshares Corporation ("Premier") was incorporated in May 1986
to operate as a bank holding company and acquired its first two bank
subsidiaries, Bank of Speedwell, Inc. ("Speedwell"), and Tazewell National
Bank ("TNB") in November 1986. Peoples Bank, Inc., ("Peoples") was
acquired in July 1987 and Richlands National Bank ("RNB") in August 1987.
Shawsville Bancorp, Inc., was merged into Premier on September 29, 1990,
which added another subsidiary, Bank of Shawsville, Inc. ("Shawsville").
Bank of Speedwell and Bank of Shawsville were merged as of October 9, 1991,
under the name Premier Bank, Inc. ("PBI"). Dickenson-Buchanan Bank ("D-B")
was acquired effective December 31, 1994, adding three additional branches
in Buchanan and Dickenson counties.
Beginning in January 1995, D-B's name was changed to Premier Bank-North,
Inc. , Peoples' name was changed to Premier Bank-Central, Inc., RNB's was
changed to Premier Bank-Richlands, N.A., and TNB's name was changed to
Premier Bank, N. A. Six branches were acquired in May and another in
July, 1995 from NationsBank and absorbed into Premier Bank-North, Inc.,
Premier Bank-Central, Inc. and Premier Bank, Inc. In July 1995, Premier
Bank-Richlands. N. A. was merged into Premier Bank, N.A. Also, during mid-
1995, the three existing state chartered banks were converted to national
bank charters. Premier Bank-North, Inc. became Premier Bank-North, N.A.,
Premier Bank-Central, Inc. became Premier Bank-Central, N. A. and Premier
Bank, Inc. became Premier Bank-South, N.A. In November 1995, Premier Bank-
North, N.A. was merged into Premier Bank-Central, N.A., reducing the number
of banking subsidiaries to three: Premier Bank-South, N.A. ("Wytheville"),
Premier Bank, N.A. ("Tazewell"), and Premier Bank-Central, N.A.
("Honaker").
Premier's subsidiary banks offer a full range of banking services,
including commercial, installment and real estate loans, as well as
checking, savings, individual retirement accounts and certificates of
deposit. The trust services previously offered at each bank through the
administrative support of the trust department of TNB was consolidated at
the end of 1994 through the formation of Premier Trust Company, a wholly-
owned, non-bank subsidiary. Credit card operations and secondary mortgage
services are housed at the parent company level but still technically
licensed and operating under Premier Bank-South, N.A.
Premier's philosophy allows its subsidiary banks to exercise a degree of
independence under their respective boards of directors and officers,
subject to accountability for financial condition and operating results.
Premier believes that this preserves community contact and customer loyalty
without sacrificing the centralized direction and operating efficiencies of
a larger holding company. The principal role of Premier is to assist
subsidiary banks with burdensome regulatory and administrative tasks, to
coordinate activities, ensure common direction, and to supervise overall
strategic and financial plans. Premier assists its bank subsidiaries in
management of their investment and loan portfolios and coordinates pension,
hospitalization, and other benefit plans for employees. Premier also
performs item-processing and back-room operations for the subsidiary banks,
assists in developing and coordinating auditing and marketing programs and
performs certain accounting and planning functions for all subsidiaries.
Premier Bank Services Corporation, a wholly-owned Virginia corporation,
was chartered February 16, 1989 to process certain consumer loans for
affiliate banks. Its Articles of Incorporation were amended in 1990 to
allow it to sell insurance products. At December 31, 1995, this
corporation is inactive.
Shawsville Bancorp, Inc., had prevously formed a wholly-owned nonbank
subsidiary, Professional Financial Services of Virginia, Inc., on March 2,
1987, to render accounting and tax return preparation services..
Professional Financial Services of Virginia, Inc. is presently inactive.
Competition
Premier and its subsidiary banks face strong competition in their
respective market areas from other commercial banks and savings
institutions. In addition, they face competition for deposits from money
market funds and similar investment vehicles. Certain of its competitors
are branches of much larger statewide banks; others are subsidiaries of
much larger bank holding companies.
Supervision and Regulation
Premier is a bank holding company registered under the Bank Holding
Company Act of 1956, as amended ("the Act"). As a bank holding company,
Premier is required to file with the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board" or Board") periodic reports and
such additional information as the Board may require pursuant to the Act.
The Board also reviews and acts on all applications for establishing
nonbank subsidiaries. The act requires approval by the Board prior to any
acquisition by Premier of substantially all the assets or ownership or
control of any bank, if after such acquisition, it would own or control,
directly or indirectly, more that five (5%) percent of the voting shares of
such bank. It also prohibits the acquisition by Premier of the stock or
substantially all the assets of any bank located in a state other than
Virginia unless the statutory law of the state in which such bank is
located specifically authorizes such acquisition. Virginia and certain
neighboring states, including West Virginia (effective January 1, 1988)
Kentucky and Tennessee, have reciprocal agreements regarding limited
interstate banking activities.
The Act prohibits Premier, with certain exceptions, from acquiring
direct or indirect ownership or control of more than five percent of the
voting shares of any company which is not a bank or bank holding company,
and from engaging directly or indirectly in any activity other than that of
banking or of managing or controlling banks. One of the principal
exceptions to this prohibition is for activities which the Federal Reserve
Board determines to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. In making such
determination, the Board is required to weigh the expected benefits to the
public (such as greater convenience, increased competition or gains in
efficiency) against the risks of possible adverse effects (such as undue
concentration of resources, decreased or unfair competition, conflicts of
interest or unsound banking practices). The Board has adopted regulations
which specify certain permitted activities, subject to Board approval in
individual cases. No such activities are now contemplated by management of
Premier which are not already being engaged in by the Banks.
The primary federal and state banking agencies responsible for
regulating the holding company and its subsidiaries are: Premier
Bankshares Corporation and Premier Trust Company, the Federal Reserve Bank
of Richmond and the Virginia Bureau of Financial Institutions,
respectively; Premier Bank-South, N.A., Premier Bank, N.A. and Premier
Bank-Central, N.A., the Office of the Comptroller of the Currency, solely.
Section 131 of the FDIC Improvement Act of 1991 (FDICIA) amends the
Federal Deposit Insurance Act by adding a new Section 38 that restricts or
prohibits certain activities and requires an insured institution to submit
a capital restoration plan when it becomes undercapitalized. None of the
above institutions have been required to submit a capital restoration plan,
all are considered adequately or well capitalized. The FDIC's final rule,
effective December 19, 1992 applies primarily to state-chartered banks and
insured U.S. branches of foreign banks that are supervised by the FDIC, as
well as to directors and senior executive officers of those institutions.
Portions of the FDIC rule also apply to all insured depository institutions
that are deemed to be "critically undercapitalized." The Federal Reserve
Board, the Office of the Comptroller of the Currency and the Office of
Thrift Supervision have adopted parallel rules for the institutions they
supervise.
The final rule also amends Part 308 of the FDIC's regulations by
establishing procedures for "downgrading" an institution to a lower
category. For example, the restrictions for undercapitalized institutions
may be applied to an institution that meets minimum capital requirements
but otherwise is in a less-than-satisfactory condition, such as one that
has significant asset quality problems. The final rule also includes
procedures for issuing and contesting "prompt corrective action"
directives. Such directives include those from the FDIC requiring an
institution to dismiss directors and senior executive officers.
Government Monetary Policies and Economic Controls
The earnings growth of the Registrant and its subsidiaries are affected
by the monetary policies of the Federal Reserve System. An important
function of the Federal Reserve System is to regulate the national supply
of credit in order to deal with economic conditions. The instruments
employed by the Federal Reserve are open market operations of U. S.
Government securities, changes in the discount rate on member bank
borrowings, and changes in reserve requirements on bank deposits. These
policies influence in various ways the level of investments, loans and
deposits and rates earned on earning assets and interest rates paid on
liabilities.
Financial Information About Industry Segments
The information required by this item is included in the Consolidated
Financial Statements included elsewhere in this filing.
Financial Information About Domestic Operations
The information required by this item is included in the Management's
Discussion and Analysis of Financial Condition and Results of Operations
included elsewhere in this filing.
ITEM 2. PROPERTIES
Premier purchased its current headquarters building, located in
Bluefield, Virginia, in October, 1994. Premier Trust Company shares the
building with Premier.
Tazewell owns its main office at Hillsboro Drive and Market Street, and
the branch offices on West Main Street and in the Riverjack section,
Tazewell, Virginia, and branch offices in the Towns of Bluefield and
Pocahontas, Virginia. Since its merger with RNB, it now owns and operates
additional branches in the Town of Richlands, Virginia, the unincorporated
village of Raven, the Town of Cedar Bluff, Virginia and in the Claypool
Hill area of Cedar Bluff, Virginia.
Wytheville owns the historic George Wythe Hotel building in the town of
Wytheville, remodeled for bank use in 1977. It owns and operates eleven
other bank premises including a second branch in Wytheville, on East Main
Street, and in the towns of Dublin, Fort Chiswell, Fries, Independence,
Pulaski, Rural Retreat, Shawsville and Speedwell. It also has branches in
the Cities of Galax and Salem, and owns an unimproved lot in the City of
Roanoke. The unimproved lot was bought by Bank of Shawsville, Inc., into
which Bank of Speedwell, Inc., was merged (currently Premier Bank-South,
N.A.). Bank of Shawsville, Inc., bought the Roanoke lot for a branch
location, but no application for such use has been made.
Honaker owns its main office in the Town of Honaker and owns and
operates branch locations in the towns of Big Stone Gap, Castlewood,
Cleveland, Clintwood, Coeburn, Davenport, Dungannon, Gate City, Haysi,
Lebanon , Nickelsville and Pound and the unincorporated village of
Duffield.
Premier leases part of its headquarters building to the former owner.
This lease is expected to terminate in 1997. Each of the three bank
subsidiaries lease office space to others. The rental income received,
however, is not considered material to the subsidiaries or Premier.
ITEM 3. LEGAL PROCEEDINGS
From time to time, Premier or its subsidiary banks are parties to
lawsuits arising from the normal course of business, in which claims for
money damages are asserted. Management, after consultation with legal
counsel handling these claims, believe it has valid defenses to each, and
is of the opinion that the possibility of results having a materially
adverse effect on Premier's financial condition is remote. In each pending
instance in which a claim has been asserted against Premier or a
subsidiary, the alternative of succumbing to an unfounded claim is deemed
unacceptable by management. In each such instance there are facts
supporting Premier's or its subsidiary's positions. Premier intends to
defend its position in these cases and pursue its legal remedies to the
fullest extent possible.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following list sets forth Premier's executive officers, who serve until
the Board of Directors meeting following the next annual meeting of
stockholders. There are no family relationships among these officers, nor
any arrangements or understanding between any officer and other person
pursuant to which the officer was selected.
Employed by
Premier or
Name Age Position Affiliate Since
James R. Wheeling 40 President, CEO and 1990
Director of Premier
J. Robert Buchanan 45 Vice President and 1991
Treasurer of Premier
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
Since August 1987, Premier's common stock has been traded on The Nasdaq
Stock Market under the symbol PBKC. Transfers thereof occur from time to
time, but management has no direct access to the prices realized in trades
of such stock.
Per share data is listed below:
<TABLE>
Net Cash Book Price * Sales
1995 Income** Dividends** Value** High Low Volume
<S> <C> <C> <C> <C> <C> <C>
1st Quarter $ 0.33 $ 0.105 $ 9.61 $ 14.25 $ 12.38 68,173
2nd Quarter 0.30 0.105 10.19 14.06 11.81 260,706
3rd Quarter 0.37 0.105 10.47 14.63 12.75 70,857
4th Quarter 0.39 0.115 11.01 15.38 13.13 132,103
Year $ 1.39 $ 0.430 $ 11.01 $ 15.38 $ 11.81 531,839
1994
1st Quarter $ 0.39 $ 0.08 $ 9.02 $ 15.38 $ 12.56 334,598
2nd Quarter 0.34 0.08 8.98 14.25 12.38 49,348
3rd Quarter 0.33 0.09 9.09 14.25 12.75 101,059
4th Quarter 0.30 0.11 9.07 14.25 12.38 30,218
Year $ 1.36 $ 0.36 $ 9.07 $ 15.38 $ 13.38 515,223
*Adjusted to reflect the four for three stock split declared on December
14, 1995.
</TABLE>
The holders of common stock of Premier will be entitled to receive such
dividends as may be declared by its Board of Directors. Although its Board
intends to continue as a minimum the current level of dividend payments,
the ability of Premier to pay such dividends in the future will depend upon
the earnings and financial condition of Premier and its affiliate banks and
is subject to the restrictions described in Note 10 to the Notes to
Consolidated Financial Statements.
ITEM 6. SELECTED FINANCIAL DATA
The Consolidated Selected Financial Data for the five years ended
December 31, 1995 appears as Table I to the Management's Discussion and
Analysis of Financial Condition and Results of Operations.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION AND SUMMARY
The information in this section should be read in conjunction with
the Consolidated Financial Statements and the accompanying Notes to
Consolidated Financial Statements included elsewhere. References to
average assets and liabilities and changes thereto represent daily
averages for the periods indicated.
Summarized in Table I are selected key measures of financial position
and results of operations.
