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, 1996
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 15, 1997:
Common Stock, $2 par value - $ 171,386,648
The number of shares outstanding of the issuer's classes of common
stock, as of March 15, 1997:
Common Stock, $2 par value - 6,650,083 Shares
DOCUMENTS INCORPORATED BY REFERENCE:
Agreement and Plan of Reorganization and the Stock Option Agreement are
incorporated herein by reference to Exhibit I of First Virginia Bank's
Schedule 13D (filed on November 8, 1996)
PREMIER BANKSHARES CORPORATION
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
PAGE
Item 1. Business 3
Item 2. Properties 7
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security
Holders Executive Officers of the Registrant 8
PART II
Item 5. Market for the Registrant's Common Stock
and Related Security Holder Matters 9
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation 10
Item 8. Financial Statements and Supplementary Data 34
Item 9. Disagreements on Accounting and Financial Disclosure 73
PART III
Item 10. Directors and Executive Officers of the Registrant 73
Item 11. Executive Compensation 73
Item 12. Security Ownership of Certain Beneficial Owners and
Management 77
Item 13. Certain Relationships and Related Transactions 78
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 78
Signatures 79
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).
April 9, 1996, Premier Bank-Central, N. A. leased space and opened a
loan production office in Bristol, Virginia. September 30, 1996, Premier
Bank-South, N. A. also leased space and opened a branch office in
Christiansburg, Virginia. On December 16, 1996, Premier Bank-Central
acquired the outstanding stock of Big Stone Gap Bank and Trust Company of
Big Stone Gap, Virginia which had only the one location in Big Stone Gap,
Virginia. Big Stone Gap was immediately merged into Premier Bank-Central,
N.A. and the previously existing branch of Premier Bank-Central, N.A. was
moved to the purchased location.
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, 1996, 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.
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.
The commercial loan portfolio consists of general commercial loans,
agricultural loans and commercial real estate loans. The general
commercial loans include working capital lines or single pay notes to
finance accounts receivable, inventory and other short-term cash
requirements of a commercial borrower, and amortizing loans which finance
fixed assets, acquisitions or permanent growth in the working capital
accounts. The agricultural loans include seasonal or working capital
lines to finance crops or livestock (primarily beef or dairy cattle), and
term loans to finance land or equipment. The commercial real estate loans
typically finance the construction or purchase of commercial real estate.
The primary credit risk associated with all commercial lending is that
the borrower will not be able to repay the debt as contracted. In an
effort to minimize this risk, the bank has established underwriting
standards which stress quality loan growth. Two sources of repayment are
generally sought for all loans: operating cash flow of the business or
project and guarantor or collateral support. The majority of our
commercial loans are for less than $1.0 million. Economic risks
(inflationary or recessionary pressures, unemployment trends,
competition) are also analyzed during the loan approval process.
The bank's primary market is southwest Virginia. The more rural
counties within this market are dependent on coal mining and farming for
jobs and report unemployment rates in the 10% range. Significant
improvement is not expected during 1997; the production of coal in
Virginia was up only modestly in 1996; beef producers will experience
another rough year due to continued low cattle prices. Salem-Roanoke is
a more diversified segment of the bank's market and reports an
unemployment rate in the 3% range. The region's companies expect an
average 10% increase in sales during 1997 and overall growth in total
employees. Roanoke's commercial real estate market is characterized by a
large amount of unleased downtown space but a tight supply of suitable
inventory in the outlying counties. Home sales were down slightly in
1996 and are expected to track the direction of interest rates during 1997.
Only very strong customers with excellent bank relationships and who
represent very little credit risk will be considered for unsecured
credit. The majority of the commercial loan portfolio is secured and the
maximum collateral margins recommended by bank policy are as follows:
Collateral % of Market Value
Raw Land 65%
Land Development 75%
Improved Property 85%
Commercial Construction 80%
Accounts Receivable 50-60%
Inventory 50%
Equipment 70%
Consumer loans include mortgage, credit card, installment, and single
pay loans. The retail real estate represents 1-4 family first and
second mortgage loans. The bankcard debt represents unsecured revolving
lines of credit. The retail installment and single pay loans represent
all other consumer purpose loans (autos, household goods, etc.). The
bank emphasizes loan decisions that focus on a customer's total debt
obligations, ability and willingness to repay and current economic
trends. The majority of the consumer loan portfolio is secured and the
maximum collateral margins recommended by bank policy are as follows:
Collateral % of Market Value
Owner occupied 1-4
family and home equity 80% to 89%
Construction 1-4
family residential 85%
Mobile homes 80%
Automobiles 80%
Boats 75%
Motorcycles, ATVs 70%
Recreational vehicles 75%
Household goods 80%
Home improvement 80%
Listed stock, municipal
bonds 70%
Savings 100%
The consumer portfolio includes indirect loans purchased from retail
dealers (primarily auto dealerships). The dealer retains liability for
those loans sold with full or partial recourse; the bank assumes the full
credit risk for all nonrecourse loans. The financial strength and
stability of the dealers are the primary basis for accepting recourse
contracts. Nonrecourse contracts are evaluated and purchased on the
merits of the makers and must meet the underwriting standards outlined in
bank policy.
The accrual of interest is generally discontinued on all loans that
become 90 days past due as to principal and interest unless the loan is
well collateralized and in the process of collection. Charge-off,
repossession or foreclosure is generally initiated at 120 days on all
consumer loans.
Mortgage-backed securities accounted for approximately 30.47%, or
$58,244,000 of the investment portfolio at December 31, 1996. The
principle risks associated with the mortgage-backed securities are credit
risk and prepayment risk. The portfolio had only one private issue
mortgage-backed security and it maintains a AAA rating by Moodys. The
remaining mortgage securities were federally sponsored Ginnie Mae,
Freddie Mac and Fannie Mae. These mortgage-backed securities were pass-
through securities and collateral mortgage obligations (CMO). The
composite weighted average life for these mortgage securities was 3.41
years. There were eighteen CMO securities, or approximately $9,060,000
at year-end 1996 in the portfolio. These were not considered high-risk
securities as they meet the FFIEC test. The average life of these CMOs
was .55 years.
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
twelve 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, Salem and an office opened in 1996
in the city of Christiansburg. It owns an unimproved lot in the City of
Roanoke which was origionally bought by Bank of Shawsville, Inc. 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. During 1995, it also opened a loan production office in the
city of Bristol, Virginia.
Premier has, in the past, leased part of its headquarters building to
the former owner. This lease is expected to be terminated in February
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 1996.
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 41 President, CEO and 1990
Director of Premier
J. Robert Buchanan 46 Senior Vice President 1991
and 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
Income* Dividends* Value* High Low Volume
<S> <C> <C> <C> <C> <C> <C>
1996
1st Quarter $ 0.38 $ 0.12 $ 11.04 $ 20.00 $ 14.75 174,545
2nd Quarter 0.39 0.12 11.19 19.25 16.50 104,730
3rd Quarter 0.41 0.12 11.51 18.00 16.50 53,128
4th Quarter 0.35 0.12 11.81 25.50 16.50 170,334
Year 1.53 0.48 11.81 25.50 14.75 520,737
1995
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
</TABLE>
*1995 figures adjusted to reflect the four for three stock split
declared on December 14, 1995.
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, 1996 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 Bank-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.
Effective with the acquisition, on December 16, 1996, Big Stone Gap
Bank and Trust Company was acquired by and merged into Premier Bank
Central, N. A. with Premier Bank-Central, N. A. being the survivor.
AFFILIATION
On December 16, 1996, Premier Bank-Central, N. A. acquired the
outstanding stock of Big Stone Gap Bank and Trust Company of Big Stone
Gap, Virginia at $50.00 per share for an aggregate amount of $4,328,500,
utilizing the purchase method of accounting. Big Stone Gap Bank and
Trust was immediately merged into Premier Bank-Central, N.A. At date of
acquistion, Big Stone Gap reported total assets of $23,147,000.
<TABLE>
TABLE I
PREMIER BANKSHARES CORPORATION AND AFFILIATES
SELECTED FINANCIAL INFORMATION: FIVE YEAR SUMMARY
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Interest Income $ 57,094 $ 53,643 $ 47,892 $ 44,513 $ 42,699
Interest Expense 25,669 25,023 20,307 19,164 19,533
Net Interest Income 31,425 28,620 27,585 25,349 23,166
Provision for Loan Losses 880 315 1,144 857 1,151
Other Income 5,067 4,455 4,681 5,033 4,350
Other Expense 22,194 20,582 19,092 17,118 15,150
Applicable Income Taxes 3,267 2,967 3,024 2,889 2,955
Net Income 10,151 9,211 9,006 9,519 8,260
PER SHARE DATA:
Net Income $ 1.53 $ 1.39 $ 1.35 $ 1.43 $ 1.25
Cash Dividends Declared 0.48 0.43 0.36 0.32 0.28
Book Value 11.81 11.01 9.07 8.99 7.88
AVERAGE BALANCE SHEET SUMMARY:
Loans, Net $ 443,309 $ 380,767 $ 357,235 $ 318,764 $ 289,056
Securities 232,880 239,105 232,898 202,745 161,484
Total Assets 752,558 711,968 651,807 596,069 506,340
Deposits 658,421 626,094 567,711 522,796 444,422
Capital 75,340 64,910 60,135 56,443 48,534
END OF PERIOD BALANCE SHEET SUMMARY:
Loans, Net $ 492,215 $ 400,569 $ 360,860 $ 332,725 $ 300,898
Securities 191,095 267,531 231,448 230,076 189,761
Total Assets 761,104 762,035 655,193 640,590 546,676
Deposits 665,798 661,913 569,410 560,744 480,758
Capital 78,565 73,223 60,293 59,769 52,421
SELECTED RATIOS:
Equity to Assets 10.32 % 9.61 % 9.20 % 9.33 % 9.59 %
Average Equity to
Average Assets 10.01 9.12 9.23 9.47 10.35
Return on Average Assets 1.35 1.29 1.38 1.60 1.63
Return on Average Equity 13.47 14.19 14.98 16.86 17.02
Tier I Capiatal 13.88 13.84 16.79 * *
Tier II Capital 15.04 15.05 18.04 * *
Leverage Ratio 9.20 8.92 10.05 * *
Spread on Average Assets 4.45 4.31 4.55 4.54 *
Net Spread 4.18 4.00 4.27 3.42 *
Net Interest Margin 4.82 4.62 4.84 4.82 *
Avg. Interest-earning
Assets/Avg. Interest-bearing
Liabilities 117.20 116.41 117.20 117.30 *
Total Non-interest Exp/Avg.
Assets 2.95 2.89 2.93 2.87 *
Non-performing Assets/
Total Assets .35 .46 .74 1.02 1.18
Reserves as % of
Non-performing 212.85 154.26 120.07 80.22 82.17
Cash Dividends
Declared as Percent of
Net Income 32.74 31.42 26.39 22.61 22.35
</TABLE>
*Figures not readily Available
PREMIER BANKSHARES CORPORATION AND AFFILIATES
EARNINGS PERFORMANCE
Premier's net income for 1996 was $10,151,000, a 10.21% increase over 1995
income of $9,211,000. On a per share basis, net income was $1.53 per
share compared to $1.39 in 1995.
