FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
_____________________to____________________
For Quarter Ended Commission file number 0-15729
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, VA 24605
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code (540) 322-2242
_________________________________________________________________
(Former name, former address and former fiscal year, if changed
since last report).
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No ___.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of September 30, 1996.
Common stock, $2 par value - 6,650,083 shares.
INDEX
Page
No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
September 30, 1996 and December 31, 1995 3
Consolidated Statements of Income -
Three and Nine Months Ended September 30,
1996 and 1995 4
Consolidated Statements of
Stockholders' Equity - Nine Months
Ended September 30, 1996 and 1995 5
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7-10
Supplemental Financial Data (Tables I - III) 11-13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14-15
Part II. Other Information:
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security 16
Item 5. Holders Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
ITEM 1. FINANCIAL INFORMATION:
PREMIER BANKSHARES CORPORATION AND AFFILIATES
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
September 30, December 31,
1996 1995
ASSETS:
Cash and Due From Banks $ 26,251 $ 28,957
Securities Held to Maturity (Approximate
Market Value $30,343 in 1996; $34,014 in
1995) 30,094 33,348
Securities Available for Sale (Amortized
Cost $182,799 in 1996 $233,545 in 1995) 180,195 234,183
Federal Funds Sold 24,105
Loans, Net of Unearned Income of $4,900 in
1996, $5,386 in 1995 and Allowance for
Loan Losses of $5,367 in 1996 and $5,430
in 1995 468,654 400,569
Bank Premises and Equipment 17,018 17,242
Other Assets 22,195 23,631
TOTAL ASSETS $ 744,407 $ 762,035
LIABILITIES:
Deposits:
Demand $ 77,937 70,431
Interest-bearing Demand 82,888 89,558
Savings 134,560 141,142
Large Denomination Certificates
of Deposit 50,510 52,839
Other Time 303,846 307,943
TOTAL DEPOSITS $ 649,741 $ 661,913
Short-term Debt 12,232 17,407
Other Liabilities 5,916 9,492
TOTAL LIABILITIES $ 667,889 $ 688,812
SHAREHOLDERS' EQUITY:
Capital Stock-Common-$2 Par
10,000,000 Authorized; 6,650,083
Shares Issued in 1996 and 1995 $ 13,300 $ 13,300
Surplus 18,696 18,704
Undivided Profits 46,279 40,818
Net Unrealized Gain (Loss) on Securities (1,757) 401
TOTAL STOCKHOLDERS' EQUITY $ 76,518 $ 73,223
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 744,407 $ 762,035
Notes to financial statements are an integral part of these
statements.
PREMIER BANKSHARES CORPORATION AND AFFILIATES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
INTEREST INCOME:
Loans and Fees $ 11,202 $ 9,836 $ 31,875 $ 27,815
Federal Funds Sold 102 719 591 1,449
Securities Held to Maturity 1,065 434 3,045 3,067
Securities Held for Sale 1,997 3,292 7,264 7,187
Total Interest Income $ 14,366 $ 14,281 $ 42,775 $ 39,518
INTEREST EXPENSE:
Demand Deposits $ 526 $ 552 $ 1,555 $ 1,503
Savings Deposits 1,013 1,164 3,093 3,583
Large Denomination Certificates
of Deposit 717 759 2,201 2,021
Other Time Deposits 3,935 4,113 12,187 10,250
Short-term Debt 107 234 470 711
Long-term Debt 34 153
Total Interest Expense $ 6,298 $ 6,856 $ 19,506 $ 18,221
Net Interest Income $ 8,068 $ 7,425 $ 23,269 $ 21,297
ADDITION TO ALLOWANCE FOR LOAN
AND LEASE LOSSES 225 0 375 315
Net Interest Income After
Addition to Allowance for
Loan and Lease Losses $ 7,843 $ 7,425 $ 22,894 $ 20,982
OTHER INCOME:
Service Charges on Deposit
Accounts $ 737 $ 748 $ 2,168 $ 1,804
Trust Department Income 83 61 183 178
Other Service Charges,
Commissions and Fees 437 402 1,351 1,184
Other Operating Income 98 44 320 255
Security Gains (Losses) (66) 49 (201) (104)
Total Other Income $ 1,289 $ 1,304 $ 3,821 $ 3,317
OTHER EXPENSES:
Salaries $ 2,248 $ 2,045 $ 6,658 $ 5,993
Employee Benefits 469 547 1,524 1,532
Occupancy Expenses 290 258 891 678
Furniture and Equipment Expenses 312 300 971 891
Other Operating Expenses 2,127 2,254 6,072 6,305
Total Other Expense $ 5,446 $ 5,404 $ 16,116 $ 15,399
Income Before Income Taxes $ 3,686 $ 3,325 $ 10,599 $ 8,900
Applicable Income Taxes 986 857 2,746 2,242
Net Income $ 2,700 $ 2,468 $ 7,853 $ 6,658
NET INCOME PER SHARE $ 0.41 $ 0.37 $ 1.18 $ 1.00
CASH DIVIDENDS PER SHARE $ 0.12 $ 0.105 $ 0.36 $ 0.32
The notes to financial statements are an integral part of these statements.