MERGERS
Effective October 9, 1991, Bank of Speedwell and Bank of Shawsville
were merged using the pooling of interests method of accounting creating a
new affiliate, Premier Bank, Inc., headquartered in Wytheville, Virginia
(Premier Bank, Inc. converted to a national charter in 1995, changing its
name to Premier Bank-South, N.A.). Effective July 18, 1995, Premier Bank-
Richlands, N. A. was merged into Premier Bank, N. A. with Premier Bank,
N.A. (Tazewell) the survivor. Premier Bank-North, N.A. was merged into
Premier Bank-Central N.A. effective November 18, 1995 with Premier Central-
N.A. (Honaker) the survivor. The 1995 mergers were also accounted for
using the pooling of interests method.
. Effective May 26, 1995, Premier acquired six branches from NationsBank,
and a seventh effective July 6, 1995. These were accounted for using the
purchase method of accounting.
AFFILIATION
Effective December 31, 1994, Dickenson-Buchanan Bank was acquired in
an exchange of stock transaction in which 582,678 shares of Premier were
issued for all of the outstanding stock of Dickenson-Buchanan Bank. The
transaction was accounted for as a pooling-of-interest and all financial
data has been restated accordingly.
<TABLE>
TABLE I
PREMIER BANKSHARES CORPORATION AND AFFILIATES
SELECTED FINANCIAL INFORMATION: FIVE YEAR SUMMARY
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
1995 1994 1993 1992 1991
SUMMARY OF OPERATIONS:
<S> <C> <C> <C> <C> <C>
Interest Income $ 53,643 $ 47,892 $44,513 $ 42,699 $ 43,701
Interest Expense 25,023 20,307 19,164 19,533 24,563
Net Interest Income 28,620 27,585 25,349 23,166 19,138
Provision for Loan Losses 315 1,144 857 1,151 1,396
Other Income 4,455 4,681 5,033 4,350 3,710
Other Expense 20,582 19,092 17,118 15,150 13,808
Applicable Income Taxes 2,967 3,024 2,889 2,955 1,430
Net Income 9,211 9,006 9,519 8,260 6,214
PER SHARE DATA:
Net Income $ 1.39 $ 1.35 $ 1.43 $ 1.25 $ 0.93
Cash Dividends Declared 0.43 0.36 0.32 0.28 0.24
Book Value 11.01 9.07 8.99 7.88 6.92
AVERAGE BALANCE SHEET SUMMARY:
Loans, Net $ 380,767 $ 357,235 $318,764 $ 289,056 274,323
Securities 239,105 232,898 202,745 161,484 133,395
Total Assets 711,968 651,807 596,069 506,340 461,235
Deposits 626,094 567,711 522,796 444,422 405,698
Capital 64,910 60,135 56,443 48,534 43,415
END OF PERIOD BALANCE SHEET SUMMARY:
Loans, Net $ 400,569 $ 360,860 $332,725 $ 300,898 277,226
Securities 267,531 231,448 230,076 189,761 143,821
Total Assets 762,035 655,193 640,590 546,676 486,921
Deposits 661,913 569,410 560,744 480,758 425,120
Capital 73,223 60,293 59,769 52,421 46,046
SELECTED RATIOS:
Average Equity to Average
Assets 9.12 % 9.23 % 9.47 % 9.59 % 9.41 %
Return on Average Assets 1.29 1.38 1.60 1.63 1.35
Return on Average Equity 14.19 14.98 16.86 17.02 14.31
Cash Dividends Declared as
Percent of Net Income 31.42 26.39 22.61 22.35 25.49
</TABLE>
PREMIER BANKSHARES CORPORATION AND AFFILIATES
EARNINGS PERFORMANCE
Taking into account the various costs associated with the restructuring,
Premier closed 1995 at $9,211,000, or $1.39 per share compared to 1994
earnings of $9,006,000 ($1.35 per share) and $9,519,000 ($1.43 per share)
in 1993.
Average shares outstanding were 6,650,083 in 1995, 1994 and 1993.
Accounting Changes - 1993 earnings were greatly effected by security gains
which were mostly due to the restructuring of the investment portfolio in
anticipation of the implementaion of FASB 115. Net security gains were
$1,222,000 in 1993 and $642,000 in 1994. Security losses of $158,000 were
recognized in 1995. In addition, a remaining net loss carryforward of
$439,000 (resulting from the merger of Bank of Speedwell and Bank of
Shawsville in 1991) was required to be accelerated and recognized in 1993
following implementation of FASB 109.
PREMIER BANKSHARES CORPORATION AND AFFILIATES
NET INTEREST INCOME
Management has continued to monitor closely the asset/liability
position of the company. Syestems were implemented to control costs of
funds, while greater emphasis was placed on improving yields. Net interest
income was impacted during 1995 by the effective utilization of
approximately $90 million in cash (net settlement of the branches
acquisition), such funds being first placed in short-term investments and
subsequently moved to higher-yielding investments and loans. The
recognition of interest on the related deposits of approximately $116
million was immediate.
Additional earning asset volume, particularly in the loan area
contributed to an increase in net interest income of $1,035,000, or
3.75% in 1995. On a taxable equivalent basis, the average rate paid on
interest-bearing liabilities increased 51 basis points to 4.39%, while
the taxable equivalent yield on average interest-earning assets increased
24 basis points to 8.39% in 1995. As a result, the net interest spread
was 4.00% with a net interest margin of 4.62% in 1995 compared to 4.27%
and 4.84%, respectively, in 1994. Total average loans increased 6.51% ,
total average securities increased 2.67%, and average federal funds sold
and deposits increased 104.76% with total average earning assets increasing to
$660,343,000 in 1995.
Net interest income increased $2,236,000, or 8.82% in 1994; on a
taxable equivalent basis, $2,573,000 with interest-bearing liabilities
decresed by 13 basis points to 3.88%, while the yield on average earning
assets declined only 9 basis points to 8.15% in 1994. As a result, the
taxable equivalent net yield on earning assets remained steady at 4.84%
compared to 4.82% in 1993 despite a rising interest rate environment and
Premier's liability-sensitive position. Total average loans increased
12.22% and average securities increased 14.49% in 1994. The average
volume of earning assets increased 9.21% to $612,794,000, while the
yield decreased, as mentioned earlier, only 9 basis points to 9.21%.
The average volume of interest bearing liabilities increased 9.30% to
$522,848,000. The average rate paid on these liabilities decreased 13
basis points to 3.88% in 1994.
Forgone interest on non-performing loans amounted to $136,000 in
1995, $194,000 in 1994, and $262,000 in 1993.
Net interest income for the years 1993 through 1995 is shown in
Table II. The presentation appears on a "taxable equivalent" basis to
adjust for the tax-exempt status of income earned on certain loans and
investments.
Table III summarizes the effect on net interest income of changes in
interest rates earned and paid, as well as changes in volume.
<TABLE>
TABLE II
PREMIER BANKSHARES CORPORATION AND AFFILIATES
NET INTEREST INCOME
(IN THOUSANDS OF DOLLARS)
Increase Increase
(Decrease) (Decrease)
1995 1994
1995 1994 1993 Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income from
Loans:
Demand and Time** $ 6,133 $ 4,519 $ 4,329 1,614 35.72 % $ 190 4.39 %
Real Estate 21,447 19,307 17,826 2,140 11.08 1,481 8.31
Installments 10,231 9,018 8,816 1,213 13.45 202 2.29
Total Loan Income*** $ 37,811 $ 32,844 $30,971 4,967 15.12 % $1,873 6.05 %
Interest Income from
Securities:
Taxable 9,908 10,379 9,277 (471) (4.54) 1,102 11.88
Non-taxable* 5,962 5,947 4,971 15 .03 976 19.63
Total Security $ 15,870 $ 16,326 $14,248 (456) (2.79) % $2,078 14.58%
Income*
Federal Funds Sold
and Deposits 2,017 774 1,009 1,243 160.59 (235) (23.29)
Total Interest Income $ 55,698 $ 49,944 $46,228 5,754 11.52 % $3,716 8.04%
Interest Expense:
Demand Deposits 2,061 1,807 1,691 254 14.06 116 6.86
Savings 4,705 5,851 5,559 (1,146)(19.59) 292 5.25
Large Denomination
Certificates 2,801 2,108 2,124 693 32.87 (16) (0.75)
Other Time Deposits 14,379 9,870 9,473 4,509 45.68 397 4.19
Borrowed Funds 1,077 671 317 406 60.51 354 111.67
Total InterestExpense $ 25,023 $ 20,307 $19,164 4,716 23.22 % $1,143 5.96 %
Net Interest Income* $ 30,675 $ 29,637 $27,064 1,038 3.50 % $2,573 9.51 %
*Fully Taxable Equivalent - Using the Statutory Rate of 34%.
**Partially Taxable Equivalent - Using the Statutory Rate of 34%.
***Nonaccruing loans are included in the daily average loan amounts
outstanding.
</TABLE>
<TABLE>
TABLE III
PREMIER BANKSHARES CORPORATION AND AFFILIATES
RATE/VOLUME ANALYSIS OF CHANGES IN INTEREST
INCOME AND EXPENSE***
(IN THOUSANDS OF DOLLARS)
1995 vs 1994 1994 vs 1993
Increase (Decrease) In Increase (Decrease) In
Net Interest Income Net Interest Income
Volume Rate Total Volume Rate Total
<S> <C> <C> <C> <C> <C> <C>
Loans:
Demand and Time** $ 823 $ 791 $ 1,614 $ (410) $ 600 $ 190
Real Estate 1,077 1,063 2,140 2,543 (1,062) 1,481
Installments 586 627 1,213 1,883 (1,681) 202
Total Loans $ 2,486 $ 2,481 $ 4,967 $ 4,016 $ (2,143) $ 1,873
Securities:
Taxable 382 (853) (471) 772 330 1,102
Non-taxable* 30 (15) 15 1,503 (527) 976
Total Securities $ 412 $ (868) $(456) $ 2,275 $ (197) $ 2,078
Federal Funds Sold
and Deposits 812 431 1,243 (510) 275 (235)
Total InterestIncome* $ 3,710 $ 2,044 $5,754 $ 5,781 $(2,065) $ 3,716
Deposits:
Interest-bearing
Checking $ 239 $ 15 254 $ 387 $ (271) $ 116
Savings Deposits (578) (568) (1,146) 496 (204) 292
Large Denomination
Certificates 370 323 693 (176) 160 (16)
Other Time Deposits 2,007 2,502 4,509 685 (288) 397
Total Deposits $ 2,038 $ 2,272 $4,310 $ 1,392 $ (603) $ 789
Borrowed Funds 1 405 406 197 157 354
Total Interest
Expense $ 2,039 $ 2,677 $4,716 $ 1,589 $ (446) $ 1,143
Net InterestIncome* $ 1,671 $ (633) $1,038 $ 4,192 $ 1,619 $ 2,573
*Fully Taxable Equivalent - Using the Statutory Rate of 34%.
**Partially Taxable Equivalent - Using the Statutory Rate of 34%.
***Variances caused by the rate times the change in volume are allocated to
rate.
</TABLE>
PREMIER BANKSHARES CORPORATION AND AFFILIATES
OTHER INCOME AND EXPENSE
Total Other Income of $4,455,000 in 1995 represents a $226,000, or a 4.83%
decrease over 1994. However, considering the effect of security
gains/(losses), other income increased $574,000 primarily because of increased
service fee income.
Total Other Income of $4,681,000 in 1994 represents a $262,000, or a 6.94%
increase over 1993, when considered net of security gains. Again, this
improvement was primarily attributable to an increase in service fee income.
Largely the result of structural changes, other operating expenses in 1995
increaed $1,490,000, of which $524,000 was an increase in salaries over 1994.
Amortization of goodwill increased $383,000, and data processing expenses
increased $375,000. FDIC assessment was $588,000 less than 1994. Noninterest
expenses have been reduced relative to growth.
In 1994, significant restructuring took place within Premier. As a
result, 1994 reflected significant increases in salaries and benefits,
occupancy, legal, and other operating expenses. Although total other expenses
increased $1,974,000, or 11.53%, to $19,092,000, management considers these
expenses as investments in the company's infrastructure, providing a foundation
for future growth.
Other increases/decreases were generally in the normal course of business.
The major components of other income and expense are shown in Tables IV
and V.
<TABLE>
TABLE IV
PREMIER BANKSHARES CORPORATION AND AFFILIATES
OTHER INCOME
(IN THOUSANDS OF DOLLARS)
Increase Increase
(Decrease) (Decrease)
1994 1993
1995 1994 1993 Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C> <C>
Service Charges on
Deposit Accounts $ 2,545 $ 2,006 $ 1,817 $ 539 26.87 $ 189 10.40 %
Trust Fees 218 240 254 (22) (9.17) (14) (5.51)
Other Service Charges,
Commissions, and Fees 1,579 1,496 1,518 83 5.55 (22) (1.45)
Other Operating Income 271 297 222 (26) (8.75) 75 33.78
Security Gains (158) 642 1,256 (800) (124.61) (614) (48.89)
Trading Account
Gains (Losses) (34) N/A 34 (100.00)
Total Other Income $ 4,455 $ 4,681 $ 5,033 $(226) (4.83) % $(352) 6.99 %
</TABLE>
<TABLE>
TABLE V
PREMIER BANKSHARES CORPORATION AND AFFILIATES
OTHER EXPENSES
(IN THOUSANDS OF DOLLARS)
Increase Increase
(Decrease) (Decrease)
1995 1994
1995 1994 1993 Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries and Wages $ 8,004 $ 7,480 $ 7,012 $ 524 7.01 % $468 6.67%
Employee Benefits 2,072 2,259 1,783 (187) (8.28) 476 26.70
Total Employee
Benefits $ 10,076 $ 9,739 $ 8,795 $ 337 3.46 % $944 10.73%
Other Operating
Expenses:
Occupancy 904 846 848 58 6.86 (2) (0.24)
Equipment 1,205 1,099 922 106 9.65 177 19.20
Other Operating
Expenses 8,397 7,408 6,553 989 13.35 855 13.05
Total Other
Operating Expenses $ 10,506 $ 9,353 $ 8,323 $ 1,153 12.33 % $1,030 12.38%
Total Other
Expenses $ 20,582 $ 19,092 $17,118 $ 1,490 7.80 % $1,974 11.53%
</TABLE>
PREMIER BANKSHARES CORPORATION AND AFFILIATES
ALLOWANCE FOR LOAN LOSSES
Net charge offs for 1995 were $729,000, an increase of $202,000 over
1994. Additions to the allowance in 1995 totalled $315,000. The balance in
the allowance at year-end 1995 was $5,430,000, or 1.40% of average
outstanding loans.