Average shares outstanding were 6,650,083 for both 1996 and 1995.
Premier closed 1995 at $9,211,000, or $1.39 per share
compared to 1994 earnings of $9,006,000 ($1.35 per share).
PREMIER BANKSHARES CORPORATION AND AFFILIATES
NET INTEREST INCOME
Management has continued to monitor closely the
asset/liability position of the company. Systems were implemented to
control costs of funds, while greater emphasis was placed on improving
yields.
Net interest income increased $2,805,000, or 9.80% in 1996
to $31,425,000 from $28,620,000 in 1995. This increase was primarily due
to a shift from securities and fed funds sold in 1995 to loans in 1996
coupled with a 4.76% increase in average earning assets in 1996. On a
taxable equivalent basis, the average rate paid on interest-bearing
liabilities decreased 6 basis points to 4.33%, while the taxable
equivalent yield on average interest-earning assets increased 12 basis
points to 8.51% in 1996. As a result, the net interest spread or
differential was 4.18% with a net yield or margin of 4.82% in 1996
compared to 4.00% and 4.62%, respectively, in 1995. Total average loans
increased 15.04%, total average securities decreased 2.60%, and average
fed funds sold and deposits decreased 60.12%. Total interest bearing
liabilities increased 4.05% over 1995.
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 7.44% , total average securities increased 2.67%,
and average federal funds sold and deposits increased 104.76% with total
average earning assets increasing to $663,727,000 in 1995.
Forgone interest on non-performing loans amounted to $113,000 in
1996, $136,000 in 1995, and $194,000 in 1994.
Net interest income for the years 1994 through 1996 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)
1996 1995
1996 1995 1994 Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income from
Loans:
Demand and Time** $ 9,261 $ 6,133 $ 4,519 $ 3,128 51.00 % $ 1,614 35.72%
Real Estate 22,952 21,447 19,307 1,505 7.02 2,140 11.08
Installments 11,177 10,231 9,018 946 9.25 1,213 13.45
Total Loan Income*** $43,390 $37,811 $32,844 $ 5,579 14.76 % $ 4,967 15.12
Interest Income from
Securities:
Taxable 9,300 9,908 10,379 (608) (6.14) (471) (4.54)
Non-taxable* 5,744 5,962 5,947 (218) (3.66) 15 0.03
Total Security
Income* $15,044 $15,870 $16,326 $ (826) (5.20) % $ (456) (2.79)%
Federal Funds Sold
and Deposits 752 2,017 774 (1,265) (62.72) 1,243 160.59
Total Interest Income $59,186 $55,698 $ 49,944 $ 3,488 6.26 % $ 5,754 11.52%
Interest Expense:
Demand Deposits 2,064 2,061 1,807 3 0.15 254 14.06
Savings 4,073 4,705 5,851 (632) (13.43) (1,149) (19.59)
Large Denomination
Certificates 2,881 2,801 2,108 80 2.86 693 32.87
Other Time Deposits 16,086 14,379 9,870 1,707 11.87 4,509 45.68
Borrowed Funds 565 1,077 671 (512) (47.54) 406 60.51
4)
Total Interest Expense$25,669 $25,023 $20,307 $ 646 2.58 % $ 4,716 23.22%
Net Interest Income* $33,517 $30,675 $29,637 $ 2,842 9.26 % $ 1,038 3.50%
</TABLE>
*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 III
PREMIER BANKSHARES CORPORATION AND AFFILIATES
RATE/VOLUME ANALYSIS OF CHANGES
IN INTEREST INCOME AND EXPENSE***
(IN THOUSANDS OF DOLLARS)
1996 vs 1995 1995 vs 1994
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** $ 4,203 $(1,075) $ 3,128 $ 823 $ 791 $ 1,614
Real Estate 1,681 (176) 1,505 1,077 1,063 2,140
Installments 261 685 946 586 627 1,213
Total Loans $ 6,145 $ (566) $ 5,579 $ 2,486 $ 2,481 $ 4,967
Securities:
Taxable (322) (286) (608) 382 (853) (471)
Non-taxable* (77) (141) (218) 30 (15) 15
Total Securities $ (399) $ (427) $ (826) $ 412 $ (868) $ (456)
Federal Funds Sold
and Deposits (1,213) (52) (1,265) 812 431 1,243
Total Interest
Income* $ 4,533 $(1,045) $ 3,488 $ 3,710 $ 2,044 $ 5,754
Deposits:
Interest-bearing
Checking 230 (227) 3 239 15 254
Savings Deposits (331) (301) (632) (578) (568) (1,146)
Large Denomination
Certificates 33 47 80 370 323 693
Other Time Deposits 1,553 154 1,707 2,007 2,502 4,509
Total Deposits $ 1,485 $ (327) $ 1,158 $ 2,038 $ 2,272 $ 4,310
Borrowed Funds (368) (144) (512) 1 405 406
Total Interest
Expense $ 1,117 $ (471) $ 646 $ 2,039 $ 2,677 $ 4,716
Net Interest
Income* $ 3,416 $ (574) $ 2,842 $ 1,671 $ (633) $ 1,038
</TABLE>
*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.
PREMIER BANKSHARES CORPORATION AND AFFILIATES
OTHER INCOME AND EXPENSE
Total Other Income in 1996 totaled $5,067,000, a $612,000 or 13.74%
increase over the $4,455,000 in 1995. Not considering security gains/
(losses), other income increased $826,000, or 17.91%. Service charges on
deposit accounts increased $396,000, other service charges commissions
and fees increased $231,000, other operating income increased $178,000 and
trust department income increased $21,000. Security losses were $372,000 in
1996 and $158,000 in 1995.
Other operating expenses in 1996 increased $1,612,000, or 7.83%. Salaries
accounted for $1,270,000 of this increase. Normal salary increases, an
additional branch opened in Christiansburg, and a loan production office opened
in Bristol, Virginia accounted for a large part of the change in salaries in
1996. Also, 1996 reflected a full year of salaries paid to employees of the
seven branches purchased in 1995, whereas 1995 reflected salaries from the
second and third quarters forward. The increase in occupancy expenses of
$246,000 was largely the result of these same structural changes.
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.
Largely the result of structural changes, other operating expenses in 1995
increased $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.
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 (Decrease) Increase (Decrease)
1996 1995
1996 1995 1994 Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C> <C>
Service Charges on
Deposit Accounts $2,941 $2,545 $ 2,006 $ 396 15.56 % $ 539 26.87%
Trust Fees 239 218 240 21 9.63 (22) (9.17)
Other Service Charges,
Commissions and Fees 1,810 1,579 1,496 231 14.63 83 5.55
Other Operating Income 449 271 297 178 65.68 (26) (8.75)
Security Gains (372) (158) 642 (214) 135.44 (800) (124.61)
Total Other Income $ 5,067 $4,455 $ 4,681 $ 612 13.74 % $(226) (4.83)%
</TABLE>
TABLE V
PREMIER BANKSHARES CORPORATION AND AFFILIATES
OTHER EXPENSES
(IN THOUSANDS OF DOLLARS)
<TABLE>
Increase (Decrease) Increase (Decrease)
1996 1995
1996 1995 1994 Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries and Wages $ 9,274 $ 8,004 $ 7,480 $1,270 15.87 % $ 524 7.01 %
Employee Benefits 1,993 2,072 2,259 (79) (3.81) (187) (8.28)
Total Employee
Benefits $ 11,267 $10,076 $ 9,739 $1,191 11.82 % $ 337 3.46 %
Other Operating Expenses:
Occupancy 1,150 904 846 246 27.21 58 6.86
Equipment 1,377 1,205 1,099 172 14.27 106 9.65
Other Operating
Expenses 8,400 8,397 7,408 3 0.04 989 13.35
Total Other Operating
Expenses $ 10,927 $10,506 $ 9,353 $ 421 4.01 % $1,153 12.33 %
Total Other
Expenses $ 22,194 $20,582 $19,092 $1,612 7.83 % $1,490 7.80 %
</TABLE>
PREMIER BANKSHARES CORPORATION AND AFFILIATES
ALLOWANCE FOR LOAN LOSSES
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.
Net loans charged off in 1996 increased by $18,000 compared to 1995,
while $880,000 in provisions were added during the year compared to $315,000
last year. Also, $150,000 additional reserves were added as a result of the
acquisition of Big Stone Gap Bank and Trust. Premier remains committed to
maintaining more than adequate reserves for possible loan losses. The
allowance at year-end of $5,713,000 was 1.29% of average outstanding loans.
Total non-performing assets decreased by $836,000, or 23.75% in 1996.
Foreclosed properties decreased $163,000, and non-accrual loans decreased
$1,037,000 while restructured loans increased $364,000. Total delinquent
loans increased $1,105,000, or 10.92% in 1996. However, delinquencies
represented 2.31% of loans net of unearned compared to 2.49% last year.
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.
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.
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 VI
PREMIER BANKSHARES CORPORATION AND AFFILIATES
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
(IN THOUSANDS OF DOLLARS)
<TABLE>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Balance at Beginning of Period $ 5,430 $ 5,844 $ 5,227 $ 5,312 $5,217
Charge-offs:
Commercial, Finanical and
Agriculture 134 329 171 367 553
Real Estate - Construction
Real Estate - Mortgage 113 22 116 623 117
Loans to Individuals 824 692 685 734 939
Other Loans
Total charge-offs 1,071 1,043 972 1,724 1,609
Recoveries:
Commercial, Financial and
Agriculture 60 57 178 209 240
Real Estate - Construction
Real Estate - Mortgage 42 15 44 104 61
Loans to Individuals 222 242 223 470 252
Other Loans
Total Recoveries 324 314 445 783 553
Net Charge-offs (Recoveries) 747 729 527 941 1,056
Additions Charged to Operations 880 315 1,144 856 1,151
Changes Incident to Merger 150
Balance at End of Period $ 5,713 $ 5,430 $ 5,844 $ 5,227 $5,312
Ratio of Net Charge-offs (Recoveries)
to Average Outstanding Loans 0.17 % 0.19 % 0.14 % 0.29 % 0.36 %
Ratio of Allowance for Loan Losses
to Average Outstanding Loans 1.29 % 1.40 % 1.61 % 1.62 % 1.81 %
Ratio of Provision for Loan Losses
to Average Outstanding Loans 0.20 % 0.08 % 0.32 % 0.26 % 0.39 %
</TABLE>
TABLE VII
PREMIER BANKSHARES CORPORATION AND AFFILIATES
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
(IN THOUSANDS OF DOLLARS)
<TABLE>
1996 1995 1994 1993 1992
% of % of % of % of % of
Loans Loans Loans Loans Loans
to Total to Total to Total to Total to Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Domestic
Commercial,
Financial and Agri-
cultural $2,280 31.76%$2,206 32.23%$2,658 31.21%$2,465 30.63%$2,401 18.74%
Real Estate -
Construction 50 3.45 50 3.01 105 2.32 90 1.64 83 1.60
Real Estate -
Mortgage 775 43.66 722 40.33 982 40.72 875 41.76 805 52.75
Loans to
Individuals 2,050 19.87 2,017 23.71 1,549 25.32 1,384 25.41 1,302 26.35
Other Loans 16 1.26 15 .72 20 .43 20 .56 20 0.56
Foreign
Unallocated 542 420 530 393 701
Totals $ 5,713 100.00%$5,430 100.00%$5,844 100.00%$5,227 100.00%$5,312 100.00
</TABLE>
PREMIER BANKSHARES CORPORATION AND AFFILIATES
INCOME TAXES
Applicable income taxes on 1996 earnings amounted to $3,267,000 or 24.35%
of income before income taxes, compared to $2,967,000 or 24.36% for 1995.