PREMIER BANKSHARES CORPORATION AND AFFILIATES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands of Dollars)
Nine Months Ended
September 30,
1996 1995
Balance at Beginning of Year $ 73,223 $ 60,293
Net Income 7,853 6,658
Cash Dividends Declared (2,394) (2,094)
Other (7)
Change in Valuation Allowance for
Securities (2,157) 4,801
Balance at End of Period $ 76,518 $ 69,658
The notes to financial statements are an integral part of these
statements.
PREMIER BANKSHARES CORPORATION AND AFFILIATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,700 $ 2,468 $ 7,853 $ 6,658
Adjustments to Reconcile Net
Income to Cash Provided by
Operating Activities:
Depreciation and
Amortization of Premises
and Equipment 311 275 918 763
Provision for Loan Losses 225 375 315
Amortization of:
Goodwill and Intangibles 388 308 684 529
Premiums and Accretion
of Discounts, Net 300 244 856 474
Sale of Originated Loans 850 850
Security Gains (Losses) 66 (49) 201 104
Increase in Other Assets 1,370 (1,416) 2,114 (11,876)
Increase in Other
Liabilities 438 788 (3,576) 3,513
Net Cash Provided by
Operating Activities $ 6,648 $ 2,618 $ 10,275 $ 480
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net Decrease in Temporary
Investments $ 12,150 $ 14,574 $ 24,105 $ (24,190)
Sale of Securities
Available for Sale 19,114 8,679 42,125 20,295
Purchases of Securities
Available for Sale (60,067) 9,374 (31,380) (45,679)
Maturities of Securities
Available for Sale 62,442 (28,464) 38,664 14,845
Maturities of Securities
Held to Maturity 2,916 2,747 4,606 10,114
Purchase of Securities Held
to Maturity (1,670) (1,352) (19,230)
Net Increase in Customer
Loans (30,227) (8,620) (69,310) (32,415)
Premises and Equipment
Expenditures (245) (472) (1,288) (3,338)
Sales of Premises and
Equipment 65 15 588 635
Net Cash (Used) in
Provided by Investing
Activities $ 6,148 $ (3,837) $ 6,758 $ (78,963)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net (Decrease) Increase in
Demand Deposits, Now and
Savings Deposits $ 402 $ 4,601 $ (5,746) $ 14,835
Net (Decrease) Increase in
Time Deposits (6,812) 4,925 (6,426) 81,218
Borrowings of Long-term Debt 7,000
Payment on Long-term Debt (7,300) (7,300)
Net Decrease in Short-term Debt (8,791) (5,345) (5,175) (9,564)
Cash Dividends Paid (798) (699) (2,392) (2,095)
Net Cash Provided by (Used)
In Financing Activities $ (15,999) $ (3,818) $ (19,739) $ 84,094
Net Increase in Cash and
Due from Banks $ (3,203) $ (5,037) $ (2,706) $ 5,611
CASH AND DUE FROM BANKS:
Beginning 29,454 30,123 28,957 19,475
Ending $ 26,251 $ 25,086 $ 26,251 $ 25,086
Supplemental Disclosures of
Cash Flow Information:
Cash Payments for Interest Paid:
To Depositors $ 6,285 $ 4,598 $ 19,761 $ 16,543
On Federal Fund Purchased
and Securities Sold Under
Agreement to Repurchase $ 95 $ 224 $ 458 $ 714
Income Taxes $ 856 $ $ 2,006 $ 1,655
The notes to financial statements are an integral part of these
statements.
PREMIER BANKSHARES CORPORATION AND AFFILIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The consolidated statements include the accounts of Premier and its
affiliates. All significant intercompany balances and transactions have
been eliminated. In the opinion of management, the accompanying
unaudited consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the financial positions as of September 30, 1996, and December 31,
1995, and the results of operations and cash flows for the nine months
ended September 30, 1996 and 1995.