Net charge offs decreased to $527,000 in 1994, a decrease of $414,000,
or 44% compared to 1993. Provisions to the reserve of $1,144,000, an
increase of $288,000, or 34% were made over 1993.
An allowance for loan losses is maintained in accordance with periodic
reviews of loans. Additions are made to this allowance as needed. Losses
are charged to the allowance rather than being reported as a direct
expense. Non performing assets at year end 1995 included $1,925,000 of
nonaccrual loans, $714,000 restructured loans, and $881,000 of other real
estate owned. Reserves totaling $5,430,000 are considered adequate to cover
future losses expected from non-performing assets.
Table VI reflects the activity in the Allowance for Loan and Lease Losses,
while Table VII shows the allocation of the allowance by type of loan. Table
VIII outlines nonperforming assets.
<TABLE>
TABLE VI
PREMIER BANKSHARES CORPORATION AND AFFILIATES
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
(IN THOUSANDS OF DOLLARS)
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Balance at Beginning of Period $ 5,844 $ 5,227 $ 5,312 $ 5,217 $ 4,447
Charge-offs:
Commercial, Financial and
Agriculture 329 171 367 553 389
Real Estate - Construction
Real Estate - Mortgage 22 116 623 117 158
Loans to Individuals 692 685 734 939 805
Other Loans
Total charge-offs 1,043 972 1,724 1,609 1,352
Recoveries:
Commercial, Financial and
Agriculture 57 178 209 240 240
Real Estate - Construction
Real Estate - Mortgage 15 44 104 61 178
Loans to Individuals 242 223 470 252 308
Other Loans
Total Recoveries 314 445 783 553 726
Net Charge-offs (Recoveries) 729 527 941 1,056 626
Additions Charged to Operations 315 1,144 856 1,151 1,396
Balance at End of Period $ 5,430 $ 5,844 $ 5,227 $ 5,312 $ 5,217
Ratio of Net Charge-offs
(Recoveries)to Average
Outstanding Loans 0.19 % 0.14 % 0.29 % 0.36 % 0.23 %
Ratio of Allowance for Loan
Losses to Average Outstanding Loans 1.40 % 1.61 % 1.62 % 1.81 % 1.92 %
Ratio of Provision for Loan Losses
to Average Outstanding Loans 0.08 % 0.32 % 0.26 % 0.39 % 0.51 %
</TABLE>
<TABLE>
TABLE VI
PREMIER BANKSHARES CORPORATION AND AFFILIATES
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
(IN THOUSANDS OF DOLLARS)
1995 1994 1993 1992 1991
% of % of % of % of % of
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
to to to to to
Total Total Total Total Total
Loans Loans Loans Loans Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Domestic
Commercial,
Financial and
Agricultural 2,206 32.23 2,658 31.21 2,465 30.63 2,401 18.74 2,040 12.29
Real Estate -
Construction 50 3.01 105 2.32 90 1.64 83 1.60 85 1.69
Real Estate -
Mortgage 722 40.33 982 40.72 875 41.76 805 52.75 770 56.08
Loans to
Individuals 2,017 23.71 1,549 25.32 1,384 25.41 1,302 26.35 1,268 28.83
Other Loans 15 .72 20 .43 20 .56 20 .56 24 1.11
Foreign
Unallocated 420 530 393 701 1,030
Totals 5,430 100.00 5,844 100.00 5,227 100.00 5,312 100.00 5,217 100.00
</TABLE>
PREMIER BANKSHARES CORPORATION AND AFFILIATES
INCOME TAXES
Applicable income taxes on 1995 earnings amounted to $2,967,000 or
24.36% of income before income taxes, compared to $3,024,000 or 25.14%
for 1994.
BALANCE SHEET ANALYSIS
The Corporation had total assets of $762 million at the end of
1995, an increase of 16.31% over 1994. Average earning assets increased
7.76% during 1995, and comprised 92.75% of average total average assets.
LOANS
Total loans, net of unearned income, at year-end totaled
$405,999,000, an increase of $39,295,000 or 10.72% over 1994. Although
loan demand improved during 1995 over the moderate demand experienced in
1994, the ratio of loans-to-deposits at year-end 1995 was 61%, compared
to 64% at year-end 1994. This change was primarily the result of the
increase in deposits from the seven branches acquired in 1995. The ratio
of net chareoffs to average outstanding loans was 0.19% in 1995 compared
to 0.14% in 1994. Loans delinquent 90 days or more and still accruing
were $1,548,000 in 1995 compared to $711,000 in 1994, while nonaccrual
loans decreased from $3,018,000 in 1994 to $1,925,000 in 1995.
Forclosured properties increased from $677,000 in 1994 to $881,000 in 1995;
restructured loans decreased from $1,172,000 in 1994 to $714,000 in 1995.
Real estate mortgages representing 40.86% of the December 31, 1995
loan portfolio net of unearned interest, have been, and should continue
to be, the major lending activity of Premier's subsidiary banks.
Management further intends as a part of its lending policy, to satisfy
this demand as long as deposit growth and liquidity remain satisfactory.
To assist in this, Premier Bank, Inc.(currently Premier Bank-South, N.A.)
obtained approval in 1992, from the Federal National Mortgage Association
to become a seller/servicer of its mortgage products, and continues to
close, sell and service qualified loans, thus creating a new income
source while releasing funds for additional loan activities.
Table VIII reflects loans by type while Table IX shows average rates
earned and other significant data on loans.
INVESTMENTS
The investment porfolio increased $36,083,000, or 15.59% over 1994.
At year-end 1995, the portfolio totaled $267,531,000, compared to
$231,448,000 at year-end 1994. At year-end, 95% of all securities were
rate "A" or better or were issued by the U.S. Government or its agencies.
The investment portfolio had an average taxable equivalent yield of 6.64%
at year-end.
Management primarily purchases securities with an intent to hold to
maturity. However, because of changes in accounting rules due to the
Financial Accounting Standards Board pronouncement 115, effective for
Premier beginning January 1, 1994, securities must now be segregated into
three categories with distinctively different accounting treatments.
Securities which management has a positive intent and ability to
hold to maturity are segregated as "Held to Maturity" where they are
accounted for using historic cost methods. Securities which may have
more volatile characteristics, or for which management anticipates a
higher likelihood of active management through sales prior to maturity
are segregated as "Available For Sale" and accounted for using methods
which adjust capital accounts for fluctuations in the securities' market
values. Securities purchased with the intent of profiting from
fluctuations in values that result from short term interest rate changes
are segregated into a "Trading Account", with such value fluctuations
accounted for as adjustments to income.
The impending changes in accounting treatment required by FASB 115
resulted in a significant investment portfolio restructuring during 1993,
and material increase in net income. Such restructuring will maximize
the company's long term overall return.
DEPOSITS
Total deposits increased $92,503,000 to $569,410,000 at year end
1995 compared to $661,913,000 at year-end 1994. This change was largely
the result of the branch acquisitions. Demand deposits increased 10.42%,
interest bearing demand 32.64%, savings decreased 11.96%, large
denomination certificates increased 17.48%, and other time deposits
increased 32.27%.
Table X shows average rates paid and other significant data on
deposits. Maturities of $100,000 or more certificates of deposit are
shown in Table XIV.
STOCKHOLDERS' EQUITY
Common stockholders' equity at year-end was $73,223,000 compared to
$60,293,000 for 1994. Beginning in 1994, FASB 115 requires a monthly
adjustment to capital, for financial accounting purposes, equal to the
net increase or decrease in the market value of the available for sale
portfolio. Changes in the interest rate environment during 1995 was
reflected through a positive adjustment in this allowance from a net
unrealized loss in 1994 of $6,212,000 to a net unrealized gain of
$401,000 at year-end 1995. At year-end, the leverage capital ratio was
8.92%.
On December 14, 1995, Premier declared a four for three stock split
payable January 3, 1996. Shares outstanding were 6,650,083 and 4,987,05
for 1995 and 1994, respectively. Cash dividends of $2,894,000,
(originally $0.56 per share restated to $0.43 per share because of the
split) were declared in 1995.
As mentioned earlier, during 1994, Dickenson-Buchanan Bank was
acquired in a stock exchange transaction. A total of 582,678 shares of
Premier were issued for all of the outstanding stock of Dickenson-
Buchanan Bank.
Cash dividends of $2,377,000, or $0.36 per share were declared in
1994.
<TABLE>
TABLE VIII
PREMIER BANKSHARES CORPORATION AND AFFILIATES
LOAN CLASSIFICATION SUMMARY
(IN THOUSANDS OF DOLLARS)
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Domestic:
Commercial, Financial
and Agricultural $ 132,601 $72,684 $72,233 $58,966 $35,925
Real Estate-
Construction 12,393 8,654 5,667 5,028 4,948
Real Estate -Mortgage 165,900 195,794 176,452 165,996 163,923
Loans to Individuals 97,554 94,520 89,412 82,922 84,255
Other Loans 2,937 1,606 1,573 1,764 3,237
Foreign:
Total Gross Loans $ 411,385 373,258 $345,337 $314,676 $292,288
Less:
Unearned Income 5,386 6,554 7,385 9,026 10,312
Allowance for Loan
Losses 5,430 5,844 5,227 5,312 5,217
Net Loans $ 400,569 360,860 $332,725 $300,338 $276,759
Non-performing Assets:
Non-accrual Loans $ 1,925 $3,018 $4,006 $4,287 $4,650
Loans Past Due Over
90 Days 1,548 711 1,407 1,538 2,245
Other Real Estate
Owned 881 677 1,382 892 811
Restructured Debt 714 1,172 1,128 1,286
Total $ 5,068 $5,578 $7,923 $8,003 $7,706
</TABLE>
<TABLE>
TABLE IX
PREMIER BANKSHARES CORPORATION AND AFFILIATES
EARNING ASSETS AND INTEREST BEARING LIABILITIES
(IN THOUSANDS OF DOLLARS)
Average Percent of Change
Outstanding** Prior Year Average Rate*
1995 1994 1993 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Earning Assets:
Loans:
Demand and Time $ 54,997 $ 46,517 51,375 18.23 % (9.46)% 11.15% 9.71 %
Real Estate 233,820 221,469 193,823 5.58 14.26 9.17 8.72
Installments 101,165 94,993 78,266 6.50 21.37 10.11 9.49
Total Loans 389,982 362,979 323,464 7.44 12.22 9.70 9.05
Securities:
Taxable 164,129 158,304 146,147 3.68 8.32 6.04 6.56
Non-taxable 74,976 74,594 57,284 5.12 30.22 7.93 7.97
Total Securities 239,105 232,898 203,431 2.67 14.49 6.64 7.01
Federal Funds Sold
and Deposits 34,640 16,917 34,200 104.76 (50.54) 5.82 4.58
Total Earning Assets 663,727 612,794 561,095 8.31 9.21 8.39% 8.15
Other Assets, Net of
Allowance for Loan
Losses 48,241 39,013 34,974 23.65 11.55
$ 711,968 $651,807 $596,069 9.23 % 9.35 %
* Average Rate Calculated on the Fully Taxable Equivalent - Using the
Statutory Rate of 34%.
** Nonaccruing loans are included in the daily average loan amounts
outstanding.
</TABLE>
<TABLE>
TABLE X
PREMIER BANKSHARES CORPORATION AND AFFILIATES
EARNING ASSETS AND INTEREST BEARING LIABILITIES, Continued
(IN THOUSANDS OF DOLLARS)
Average Percent of Change
Outstanding Prior Average Rate*
1995 1994 1993 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-bearing
Liabilities:
Interest-bearing
Checking $ 75,436 $ 66,605 $ 54,200 13.26 % 22.89% 2.73% 2.71 %
Savings Deposits 146,802 162,890 149,558 (9.88) 8.91 3.20 3.59
Large Denomination
Certificates 52,065 44,283 48,275 17.57 (8.27) 5.38 4.76
Time Deposits 277,040 230,254 214,715 20.32 7.24 5.19 4.29
Borrowed Funds 18,832 18,816 11,591 .09 62.33 5.72 3.57
Total Interest-
bearing Liabilities 570,175 522,848 478,339 9.05 9.30 4.39 3.88
Demand Deposit 74,750 63,679 55,882 17.39 13.95
Other Liabilities 2,133 5,145 5,405 (58.54) (4.81)
Stockholders' Equity 64,910 60,135 56,443 7.94 6.54
Total Liabilities
and Stockholders'
Equity $ 711,968 $ 651,807 $596,069 9.23 % 9.35 %
Net Yield on
Earnings Assets 4.62% 4.84 %
*Average Rate Calculated on the Fully Taxable Equivalent - Using Statutory
Rate of 34%.