BALANCE SHEET ANALYSIS
Premier's total assets decreased $931,000 to $761,035,000 from year-end 1995.
Average earning assets increased 4.76% during 1996, and comprised 92.39% of
average total assets.
The Corporation had total assets of $762 million at the end of 1995, an
increase of 16.31% over 1994.
LOANS
Loan demand was significantly higher in 1996 than in previous years
and total loans, net of unearned income, at year-end totaled $497,928,000,
an increase of $91,929,000, or 22.64% over 1995. The most significant
increases were in real estate mortgages. The ratio of loans-to-deposits
at year-end 1996 was 75.09%, compared to 61.56% at year-end 1995. The ratio
of net chargeoffs to average outstanding loans was 0.17% in 1996. Loans
delinquent 90 days or more and still accruing were $2,520,000 in 1996 compared
to $1,548,000 in 1995; nonaccrual loans decreased from $1,925,000 in 1995 to
$888,000 in 1996. Foreclosed properties decreased from $881,000 in 1995 to
$718,000 in 1996; restructured loans increased from $714,000 in 1995 to
$1,078,000 in 1996.
Total loans, net of unearned income, at year-end 1995 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 61.56%, compared
to 63.37% 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 chargeoffs 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. Forclosed
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 44.05% and 40.86% of the loan
portfolio net of unearned interest at December 31, 1996 and December 31, 1995,
respectively. Management believes that such loans 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. Also in 1995,
through Premier Bank-South, N.A. an agreement was entered into with Chase
Manhattan Mortgage Corporation to sell real estate mortgages on the secondary
market along with a contract with Nellie Mae. There was also an agreement
made with Chase Manhattan Funding in 1996.
Table VIII reflects loans by type while Table IX shows average rates
earned and other significant data on loans.
INVESTMENTS
The investment securities portfolio decreased $76,436,000,
or 28.57% over 1995. At year-end 1996, the portfolio totaled $191,095,000,
compared to $267,531,000 at year-end 1995. At year-end 94% of all
securities were rated "A" or better, or were issued by the U.S. Government
or its agencies. The investment portfolio had an average taxable
equivalent yield of 6.46% at year-end.
Investments increased $36,083,000, or 15.59% in 1995 over 1994. At
year-end, the portfolio totaled $267,531,000, compared to $231,448,000 at
year-end 1994 and 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 $3,885,000 to $665,798,000 at year-end 1996.
Interest-bearing demand accounts, savings, and large denomination
certificates of deposit decreased 3.03%, 4.37% and 1.64%, respectively.
Non-interest bearing demand and other time deposits increased 16.44% and
.66%, respectively, in 1996 over 1995.
Total deposits increased $92,503,000 to $661,913,000 at year end 1995
compared to $569,410,000 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 1996 was $78,565,000
compared to $73,223,000 at year-end 1995. Changes in the interest rate
environment during 1996 were reflected through a negative adjustment of
$1,478,000 to the allowance for net unrealized losses in available for sale
securities bringing the year-end balance to a net unrealized loss of
$1,077,000 compared to a gain of $401,000 at year-end 1995. At year-end,
the leverage capital ratio was 9.20%.
Common stockholders' equity at year-end was $78,565,000 compared to
$73,223,000 for 1995. There was a positive adjustment in the allowance
for unrealized losses in 1994 of $6,212,000 to reflect a net unrealized
gain of $401,000 at year-end 1995. At year-end 1995, 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
4,987,805 for 1995 and 1994, respectively. Restated for the split, average
shares were 6,650,803 for each of the three years. 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.
<TABLE>
TABLE VIII
PREMIER BANKSHARES CORPORATION AND AFFILIATES
LOAN CLASSIFICATION SUMMARY
(IN THOUSANDS OF DOLLARS)
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Domestic:
Commercial,
Financial and
Agricultural $ 159,572 $ 132,601 $ 72,684 $ 72,233 $ 58,966
Real Estate-
Construction 17,321 12,393 8,654 5,667 5,028
Real Estate -
Mortgage 219,342 165,900 195,794 176,452 165,996
Loans to Individuals 99,807 97,554 94,520 89,412 82,922
Other Loans 6,316 2,937 1,606 1,573 1,764
Foreign:
Total Gross Loans $ 502,358 $ 411,385 $ 373,258 $ 345,337 $ 314,676
Less:
Unearned Income 4,430 5,386 6,554 7,385 9,026
Allowance for Loan Losses 5,713 5,430 5,844 5,227 5,312
Net Loans $ 492,215 $ 400,569 $ 360,860 $ 332,725 $ 300,338
Non-performing Assets:
Non-accrual Loans $ 888 $ 1,925 $ 3,018 $ 4,006 $ 4,287
Loans Past Due Over
90 Days 2,520 1,548 711 1,407 1,538
Other Real Estate Owned 718 881 677 1,382 892
Restructured Debt 1,078 714 1,172 1,128 1,286
Total $ 5,204 $ 5,068 $ 5,578 $ 7,923 $ 8,003
</TABLE>
<TABLE>
TABLE IX
PREMIER BANKSHARES CORPORATION AND AFFILIATES
EARNING ASSETS AND INTEREST BEARING LIABILITIES
(IN THOUSANDS OF DOLLARS)
Percent of Change
Average Outstanding** Prior Year Average Rate*
1996 1995 1994 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Earning Assets:
Loans:
Demand and Time $ 92,688 $ 54,997 $ 46,517 68.53% 18.23% 9.99% 11.15%
Real Estate 252,180 233,820 221,469 7.85 5.58 9.10 9.17
Installments 103,763 101,165 94,993 2.57 6.50 10.77 10.11
Total Loans 448,631 389,982 362,979 15.04 7.44 9.67 9.70
Securities:
Taxable 158,709 164,129 158,304 (3.30) 3.68 5.86 6.04
Non-taxable 74,171 74,976 74,594 (1.07) 5.12 7.74 7.93
Total Securities 232,880 239,105 232,898 (2.60) 2.67 6.46 6.64
Federal Funds Sold
and Deposits 13,813 34,640 16,917 (60.12) 104.76 5.44 5.82
Total Earning Assets 695,324 663,727 612,794 4.76 8.31 8.51% 8.39%
Other Assets, Net of
Allowance for Loan
Losses 57,234 48,241 39,013 18.64 23.65
$752,558 $711,968 $651,807 5.70% 9.23%
</TABLE>
* 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 X
PREMIER BANKSHARES CORPORATION AND AFFILIATES
EARNING ASSETS AND INTEREST BEARING LIABILITIES, Continued
(IN THOUSANDS OF DOLLARS)
Percent of Change
Average Outstanding Prior Year Average Rate*
1996 1995 1994 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-bearing
Liabilities:
Interest-bearing
Checking $ 84,070 $ 75,436 $ 66,605 11.45 13.26% 2.46% 2.73%
Savings Deposits 136,897 146,802 162,890 (6.75)% (9.88) 2.98 3.20
Large Denomination
Certificates 52,639 52,065 44,283 1.10 17.57 5.47 5.38
Time Deposits 307,263 277,040 230,254 10.91 20.32 5.24 5.19
Borrowed Funds 12,402 18,832 18,816 (34.14) .09 4.56 5.72
Total Interest-bearing
Liabilities 593,271 570,175 522,848 4.05 9.05 4.33 4.39
Demand Deposit 77,553 74,750 63,679 3.75 17.39
Other Liabilities 6,394 2,133 5,145 199.77 (58.54)
Stockholders' Equity 75,340 64,910 60,135 16.07 7.94
Total Liabilities and
Stockholders'Equity $752,558 $711,968 $651,807 5.70% 9.23%
Net Yield on Earnings Assets 4.82% 4.62%
</TABLE>
*Average Rate Calculated on the Fully Taxable Equivalent - Using Statutory
Rate of 34%.
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, the net increase in loans was $95,354,000 during 1996 which was
funded mostly through proceeds from the maturity and sale of certain
securities and the termination of fed funds sold. In 1995, net increases
in deposits amounted to $92,503,000 (demand and time) 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.
The cash flow trend since 1992 in customer loans has been in the $30
to $40 millions of dollar range except in 1996 where an increase of $95
million was experienced. In 1993 through 1995, the majority of cash flow
funding was generated by increases in deposits. However, in 1996, loans
were funded by maturity and sales of investment securities. Cash flow from
operations supplemented each year.
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.
Premier's guideline for asset and liability management allows for a
variance of +/- 10% cumulative gap position to total assets for the twelve
month horizon. Prepayment assumptions for the mortgage backed securities
are determined by obtaining the cash flow for the next twelve months from
an investment service at the end of each year. The percentage of
prepayments at the mortgage prepayment speeds at the time are used for the
ensuing year. The deposit assumptions under the once proposed FDIC
Improvement Act of 1991 (FDICIA 305) are used for the runoff/decay of
deposits. Using this approach, Premier's rate sensitivity shows that the
balance sheet is liability sensitive. This indicates that earnings are
subject to decline in a rising interest rate environment. Premier's actual
experience has been that deposit rates do not move in conjunction with the
federal funds rate but in fact lag this index in a rising-rate environment.
The deposit run offs have not approximated the prepayments under FIDICIA
305 although some deposit decay has occurred due to Premier's conservative
pricing policy.
Following is a summary of Premier's Dynamic Gap position as of
December 31, 1996, using the maturity and repayment assumptions mentioned
above:
<TABLE>
Three Month One Year Beyond One Year
<S> <C> <C> <C>
Total Earning Assets Repricing 149,674 174,748 436,671
Total Interest-bearing
Liabilities Repricing 144,700 226,463 192,151
Repricing Gap Adjusted 4,974 (51,715) 244,520
Repricing Gap-Cummulative 4,974 (46,742) 197,778
Cumulative Gap to Total Assets 0.65% (6.14%) 25.99%
Cumulative Net Interest-earning
Assets to Cumulative Interest-
bearing liabilities 103.34% 77.16% 227.25%
</TABLE>
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>
1996
U.S. Treasury
and Agency
Securities $111,615 6.05%$ 6,486 5.33%$ 28,852 5.67%$43,747 6.02%$32,530 6.59%
State and
Political
Subdivisions* 73,825 7.67 5,014 6.34 39,477 7.60 27,888 7.97 1,446 8.85
Other
Securities 7,245 6.30 1,100 5.03 1,182 6.08 4,963 6.64
Totals $192,685 6.68%$12,600 5.71%$ 69,511 6.77%$71,635 6.78%$38,939 6.68%
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%
</TABLE>
* Fully Taxable Equivalent - Using the Statutory Rate of 34%.
** Prepared Using Investments at Amortized Cost.
<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>
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%
</TABLE>
* Fully Taxable Equivalent - Using the Statutory Rate of 34%.