The results of operations for the nine months ended September 30, 1996,
are not necessarily indicative of the results to be expected for the full
year.
2. Investment Securities
Carrying amounts and fair values of securities being held to maturity
are summarized as follows:
September 30, 1996
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(In Thousands of Dollars)
Obligations of States and
Political Subdivisions $ 30,094 $ 429 $ (180) $ 30,343
$ 30,094 $ 429 $ (180) $ 30,343
December 31, 1995
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(In Thousands of Dollars)
Obligations of States and
Political Subdivisions $ 33,282 $ 844 $ 178 $ 33,948
Other Debt Securities 66 66
$ 33,348 $ 844 $ 178 $ 34,014
2. Investment Securities (continued)
Amortized cost and carrying amount (estimated fair value) of securities
available for sale are summarized as follows:
September 30, 1996
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(In Thousands of Dollars)
U.S. Treasury Securities $ 7,442 $ 2 $ $ 7,444
U.S. Government Agencies and
Corporations 61,407 12 (836) 60,583
Obligations of States and
Political Subdivisions 44,135 671 (120) 44,686
Corporate Securities 4,497 (7) 4,490
Mortgage-backed Securities 56,680 1 (2,127) 54,554
Marketable Equity 1,596 (180) 1,416
Other Debt Securities 7,042 16 (36) 7,022
$ 182,799 $ 702 $ (3,306)$ 180,195
December 31, 1995
Gross Gross Estimated
Amortized Unrealize Unrealized Market
Cost d Gains Losses Value
(In Thousands of Dollars)
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 1,596 1 131 1,466
Other Debt Securities 1,794 1 13 1,782
$ 233,545 $ 2,033 $ 1,395 $ 234,183
Nine Months Ended
September 30,
1996 1995
(In Thousands of Dollars)
Gross proceeds from sales of
securities $ 42,125 20,295
Gross Gains on Sale of
Securities $ 146 $ 107
Gross Losses on Sale of
Securities (347) (211)
Net Securities Losses $ (201) $ (104)
PREMIER BANKSHARES CORPORATION AND AFFILIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
3. Loans
On January 1, 1996, the Company adopted Statement of Financial
Accounting Standard Number 122, Accounting for Mortgage Servicing Rights.
The Statement generally required a Company that originates mortgage
loans for sale on a secondary mortgage market such as FNMA and
retains the servicing rights, to allocate the total costs of the mortgage
loans to the morgage servicing rights and loans (without the mortgage
servicing rights) based on their relative fair values. Any cost allocated
to mortgage servicing rights should be recognized as a separate asset and
amortized in proportion to and over the period of estimated net servicing
income and should be evaluated for impairment based on their fair value.
The application of this standard had no material impact on the
consolidated financial statements of the Company.
The following is a summary of loans outstanding at the end of
the periods indicated:
September 30, December 31,
1996 1995
(In Thousands of Dollars)
Commercial, Financial, and
Agricultural $ 170,310 $ 132,601
Real Estate - Construction 15,879 12,393
Real Estate - Mortgage 187,972 165,900
Loans to Individuals 98,580 97,554
Others 6,181 2,937
478,922 411,385
Less Unearned Income (4,900) (5,386)
474,022 405,999
Less Allowance for Loan and Lease
Losses (5,368) (5,430)
$ 468,654 $ 400,569
The following schedule summarizes the changes in the allowance
for loan and lease losses:
September 30, September 30, December 31,
1996 1995 1995
(In Thousands of Dollars)
Balance, Beginning $ 5,430 $ 5,844 $ 5,844
Provision Charged Against
Income 375 315 315
Recoveries 250 274 314
Loans Charged Off (688) (798) (1,043)
Balance, Ending $ 5,367 $ 5,635 $ 5,430
Nonperforming assets consist of the following:
September 30, December 31,
1996 1995
(In Thousands of Dollars)
Nonaccrual Loans $ 1,008 $ 1,925
Restructured Loans 967 714
Nonperforming Loans 1,975 2,639
Foreclosed Properties 668 881
Nonperforming Assets $ 2,643 $ 3,520
Total loans past due 90 days or more and still accruing were
$2,924 on September 30, 1996 and $1,548 on December 31, 1995.