</TABLE>
PREMIER BANKSHARES CORPORATION AND AFFILIATES
LIQUIDITY AND INTEREST SENSITIVITY
Banks maintain liquidity for two major reasons, to fund unforeseen
demands for withdrawals of deposits and to fund additional loan requests.
The adequacy of a bank's liquidity can not be effectively measured in an
absolute sense, but must be viewed relative to the bank's probable needs.
Based on perceived needs, a bank may employ a variety of techniques to
control liquidity. The four most common techniques involve maintaining
cash reserves, carefully planning cash flows, structuring other types of
assets in a manner which will allow them to be quickly converted to cash,
or to develop commitments from other institutions to loan the bank cash in
the event such is needed.
Premier's deposit base has become somewhat more volatile since
deregulation, but continues to be very stable relative to industry
standards. Also, loan demand throughout Premier's trade area has
traditionally been modest. Combined, these factors mitigate much of the
need for short term liquidity.
To the extent liquidity is required, it can normally be handled using
cash flows from operations. As shown in the Consolidated Statements of
Cash Flows, net increases in deposits amounted to $92,503,000 (demand and
time) in 1995 versus net loan increases of $40,958,000. In 1994 net
deposit increases amounted to $8,666,000 versus net loan increases of
$30,182,000 in 1994. Should unforeseen liquidity needs arise, they can be
handled using federal funds sold, investments maturing within one year, and
stand by federal funds purchase commitments.
In order to allow regular repricing on a large portion of Premier's
loan portfolio, most real estate can be repriced over a period of one to
ten years. Premier's policy is to maintain the relationship between rate-
sensitive assets and rate-sensitive liabilities which will best maximize
profits and continue future profit levels in keeping with the trend and
expectations of interest rates.
Premier's current gap position is such that in periods of rising rates
earnings would be negatively impacted as interest on interest-bearing
accounts would rise more sharply than interest on earning assets.
Conversely, in periods of falling rates, earnings would rise. Management,
through constant monitoring of Premier's gap position and market interest
trends and forecasts, can minimize the negative impact of a rise in the
market interest rate.
Tables XI through XIV reflect additional data on liquidity and
interest sensitivity.
INFLATION
Since the assets and liabilities of banks are primarily monetary in
nature, the performance of banks is affected more by changes in interest
rates than by inflation. Interest rates generally increase as the rate of
inflation increases, but the change may not necessarily be the same.
During periods of high inflation, banks will normally experience
growth in assets and deposits, which will result in increased operating
expenses.
<TABLE>
TABLE XI
PREMIER BANKSHARES CORPORATION AND AFFILIATES
INVESTMENT SECURITY ANALYSIS**
(IN THOUSANDS OF DOLLARS)
Total 0 - 1 1 - 5 5 - 10 10 and Over
Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995
U.S. Treasury
and Agency
Securities $163,687 5.94% 18,468 4.91% 74,675 5.72% 40,276 6.10% 30,268 6.91%
State and
Political
Subdivisions* 85,634 7.74 4,136 7.68 38,091 7.32 38,952 8.04 4,455 8.76
Other
Securities 17,572 5.99 6,876 6.03 8,149 5.97 2,547 5.94
Totals $266,893 6.52% 29,480 5.56%120,915 6.24% 79,228 7.05% 37,270 7.06 %
1994
U.S. Treasury
and Agency
Securities $154,516 5.81% 13,994 4.53% 67,762 5.42% 37,681 5.95% 35,079 6.95 %
State and
Political
Subdivisions* 77,997 8.03 3,268 7.56 28,446 7.30 39,468 8.44 6,815 8.88
Other
Securities 8,233 5.76 5,610 6.08 262 5.84 2,361 5.02
Totals $240,746 6.53% 17,262 5.10%101,818 5.98% 77,411 7.22% 44,255 7.14 %
* Fully Taxable Equivalent - Using the Statutory Rate of 34%.
** Prepared Using Investments at Amortized Cost.
</TABLE>
<TABLE>
TABLE XI (Continued)
PREMIER BANKSHARES CORPORATION AND AFFILIATES
INVESTMENT SECURITY ANALYSIS**
(IN THOUSANDS OF DOLLARS)
Total 0 - 1 1 - 5 5 - 10 10 and Over
Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993
U.S. Treasury
and Agency
Securities $153,845 6.25% 6,663 7.30% 53,268 5.60% 48,520 6.02% 45,394 7.09 %
State and
Political
Subdivisions* 68,088 8.39 2,326 7.50 18,427 7.97 38,610 8.46 8,725 9.19
Other
Securities 8,143 6.65 2,900 6.68 2,436 6.82 782 8.53 2,025 5.68
Totals $230,076 6.90%11,889 7.19% 74,131 6.23% 87,912 7.11% 56,144 7.37 %
* Fully Taxable Equivalent - Using the Statutory Rate of 34%.
** Prepared Using Investments at Amortized Cost
</TABLE>
<TABLE>
TABLE XII
PREMIER BANKSHARES CORPORATION AND AFFILIATES
INTEREST RATE SENSITIVITY
(IN THOUSANDS OF DOLLARS)
DECEMBER 31, 1995
Interest- Beyond
Sensitive
1-90 91-365 One Year Total
<S> <C> <C> <C> <C>
Earnings Assets:
Loans $ 89,434 $80,444 $236,121 $ 405,999
Investment 6,878 19,079 240,936 266,893
Securities 24,105 24,105
Fed Funds Sold
Total Earning
Assets 120,417 99,523 477,057 696,997
Interest-bearing Liabilities:
Interest-bearing
Demand 89,558 89,558
Savings Deposits 100,371 100,371
Large Denomination
CD's 13,510 24,780 14,549 52,839
Other Time Deposits 74,854 136,681 96,408 307,943
Money Market
Instruments 40,771 40,771
Total Interest-
Bearing Deposits 319,064 161,461 110,957 591,482
Other Short-term Debt 17,407 17,407
Total Interest-
bearing Liabilities 336,471 161,461 110,957 608,889
Cumulative Interest-
Sensitivity Excess
(GAP) $(216,054) $(61,938) N/A N/A
</TABLE>
<TABLE>
TABLE XIII
PREMIER BANKSHARES CORPORATION AND AFFILIATES
MATURITY AND RATE SENSITIVITY ANALYSIS
(IN THOUSANDS OF DOLLARS)
DECEMBER 31, 1995
Due in One to
Due In Five Years Due After Five Years
One Year Fixed Floating Fixed Floating
Total Or Less Rate Rate Rate Rate
<S> <C> <C> <C> <C> <C> <C>
Domestic:
Commercial,
Financial and
Agricultural $ 71,449 $ 52,272 $ 9,776 $4,168 $ 5,096 $137
Real Estate -
Construction 10,101 8,196 1,542 52 311
Other (Excluding
Consumer Installment
and Residential
Mortgage Loans) 70,294 42,456 19,458 4,006 4,374
Foreign
Totals $ 151,844 $102,924 $30,776 $8,226 $ 9,781 $137
</TABLE>
<TABLE>
TABLE XIV
PREMIER BANKSHARES CORPORATION AND AFFILIATES
MATURITY SCHEDULE - LARGE DENOMINATION CERTIFICATES OF DEPOSIT
(IN THOUSANDS OF DOLLARS)
Time Certificates of Deposit, in amounts of $100,000 or more,
outstanding at December 31, 1995, mature as follows:
<S> <C>
Three Months or Less $ 13,510
Over Three Months Through
Six Months 10,592
Over Six Months Through
Twelve Months 14,188
Over Twelve Months 14,549
$ 52,839
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of independent auditors and consolidated financial
statements of Bankshares and its affiliates appear herein.
Quarterly Results of Operations is included in the Notes to
Consolidated Financial Statements as Note 17.
Persinger & Company, L.L.C.
204 George Street
Beckley, WV 25801
Telephone (304) 255-1978
Fax (304) 255-1971
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Premier Bankshares Corporation
Bluefield, Virginia
We have audited the accompanying consolidated balance sheets of Premier
Bankshares Corporation and Affiliates as of December 31, 1995 and 1994,
and the related consolidated statements of income, stockholders'
equity and cash flows for each of the years in the three-year period
ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We did not audit the financial statements of Dickenson-Buchanan Bank, a
consolidated subsidiary, which statements reflect total assets and
revenue constituting 13% and 14%, respectively, in 1994 and revenue
constituting 12% in 1993 of the related consolidated totals. Those
statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to the amounts
included for Dickenson-Buchanan Bank, is based solely on the report of
the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other
auditors, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Premier Bankshares Corporation and Affiliates as of December 31, 1995
and 1994, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1995, in
conformity with generally accepted accounting principles.
Persinger & Company, L.L.C.
Beckley, West Virginia
January 18, 1996
<TABLE>
CONSOLIDATED BALANCE SHEETS
PREMIER BANKSHARES CORPORATION AND AFFILIATES
(In Thousands of Dollars)
December 31,
1995 1994
<S> <C> <C>
ASSETS
Cash and Due From Banks (Note 16) $ 28,957 $ 19,475
Securities Available for Sale (Note 4) 234,183 142,682
Securities Held to Maturity (Note 4) 33,348 88,766
Federal Funds Sold 24,105 17,240
Loans, Net (Note 5) 400,569 360,860
Bank Premises and Equipment, Net (Note 6) 17,242 14,259
Accrued Income Receivable 6,377 5,268
Other Assets 17,254 6,643
$ 762,035 $ 655,193
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand $ 70,431 $ 63,784
Now Accounts 89,558 67,518
Savings 141,142 160,323
Time, $100,000 and Over 52,839 44,978
Other Time 307,943 232,807
$ 661,913 $ 569,410
Short-Term Debt (Note7) $ 17,407 $ 21,377
Accrued Interest and Other Liabilities 9,492 2,213
Long-Term Debt (Note 8) 1,900
TOTAL LIABILITIES $ 688,812 $ 594,900
Commitments and Contingencies (Note 11, 12 and 14)
Stockholders' Equity (Note 10):
Capital Stock:
Common, $2 Par Value; Authorized 10,000,000
shares; Issued 6,650,083 in
1995 and 1994 4,987,805 $ 13,300 $ 9,975
Surplus 18,704 22,029
Retained Earnings 40,818 34,501
Net Unrealized Gain (Loss) on Securities
Available for Sale 401 (6,212)
$ 73,223 $ 60,293
$ 762,035 $ 655,193
See Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
PREMIER BANKSHARES CORPORATION AND AFFILIATES
(In Thousands of Dollars except per share data)
Years Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
INTEREST INCOME:
Loans and Fees $ 37,784 $ 32,814 $ 30,938
Securities Available for Sale 9,907 9,404
Securities Held to Maturity 3,935 4,900 1,306
Securities Held for Sale 11,167
Federal Funds Sold 2,017 751 1,009
Money Market Deposits 23 76
Trading Account Income 17
$ 53,643 $ 47,892 $ 44,513
INTEREST EXPENSE:
Deposits $ 23,946 $ 19,636 $ 18,853
Short-term Debt 877 632 293
Long-term Debt 200 39 18
$ 25,023 $ 20,307 $ 19,164
Net Interest Income $ 28,620 $ 27,585 $ 25,349
PROVISION FOR POSSIBLE LOAN LOSSES
(NOTE 5) 315 1,144 856
Net Interest Income After
Provision for Possible Loan Losses $ 28,305 $ 26,441 $ 24,493
OTHER INCOME:
Trust Department Income $ 218 $ 240 $ 254
Service Fees 2,545 2,006 1,817
Security Gains (Losses) (158) 642 1,256
Trading Account Security Losses (34)
Other Service Charges, Commissions
and Fees 1,579 1,496 1,518
Other (Note 13) 271 297 222
$ 4,455 $ 4,681 $ 5,033
OTHER EXPENSES:
Salaries and Wages $ 8,004 $ 7,480 $ 7,012
Pensions and Other Employee
Benefits (Note 11) 2,072 2,259 1,783
Occupancy Expenses 904 846 848
Equipment Rentals, Depreciation
and Maintenance 1,205 1,099 922
Other Operating Expenses (Note 13) 8,397 7,408 6,553
$ 20,582 $ 19,092 $ 17,118
Income Before Income Taxes $ 12,178 $ 12,030 $ 12,408
FEDERAL INCOME TAXES (NOTE 9) 2,967 3,024 2,889
NET INCOME $ 9,211 $ 9,006 $ 9,519
EARNINGS PER COMMON SHARE (NOTE 10) $ 1.39 $ 1.35 $ 1.43
CASH DIVIDENDS PER COMMON SHARE $ 0.43 $ 0.36 $ 0.32
See Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
PREMIER BANKSHARES CORPORATION AND AFFILIATES
(In Thousands of Dollars)
Years Ended December 31, 1995, 1994, and 1993
Net Unrealized Gain
(Loss) on Securities
Capital Stock Retained Available for
Shares Amount Surplus Earnings Sale Total
<S> <C> <C> <C> <C> <C> <C>
BALANCE-DECEMBER 31, 1992 4,988,136 $ 9,975 $ 22,036 $ 20,505 $ (95) $52,421
Net Income 9,519 9,519
Cash Dividends Declared (2,152) (2,152)
Stock Repurchased (331) (7) (7)
Change in Valuation
Allowance For Marketable
Equity Securities (12) (12)
BALANCE-DECEMBER 31, 1993 4,987,805 $ 9,975 $ 22,029 $ 27,872 $ (107) $59,769
Net Income 9,006 9,006
Cash Dividends Declared (2,377) (2,377)
Change in Unrealized Gain
(Loss) On Securities
Available for Sale, Net (6,105) (6,105)
BALANCE-DECEMBER 31, 1994 4,987,805 $ 9,975 $ 22,029 $ 34,501 $(6,212) $60,293
Net Income 9,211 9,211
Cash Dividends Declared (2,894) (2,894)
Change in Unrealized Gain
(Loss) On Securities
Available for Sale, Net 6,613 6,613
Four for ThreeStock Split 1,662,278 3,325 (3,325)
BALANCE-DECEMBER 31, 1995 6,650,083 $13,300 $ 18,704 $ 40,818 $ 401 $73,223
See Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
PREMIER BANKSHARES CORPORATION AND AFFILIATES
(In Thousands of Dollars)
Years Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 9,211 $ 9,006 $ 9,519
Adjustments to Reconcile Net Income
to Cash Provided by Operating Activities:
Depreciation and Amortization of
Premises and Equipment 1,069 847 823
Provision for Possible Loan Losses 315 1,144 856
Provision for Deferred (Prepaid)
Income Taxes 3 (39) (401)
Amortization of Goodwill and Intangibles 662 288 372
Amortization of Premiums and Accretion
of Discounts, Net 690 680 408
Securities Gains (Loss) 158 (642) (1,256)
Gain on Foreclosed Properties 23 52 119
(Increase) Decrease in Accrued
Income Receivable (1,109) (652) 147
Increase in Other Assets (10,700) (374) (5)
(Decrease) Increase in Accrued
Interest Payable and Other Liabilities 7,279 (2,533) 30
Net Cash Provided by Operating Activities 7,601 $ 7,777 $ 10,612
CASH FLOWS FROM INVESTING ACTIVITIES
Net Decrease (Increase) in Temporary
Investments $ (6,865) $ 22,654 $(20,456)
Proceeds From Sales of Securities
Held to Maturity 3,324
Proceeds From Maturities of Securities
Held to Maturity 9,170 26,001 1,300
Purchase of Securities Held to Maturity (20,160) (15,481) (1,545)
Proceeds From Sales of Securities
Available for Sale 35,615 18,648
Proceeds From Maturities of Securities
Available for Sale 24,806 31,524
Purchases of Securities Available
for Sale (79,749) (68,224)
Proceeds From Sales of Securities
Held for Sale 71,533
Proceeds From Maturities of Securities
Held for Sale 37,867
Purchases of Securities Held for Sale (152,071)
Net Increase in Customer Loans (40,958) (30,182) (34,549)
Proceeds From Sales of Foreclosed
Properties 343 1,356 777
Purchases of Premises and Equipment (4,508) (3,978) (1,011)
Proceeds From Sales of Premises
and Equipment 448 88 39
Net Cash Used In Investing Activities $ (81,858) $(17,594) $ (94,792)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Demand, NOW
and Savings Accounts $ 9,506 $ 1,491 $ 67,697
Net Increase in Time Deposits 82,997 7,175 12,288
Net (Decrease) Increase in
Short-Term Debt (3,970) 6,046 7,187
Cash Dividends (2,894) (2,377) (2,152)
Purchase of Capital Stock (7)
Proceeds from Long-term Borrowings 2,000
Payments on Long-term Borrowings (1,900) (100) (776)
Net Cash Provided by Financing
Activities $ 83,739 $ 14,235 $ 84,237
Net Increase In Cash and Due
From Banks $ 9,482 $ 4,418 $ 57
See Notes to Consolidated Financial Statements.