** Prepared Using Investments at Amortized Cost
<TABLE>
TABLE XII
PREMIER BANKSHARES CORPORATION AND AFFILIATES
INTEREST RATE SENSITIVITY
(IN THOUSANDS OF DOLLARS)
DECEMBER 31, 1996
Beyond
Interest-Sensitive One
1-90 91-365 Year Total
<S> <C> <C> <C> <C>
Earnings Assets:
Loans $ 113,378 $ 95,116 $ 289,434 $ 497,928
Investment
Securities 11,061 6,850 173,184 191,095
Fed Funds Sold 9,130 9,130
Total Earning Assets 133,569 101,966 462,618 698,153
Interest-bearing
Liabilities:
Interest-bearing Demand 86,844 86,844
Savings Deposits 98,413 98,413
Large Denomination CD's 16,198 23,993 11,781 51,972
Other Time Deposits 76,794 135,205 97,990 309,989
Money Market Instruments 36,567 36,567
Total Interest-bearing
Deposits 314,816 159,198 109,771 583,785
Other Short-term Debt 10,347 10,347
Total Interest-bearing
Liabilities 325,163 159,198 109,771 594,132
Cumulative Interest-
Sensitivity Excess (GAP)$(191,594) $(248,826) N/A N/A
</TABLE>
<TABLE>
TABLE XIII
PREMIER BANKSHARES CORPORATION AND AFFILIATES
MATURITY AND RATE SENSITIVITY ANALYSIS
(IN THOUSANDS OF DOLLARS)
DECEMBER 31, 1996
Due In Due In One to 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 $ 89,809 $ 61,457 $ 18,396 $ 2,399 $ 7,029 $ 528
Real Estate -
Construction 17,311 11,462 3,490 580 1,484 295
Other (Excluding
Consumer
Installment and
Residential
Mortgage Loans) 81,280 43,852 23,949 5,736 7,743
Foreign
Totals $188,400 $116,771 $ 45,835 $ 8,715 $16,256 $ 823
</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, 1996, mature as follows:
<S> <C>
Three Months or Less $ 16,199
Over Three Months Through Six Months 12,741
Over Six Months Through Twelve Months 11,252
Over Twelve Months 11,780
$ 51,972
</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.
252 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, 1996 and 1995,
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, 1996. 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 in 1994, which statements reflect total revenue
constituting 14% of the related consolidated total. 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 on 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, 1996
and 1995, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1996, in
conformity with generally accepted accounting principles.
Persinger & Company, L.L.C.
Beckley, West Virginia
January 15, 1997
Brown, Edwards & Company, L.L.P
Certified Public Accountants
1969 Lee Highway
Bristol, Virginia
January 13, 1995
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Dickenson-Buchanan Bank
Haysi, Virginia
We have audited the balance sheet of Dickenson-Buchanan Bank as of
December 31, 1994 and the related statements of income, stockholders'
equity, and cash flows for the year ended December 31, 1994. These
financial statements are the responsibility of the Bank's management.
Our responsibility is to express an opinion of these financial
statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly in all material respects, the financial position of Dickenson-
Buchanan Bank as of December 31, 1994 and the results of operations and
its cash flows for the year ended December 31, 1994, in conformity with
generally accepted accounting principles.
Brown, Edwards & Company, L.L.P.
Certified Public Accountants
<TABLE>
CONSOLIDATED BALANCE SHEETS
PREMIER BANKSHARES CORPORATION AND AFFILIATES
(In Thousands of Dollars)
December 31,
1996 1995
<S> <C> <C>
ASSETS
Cash and Due From Banks $ 28,086 $ 28,957
Securities Available for Sale 157,306 234,183
Securities Held to Maturity 33,789 33,348
Federal Funds Sold 9,130 24,105
Loans, Net 492,215 400,569
Bank Premises and Equipment, Net 17,483 17,242
Accrued Income Receivable 6,040 6,377
Other Assets 17,055 17,254
$761,104 $762,035
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand $ 82,013 $ 70,431
Now Accounts 86,844 89,558
Savings 134,980 141,142
Time, $100,000 and Over 51,972 52,839
Other Time 309,989 307,943
$665,798 $661,913
Short-Term Debt $ 10,347 $ 17,407
Accrued Interest and Other Liabilities 6,394 9,492
TOTAL LIABILITIES $682,539 $688,812
Commitments and Contingencies
Stockholders' Equity
Capital Stock:
Common, $2 Par Value; Authorized
10,000,000 shares; Issued
6,650,083 in 1996 and 1995 $ 13,300 $ 13,300
Surplus 18,696 18,704
Retained Earnings 47,646 40,818
Net Unrealized Gain (Loss) on
Securities Available for Sale (1,077) (401)
$ 78,565 $ 73,223
$761,104 $762,035
</TABLE>
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF INCOME
PREMIER BANKSHARES CORPORATION AND AFFILIATES
(In Thousands of Dollars except per share data)
<TABLE>
Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
INTEREST INCOME:
Loans and Fees $ 43,251 $ 37,784 $ 32,814
Securities Available For Sale 9,096 9,907 9,404
Securities Held to Maturity 3,995 3,935 4,900
Federal Funds Sold 752 2,017 751
Money Market Deposits 23
$ 57,094 $ 53,643 $ 47,892
INTEREST EXPENSE:
Deposits $ 25,104 $ 23,946 $ 19,636
Short-term Debt 565 877 632
Long-term Debt 200 39
$ 25,669 $ 25,023 $ 20,307
Net Interest Income $ 31,425 $ 28,620 $ 27,585
PROVISION FOR POSSIBLE LOAN LOSSES 880 315 1,144
Net Interest Income After Provision
for Possible Loan Losses $ 30,545 $ 28,305 $ 26,441
OTHER INCOME:
Trust Department Income $ 239 $ 218 $ 240
Service Fees 2,941 2,545 2,006
Security Gains (Losses) (372) (158) 642
Other Service Charges, Commissions
and Fees 1,810 1,579 1,496
Other 449 271 297
$ 5,067 $ 4,455 $ 4,681
OTHER EXPENSES:
Salaries and Wages $ 9,274 $ 8,004 $ 7,480
Pensions and Other Employee Benefits 1,993 2,072 2,259
Occupancy Expenses 1,150 904 846
Equipment Rentals, Depreciation and
Maintenance 1,377 1,205 1,099
Other Operating Expenses 8,400 8,397 7,408
$ 22,194 $ 20,582 $ 19,092
Income Before Income Taxes $ 13,418 $ 12,178 $ 12,030
FEDERAL INCOME TAXES 3,267 2,967 3,024
NET INCOME $ 10,151 $ 9,211 $ 9,006
EARNINGS PER COMMON SHARE $ 1.53 $ 1.39 $ 1.35
CASH DIVIDENDS PER COMMON SHARE $ 0.48 $ 0.43 $ 0.36
</TABLE>
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
PREMIER BANKSHARES CORPORATION AND AFFILIATES
(In Thousands of Dollars)
<TABLE>
Years Ended December 31, 1996, 1995, and 1994
Net Unrealized
Gain(Loss)
on Securities
Capital Stock Retained Available
Shares Amount Surplus Earnings for Sale Total
<S> <C> <C> <C> <C> <C> <C>
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 Securites
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 Three
Stock Split 1,662,278 3,325 (3,325)
BALANCE-
DECEMBER 31, 1995 6,650,083 $ 13,300 $ 18,704 $ 40,818 $ 401 $ 73,223
Net Income 10,151 10,151
Cash Dividends Declared (3,323) (3,323)
Stock Repurchased (8) (8)
Change in Unrealized Gain
(Loss) On Securities
Available for Sale, Net (1,478) (1,478)
BALANCE-
DECEMBER 31, 1996 6,650,083 $ 13,300 $ 18,696 $ 47,646 $ (1,077) $ 78,565
</TABLE>
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
PREMIER BANKSHARES CORPORATION AND AFFILIATES
(In Thousands of Dollars)
<TABLE>
Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 10,151 $ 9,211 $ 9,006
Adjustments to Reconcile Net Income to Cash
Provided by Operating Activities:
Depreciation and Amortization of Premises
and Equipment 1,317 1,069 847
Provision for Possible Loan Losses 880 315 1,144
Provision for Deferred (Prepaid)
Income Taxes (623) 3 (39)
Amortization of Goodwill and Intangibles 925 662 288
Amortization of Premiums and Accretion of
Discounts, Net 1,095 690 680
Securities (Gains)Losses 372 158 (642)
Loss on Foreclosed Properties 44 23 52
(Increase)Decrease in Loans Held for Sale 2,331 (970) (4,879)
(Increase)Decrease in Accrued
Income Receivable 337 (1,109) (652)
Increase in Other Assets (244) (10,700) (374)
(Decrease)Increase in Accrued Interest
Payable and Other Liabilities (3,098) 7,279 (2,533)
Net Cash Provided by Operating Activities $ 13,487 $ 6,631 $ 2,898
CASH FLOWS FROM INVESTING ACTIVITIES
Net Decrease (Increase) in Temporary
Investments $ 14,975 $ (6,865) $ 22,654
Proceeds From Maturities of Securities
Held to Maturity 3,752 9,170 26,001
Purchase of Securities Held to Maturity (4,841) (20,160) (15,481)
Proceeds From Sales of Securities
Available for Sale 62,126 35,615 18,648
Proceeds From Maturities of Securities
Available for Sale 50,405 24,806 31,524
Purchases of Securities Available for Sale (38,039) (79,749) (68,224)
Net Increase in Customer Loans (95,354) (39,988) (25,303)
Proceeds From Sales of Foreclosed Properties 682 343 1,356
Purchases of Premises and Equipment (1,579) (4,508) (3,978)
Proceeds From Sales of Premises and Equipment 21 448 88
Net Cash Used In Investing Activities $ (7,852) $(80,888) $(12,715)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Demand, NOW and Savings
Accounts 2,706 9,506 1,491
Net Increase in Time Deposits 1,179 82,997 7,175
Net (Decrease)Increase Short-term Debt (7,060) (3,970) 6,046
Cash Dividends (3,323) (2,894) (2,377)
Purchase of Capital Stock (8)
Proceeds from Long-term Borrowings 2,000
Payments on Long-term Borrowings (1,900) (100)
Net Cash Provided by Financing Activities $ (6,506) $ 83,739 $ 14,235
Net Increase In Cash and Due From Banks $ (871) $ 9,482 $ 4,418
</TABLE>
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
PREMIER BANKSHARES CORPORATION AND AFFILIATES
(In Thousands of Dollars)
<TABLE>
Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
CASH AND DUE FROM BANKS
Beginning 28,957 19,475 15,057
Ending $ 28,086 $ 28,957 $ 19,475
Supplemental Disclosures of Cash Flow Information
Cash Payments of Interest Paid:
To Depositors $ 25,277 $ 23,188 $ 19,565
On Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase 570 3,723 670
Income Taxes 2,972 2,634 3,229
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 $ 497 $ 934 $ 903
Net Change in Unrealized (Gain) Loss
on Securities Available for Sale 2,033 (9,937) 9,298
</TABLE>
See 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 PRESENTATION: 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, two of the banking affiliates of
the Company became National Banking Organizations. The principle
regulatory agency for all banks is now the Office of 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
interestbearing 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.
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)
SECURITIES: 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.
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.
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. The Financial Accounting Standards Board's Statement No.