PREMIER BANKSHARES CORPORATION AND AFFILIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
4. Short-term Debt
Short-term debt consists of the following:
September 30, December 31,
1996 1995
(In Thousands of Dollars)
Federal Funds Purchased and
Securities Sold Under Agreements
to Repurchase $ 12,232 $ 17,407
Total Short-term Debt $ 12,232 $ 17,407
5. Long-term Debt
The long-term note dated 9/16/94 was paid off in December,
1995. As a result, there was no long-term debt outstanding as of
September 30, 1996 or December 31, 1995.
6. Earnings Per Share
Earnings per share are computed on the weighted average
common shares outstanding of 6,650,083 for the nine months ended
September 30, 1996 and 1995, respectively.
7. Capital Requirements
A comparison of the Company's capital as of June 30, 1996
with the minimum requirements is presented below.
Minimum
Actual Requirements
Tier I Risk-based Capital 14.43 % 4.00 %
Total Risk-based Capital 15.57 % 8.00 %
Leverage Ratio 9.16 % 4.00 %
8. Branch Acquisitions
In June 1995, the Company acquired seven branches from
NationsBank of which six branches were settled in the second
quarter of 1995, the seventh in the third quarter, 1995. These
acquisitions were accounted for under the purchase method of
accounting. The purchase prices were allocated to the identifiable
tangible and intangible assets acquired and liabilities assumed
based upon their estimated fair value at the date of consummation.
The intangibles are being amortized on a straight-line basis over
their respective lives.
TABLE I
Consolidated Selected Financial Data
(Amounts in thousands, except per share data)
1996
Third Second First
Quarter Quarter Quarter
Interest Income $ 14,366 $ 14,217 $ 14,192
Interest Expense 6,298 6,496 6,711
Net Interest Income 8,068 7,721 7,481
Provision for Loan Losses 225 115 35
Net Income 2,700 2,650 2,503
Per Share Data:
Net Income 0.41 0.39 0.38
Cash Dividends Paid 0.12 0.12 0.12
Total Average Stockholders' Equity $ 75,148 $ 73,879 $ 73,987
Total Average Assets $ 744,853 $ 758,564 $ 759,329
Ratios:
Average Stockholders' Equity
to Total Average Assets 10.09 % 9.74 % 9.74 %
Return on Average Equity 14.37 % 14.35 % 13.53 %
Return on Average Assets 1.45 % 1.40 % 1.32 %
1995
Fourth Third Second First
Quarter Quarter Quarter Quarter
Interest Income $ 14,125 $ 14,281 $ 13,038 $ 12,199
Interest Expense 6,802 6,856 6,071 5,294
Net Interest Income 7,323 7,425 6,967 6,905
Provision for Loan
Losses 127 188
Net Income 2,553 2,468 1,988 2,202
Per Share Data:
Net Income 0.39 0.37 0.30 0.33
Cash Dividends Paid 0.115 0.105 0.105 0.105
Total Average
Stockholders' Equity $ 70,387 $ 68,803 $ 62,968 $ 59,938
Total Average Assets $ 756,507 $ 755,186 $ 681,947 $ 653,074
Ratios:
Average Stockholders'
Equity to Total
Average Assets 9.30 % 9.11 % 9.23 % 9.18 %
Return on Average Equity 14.51 % 14.35 % 12.63 % 14.70 %
Return on Average Assets 1.35 % 1.31 % 1.17 % 1.35 %
TABLE II
DISTRIBUTION OF ASSETS, LIABILITIES, STOCKHOLDERS' EQUITY,
INTEREST RATES AND INTEREST DIFFERENTIAL
The following schedule presents the condensed consolidated average balance
sheets and the average rates earned and paid by Premier and its affiliates
on a fully taxable equivalent basis assuming a 34% tax rate for the nine
months ended September 30, 1996 and 1995. Nonaccruing loans are included in
the total loans.