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<TABLE>
PREMIER BANKSHARES CORPORATION AND AFFILIATES
(In Thousands of Dollars)
Years Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
CASH AND DUE FROM BANKS
Beginning 19,475 15,057 15,000
Ending $ 28,957 $ 19,475 $ 15,057
Supplemental Disclosures of Cash Flow Information
Cash Payments of Interest Paid:
To Depositors $ 23,188 $ 19,565 $ 18,885
On Federal Funds Purchased and
Securities Sold Under Agreements
to Repurchase 3,723 670 285
Income Taxes 2,634 3,229 3,122
Cash Payment Made For Seven Branches
Purchased in 1995:
Cash and Due From Banks $ 89,518
Bank Premises and Equipment 2,253
Loans 15,062
Other Assets 9,866
Deposits 116,439
Other Liabilities 260
Supplemental Schedule of Noncash
Investing and Financing Activities
Other Real Estate Acquired in
Settlement of Loans $ 934 $ 903 $ 1,214
Net Change in Unrealized
(Gain) Loss on Securities
Available for Sale (9,937) 9,298
See Notes to Consolidated Financial Statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS: The Company through its banking
affiliates grants commercial, residential and installment
loans to customers located in Southwest Virginia.
Although the loan portfolio is diversified, a substantial
portion of its debtors' abilities to honor their contracts
is dependent upon the coal and agribusiness economic sectors.
Summary of the Company's significant accounting policies:
BASIS OF ACCOUNTING: The accounting and reporting
policies of the Company and its wholly-owned affiliates
conform to generally accepted accounting principles
and general practices within the banking industry.
During 1995, the banking affiliates of the Company
became National Banking Organizations and their
principle regulatory agency will be the Comptroller
of the Currency.
Certain estimates and assumptions are required by
management in the preparation of the consolidated
financial statements. Actual results could differ
significantly from those estimates. The more significant
estimates and assumptions that affect the reporting of
amounts in assets and liabilities at the balance sheet
date and the revenues and expenditures for the year
are those required in the determination of the allowance
for possible loan losses and the valuation of other real
estate acquired in foreclosure. Management obtains
independent appraisals for significant properties in the
determination of the allowance for possible loan losses
and the valuation of other real estate owned.
CONSOLIDATION: The consolidated statements include
accounts of Premier and its' Affiliates. All significant
intercompany balances and transactions have been eliminated.
RECLASSIFICATION: Certain reclassifications have been
made to prior years' consolidated financial statements
to place them on a comparable basis with the current year.
CASH AND CASH EQUIVALENTS: For purposes of reporting
cash flows, cash and due from banks includes cash on
hand and amounts due from banks including cash items
in the process of clearing. Cash flows from loans
originated by the affiliate banks, deposits, and
federal funds purchased and sold are reported net.
Temporary investments include federal funds sold,
trading securities, and interest-bearing deposits in banks.
The Company maintains amounts due from banks which,
at times, may exceed federally insured limits. The
Company has not experienced any losses in such accounts.
TRUST ASSETS: Assets held in a fiduciary capacity
for affiliate bank customers, other than cash on deposit
at the affiliate banks, are not included in the
consolidated balance sheets since they are not assets
of the Company or its affiliate banks.
SECURITIES AND ACCOUNTING CHANGE: The Company adopted
provisions of Statement of Financial Accounting
Standards No. 115, Accounting for Certain Investments
in Debt and Equity Securities, as of January 1, 1994.
Statement 115 requires that management determine
the appropriate classification of securities at the
date of adoption, and thereafter at the date individual
investment securities are acquired, and that the
appropriateness of such classification be reassessed
at each balance sheet date.
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(continued)
Securities available for sale are those debt
securities that the Company intends to hold for an
indefinite period of time, but not necessarily to
maturity. Any decision to sell a security classified
as available for sale would be based on various factors,
including significant movements in interest rates, changes
in the maturity mix of the Company's assets and liabilities,
liquidity needs, regulatory capital considerations, and
other similar factors. Securities available for sale are
carried at fair value. Unrealized gains or losses are
reported as increases or decreases in stockholders' equity,
net of the related deferred tax effect. Securities classified
as held to maturity are those debt securities the Company
has both the intent and ability to hold to maturity
regardless of changes in market conditions, liquidity
needs or changes in general economic conditions.
Trading securities, which are generally held for the
short term in anticipation of market gains, are carried
at fair value. Realized and unrealized gains and losses
on trading account assets are included in other income.
The Company does not classify any securities as trading
securities at this time. Prior to the adoption of
Statement 115, the Company stated its securities held
for sale at the lower of aggregate cost or market value.
Securities classified as held for sale were part of the
Company's asset and liability management strategy and were
sold in response to changes in interest rates, changes
in prepayment risk, the need to increase regulatory capital
and other factors. Marketable equity securities were
stated at the lower of their aggregate cost or market
value. Under both the newly adopted standard and the
Company's former accounting practices, premiums and
discounts on investments in debt securities are
amortized over their contractual lives. The method of
amortization results in a constant effective yield on
those securities (the interest method). Interest
on debt securities is recognized in income as accrued,
and dividends on marketable equity securities are
recognized in income when declared. Realized gains
and losses, including losses from declines in value
of specific securities determined by management to be
other-than-temporary, are included in income. Realized
gains and losses are determined on the basis of specific
securities sold.
Note 4 to the consolidated financial statements provides
further information about the effect of adopting
Statement 115.
LOANS HELD FOR SALE: Mortgage loans originated and
intended for sale in the secondary market are carried
at the lower of cost or estimated market value in the
aggregate. Net unrealized losses are recognized
through a valuation allowance by charges to income.
LOANS: On January 1, 1995, the Company adopted
Statement of Financial Accounting Standard 114,
Accounting by Creditors for Impairment of a Loan.
Statement No. 114 has been amended by Statement of
Financial Accounting Standard No. 118, Accounting by
Creditors for Impairment of a Loan - Income Recognition
and Disclosures. Statement 114, as amended, requires
that the impairment of loans that have been separately
identified for evaluation is to be measured based on the
present value of expected future cash flows or,
alternatively, the observable market price of the
loans or the fair value of the collateral. However, for
those loans that are collateral dependent ( that is, if
repayment of those loans is expected to be provided solely
by the underlying collateral) and for which management has
determined foreclosure is probable, the measure of the
impairment of those loans is to be based on the fair
value of the collateral. Statement 114, as amended, also
requires certain disclosures about investments in impaired
loans and the allowance for possible loan losses and interest
income recognized on those loans. The adoption of Statement 114
had no effect on the consolidated financial statements.
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(continued)
Loans that management has the intent and ability to
hold for the foreseeable future or until maturity or
pay-off are stated at the amount of unpaid principal,
reduced by unearned discount and fees and cost and an
allowance for possible loan losses.
The allowance for possible loans losses is increased
though a provision for possible loan losses charged
to income, and decreased by charge-offs, net of recoveries,
when management determines that collectability of all
amounts when due is unlikely. The allowance is based
on management's estimate of the amount necessary to
absorb losses on existing loans. Management's estimate
is based on a review of specific loans and, for smaller
balance homogeneous loans, on the Company's past loan
loss experience known and inherent risks in the entire
loan portfolio, overall portfolio quality, estimated fair
value of any underlying collateral, and current economic
conditions that may affect borrower's ability to pay.
For those loans that are separately evaluated for
collectability, when management determines that it is
probable that principal and interest on those loans will
not be collected according to their contractual terms, the
impairment of those loans is recognized in the allowance
account based on the fair value of the underlying collateral,
if collateral dependent, and on the present value of
expected future cash flows discounted at the loans'
effective rate where the loan is unsecured. Cash
collections on loans that are impaired are credited to the
loan receivable balance, and no interest income is recognized
on those loans until the principal balance has been collected.
Unearned interest on discounted loans is amortized to
income over the life of the loans, using the
sum-of-the-months digits (78ths) method. For all other
loans, interest is accrued daily on the outstanding
balances. The methods collectively produce a result that
is not materially different from the level yield method.
Accrual of interest is discontinued on a loan when
management believes, after considering collection
efforts and other factors, that the borrower's financial
condition is such that collection of interest is doubtful.
Upon such discontinuance, all unpaid accrued interest is
reversed.
Loan commitment fees and certain direct loan costs are
deferred and the net amount amortized as an adjustment
of the related loan's yield. The Company is generally
amortizing these amounts over the contractual life.
BANK PREMISES AND EQUIPMENT: Bank premises and equipment
are stated at cost less accumulated depreciation.
Depreciation is computed by the straight-line method
over the following estimated useful lives:
Years
Buildings 10-50
Furniture and Equipment 5-10
Costs of ordinary maintenance and repairs are charged to
expense as incurred, while major improvements
are capitalized.
OTHER REAL ESTATE OWNED: Other real estate owned (OREO)
represents properties acquired through
foreclosure or other proceedings. OREO is held for sale
and is recorded at the lower of the recorded amount of the
loan or fair value of the properties less estimated costs
of disposal. Any write-down to fair value at the time of
transfer to OREO is charged to the allowance for possible
loan losses. Property is evaluated regularly to ensure
the recorded amount is supported by its current fair value
and valuation allowances to reduce the carrying amount to
fair value less estimated costs to dispose are recorded
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(continued)
as necessary. Depreciation is recorded based on the
recorded amount of depreciable assets after they have been
owned for one year. Depreciation and additions to or
reductions from valuation allowances are recorded in income.
INTANGIBLE ASSETS: Included in other assets are net
intangible assets of $ 10,916,000 and $1,808,000 at
December 31, 1995 and 1994, respectively. At
December 31, 1995, intangible assets consisted primarily
of $ 10,649,000 of goodwill, and $267,000 of building
premiums. Intangibles are being amortized over periods
ranging from one to thirty-five years.