122, Accounting for Mortgage Servicing Rights, 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 evaluated for
impairment based on their fair value. The Company has not
adopted this Statement for the year ended December 31, 1996, as
there were no significant transactions involving servicing rights.
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.
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)
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 disclosuresabout 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.
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 loan losses is increased through 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 generally discontinued when a loan becomes
90 days past due as to principal or interest. Upon such
discontinuance, all unpaid accrued interest is reversed.
Management may elect to continue the accrual of interest if the
loan is well collateralized and in process of collection.
Charge-off, repossession or foreclosure is generally initiated at
120 days on all consumer loans. The charge-off of commercial
loans is managed on a loan by loan basis after establishing the
ongoing status of the company and the strength of any guarantor
and collateral support.
A loan is considered impaired at the time that it is probable
that the bank will be unable to collect all amounts due, both
principal and interest, in accordance with the contractual terms
of the loan agreement. The fair value of any collateral is used
to determine the value of secured impaired loans. The discounted
cash flow method is used to determine the value of unsecured
impaired loans.
In making judgments about the probability that a loan is
impaired, a delay or shortfall (90 days or less) in payments
received does not require the application of these standards if
the bank expects to collect all amounts due, including
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)
accrued interest at the contractual interest rate, for the period
of delay. All loans classified as "doubtful" by internal or
external examiners are considered impaired. All impaired loans
will be on nonaccrual as they no longer meet the definition of
being well secured and in the process of collection. (A loan may
be on nonaccrual due to delays in collection caused by
bankruptcy, etc., but no loss is expected on the account due to
collateral or guarantor support and therefore the loan is not
considered impaired.) The "doubtful" classification implies that
all collateral will not be liquidated and any deficit loan
balance charged off, generally within 120 (consumer) to 180 days
of being classified.
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 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: The excess of cost over net assets and
identifiable intangible assets, including deposit base
intangibles, of acquired businesses is amortized on a straight-
line method over the estimated periods benefited. Included in
assets are net intangible assets of $11,532,000 and $10,916,000
at December 31, 1996 and 1995, respectively. At December 31,
1996, intangible assets consisted primarily of $11,263,000 of
goodwill, $258,000 of building premiums and $11,000 of
unamortized organizational costs.
PENSION PLAN: Generally, Premier and its affiliates fund pension
plan costs as incurred.
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(continued)
STOCK-BASED COMPENSATION: In October, 1995, the Financial
Accounting Standards Board, issued Statement No. 123, "Accounting
for Stock-Based Compensation," which is effective for fiscal
years beginning after December 31, 1995. Statement No. 123
defines a fair value based method of accounting for stock-based
compensation.
Under the fair value method, compensation expense is measured
based upon the estimated value of the award as of the grant date
and is recognized over the service period. Statement No. 123
provides companies with the option of accounting for stock-based
compensation under APB No. 25, "Accounting for Stock Issued to
Employees," or applying the provisions of Statement No. 25 in
accounting for stock-based compensation. The disclosure requirements
of SFAS No. 123 require entities applying APB No. 25 to provide pro forma
disclosures of net income and earnings per share as if the fair
value method of accounting had been applied. Premier has provided
these disclosures in Note 10.
INCOME TAXES: 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.
NOTE 2 - BUSINESS COMBINATION
On December 16, 1996, Premier Bank-Central, N.A., a wholly owned
subsidiary bank of Premier Bankshares Corporation, acquired the
outstanding stock of Big Stone Gap Bank and Trust Company (BSG)
of Big Stone Gap, Virginia at $50.00 per share for an aggregate
amount of $4,328,500, utilizing the purchase method of
accounting. BSG was then merged into Premier Bank-Central, N.A.
At date of acquisition, BSG reported total assets of $23,147,000,
total net loans of $8,392,000 and deposits of $20,585,000. The
results of operations of BSG, which are not significant, have
been included in the consolidated results of operations from the
date of acquisition. Goodwill and the core deposit intangible
amounting to $1,564,000 is being amortized on a straight-line
basis over twelve and one-half (12 1/2) years.
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.
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.
NOTE 3 - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
The estimated fair values in thousands of dollars of the
Company's financial instruments at December 31, 1996 and 1995
are as follows:
<TABLE>
December 31, 1996 December 31, 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Financial Assets:
Cash and Short-term Investments $ 37,216 $ 37,216 $ 53,062 $ 53,062
Securities 191,095 197,821 267,531 268,197
Loans 497,928 494,645 405,999 412,492
Less: Allowance for Possible Loan
Losses 5,713 5,713 5,430 5,430
Net Loans $ 492,215 $ 488,932 $ 400,569 $ 407,062
Financial Liabilities:
Deposits $ 665,798 $ 666,693 $ 661,913 $ 662,484
Short-term Debt 10,347 10,347 17,407 17,407
Long-term Debt
Unrecognized Financial Instruments:
Standby Letters of Credit 2,595 1,486
Unused Commercial Line Commitments 29,554 20,427
Revolving Home Equity Lines 6,808 5,815
Credit Card Lines 7,289 5,852
Other 10,548 7,327
</TABLE>
NOTE 4 - SECURITIES
In accordance with provisions of the Financial Accounting Standards
Board's Guide to Implementation of Statement 115, the Company on
December 15, 1995 transferred bonds with an amortized cost of
$66,408,000 and fair value of $66,605,000 from the held to
maturity category to available for sale. This transition
increased stockholders' equity by $130,000 net after tax effect.
Carrying amounts and fair values of securities available for sale
as of December 31, 1996 and 1995 are summarized as follows:
<TABLE>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
1996
(In Thousands of Dollars)
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 6,947 $ 19 $ 5 $ 6,961
U.S. Government Agencies and
Corporations 43,074 5 561 42,518
Obligations of States and
Political Subdivisions 42,590 809 156 43,243
Corporate Securities 2,282 1 5 2,278
Mortgage-backed Securities 58,546 38 1,591 56,993
Marketable Equity Securities 2,281 7 171 2,117
Other Debt Securities 3,176 20 3,196
$ 158,896 $ 899 $ 2,489 $ 157,306
</TABLE>
<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>
NOTE 4 - SECURITIES (continued)
Carrying amounts and fair values of securities being held to
maturity as of December 31, 1996 and 1995 are summarized as
follows:
<TABLE>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
1996
(In Thousands of Dollars)
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 100 $ $ 2 $ 98
U.S. Government Agencies and
Corporations 1,950 1 18 1,933
Obligations of States and 30,412 607 200 30,819
Political Subdivisions
Other Debt Securities 1,327 17 2 1,342
$ 33,789 $ 625 $ 222 $ 34,192
</TABLE>
<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 Subsdivisions $ 33,282 $ 844 $ 178 $ 33,948
Other Debt Securities 66 66
$ 33,348 $ 844 $ 178 $ 34,014
</TABLE>
The amortized cost and fair value of securities available for sale
and held to maturity as of December 31, 1996 by 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 $ 12,681 $ 12,707 $ 511 $ 510
Due After One Year Through
Five Years 56,191 56,053 13,861 14,052
Due After Five Years Through
Ten Years 53,960 53,195 17,675 17,857
Due after Ten Years 36,064 35,351 1,742 1,773
$ 158,896 $ 157,306 $ 33,789 $ 34,192
</TABLE>
NOTE 4 - SECURITIES (continued)
Gross gains and losses from sales of securities for the years
ending December 31, 1996, 1995 and 1994 are as follows:
<TABLE>
1996 1995 1994
(In Thousands of Dollars)
<S> <C> <C> <C>
Realized Gains $ 180 $ 288 $ 795
Realized Losses (552) (446) (153)
Net Gains and (Losses) $ (372) $ (158) $ 642
</TABLE>
Securities with carrying values of $43,775,000, and $45,983,000
at December 31, 1996 and 1995, respectively, were pledged as
collateral on public deposits and for other purposes as required
or permitted by law.
NOTE 5 - LOANS
The composition of net loans is as follows:
<TABLE>
December 31,
1995 1996
(In Thousands of Dollars)
<S> <C> <C>
Commercial, Financial,
and Agricultural $ 159,572 $ 132,601
Real Estate-construction 17,321 12,393
Real Estate-mortgage 219,342 165,900
Loans to Individuals 99,807 97,554
Other 6,316 2,937
$ 502,358 $ 411,385
Deduct:
Unearned discount
and net loan fees 4,430 5,386
Allowance for
possible loan losses 5,713 5,430
$ 492,215 $ 400,569
</TABLE>
Nonperforming assets consist of the following:
<TABLE>
December 31,
1996 1995 1994
(In Thousands of Dollars)
<S> <C> <C> <C>
Nonaccrual Loans $ 888 $ 1,925 $ 3,018
Restructured Loans 1,078 714 1,172
Nonperforming Loans $ 1,966 $ 2,639 $ 4,190
Foreclosed Properties 718 881 677
Nonperforming Assets $ 2,684 $ 3,520 $ 4,867
</TABLE>
There were no commitments to lend additional funds to customers whose loans
were classified as nonperforming at December 31, 1996 and 1995. The following
table shows the pro forma 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,
1996 1995 1994
(In Thousands of Dollars)
<S> <C> <C> <C>
Interest Earned $ 212 $ 150 $ 269
Interest That Would 325 286 463
Have Been Earned
Interest Lost $ 113 $ 136 $ 194
Loss Per Common Share $ 0.02 $ 0.02 $ 0.03
</TABLE>
NOTE 5 - LOANS (continued)
Changes in the allowance for possible loan losses are as follows:
<TABLE>
Years Ended December 31,
1996 1995 1994
(In Thousands of Dollars)
<S> <C> <C> <C>
Balance, Beginning $ 5,430 $ 5,844 $ 5,227
Provision Charged to
Operating Expenses 880 315 1,144
Changes Incident to Merger 150
Recoveries of Amounts Charged Off 323 314 445
$ 6,783 $ 6,473 $ 6,816
Amounts Charged Off 1,070 1,043 972
Balance, Ending $ 5,713 $ 5,430 $ 5,844
</TABLE>
Information about impaired loans as of and for the year ended December 31,
1996 and 1995 is as follows:
<TABLE>
1996 1995
(In Thousands of Dollars)
<S> <C> <C>
Loans receivable for
which there is a related
allowance for loan losses $ 928 $ 669
Loans receivable for which
there is no related allowance
for loan losses 639 1,929
Total impaired loans 1,567 2,598
Related allowance for
possible loan losses $ 457 $ 175
Average balance (based
on month-end-balances) $ 2,070 $ 3,415
Interest income recognized $ 119 $ 146
</TABLE>
The Company has sold, without recourse, $23,456,000 and $25,787,000 in
one-to-four family residential real estate loans at December 31, 1996 and 1995,
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,
1996 1995
(In Thousands of Dollars)
<S> <C> <C>
Land $ 3,379 $ 2,734
Buildings and Improvements 13,089 13,207
Furniture and Equipment 10,796 10,291
$ 27,264 $ 26,232
Less Accumulated Depreciation 9,781 8,990
$ 17,483 $ 17,242
</TABLE>
NOTE 7 - SHORT-TERM DEBT
Short-term debt and weighted average interest rates at December 31, 1996 and
1995, and the maximum amount outstanding at any month-end during the year
are summarized as follows:
<TABLE>
December 31, 1996
Year-End Maximum
Amount Weighted Average Outstading
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 $ 10,347 4.25% $ 12,324 4.56% $ 21,404
Other Short-term
Borrowings 38 6.95% 150
$ 10,347 4.25% $ 12,362 4.57% $ 21,554
</TABLE>
<TABLE>
December 31, 1995
Year End Maximum
Amount Weighted Average Outstading
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>
Federal funds purchased include reserves at the Federal Reserve or
correspondent bank purchased on a daily basis to satisfy reserve requirements.