1996 1995
Average Interest Yield/ Average Interest Yield/
Balance And Fees Rate Balance And Fees Rate
(In Thousands of Dollars) (In Thousands of Dollars)
Assets
Interest-earning Assets:
Loans and Leases $437,082 $ 31,979 9.76 % $ 381,119 $ 27,834 9.74 %
Taxable Investment
Securities 169,974 7,415 5.82 158,949 7,319 6.14 8.01
Nontaxable Investment
Securities 75,278 4,383 7.76 74,065 4,447 8.01
Interest-bearing Deposits
with Other Banks
Federal Funds Sold and
Securities Purchased
Under Agreements to Resell 14,295 591 5.51 33,612 1,449 5.75
Total Interest-earning Assets $696,629 $ 44,368 8.49 % $ 647,745 $ 41,049 8.45 %
Noninterest-earning Assets:
Cash and Noninterest-bearing
Deposits $ 23,715 $ 25,323
Premises and Equipment, Net 17,175 15,042
Other Assets 21,966 14,923
Less Allowance for Loan and
Lease Losses (5,326) (5,911)
Total Assets $754,159 $ 697,122
Liabilities and Stockholders'Equity
Interest-bearing Liabilities:
Demand Deposits $ 83,616 $ 1,555 2.48 % $ 72,728 $ 1,503 2.76 %
Savings Deposits 138,312 3,093 2.98 148,043 3,583 3.23
Large Denomination Certificates
of Deposit 53,413 2,201 5.49 51,470 2,021 5.24
Other Time Deposits 308,194 12,187 5.27 267,665 10,250 5.11
Short-term Borrowings 13,679 469 4.57 16,167 711 5.86
Long-term Debt 4,204 153 4.85
Total Interest-bearing $597,214 $ 19,505 4.35 % $ 560,277 $ 18,221 4.34 %
Liabilities
Noninterest-bearing Liabilities:
Demand Deposits 76,276 73,302
Other Liabilities 6,331 458
Stockholders' Equity 74,338 63,085
Total Liabilities and
Stockholders' Equity $754,159 $ 697,122
Net Interest Differential 4.14 % 4.11 %
Net Interest Earnings $ 24,863 $ 22,828
Net Yield on Interest-earning
Assets 4.76 % 4.70 %
TABLE III
A summary of the increases and decreases of the items included in the
Consolidated Statements of Income are shown below:
Net Increases (Decreases)
Three Months Ended Nine Months Ended
September 30, Septermber 30,
1996 and 1995 1996 and 1995
(In Thousands of Dollars)
INTEREST INCOME: Amount Percent Amount Percent
Interest and Fees on Loans $ 1,366 13.89 % $ 4,060 14.60 %
Federal Funds Sold (617) (85.81) % (858) (59.21) %
Interest on Investments Held to
Maturity Nontaxable 631 145.39 % (22) (0.72) %
Interest on Securities Held for
Sale, Taxable (1,295) (39.34) % 77 1.07 %
Total Interest Income 85 0.60 % 3,257 8.24 %
INTEREST EXPENSE:
Demand Deposits (26) (4.71) % 52 3.46 %
Savings Deposits (151) (12.97) % (490) (13.68) %
Large Denomination Certificates
of Deposits (42) (5.53) % 180 8.91 %
Other Time Deposits (178) (4.33) % 1,937 18.90 %
Short-term Debt (127) (54.27) % (241) (33.90) %
Long-term Debt (34) (100.00) % (153) (100.00) %
Total Interest Expense (558) (8.14) % 1,285 7.05 %
Net Interest Income 643 8.66 % 1,972 9.26 %
ADDITION TO ALLOWANCE FOR LOAN
LEASE LOSSES 225 N/A 60 19.05 %
Net Interest Income After
Addition to Allowance for
Loan and Lease Losses 418 5.63 % 1,912 9.11 %
OTHER INCOME:
Service Charges on Deposit
Accounts (11) (1.47) % 364 20.18 %
Trust Department Income 22 36.07 % 5 2.81 %
Other Service Charges,
Commissions and Fees 35 8.71 % 167 14.10 %
Other Operating Income 54 122.73 % 65 25.49 %
Security Gains (Losses) (115) (234.69) % (97) 93.27 %
Total Other Income (15) (1.15) % 504 15.19 %
OTHER EXPENSES:
Salaries 203 9.93 % 665 11.10 %
Employees Benefits (78) (14.26) % (8) (0.52) %
Occupancy Expenses 32 12.40 % 213 31.42 %
Furniture and Equipment Expenses 12 4.00 % 80 8.98 %
Other Operating Expenses (127) (5.63) % (233) (3.70) %
Total Other Expense 42 0.78 % 717 4.66 %
Income Before Income Taxes 361 10.86 % 1,699 19.09 %
Applicable Income Taxes 129 15.05 % 504 22.48 %
NET INCOME $ 232 9.40 % $ 1,195 17.95 %
ITEM 2. MANAGEMENT'S DISCUSSION:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Premier's non-bank subsidiaries, Premier Bank Services Corporation and
Professional Financial Services of Virginia, Inc. remain inactive.