PENSION PLAN: Generally, Premier and its affiliates
fund pension costs as incurred.
INCOME TAXES AND ACCOUNTING CHANGE: Effective
January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, Accounting
for Income Taxes. This adoption of Statement 109 changes
the Company's method of accounting for income taxes
from the deferred method to a liability method. Under
the deferred method, the Company deferred the past tax
effects of timing differences between financial reporting
and taxable income. The application of Statement 109 had no
material effect on the accompanying consolidated
financial statements.
Deferred taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible
temporary differences and operating loss and tax credit
carryforwards and deferred tax liabilities are recognized
for taxable temporary differences. Temporary differences
are the differences between the reported amounts of assets
and liabilities and their tax bases. Deferred tax assets
are reduced by a valuation allowance when, in the opinion
of management, it is more likely than not that some portion
or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for
the effects of changes in tax laws and rates on the date
of enactment. The operating results of the Parent Company
and its affiliates are included in a consolidated federal
income tax return. Each affiliate pays its allocation of
federal income taxes to the Parent Company, or receives
payment from the Parent Company to the extent that
tax benefits are realized.
EARNINGS PER SHARE: Earnings per share are computed on
the weighted average number of shares outstanding.
CURRENT ACCOUNTING DEVELOPMENTS: The Financial
Accounting Standards Board has issued Statement
No. 122, Accounting for Mortgage Servicing Rights,
which shall be applied prospectively for fiscal years
beginning after December 15, 1995. The Statement
generally requires a Company that originates mortgage loans
for sale on a secondary mortgage market such as FNMA
and retains the servicing rights, shall allocate the total
costs of the mortgage loans to the mortgage servicing rights
and the loans (without the mortgage servicing rights) based
on their relative fair values. Any cost allocated to
mortgage servicing rights should be recognized as a separate
asset and amortized in proportion to and over the period
of estimated net servicing income and should be evaluated
for impairment based on their fair value. The Company
has not adopted this Statement for the year ended
December 31, 1995, but believes the overall effect of
adoption will be immaterial to the consolidated
financial statements.
The Financial Accounting Standards Board has issued
Statement No. 123, Accounting for Stock-Based
Compensation, which shall be applied for fiscal years
beginning after December 15, 1995, either for its
accounting application or as a minimum its disclosure
features. This statement establishes financial accounting
and reporting standards for stock-based employee
compensation plans. Those plans include
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(continued)
all arrangements by which employees receive shares of
stock or other equity instruments of the employer
or the employer incurs liabilities to employees in
amounts based on the price of the employer's stock.
Examples are stock purchase plans, stock options,
restricted stock, and stock appreciation rights.
This statement also applies to transactions in which
an entity issues its equity instruments to acquire
goods or services from nonemployees. Those
transactions must be accounted for based on the fair
value of the consideration received or the fair value
of the equity instruments issued, whichever is more
reliably measurable. The Company has not adopted x
of the equity instruments issued, whichever is more
but believes the overall effect of adoption will be
immaterial to the consolidated financial statements.
NOTE 2 - BUSINESS COMBINATION
During 1994, Dickenson-Buchanan Bank was acquired in an
exchange of stock transaction in which 582,750 shares
of Premier were issued for all of the outstanding stock of
Dickenson-Buchanan Bank. The transaction was accounted for
as a pooling-of-interest and all financial data has been
restated accordingly. The effect of Premier's previously
reported operations and stockholders' equity follows.
<TABLE>
December 31, 1993
Previously
Reported Acquisition Restated
(In Thousands of Dollars Except Per Share Data)
<S> <C> <C> <C>
Interest Income $ 38,327 $ 6,186 $ 44,513
Net Interest Income 21,670 3,679 25,349
Net Income 8,343 1,176 9,519
Net Income Per Share 1.89 15.68 1.91
Stockholders' Equity
Common Stock 8,810 750 9,975
Surplus 21,693 750 22,029
Retained Earnings 23,943 3,930 27,872
Unrealized Loss on
Marketable Equity
Securities (107) (107)
Total Stockholders' Equity $ 54,339 $ 5,430 $ 59,769
</TABLE>
NOTE 3 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments for
which it is practicable to estimate that value.
CASH AND SHORT-TERM INVESTMENTS: For those short-term
instruments, the carrying amount is a reasonable estimate
of fair value.
SECURITIES: The fair values of securities held for trading
purposes and marketable equity securities held for investment
purposes are based on quoted market prices or dealer quotes.
For other securities held as investments, fair value equals
quoted market price, if available. If a quoted market price
is not available, fair value is estimated using quoted market
prices for similar securities.
LOAN RECEIVABLES: The fair value of loans is estimated by
discounting the future cash flows using the current rates at
which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities.
DEPOSIT LIABILITIES: The fair value of demand deposits,
savings accounts, and certain money market deposits is the
amount payable on demand at the reporting date. The fair
value of fixed-maturity certificates of deposit is estimated
using the rates currently offered for deposits of similar
remaining maturities.
NOTE 3 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
SHORT-TERM DEBT: The fair value of debt due on demand or
with a maturity of three months or less is the amount payable
on demand at the reporting date.
LONG-TERM DEBT: Rates currently available to the Company
for debt with similar terms and remaining maturities are
used to estimate fair value of existing debt.
COMMITMENTS TO EXTEND CREDIT, STANDBY LETTERS OF CREDIT, AND
FINANCIAL GUARANTEES WRITTEN:
The fair value of commitments is estimated using the fees
currently charged to enter into similar agreements, taking
into account the remaining terms of the agreements and the
present creditworthiness of the counterparties. For
fixed-rate loan commitments, fair value also considers the
difference between current levels of interest rates and the
committed rates. The fair value of guarantees and letters
of credit is based on fees currently charged for similar
agreements or on the estimated cost to terminate them or
otherwise settle the obligations with the counterparties
at the reporting date.
The estimated fair values in thousands of dollars of the
Company's financial instruments at December 31, 1995 and
1994 are as follows:
<TABLE>
December 31, 1995 December 31, 1994
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Financial Assets:
Cash and Short-term
Investments $ 53,062 $ 53,062 $ 36,715 $ 36,715
Securities 267,531 268,197 231,448 227,835
Loans 405,999 412,492 366,704 375,930
Less: Allowance for
Possible Loan Losses 5,430 5,430 5,844 5,844
Net Loans 400,569 407,062 360,860 370,086
Financial Liabilities:
Deposits 661,913 662,484 569,410 567,820
Short-term Debt 17,407 17,407 21,377 21,377
Long-term Debt 1,900 1,900
Unrecognized Financial Instruments:
Standby Letters of Credit 1,486 1,518
Unused Commercial Line
Commitments 20,427 15,740
Revolving Home Equity Lines 5,815 1,425
Credit Card Lines 5,852 3,920
Other 7,327 690
</TABLE>
NOTE 4 - SECURITIES
As discussed in Note 1, the Company adopted Statement of
Financial Accounting Standards No. 115 as of January 1, 1994.
The January 1, 1994 cumulative effect of adopting Statement 115
was immaterial. During 1995, the Company revised its accounting
policy by transferring several bonds from its held-to-maturity
category to its available-for-sale category in accordance with the
Financial Accounting Standards Board's Guide to Implementation of
Statement 115. On December 15, 1995, the Company transferred
bonds with an amortized cost of $66,408,000 and
fair value of $66,605,000.
Carrying amounts and fair values of securities available for sale
as of December 31, 1995 and 1994 are summarized as follows:
<TABLE>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
1995
(In Thousands of Dollars)
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 10,492 $ 62 $ $ 10,554
U.S. Government Agencies
and Corporations 107,857 471 425 107,903
Obligations of States
and Political Subdivisions 52,022 1,355 128 53,249
Corporate Securities 13,700 97 5 13,792
Mortgage-backed
Securities 46,084 46 693 45,437
Marketable Equity
Securities 1,596 1 131 1,466
Other Debt Securities 1,794 1 13 1,782
$ 233,545 $ 2,033 $ 1,395 $ 234,183
</TABLE>
<TABLE>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
1994
(In Thousands of Dollars)
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 23,040 $ 29 $ 472 $ 22,597
U.S. Government Agencies
and Corporations 39,844 2 2,852 36,994
Obligations of States
and Political Subdivisions 7,285 47 137 7,195
Corporate Securities 3,885 27 146 3,766
Mortgage-backed
Securities 74,643 8 5,519 69,132
Marketable Equity
Securities 1,596 222 1,374
Other Debt Securities 1,687 63 1,624
$ 151,980 $ 113 $ 9,411 $ 142,682
</TABLE>
NOTE 4 - SECURITIES (Continued)
Carrying amounts and fair values of securities being held to maturity as of
December 31, 1995 and 1994 are summarized as follows:
<TABLE>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
1995
(In Thousands of Dollars)
<S> <C> <C> <C> <C>
Obligations of States and
Political Subdivisions $ 33,282 $ 844 $ 178 $ 33,948
Other Debt Securities 66 66
$ 33,348 $ 844 $ 178 $ 34,014
</TABLE>
<TABLE>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
1994
(In Thousands of Dollars)
<S> <C> <C> <C> <C>
U.S. Government
Agencies and Corporations $ 6,003 $ $ 613 $ 5,390
Obligations of States and
Political Subdivisions 70,712 798 2,698 68,812
Mortgage-backed Securities 11,602 8 1,085 10,525
Other Debt Securities 449 23 426
$ 88,766 $ 806 $ 4,419 $ 85,153
</TABLE>
The amortized cost and fair value of securities available for sale and held
to maturity as of December 31, 1995by contractual maturity are shown below.
Maturities may differ from contractual maturities in mortgage-backed
securities because the mortgages underlying the securities may be called
or repaid without any penalties.
<TABLE>
Available For Sale Held To Maturity
Amortized Fair Carrying Fair
Cost Value Amount Value
(In Thousands of Dollars)
<S> <C> <C> <C> <C>
Due in One Year or Less $ 24,004 $ 24,053 $ 1,566 $ 1,546
Due After One Year Through
Five Years 104,422 105,093 4,582 4,660
Due After Five Years Through
Ten Years 61,137 61,385 24,947 25,498
Due after Ten Years 43,982 43,652 2,253 2,310
$ 233,545 $234,183 $ 33,348 $34,014
</TABLE>
NOTE 4 - SECURITIES (Continued)
Gross gains and losses from sales of securities for the years ending December
31, 1995, 1994 and 1993, are as follow:
<TABLE>
1995 1994 1993
(In Thousands of Dollars)
<S> <C> <C> <C>
Realized Gains $ 288 $ 795 $ 1,382
Realized Losses (446) (153) (126)
Net Gains and Losses $ (158) $ 642 $ 1,256
</TABLE>
Securities with carrying values of $45,983,000, and $46,447,000 at December
31, 1995 and 1994, repectively, were pledged as collateral on public deposits
and for other purposes as required or permitted by law.
NOTE 5 - LOANS
<TABLE>
The composition of net loans is as follows:
December 31,
1995 1994
(In Thousands of Dollars)
<S> <C> <C>
Commercial, Financial,
and Agricultural $ 132,601 $ 116,506
Real Estate-
Construction 12,393 8,654
Real Estate-mortgage 165,900 151,972
Loans to Individuals 97,554 94,520
Other 2,937 1,606
$ 411,385 $ 373,258
Deduct:
Unearned discount & net loan fees 5,386 6,554
Allowance for possible loan losses 5,430 5,844
$ 400,569 $ 360,860
</TABLE>
<TABLE>
Nonperforming assets consist of the following:
December 31,
1995 1994 1993
(In Thousands of Dollars)
<S> <C> <C> <C>
Nonaccrual Loans $ 1,925 $ 3,018 $ 4,006
Restructured Loans 714 1,172 1,128
Nonperforming Loans $ 2,639 $ 4,190 $ 5,134
Foreclosed Properties 881 677 1,382
Nonperforming Assets $ 3,520 $ 4,867 $ 6,516
</TABLE>
There were no commitments to lend additional funds to customers
whose loans were classified as nonperforming at December 31, 1995
and 1994. The following table shows the proforma interest
that would have been earned on nonaccrual loans and restructured
loans if they had been current in accordance with their original
terms and the recorded interest that was included in income
on these loans:
<TABLE>
Years Ended December 31,
1995 1994 1993
(In Thousands of Dollars)
<S> <C> <C> <C>
Interest Earned $ 150 $ 269 $ 244
Interest That Would
Have Been Earned 286 463 506
Interest Lost $ 136 $ 194 $ 262
Loss Per Common Share $ 0.02 $ 0.03 $ 0.04
</TABLE>
NOTE 5 - LOANS (continued)
<TABLE>
Changes in the allowance for possible loan losses are as follows:
Years Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Balance, Beginning $ 5,844 $ 5,227 $ 5,312
Provision Charged to
Operating Expenses 315 1,144 856
Recoveries of Amounts Charged Off 314 445 783
$ 6,473 $ 6,816 $ 6,951
Amounts Charged Off 1,043 972 1,724
Balance, Ending $ 5,430 $ 5,844 $ 5,227
Information about Impaired loans as of and for the year
ended December 31, 1995 is as follows:
Loans receivable for which
there is a related allowance
for loan losses $ 669
Loans receivable for which
there is no related allowance
for loan losses 1,929
Total impaired loans 2,598
Related allowance for
possible loan losses $ 175
Average balance (based
on month-end-balances) $ 3,415
Interest income recognized $ 146
</TABLE>
The Company has sold, without recourse, $25,787,000
and $24,817,000 in one-to-four family residential
real estate loans at December 31, 1995 and 1994,
respectively on the secondary mortgage loan market.