Securities sold under repurchase agreements mature daily or on demand. At
December 31, 1996, Premier had an unused demand line of credit of $500,000.
Premier's affiliated banks collectively had $80,000,000 of unused lines of
credit with the Federal Home Loan Bank of Atlanta.
NOTE 8 - INCOME TAXES
Net deferred tax assets consist of the following components:
<TABLE>
December 31,
1996 1995
(In Thousands of Dollars)
<S> <C> <C>
Deferred Tax Assets:
Securities Available for Sale $ 516 $
Allowance for Possible Loan Losses 1,890 1,517
Deferred Compensation Plans 681 643
Net Operating Loss Carryforwards 178 235
Permanent Decline in Securities 280 111
Deferred Loan Fees, Net 107 93
Capital Loss Carryforwards 35
Investment Tax Credit Carryforwards 31
Other 24 37
$ 3,707 2,702
Valuation Allowance 31 66
$ 3,676 $ 2,636
Deferred Tax Liabilities:
Goodwill $ 22
Securities Available for Sale $ 238
Bank Premises and Equipment 968 885
Accretion of Discounts, Net 39 243
$ 1,029 $ 1,366
$ 2,647 $ 1,270
</TABLE>
NOTE 8 - INCOME TAXES (continued)
The components of consolidated income tax expense are as follows:
<TABLE>
Years Ended December 31,
1996 1995 1994
(In Thousands of Dollars)
<S> <C> <C> <C>
Current Payable $ 3,890 $ 2,964 $ 3,063
Deferred (Prepaid) (623) 3 (39)
$ 3,267 $ 2,967 $ 3,024
</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,
1996 1995 1994
(In Thousands of Dollars)
<S> <C> <C> <C>
Computed Expected Tax Expense $ 4,562 $ 4,141 $ 4,090
Tax-exempt Interest (1,466) (1,380) (1,346)
Disallowed Interest Expense to
Carry Tax-exempt Obligations 152 154 138
Utilization of Tax-loss Carryforward
Tax Effect of Timing Differences Recognized
Other, Net 19 52 142
$ 3,267 $ 2,967 $ 3,024
</TABLE>
At December 31, 1996, the Company had net operating loss carryforwards of
$523,992 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 9 - STOCKHOLDERS' EQUITY
Premier dividend payments are made from dividends received from affiliates
which amounted to $4,700,000, $11,044,000, and $3,004,000 at December 31, 1996,
1995, and 1994, 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, 1996, retained net profits, free of such restriction, amounted to
$12,847,000. 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 collateral 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 $7,712,000
at December 31, 1996. There was deemed to exist between the Parent and an
affiliate bank at December 31, 1996 a 23A transaction in the amount
of $1,433,000.
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, 1996.
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 regulatory 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 9 - STOCKHOLDERS' EQUITY (continued)
A comparison of the Company's capital as of December 31, 1996 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 13.88% 6.00% 4.00%
Total Risk-based Capital 15.04% 10.00% 8.00%
Leverage Ratio 9.20% 5.00% 4.00%
Tangible Equity 9.20% 2.00% 2.00%
</TABLE>
NOTE 10 - 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 $1,034,000, $817,000 and $814,000 for the years ended
December 31, 1996, 1995 and 1994, 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 preretirement
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 $1,115,000 and $1,061,000 at December 31, 1996 and 1995,
respectively, which are reflected in other assets.
At December 31, 1996 and 1995, $2,002,000 and $1,891,000, respectively, had
been accrued under these contracts. This liability and related deferred
income tax charges of $681,000 and $643,000 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 $211,000, $239,000 and
$233,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
NOTE 10 - EMPLOYEE BENEFIT PLANS (continued)
Premier's Long-Term Incentive Plan (The "Plan" ) was approved by the
shareholders on April 20, 1995. The Plan administered by the Personnel
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 and
performance units.
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.
NOTE 10 - EMPLOYEE BENEFIT PLANS (continued)
Grants under the above described plans are accounted for following APB
Opinion No. 25 and related Interpretations. Accordingly, no compensation
cost has been recognized for grants under the "The Plan." Compensation cost
charged to income during 1996 for options exercised during 1996 amounted
to $6,197. Had compensation cost for "The Plan" been determined based on the
grant date fair values of awards (the method described in FASB Statement
No. 123), reported net income and earnings per common share would have been
reduced to the pro forma amounts shown below:
<TABLE>
1996 1995
<S> <C> <C>
Net Income:
As reported $ 10,151 $ 9,211
Pro Forma 9,689 8,915
Primary Earnings Per Share:
As reported $ 1.53 $ 1.39
Pro Forma 1.46 1.34
Fully Diluted Earnings
Per Share:
As reported $ 1.51 $ 1.38
Pro Forma 1.44 1.34
</TABLE>
The pro forma effects of applying Statement No. 123 are not
indicative of future amounts since, among other reasons, the
pro forma requirements of the Statement have been applied only
to options granted after January 1, 1995.
NOTE 10 - EMPLOYEE BENEFIT PLANS (continued)
The fair value of "The Plan" is estimated at the grant date
using the Black-Scholes option-pricing model with the following
weighted average assumptions for grants in 1996 and 1995,
respectively: dividend yield of 2.02% for all years; price
volatility of 40.24% and risk-free interest rate of 5.43%.
The following is a summary of changes in options outstanding:
<TABLE>
1996 1995
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
<S> <C> <C> <C> <C>
Outstanding at
beginning of year 41,717 $12.56 $
Granted 47,680 16.00 41,717 12.56
Exercised (871) 12.56
Expired (1,829) 12.56
Outstanding at
end of Year 86,697 $14.45 41,717 $12.56
Exercisable at
end of year 13,006
Weighted-average fair
value per option of
options granted during
the year $ 7.75 $ 7.94
</TABLE>
A further summary about "The Plan" options outstanding at December 31, 1996
is as follows:
<TABLE>
Options Outstanding Options Exercisable
Weighted-
Average Weighted- Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Range of Exercise Prices Outstanding Life Price Outstanding Price
<S> <C> <C> <C> <C> <C>
$12.563 39,017 9 years $ 12.563 13,006 $12.60
$15.375 to $18.25 47,680 10 years $ 16.00
$12.563 to $18.25 86,697 9.55 years $ 14.45 13,006 $12.60
</TABLE>
NOTE 11- LEASE OBLIGATION
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, 1996, 1995 and 1994
was $56,000, $35,000, and $27,000, respectively. At December
31, 1996, Premier and its affiliates were not obligated under
longterm operating or capital leases.
NOTE 12 - OTHER INFORMATION
The principal components of other income and other expenses in
the consolidated statements of income are:
<TABLE>
Years Ended December 31,
1996 1995 1994
(In Thousands of Dollars)
<S> <C> <C> <C>
Other Income (Includes no items
in excess of 1% of total revenue $ 449 $ 271 $ 297
Other Expense
Data Processing Fees $ 984 $ 979 $ 622
Amortization of Goodwill 925 653 288
FDIC Assessment 6 691 1,279
Other (Includes no items in
excess of 1% of total revenue 6,485 6,074 5,219
$ 8,400 $ 8,397 $ 7,408
</TABLE>
NOTE 13 - 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
NOTE 13 - COMMITMENTS AND CONTINGENT LIABILITIES (continued)
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.
<TABLE>
Contractual Amounts
at December 31,
1996 1995
(In Thousands of Dollars)
<S> <C> <C>
Financial instruments whose contract amounts
represent credit risk:
Standby Letters of Credit $ 2,595 $ 1,547
Unused Commercial Line Commitments 29,554 21,260
Revolving Home Equity Lines 6,808 6,052
Credit Card Lines 7,289 6,091
Other 10,548 7,626
</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 14 - 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 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,
1996 1995
(In Thousands of Dollars)
<S> <C> <C>
Balance, Beginning $ 7,510 $ 9,410
New Loans 9,412 5,354
Repayments (9,647) (5,470)
Relationship Changes 231 (1,784)
Balance, Ending $ 7,506 $ 7,510
</TABLE>
NOTE 15 - 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 $5,772,000 and $3,703,000 for the two-week
period including December 31, 1996 and 1995, respectively.
NOTE 16- PENDING MERGER
On October 29, 1996, the Company announced plans to merge with First Virginia
Banks, Inc. Under the agreement, shareholders of Premier will receive 0.545
shares of First Virginia stock for each of the 6,650,083 outstanding shares
of Premier. The agreement is subject to approval by the Securities Exchange
Commission, Bank Regulators and Premier's stockholders.
As an inducement and a condition of First Virginia entering into the
Affiliation Agreement, Premier and First Virginia entered into a stock option
agreement (the "Option Agreement") pursuant to which Premier granted First
Virginia an option (the "Option") entitling it to purchase up to 1,323,350
shares (representing 19.9% of shares issued and outstanding before giving
effect to the exercise of such Option) of Premier Common Stock under the
circumstance described below, at a cash price per share equal to $20.00,
subject to possible adjustment in certain circumstances. The Option may be
exercised in whole or in part.
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>
1996
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 $ 14,192 $ 14,217 $ 14,366 $ 14,319
Interest Expense 6,711 6,496 6,298 6,164
Provision for Possible
Loan Losses 35 115 225 505
Securities Gains
(Losses) (34) (101) (66) (171)
Other Income 1,349 1,318 1,355 1,417
Other Expense 5,418 5,253 5,446 6,077
Income Before Tax
Expense $ 3,343 $ 3,570 $ 3,686 $ 2,819
Income Tax Expense 840 920 986 521
Net Income $ 2,503 $ 2,650 $ 2,700 $ 2,298
Net Income Per Share$ 0.38 $ 0.39 $ 0.41 $ 0.35
</TABLE>
<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>
NOTE 18 - PARENT COMPANY FINANCIAL INFORMATION
Condensed financial information of Premier Bankshares Corporation
(Parent Company) is presented below:
<TABLE>
December 31,
1996 1995
(In Thousands of Dollars)
<S> <C> <C>
Assets
Cash and Noninterest Bearing Deposits in Banks $ 162 $ 122
Interest-bearing Deposits in Banks 55 53
Investments 691 61
Investments in Affiliated Banks, at Equity 77,426 71,873
Premises and Equipment, Net 2,814 2,953
Other Assets 186 201
Intangibles 879
$ 81,334 $ 76,142
Liabilities
Accounts Payable and Accrued Liabilities $ 1,336 $ 936
Long-term Debt 1,433 1,983
$ 2,769 $ 2,919
Stockholders' Equity
Common Stock $ 13,300 $ 13,300
Capital Surplus 18,696 18,704
Retained Earnings 47,646 40,818
Net Unrealized Gain (Loss) on Securities
Available For Sale (1,077) 401
$ 78,565 $ 73,223
$ 81,334 $ 76,142
</TABLE>
NOTE 18 - PARENT COMPANY FINANCIAL INFORMATION (continued)
Statements of Income
<TABLE>
Years Ended December 31,
1996 1995 1994
(In Thousands of Dollars)
<S> <C> <C> <C>
Income
Dividends from Banking Affiliates $ 4,700 $ 11,044 $ 3,004
Service Fees 2,321 1,728 273
Other Dividends 1
Interest 27 9 5
$ 7,049 $ 12,781 $ 3,282
Expenses
Salaries and Employee Benefits $ 1,494 $ 1,086 $ 737
Interest on Short-term Debt 3 145 1
Interest on Long-term Debt 133 151 39
Equipment Rentals, Depreciation
and Maintenance 297 234 112
Professional Fees 331 425 675
Postage 316 247 12
Courier 234 156
Data Processing 99 108 27
Amortization of Goodwill and
Other Intangibles 57 173 173
Other 490 420 235
$ 3,454 $ 3,145 $ 2,011
Income Before Income Tax Benefit
and Equity in Undistributed
Income of Affiliates $ 3,595 $ 9,636 $ 1,271
Federal Income Tax Benefit 344 321 499
Income Before Equity in
Undistributed Income of Affiliates $ 3,939 $ 9,957 $ 1,770
Equity in Undistributed
Income of Affiliates 6,212 (746) 7,236
Net Income $ 10,151 $ 9,211 $ 9,006
</TABLE>
NOTE 18 - PARENT COMPANY FINANCIAL INFORMATION (continued)
Statements of Cash Flows
<TABLE>
Years Ended December 31,
1996 1995 1994
(In Thousands of Dollars)
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net Income $ 10,151 $ 9,211 $ 9,006
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Depreciation of Premises and Equipment 192 185 80
Deferred Tax Assets (Liabilities) (7) (100) 93
Amortization of Intangibles 57 173 173
Decrease (Increase) in Equity in
Undistributed Income of Affiliates (6,212) 746 (7,236)
Decrease (Increase) in Other Assets 25 148 (149)
(Decrease) Increase In Accounts
Payable and Accrued Liabilities 400 (346) 610
Net Cash Provided By Operating
Activities 4,606 10,017 2,577
Cash Flows From Investing Activities
Net Increase in Temporary Investments $ (2) $ (2) $ (51)
Purchase Of Investment Security (769) (61) (200)
Sale of Investment Security 139 200
Repayment of Loan Receivable
From Affiliate (550) 1,041
Advance of Loan Receivable
From Affiliate 1,983
Investment in Affiliates (7,600) 70
Net Decrease In Customer Loan 38 17
Premises and Equipment Expenditures (53) (149) (2,852)
Net Cash Provided By (Used In)
Investing Activity $(1,235) $(5,591) $ (1,975)
Cash Flows From Financing Activities
Increase (Decrease) in Short-term Debt $ $ (200) $ 140
Issuance of Long-term Debt 2,000
Repayment of Long-term Debt (1,900) (100)
Purchase of Capital Stock (8)
Cash Dividends (3,323) (2,894) (2,377)
Net Cash Used in Financing Activities $(3,331) $(4,994) $ (337)
Net Increase (Decrease) in Cash and
Due from Banks $ 40 $ (568) $ 265
Cash and Due from Banks
Beginning 122 690 425
Ending $ 162 $ 122 $ 690
</TABLE>
Premier Bankshares Corporation
Directors
James H. Addington - President, Addington Oil Company, Inc.
Donald Baker - Retired-Coal Mining; Mayor, Town of Clintwood, VA
Robert Brittain - Real Estate Developer
Jack P. Chambers - Former President & CEO, Premier Bankshares Corporation
Harris Hart, II - Partner in Law Firm of Gillespie,Hart,Altizer & Whitesell,P.C.
Chairman, Premier Bank, N.A.
Charles C. Henley - Former President of the Bank of Speedwell
Gene H. James - Farming; Chairman, Premier Bank - South, N.A.
Robert C. James - Real Estate Broker and Developer
John A. Johnston - Consultant, Educational Administration
N. Stanley King, Sr. - Real Estate Broker, Farming
George R. Smith, Jr. - Physician; Chairman, Premier Trust Company
James R. Wheeling - President & CEO, Premier Bankshares Corporation
Officers
Harris Hart, II, Chairman of the Board
James R. Wheeling, President & Chief Executive Officer
J. Robert Buchanan, Senior Vice President & Treasurer
E. Stephen Lilly, Vice President/Operations
Ellen Simpson, Secretary
Other Personnel
Gerry Bandy, Operations Manager
Charlotte Gilmer, Loan Review Manager
Pamela Meade, Human Resources & Marketing Manager
Joyce Mundy, Credit Card Manager
Mary Louise Peery, Secondary Market Mortgage Manager
Janice Lutz, Investor Relations Coordinator
C. Todd Asbury, Accounting Supervisor
Main Office
P. O. Box 1199
29 College Drive
Bluefield, VA 24605
(540) 322-2242
Premier Bank - South, N.A.
Gene H. James, Chairman
Jerry L. Ocheltree,President & CEO Main Office Directors
Main Street Thomas M. Dunkenberger
Drawer 540 Charles C. Henley
(In Thousands of Dollars) Wytheville, VA 24382 Thomas G. Hodges
Assets $239,952 (540) 228-5464 Gene H. James
Deposits 204,725 Robert C. James
Loans(Net) 165,169 Other Offices John A. Johnston
Stockholders' Equity 23,633 E. Main, Wytheville N. Stanley King, Sr.
Interest Income 189,799 Christiansburg Charles C. Lacy
Interest Expense 8,442 Dublin David F. Long
Provision for Loan Lossess 455 Fort Chiswell Jerry L. Ocheltree
Other Income 1,770 Fries
Other Expenses 6,413 Galax Executive Officers
Securities Gains 32 Independence Thomas A. Bralley, Jr.
Net Income Before Taxes 5,291 Pulaski Vice President
Net Income After Taxes 3,725 Rural Retreat Jim Grubbs, Vice
Salem President
Shawsville John D. Kelly, Vice
Speedwell President
Premier Bank, N.A.
Harris Hart, II,Chairman
Charles C. Paschall, President & CEO Main Office Directors
Hillsboro Drive Kenneth E. Anselmi
P. O. Box 909 G. Frank Barnes
(In Thousands of Dollars) Tazewell, VA 24651 Bernard A. Beavers
Assets $199,920 (540) 988-7511 James B. Boyd
Deposits 174,304 Robert B. Brittain
Loans(Net) 106,705 Other Offices Jack P. Chambers
Stockholders' Equity 23,200 Bluefield William A. Gillespie
Interest Income 14,498 Cedar Bluff Harris Hart, II
Interest Expense 6,375 Claypool Hill Eugene Hurst, Jr.
Provision for Loan Losses 145 Main Street-Tazewell Charles R. King
Other Income 1,033 Pocahontas B. J. Nassif
Other Expenses 5,032 Raven Charles C. Paschall
Securities Gains (447) Richlands M. O. Warner
Net Income Before Taxes 3,532 Riverjack-North Tazewell
Net Income After Taxes 3,017 Executive Officers
S. Gregory Compton,
Vice President
Cameron Forrester,
Vice President
Betty Hodge,
Vice President
Premier Trust Company
Directors
J. Robert Buchanan
Harris Hart, II
Gene H. James
Jackson E. Reasor
George R. Smith, Jr.
James R. Wheeling
Officers
George R. Smith, Jr., Chairman of the Board
Jackson E. Reasor, President & Chief Executive Officer
William F. King, Executive Vice President
Robert H. Martin, Trust Officer-Institutional Accounts
Glenn A. Murray, Trust Administration Officer
Nellie M. Stillwell, Trust Administration Officer
Ellen Simpson, Secretary & Treasurer
Main Office
P. O. Box 1199
29 College Drive
Bluefield, VA 24605
Premier Bank - Central, N.A.
Lynn Keene, Chairman Directors
R. Luke Lively, President & CEO Main Office James H. Addington
Main Street Teddy Bailey
P. O. Box 769 Donald Baker
Honaker, VA 24260 Fred B. Gent, II
(In Thousands of Dollars) (540) 873-6881 Robert G. Harrison
Assets $320,389 Charles Hay
Deposits 287,310 Other Offices Lynn Keene
Loans(Net) 221,647 Big Stone Gap Danny Lambert
Stockholders' Equity 30,287 Castlewood R. Luke Lively
Interest Income 24,024 Cleveland Lurton Lyle
Interest Expense 10,971 Clintwood Roger E. Mustard
Provision for Loan Losses 280 Coeburn Clint Sykes
Other Income 2,314 Davenport Paul Vencill
Other Expenses 9,306 Duffield
Securities Gains 43 Dungannon Executive Officers
Net Income Before Taxes 5,824 Gate City Wanda Crockett,
Net Income After Taxes 4,247 Haysi Sr. Vice President
Lebanon Kenneth Hart,
Nickelsville Sr. Vice President
Pound Gary Lawson,
Bristol--LPO Sr. Vice President
Frank Sexton,
Sr. Vice President
Jonathan Mullins,
Vice President
Sandy Slaughter,
Vice President
Jerry Sutherland,
Vice President
Robert Sutherland,
Vice President
Ron Woody,
Vice President
General Information
Executive Office
29 College Drive
P. O. Box 1199
Bluefield, Virginia 24605-1199
Request For Information
Janice Lutz, Investor Relations
(540) 322-2242
Form 10-K
A Form 10-K Report filed with the Securities and Exchange Commission is
available to stockholders without charge upon written request to the
controller of Premier Bankshares Corporation.
Stock Transfer Agent
Premier Trust Company
P. O. Box 1199
Bluefield, Virginia 24605-1199
Dividend Schedule
Dividends on common stock are normally paid on the first day of February,
May, August, and November.
Stock Listing
The common stock of Premier Bankshares Corporation is traded on the over-the-
counter (OTC) Market and is quoted on the National Association of Securities
Dealers Automated Quotations (NASDAQ) National Market System under the symbol
PBKC.
<TABLE>
Net Cash Book Price Price Sales
1996 Income Dividends Value High Low Volume
<S> <C> <C> <C> <C> <C> <C>
1st Quarter $0.38 $0.12 $11.04 $20.00 $14.75 174,545
2nd Quarter 0.39 0.12 11.19 19.25 16.50 104,730
3rd Quarter 0.41 0.12 11.51 18.00 16.50 53,128
4th Quarter 0.35 0.12 11.81 25.50 16.50 170,334
Year $1.53 $0.48 $11.81 $25.50 $14.75 502,737
</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
INFORMATION CONCERNING DIRECTORS
CLASS A, serving until the 1997 Annual Meeting of Stockholders and
until a successor shall be elected and qualify:
Name Age Principal Occupation and
Director Since Employment Last Five Years
JACK P. CHAMBERS 68 Retired; formerly President and CEO of
1986 Premier Bankshares Corporation, formerly of
Counsel, Gillespie, Chambers, Altizer,
Givens & Walk, Attorneys at Law
CHARLES C. HENLEY 69 Retired; formerly President of
1986 Bank of Speedwell
JOHN A. JOHNSTON 60 Consultant, Educational
1986 Administration
GEORGE R. SMITH 70 Physician
1990
CLASS B, serving until the 1998 Annual Meeting of Stockholders and
until a successor shall be elected and qualify:
Name Age Principal Occupation and
Director Since Employment Last Five Years
DONALD BAKER 59 Retired-Coal Mining, Mayor of
1995 Town of Clintwood, Virginia
ROBERT B. BRITTAIN 56 Real Estate Developer
1995
GENE H. JAMES 66 Farming
1986
N. STANLEY KING, SR. 70 Real Estate Broker and Farmer
1986
JAMES R. WHEELING 41 President and CEO Premier
1992 Bankshares Corporation, formerly
President of Tazewell National Bank
CLASS C, serving until the 1999 Annual Meeting of Stockholders and
until a successor shall be elected and qualify:
Name Age Principal Occupation and
Director Since Employment Last Five Years
JAMES H. ADDINGTON 59 President, Addington Oil Company, Inc.