There were no outstanding commitments to fund additional
loans to a secondary market maker.
NOTE 6 - BANK PREMISES AND EQUIPMENT
The major classes of bank premises and equipment and the total
accumulated depreciation are as follows:
<TABLE>
December 31,
1995 1994
(In Thousands of Dollars)
<S> <C> <C>
Land $ 2,734 $ 2,984
Buildings and Improvements 13,207 10,718
Furniture and Equipment 10,291 8,858
$26,232 $22,560
Less Accumulated Depreciation 8,990 8,301
$17,242 $14,259
</TABLE>
NOTE 7 - SHORT-TERM DEBT
Short-term debt and weighted average interest rates at
December 31, 1995 and 1994, and the maximun amount
outstanding at any month-end during the year are summarized
as follows:
<TABLE>
December 31, 1995
Year-End Maximum
Amount Weighted Average Outstanding
Out- Average Out- Average at any
standing Rate standing Rate Month-End
(In Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Federal Funds Purchased
and Securities Sold
Under Agreements to
Repurchase $ 17,407 5.0% $ 15,402 5.69% $ 23,688
$ 17,407 5.0% $ 15,402 5.69% $ 23,688
</TABLE>
<TABLE>
December 31, 1994
Year End Maximum
Amount Weighted Average Outstanding
Out- Average Out- Average at any
standing Rate standing Rate Month-End
(In Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Federal Funds Purchased
and Securities Sold
Under Agreements to
Repurchase $ 19,877 4.56% $ 17,288 3.36% $ 25,597
Other Short-term Borrowing 1,500 6.75 17 5.85 1,500
$ 21,377 4.71% $ 17,305 3.37% $ 27,097
</TABLE>
Federal funds purchased include reserves at the
Federal Reserve or correspondent bank purchases
on a daily basis to satisfy reserve requirements.
Securities sold under repurchase agreements
mature daily or on demand.
NOTE 8 - LONG-TERM DEBT
The Company had unsecured term debt executed on
September 16, 1994 with a face value of $2,000,000.
The loan was payable in quarterly installments of $100,000
plus interest at the fixed rate of 7.60%. The balance
at December 31, 1994 was $1,900,000. The agreement
contained restrictions to maintain prescribed levels of
risk-based and other capital ratios, keep nonperforming
assets below an established minimum percentage of loans,
and certain other restrictions. At December 31, 1994,
the Company was in substantial compliance with all covenants.
The remaining balance of the loan was paid during 1995.
NOTE 9 - INCOME TAXES
<TABLE>
Net deferred tax assets consist of the following components:
December 31,
1995 1994
(In Thousands of Dollars)
<S> <C> <C>
Deferred Tax Assets:
Securities Available for Sale $ $ 3,086
Allowance for Possible Loan Losses 1,517 1,456
Deferred Compensation Plans 643 523
Net Operating Loss Carryforwards 235 292
Permanent Decline in Securities 111
Deferred Loan Fees, Net 93 77
Capital Loss Carryforwards 35 35
Investment Tax Credit Carryforwards 31 31
Other 37 122
$ 2,702 $ 5,622
Valuation Allowance 66 66
$ 2,636 $ 5,556
Deferred Tax Liabilities:
Securities Available for Sale $ 238 $
Bank Premises and Equipment 885 828
Accretion of Discounts, Net 243 131
$ 1,366 $ 959
$ 1,270 $ 4,597
</TABLE>
NOTE 9 - INCOME TAXES (continued)
<TABLE>
The components of consolidated income tax expense are as follows:
Years Ended December 31,
1995 1994 1993
(In Thousands of Dollars)
<S> <C> <C> <C>
Current Payable $ 2,964 $ 3,063 $ 3,290
Deferred (Prepaid) 3 (39) (401)
$ 2,967 $ 3,024 $ 2,889
</TABLE>
A reconciliation of the expected income tax expense
computed at 34% to the income tax expense included in the
consolidated statement of income is as follows:
<TABLE>
Years Ended December 31,
1995 1994 1993
(In Thousands of Dollars)
<S> <C> <C> <C>
Computed Expected Tax Expense $ 4,141 $ 4,090 $ 4,218
Tax-exempt Interest (1,380) (1,346) (1,153)
Disallowed Interest Expense to
Carry Tax-exempt Obligations 154 138 117
Utilization of Tax-loss Carryforward (405)
Tax Effect of Timing Differences
Recognized 127
Other, Net 52 142 (15)
$ 2,967 $ 3,024 $ 2,889
</TABLE>
At December 31, 1995, the Company had net operating loss carryforwards of
$690,849 expiring in the year ending 2004. The net operating loss deduction
is limited to $166,857 per year, to be utilized against the earnings of an
affiliated bank as defined by Internal Revenue Code Section 382.
NOTE 10 - STOCKHOLDERS' EQUITY
Premier dividend payments are made from dividends received from affiliates
which amounted to $11,044,000, $3,004,000, and $2,660,000 at December 31,
1995, 1994, and 1993, respectively.
Under applicable federal law, the Comptroller of the Currency restricts total
dividend payments in any calendar year to net profits of that year, as defined,
combined with retained net profits for the two preceding years. At
December 31, 1995, retained net profits, free of such restriction, amounted
to 14,233,000. Notwithstanding the aforementioned amounts available for
dividends, there is a further restriction that each bank must meet prescribed
levels of capital.
Legal lending limits on loans to Premier (Parent) are governed by Federal
Reserve Act 23A, and differ from legal lending limits on loans to external
customers. Generally, a bank may lend up to 10% of its capital and surplus
to its Parent, if the loan is secured. If collareral is in the form of
stocks, bonds, debentures or similar obligations, it must have a market value
when the loan is made of at least 20% more than the amount of the loan, and
if obligations of a state or political subdivision or agency thereof, it must
have a market value of at least 10% more than the amount of the loan. If
such loans are secured by obligations of the United States or agencies
thereof, or by notes, drafts, bills of exchange or bankers' acceptances
eligible for rediscount or purchase by a Federal Reserve Bank, requirements
for collateral in excess of loan amount do not apply. If collateral
is in the form of other real or personal property, it must have a market
value when the loan is made of at least 30% more than the amount of the loan.
Under this definition combined legal lending limit for Premier banks on loans
to Parent is $7,149,000 at December 31, 1995. There was deemed to exist
between the Parent and an affiliate bank at December 31, 1995 a 23A
transaction in the amount of $1,983,000.
Substantially all retained earnings of the Parent are represented by
undistributed earnings of the affiliates.
Earnings per share are computed on weighted average number of shares
outstanding of 6,650,083, for each of the years in the three-year period
ended December 31, 1995.
On December 14, 1995, the Company declared a four-for-three stock split to
shareholders of record at the same date. All per share data has been
restated to account for this stock split.
Federal regulatroy agencies have adopted various capital standards for
financial institutions, including risk-based capital standards. The primary
objectives of comparing capital positions of financial institutions are to
take into account the different risks among financial institutions' assets
and off-balance-sheet items.
Risk-based capital standards have been supplemented with requirements for a
minimum leverage ratio. The leverage ratio is the Company's Tier I Capital
divided by the amount of the Company's total assets as reported on the
balance sheet. In addition, the regulatory agencies consider the
published capital levels as minimum levels and may require a Financial
Institution to maintain capital at higher levels.
NOTE 10 - STOCKHOLDERS' EQUITY (continued)
A comparison of the Company's capital as of December 31, 1995 with the
minimum requirements for well capitalized and adequately capitalized
institutions is presented below.
<TABLE>
Minimum Requirements
Well Adequately
Actual Capitalized Capitalized
<S> <C> <C> <C>
Tier I Risk-based Capital 13.84% 6.00% 4.00%
Total Risk-based Capital 15.05% 10.00% 8.00%
Leverage Ratio 8.92% 5.00% 4.00%
Tangible Equity 8.92%
NOTE 11 - EMPLOYEE BENEFIT PLANS
A discretionary profit sharing plan and a defined contribution retirement
plan are maintained for employees. Total expenses (funded as accrued) related
to these plans were $817,000, $814,000 and $812,000 for the years ended
December 31, 1995, 1994 and 1993, respectively. Except for an annual ten
percent of participants' eligible compensation minimum funding requirement
in the defined contribution plan, there are no other liabilities
or commitments for any of these plans.
Deferred compensation plans exist for selected directors and officers of all
affiliated banks. Under plan provisions, certain directors and officers entered
agreements with the banks which required annual payments for ten years
certain, beginning at age 65 or at death. Participants have agreed to waive
certain future compensation to reduce overall plan costs. Another plan
available to certain officers of one affiliate bank provides for annual
payments for fifteen years certain. Payments on this later plan begin upon
retirement with certain reductions of benefits in the event of pre-retirement
death.
Lives of participants of all plans have been insured for amounts that will
partially discharge these obligations. These policies had cash surrender
values of $1,061,000 and $947,000 at December 31, 1995 and 1994, respectively,
which are reflected in other assets.
At December 31, 1995 and 1994, $1,891,000 and $1,538,000, respectively, had
been accrued under these contracts. This liability and related deferred
income tax charges of $643,000 and $523,000 arising from nondeductibility of
deferred compensation for income tax purposes until paid, are reflected in
the financial statements.
The increase in estimated present values of future benefits under these plans is
charged to operations annually and amounted to $239,000,$233,000 and $195,000
for the years ended December 31, 1995, 1994 and 1993, respectively.
Premier's Long-Term Incentive Plan (The "Plan" ) was approved by the
shareholders on April 20, 1995. The Plan administered by the Personal
Committee of the Board of Directors, (the "Committee"), provided for the
grant of incentive and non-qualified options, stock appreciation rights
(SAR's) which may or may not be granted in tandem with stock options,
limited stock appreciation rights, restricted stock awards and performance
shares andperformance units.
NOTE 11 - EMPLOYEE BENEFIT PLANS (continued)
All options and SAR's are granted at not less than 100% of the fair market
value of the Common Stock at date of grant except that up to 25% of the shares
may be granted in the form of non-qualified stock options priced at no less
than 50% of the fair market value of the Common Stock on the date of grant.
All options and SAR's are exercisable no sooner than six months nor more than
ten years. All options vest one-third per year for each of the first three
years after grant. SAR's entitle the holder to receive cash, shares, other
property, or any combination thereof, representing the excess of the Fair
Market Value of one share over the grant price.
Limited Stock Appreciation Rights are SAR's that can only be exercised in
the event of a change in control and only for a period of seven months
following the date of a change in control.
The Plan permits the Committee to award restricted stock to key employees of
the Corporation (without payment of consideration by the participant) with
such terms, conditions, restrictions or limitations as the Committee deems
appropriate. While the restrictions are in effect, the Committee may permit
a participant the right to vote shares and the right to receive any dividends.
Restricted stock awards may be evidenced by stock certificates, book-entry
registrations or in such other manner as the committee determines.
The Plan permits the Committee to grant performance shares and performance
units to key employees, which will entitle the participant to convert
the performance shares or performance units into shares of Common Stock or
into cash or into a combination thereof, as determined by the Committee if
pre-determined performance targets or goals are met. Performance goals
will include one or more of the following: deposit growth, asset quality,
net earnings, operating income, cash flow, return on equity, return on
capital employed, return on assets, and total stockholder return. Award
payments made in cash rather than by the issuance of shares shall not result
in additional shares being available for reissuance under the Plan:
The following is a summary of changes in options outstanding:
</TABLE>
<TABLE>
Number Option Price
of Shares Per Share Total
(In Thousands of Dollars)
<S> <C> <C> <C>
Options outstanding at
December 31, 1994 $ $
Granted 41,720* 12.56 524
Expired
Exercised
Options outstanding at
December 31, 1995 41,720 $12.56 $524
Shares available for grant
at December 31, 1995 791,613*
*Adjusted for the four for three stock split declared December 14, 1995.
</TABLE>
NOTE 12 - LEASE OBLIGATIONS
In the normal course of business, affiliates have entered into operating leases
for premises and equipment. Operating lease expense for the years ended
December 31, 1995, 1994 and 1993 was $35,000, $27,000,and $17,000, respectively.
At December 31, 1995, Premier and its affiliates were not obligated under
long-term operating or capital leases.
NOTE 13 - OTHER INFORMATION
The principal components of other income and other expenses in the consolidated
statements of income are:
<TABLE>
Years Ended December 31,
1995 1994 1993
(In Thousands of Dollars)
<S> <C> <C> <C>
Other Income (Includes no items in
excess of 1% of total revenue) $ 271 $ 297 $ 222
Other Expense
Data Processing Fees $ 979 $ 622 $ 963
Amortization of Goodwill 653 288 372
FDIC Assessment 691 1,279 1,092
Other (Includes no items in
excess of 1% of total revenue) 6,074 5,219 4,126
$8,397 $7,408 $6,553
</TABLE>
NOTE 14 - COMMITMENTS AND CONTINGENT LIABILITIES
Financial Instruments With Off-balance-sheet Risk: The Company is a
party to financial instruments with off-balance-sheet risk in the normal
course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit,
standby letters of credit and revolving home equity lines.
These instruments involve, to varying degrees, elements of credit risk
in excess of the amount recognized in the consolidated balance sheets.