1996
HARRIS HART, II 68 Partner, Law Firm of Gillespie,
1986 Hart, Altizer & Whitesell, P. C.
ROBERT C. JAMES 55 Real Estate Broker and Developer
1986
EXECUTIVE OFFICERS:
JAMES R. WHEELING 41 President and CEO Premier Bankshares Corporation
since 1994, formerly President of Tazewell
National Bank since 1992
J. ROBERT BUCHANAN 46 Senior Vice President, Treasurer and CFO
of Premier Bankshares Corporation
ITEM 11. EXECUTIVE COMPENSATION*
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
Other Annual
Name and Principal Position Year Salary Bonus Compensation
James R. Wheeling* 1996 $154,000 $201,104 $41,518
1995 $129,000 $ $20,950
1994 $110,000 $ 16,673 $17,780
J. Robert Buchanan** 1996 $ 80,000 $ 20,117 $10,019
1995 $ 62,900 $ $ 6,289
1994 $ 53,500 $ 6,659 $ 7,404
*Mr. Wheeling was hired as Chief Executive Officer on January 1,1994.
**Mr. Buchanan was hired in 1991 as Chief Financial Officer and
Treasurer and was made Executive Vice President in 1994.
Under the provisions of individual agreements between Mssrs.
Wheeling, Buchanan and the Corporation, in the event of a change in
control of the Corporation, Mssrs. Wheeling and Buchanan will either
continue with substantially their present responsibilities and
compensations for a period of not less than three years, or if not, be
paid their aggregate annual compensations for a period of three years
after the change in control. Mr. Wheeling's agreement will be replaced
upon completion of the pending acquisition of the Corporation by First
Virginia Banks, Inc., by a new agreement, under which First Virginia Banks, Inc.
may employ him for a minimum of three years following the effective date of the
merger at a reduced salary. Under the agreement, Mr. Wheeling will have a
thirty-day period following the first anniversary of such employment during
which he may resign and receive a severance benefit of $410,000. If he is
discharged during the first year other than for cause (as defined in the
agreement), resigns due to a demotion, or has his salary reduced below the
agreed amount, he will be entitled to a payment of $410,000 plus $12,833 for
each month remaining of the first year. If he is discharged during the second
or third years, other than for cause (as defined in the agreement), resigns due
to a demotion, or has his salary reduced below the agreed amount, he will be
entitled to a payment of approximately $17,083 per month for each month
remaining in the original three year period.
The following table gives information concerning the Chief Executive
Officer and Executive Officer as of December 31, 1996.
INDIVIDUAL OPTION GRANTS IN LAST FISCAL YEAR
Potential
Realizable
% of Value at
Total Assumed
Options Annual
Number of Granted to Rates of
Securities Employees Exer- Stock Price
Underlying in cise Expir- Appreciation
Options Fiscal Price ation for Option Terms
Name Granted Year ($/Sh) Date 5% 10%
James R.
Wheeling 13,298 35.65% $15.375 Jan. 2, 2006 $128,582 $325,851
J. Robert
Buchanan 5,486 14.71% $15.375 Jan. 2, 2006 $ 53,046 $134,428
AGGREGATED OPTION EXERCISES (1) IN LAST FISCAL YEAR AND FY-END OPTION VALUES
Value of
Number of Unexercised
Securities In-the-Money
Underlying Options at
Options at FY-End Fiscal Year End
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
James R. Wheeling 3,706/20,712 $10,423/$132,223
J. Robert Buchanan 1,449/ 8,384 $ 4,075/$ 54,096
(1) No options were exercised during 1996.
EMPLOYEE BENEFIT PLANS:
The Corporation maintains a discretionary profit sharing plan and defined
contribution retirement plan for employees. Total expense (funded as accrued)
related to these plans were $1,034,000, $817,000, and $814,000 for 1996, 1995,
and 1994, respectively. This defined contribution plan is currently being
funded at a minimum rate of 10 percent of the annual eligible compensation of
participants. There are no other funding requirements and no other liabilities
or commitments for any of this plan. The amounts shown in the compensation
table include contributions under this plan for the person indicated.
DIRECTORS COMPENSATION:
Directors of the Corporation currently receive an annual retainer of $2,400
payable in two semiannual installments if they attend at least two-thirds of the
required board meetings as well as two-thirds of the required committee
meetings. In addition to the retainer, directors receive a fee of $400 for each
Board and $200 for each committee meeting attended.
Under the long-term incentive plan adopted in 1995, each nonemployee
director, in 1996, was granted a non-qualified stock option to purchase 507
shares of the Corporation's stock at an option price of $18.25. The shares will
be fully vested and may be exercised in one-third increments over the next three
years and will expire April 10, 2006.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE:
The Corporation granted each director and the named executive officer stock
options on February 16, 1995 and January 3, 1996 (directors) and April 11,
1996, (directors) respectively. Each such person inadvertently failed to file
the required report following those two grants on a timely basis. Such
filing requirement has been brought to their attention, and reports are
currently being filed by each such person to remedy the filing deficiencies.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OWNERSHIP OF COMMON STOCK
No stockholder beneficially owns in excess of five percent of
the outstanding common stock of the Corporation. The following
table sets forth the beneficial ownership of the Common Stock of
the Corporation as of March 15, 1997, by each director and named executive
officer and all directors and executive officers as a group.
Number of Shares
Name or Group Beneficially Owned(1) Percent of Class
James Addington 1,800 (2)
Donald B. Baker 39,791 (2)
Robert B. Brittain 55,206 (2)
J. Robert Buchanan 10,578 (2)
Jack P. Chambers 69,435 1.04
Harris Hart, II 41,148 (2)
Charles C. Henley 49,162 (2)
Gene H. James 70,451 1.06
Robert C. James 57,960 (2)
John A. Johnston 6,562 (2)
N. Stanley King, Sr. 129,216 1.94
George R. Smith 24,544 (2)
James R. Wheeling 27,446 (2)
All directors and executive
officers as a group (13 persons) 583,299 8.77%
(1) Includes shares which may be deemed beneficially owned by
virtue of family relationships, joint ownership, voting power or
investment power.
(2) Less than 1 percent.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN TRANSACTIONS
Some of the directors and officers of the Corporation and
their families are at present, as in the past, customers of
banking affiliates of the Corporation, and have had and expect to
have transactions with the affiliate banks in the ordinary course
of business. In addition, some of the directors and officers of
the Corporation are at present, as in the past, also directors and
officers of corporations which are customers of the affiliate
banks and which have had and expect to have transactions with such
banks in the ordinary course of business. Such transactions were
made in the ordinary course of business on substantially the same
terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other
persons, and did not involve more than normal risk of
collectibility or present other unfavorable features.
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
statments 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) A Form 8-K was filed in the fourth quarter of 1996 relating to the
pending acquistion of Premier Bankshares Corporation by First Virginia
Banks, Inc.
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/ Robert B. Brittain, Director /s/Robert C. James, Director
Date Executed: 03-18-97 Date Executed: 03-19-97
/s/ Jack P. Chambers, Director /s/Charles C. Henley, Director
Date Executed: 03-18-97 Date Executed: 03-19-97
/s/ Harris Hart, II, Director /s/John A. Johnston, Director
Date Executed: 03-18-97 Date Executed: 03-19-97
/s/ Donald Baker, Director /s/Gene James, Director
Date Executed: 03-18-97 Date Executed: 03-19-97
/s/ James H. Addington, Director /s/George R. Smith, Director
Date Executed: 03-19-97 Date Executed: 03-20-97
/s/ J. Robert Buchanan, Treasurer /s/ EllenSimpson, 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, 1996
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, 1996 are included in Item 8:
Report of Independent Auditors 35-36
Consolidated Balance Sheets - December 31, 1996 and 1995 37
Statements of Consolidated Income - Years ended
December 31, 1996, 1995, and 1994 38
Statements of Changes in Stockholders' Equity -
Years ended December 31, 1996, 1995 and 1994 39
Statements of Consolidated Cash Flows - Years ended
December 31, 1996, 1995 and 1994 40-41
Notes to Consolidated Financial Statements 42-68
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
2. Agreement and Plan of Reorganization and the Stock
Option Agreement are incorporated herein by reference to Exhibit I of
First Virginia's Schedule 13D (filed on November 8, 1996)
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, N.A. 100.00 The United Registrant
States of
America
Premier Bank, N.A. 100.00 The United Registrant
States of
America
Premier Bank-South, N.A. 100.00 The United Registrant
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, Inc. State of
Virginia
EXHIBIT 23
Brown , Edwards & Company
Certified Public Accountants
1969 Lee Highway
Bristol, Virginia
March 13, 1997
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 13, 1995, appearing in the annual
report on Form 10K for the year ended December 31, 1994.
Brown , Edwards & Company, L.L.P.
Certified Public Accountants
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 28,086
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,130
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 157,306
<INVESTMENTS-CARRYING> 33,789
<INVESTMENTS-MARKET> 34,192
<LOANS> 497,928
<ALLOWANCE> 5,713
<TOTAL-ASSETS> 761,104
<DEPOSITS> 665,798
<SHORT-TERM> 10,347
<LIABILITIES-OTHER> 6,394
<LONG-TERM> 0
0
0
<COMMON> 13,300
<OTHER-SE> 65,265
<TOTAL-LIABILITIES-AND-EQUITY> 761,104
<INTEREST-LOAN> 43,251
<INTEREST-INVEST> 13,091
<INTEREST-OTHER> 752
<INTEREST-TOTAL> 57,094
<INTEREST-DEPOSIT> 25,104
<INTEREST-EXPENSE> 565
<INTEREST-INCOME-NET> 31,425
<LOAN-LOSSES> 880
<SECURITIES-GAINS> (372)
<EXPENSE-OTHER> 22,194
<INCOME-PRETAX> 13,418
<INCOME-PRE-EXTRAORDINARY> 13,418
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,151
<EPS-PRIMARY> 1.53
<EPS-DILUTED> 1.53
<YIELD-ACTUAL> 8.51
<LOANS-NON> 888
<LOANS-PAST> 2,520
<LOANS-TROUBLED> 718
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,430
<CHARGE-OFFS> 1,070
<RECOVERIES> 323
<ALLOWANCE-CLOSE> 5,713
<ALLOWANCE-DOMESTIC> 5,713
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