The contractual amounts of these instruments reflect the extent
of Company involvement in particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to
extend credit and standby letters of credit is represented by the
contractual amount of those instruments. The Company uses the
same credit policies in making commitments and conditional obligations
as it does for on-balance-sheet instruments.
Unless noted otherwise, the Company requires that off-balance-sheet
financial instruments be collateralized by real estate.
NOTE 14- COMMITMENTS AND CONTINGENT LIABILITIES (continued)
<TABLE>
Contractual Amounts
at December 31,
1995 1994
(In Thousands of Dollars)
Financial instruments whose contract amounts represent credit risk:
<S> <C> <C>
Standby Letters of Credit $ 1,547 $ 1,664
Unused Commercial Line Commitments 21,260 18,584
Revolving Home Equity Lines 6,052 1,452
Credit Card Lines 6,091 3,717
Other 7,626 1,967
</TABLE>
Commitments to extend credit are agreements to lend to a customer as
long as there in no violation of any condition established in
the contract. Commitments generally have fixed expiration dates
or other termination clauses and may require payment of a fee.
Since many of the commitments are expected to expire without being used,
the total commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customer's credit worthiness
on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Company upon extension of credit, is based on
management's credit evaluation. Collateral held varies but may
include accounts receivable, inventory, property, plant, and equipment,
and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private
borrowing arrangements, including commercial paper, bond financing,
and similar transactions. The credit risk involved in issuing letters
of credit is essentially the same as that involved in extending loan
facilities to customers. Collateral held varies as specified above
and is required in instances the Company deems necessary.
Contingencies: In the normal course of business, the Company is
involved in various legal proceedings. In the opinion of management,
any liability resulting from such proceedings would not have a material
adverse effect on the Company's consolidated financial statements.
NOTE 15 - TRANSACTIONS WITH RELATED PARTIES
The Company's affiliated banks conducts banking transactions in the
ordinary course of business with directors, principal officers, their
immediate families and affiliated companies in which they are principal
stockholders (commonly (commonly referred to as related parties), all
of which have been, in the opinion of management, on the same terms,
including interest rates and collateral, as those prevailing at the time
for comparable transactions with others.
Aggregate loan transactions with related parties were as follows:
<TABLE>
Years Ended
December 31,
1995 1994
(In Thousands of Dollars)
<S> <C> <C>
Balance, Beginning
New Loans $ 9,410 $ 7,752
Repayments 5,354 18,303
Relationship Changes (5,470) (17,001)
Balance, Ending (1,784) 356
$ 7,510 $ 9,410
</TABLE>
NOTE 16 - RESTRICTIONS ON CASH AND DUE FROM BANKS
To comply with banking regulations, the banks are required to maintain
certain average cash reserve balances. The daily average cash reserve
requirement was approximately $3,703,000 and $2,763,000 for the
two-week period including December 31, 1995 and 1994, respectively.
NOTE 17 - UNAUDITED INTERIM FINANCIAL INFORMATION
The following unaudited data includes, in the opinion of
management, all adjustments(consisting only of normal,
recurring accruals) necessary to present fairly the results
of operations for such periods:
<TABLE>
1995
Three Months Ended
March 31, June 30, September 30, December 31,
(In Thousands of Dollars Except Per Share Data)
<S> <C> <C> <C> <C>
Interest Income $ 12,199 $ 13,038 $ 14,281 $ 14,125
Interest Expense 5,294 6,071 6,856 6,802
Provision for Possible
Loan Losses 188 127
Securities Gains(Losses) (40) (113) 49 (54)
Other Income 1,051 1,115 1,255 1,192
Other Expense 4,818 5,177 5,404 5,183
Income Before Tax
Expense $ 2,910 $ 2,665 $ 3,325 $ 3,278
Income Tax Expense 708 677 857 725
Net Income $ 2,202 $ 1,988 $ 2,468 $ 2,553
Net Income Per Share $ 0.33 $ 0.30 $ 0.37 $ 0.39
</TABLE>
<TABLE>
1994
Three Months Ended
March 31, June 30, September 30, December 31,
(In Thousands of Dollars Except Per Share Data)
<S> <C> <C> <C> <C>
Interest Income $ 11,671 $ 11,930 $ 12,059 $ 12,232
Interest Expense 4,999 5,056 5,042 5,210
Provision for Possible
Loan Losses 92 155 456 441
Securities Gains(Losses) 672 10 (15) (25)
Other Income 902 948 1,128 1,061
Other Expense 4,630 4,716 4,810 4,936
Income Before Tax
Expense $ 3,524 $ 2,961 $ 2,864 $ 2,681
Income Tax Expense 944 706 667 707
Net Income $ 2,580 $ 2,255 $ 2,197 $ 1,974
Net Income Per Share $ 0.39 $ 0.33 $ 0.33 $ 0.30
</TABLE>
NOTE 18 - PARENT COMPANY FINANCIAL INFORMATION
Condensed financial information of Premier Bankshares Corporation
(Parent Company) is presented below:
<TABLE>
December 31,
1995 1994
(In Thousands of Dollars)
<S> <C> <C>
Assets
Cash and Noninterest Bearing
Deposits in Banks $ 122 $ 690
Interest-bearing Deposits in Banks 53 51
Investments 61 200
Investments in Affiliated
Banks, at Equity 71,873 58,406
Loans, Net 38
Premises & Equipment, Net 2,953 2,989
Other Assets 201 249
Intangibles 879 1,052
$76,142 $63,675
Liabilities
Accounts Payable and Accrued Liabilities $ 936 $ 1,282
Short-term Debt 200
Long-term Debt 1,983 1,900
$ 2,919 $ 3,382
Stockholders' Equity
Common Stock $13,300 $ 9,975
Capital Surplus 18,704 22,029
Retained Earnings 40,818 34,501
Net Unrealized Gain (Loss) on Securities
Available For Sale 401 (6,212)
$73,223 $60,293
$76,142 $63,675
</TABLE>
NOTE 18 - PARENT COMPANY FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Income
Years Ended December 31,
1995 1994 1993
(In Thousands of Dollars)
<S> <C> <C> <C>
Income
Dividends from Banking Affiliates $11,044 $3,004 $2,660
Service Fees 1,728 273 279
Interest 9 5 4
$12,781 $3,282 $2,943
Expenses
Salaries and Employee Benefits $ 1,086 $ 737 $ 590
Interest on Short-term Debt 145 1 8
Interest on Long-term Debt 151 39 18
Equipment Rentals, Depreciation
and Maintenance 234 112 148
Professional Fees 425 675 84
Postage 247 12 8
Courier 156
Data Processing 108 27 11
Amortization of Goodwill and
Other Intangibles 173 173 270
Other 420 235 152
$ 3,145 $2,011 $1,289
Income Before Income Tax Benefit and
Equity in Undistributed Income
of Affiliates $ 9,636 $1,271 $1,654
Federal Income Tax Benefit 321 499 213
Income Before Equity in Undistributed
Income of Affiliates $ 9,957 $1,770 $1,867
Equity in Undistributed
Income of Affiliates (746) 7,236 7,652
Net Income $ 9,211 $9,006 $9,519
</TABLE>
NOTE 18 - PARENT COMPANY FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Cash Flows
Years Ended December 31,
1995 1994 1993
(In Thousand of Dollars)
Cash Flows From Operating Activities
<S> <C> <C> <C>
Net Income $ 9,211 $ 9,006 $ 9,519
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation of Premises & Equipment 185 80 69
Deferred Tax Assets (Liabilities) (100) 93
Amortization of Intangibles 173 173 270
Decrease (Increase) in Equity in
Undistributed Income of Affiliates 746 (7,236) (7,652)
Decrease (Increase) in Other Assets 148 (149) (104)
Decreae (Increase) In Accounts Payable
and Accrued Liabilities (346) 610 129
Net Cash Provided By Operating
Activities $10,017 $2,577 $2,231
Cash Flows From Investing Activities
Net Increase in Temporary Investments $ (2) $ (51) $
Purchase Of Investment Security (61) (200)
Sale of Investment Security 200
Repayment of Loan Receivable
From Affiliate 1,041 959
Advance of Loan Receivable
From Affiliate 1,983
Investment in Affiliates (7,600) 70 169
Net Decrease In Customer Loan 38 17
Premises and Equipment Expenditures (149) (2,852) (17)
Net Cash Provided By (Used In)
Investing Activity $(5,591) $(1,975) $1,111
Cash Flows From Financing Activities
Increase (Decrease) in Short-term Debt $ (200) $ 140 $ (140)
Issuance of Long-term Debt 2,000
Repayment of Long-term Debt (1,900) (100) (776)
Purchase of Capital Stock (7)
Cash Dividends (2,894) (2,377) (2,152)
Net Cash Used in Financing Activities $(4,994) $ (337) $(3,075)
Net Increase(Decrease) in Cash and Due
from Banks $ (568) $ 265 $ 267
Cash and Due from Banks
Beginning 690 425 158
Ending $ 122 $ 690 $ 425
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT*
ITEM 11. EXECUTIVE COMPENSATION*
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT*
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS*
*This information is incorporated by reference from the registrant's
definitive proxy statement pursuant to Instruction G of Form 10-K since
the Registrant has filed with the Securities and Exchange Commission a
definitive Proxy Statement in respect to its 1996 Annual Stockholders
Meeting.
PART IV
ITEM 14, EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-
K
(a) (1) and (2) The following documents are filed as a part of this
report:
Financial Statements:
The report of independent auditors and consolidated financial
stements of Premier Bankshares
Corporation and Affiliates as listed in the accompanying Index to
Financial Statements and Schedules are
included herein.
Financial Statement Schedules:
None
Exhibits:
The Exhibits required by Regulation S-K are listed in the Exhibit
Index.
(b) No reports on Form 8-K were filed for the three months ended
December 31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PREMIER BANKSHARES CORPORATION
(Registrant)
By: /s/ James R. Wheeling
James R. Wheeling, President,
Chief Executive Officer and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
/s/ Donald B. Baker, Director /s/ Charles C. Henley, Director
Date Executed: 02-15-96 Date Executed: 02-15-96
/s/ Claude H. Vandyke, Director /s/ Stanley King, Sr., Director
Date Executed: 02-15-96 Date Executed: 02-15-96
/s/ George R. Smith,Jr.,Director /s/ John A. Johnston, Director
Date Executed: 02-15-96 Date Executed: 02-15-96
/s/ Robert B. Brittain, Director /s/ Miles L. Hillman, Director
Date Executed: 02-15-96 Date Executed: 02-15-96
/s/ Jack P. Chambers, Director /s/ Gene H. James, Director
Date Executed: 02-15-96 Date Executed: 02-15-96
/s/ J. Robert Buchanan, Treasurer /s/ Ellen Simpson, Controller
J. Robert Buchanan, VP & Treasurer Ellen Simpson, Controller
(Principal Financial Officer) (Principal Accounting Officer)
ANNUAL REPORT ON FORM 10-K
ITEM 14 (a) (1) and (2) and (c)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
YEAR ENDED DECEMBER 31, 1995
PREMIER BANKSHARES CORPORATION
BLUEFIELD, VIRGINIA
FORM 10-K--ITEM 14 (a) (1) and (2)
PREMIER BANKSHARES CORPORATION AND AFFILIATES
Index to Financial Statements and Schedules
Page
The following report of independent auditors and
consolidated financial statements of Premier
Bankshares Corporation and Affiliates for the year
ended December 31, 1995 are included in Item 8:
Report of Independent Auditors 32
Consolidated Balance Sheets - December 31, 1995 and 34
1994
Statements of Consolidated Income - Years ended
December 31, 1995, 35
1994 and 1993
Statements of Changes in Stockholders' Equity -
Years ended December 31, 1995, 1994 and 1993 36
Statements of Consolidated Cash Flows - Years ended
December 31, 1995, 1994 and 1993 37-38
Notes to Consolidated Financial Statements 39-63
Schedules to the consolidated financial statements
required by Article 9 of Regulation S-X are not
required under the related instructions or are
inapplicable and there fore have been omitted.
NOTE: ANY EXHIBITS WILL BE FURNISHED UPON REQUEST AND UPON
PAYMENT OF REASONABLE COST TO PREMIER FOR PREPARING AND
DELIVERING COPY.
EXHIBIT INDEX
13. Annual Report to Security Holders.
22. Subsidiaries of Registrant.
23. Consents of Experts and Counsel
Consent of Brown, Edwards & Company
EXHIBIT 22
Parent and Subsidiaries
Registrant:
Premier Bankshares Corporation
29 College Drive
P.O. Box 1199
Bluefield, Virginia 24605
Subsidiaries of Registrant:
Percentage Organized Under Parent
Owned Jurisdiction Corporation
of
Premier Bank-Central, 100.00 The United Registrant
N.A. States of
America
Premier Bank, N.A. 100.00 The United Registrant
States of
America
Premier Bank-South, 100.00 The United Registrant
N.A. States of
America
Premier Trust Company 100.00 Laws of the Registrant
State of
Virginia
Premier Bank Services 100.00 Laws of the Registrant
Corporation State of
Virginia
Professional Financial 100.00 Laws of the Registrant
Services of Virginia, State of
Inc. Virginia
EXHIBIT 23
BROWN, EDWARDS & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Premier Bankshares Corporation
We consent to the incorporation by reference of our
report dated January 18, 1996, appearing in the annual
report on Form 10-K for the years ended December 31, 1994
and 1993.
Brown, Edwards & Company, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
1969 LEE HIGHWAY
BRISTOL, VIRGINIA
FEBRUARY 7, 1996
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