Premier formed and began operating a new non-bank trust subsidiary, Premier
Trust Company in January 1995. In addition, Premier acquired the former
Dickenson-Buchanan Bank located in Clintwood, Virginia at year-end 1994
using the pooling-of-interest method of accounting. Prior year financial
data reflects this acquisition. Premier recorded seven branches
purchased from Nationsbank, adding approximately $116,000,000 in assets
during the first three quarters 1995.
EARNINGS PERFORMANCE
Net income for the first nine months of 1996 was $7,853,000, a
$1,195,000, or 17.95% increase over the $6,658,000 earned for the same
period in 1995. Net income for the three months ended September 30,
1996 was $2,700,000 compared to $2,468,000 for the third quarter 1995, a
$232,000, or 9.40% increase. This increase was largely the result of an
increase in net interest income. On a per share basis, net income for
the first nine months of 1996 increased to $1.18 compared from $1.00 for
the same period in 1995; $0.41 cents per share for the third quarter
1996 compared to $0.37 for the third quarter 1995. There were 6,650,083
average shares outstanding for both the three and nine months ending
September 30, 1996 and 1995, respectively.
NET INTEREST INCOME
Net interest income, before provision for loan losses for the nine
months ended September 30, 1996 was $23,269,000 compared to $21,297,000
in 1995, an increase of $1,972,000, or 9.26%. Net interest income for
the third quarter 1996 was $8,068,000, a $643,000, or 8.66% over the
third quarter 1995 figure of $7,425,000. The net interest differential
for this period (the difference between the tax-equivalent yield on
interest-bearing assets and the rate paid on interest-bearing
liabilities) increased only 3 basis points for the nine months ended
September 30, 1996 to 4.14% compared to the same period in 1995. The
tax-equivalent yield on earning assets increased from 8.45% in 1995 to
8.49%, or 4 basis points in 1996 while the rate paid on interest-bearing
liabilities remained almost the same at 4.35% compared to 4.34% in 1995.
The net yield (fully taxable equivalent) on earning assets
increased 6 basis points in 1996 to 4.76% compared to 4.70% in 1995.
Yields on loans increased 2 basis points to 9.76% with the average
balance increasing $55,963,000 over 1995. The average yield on taxable
and nontaxable investment securities decreased 32 and 25 basis points,
while the average balances increased $11,025,000 and $1,213,000,
respectively. The average rate earned on fed funds dropped 24 basis
points in 1996 when compared to 1995, while the average balance
decreased $19,317,000. The average rates paid on demand deposits and
savings decreased by 28 and 25 basis points, respectively. Rates on
large denomination and other time deposit rates increased 25 and 16
basis points, respectively. The rate paid on short-term borrowings
decreased 129 basis points. The long-term debt outstanding in September
1995 was paid off in December 1995 and no other currently exists. The
average balance of interest-bearing liabilities increased $36,937,000
over September 1995. The increased volume of earning assets and
liabilities in 1996 over 1995 was largely due to the purchase of the
seven NationsBank branches.
OTHER INCOME AND EXPENSES
Total other income increased $504,000 for the nine months, or
15.19%, to $3,821,000, almost entirely due to an increase in service
charges on deposit accounts of $364,000 and an increase in other service
charges, commissions and fees of $167,000. For the third quarter,
other income decreased $15,000 or 1.15% when compared to third quarter
1995. The nine month increase was due in part to the increased volume
of loans and deposits and the restructuring and standardization in 1995
of deposit accounts and service charges. Net security losses for the
nine months of 1996 were $201,000 compared to net losses of $104,000 in
1995; security losses were $66,000 in the third quarter 1996 compared to
a gain of $49,000 in the third quarter 1995. Trust department income
was $183,000 for the nine months ended September 30, 1996, compared to
$178,000 for the same period of 1995; $83,000 and $61,000 for the
quarters, respectively.
OTHER INCOME AND EXPENSES (Continued)
Other expenses increased $717,000 or 4.66% year to date when
compared to last year; a $42,000, or 0.78% when comparing the third
quarter 1996 to 1995. Of this increase, salaries increased $665,000
(11.10%) for the nine months of 1996, and $203,000 (9.93%) for the third
quarter 1996 when compared to their respective periods in 1995.
Occupancy expenses increased $213,000 and $32,000 for the nine and three
months ended in 1996, respectively; furniture and equipment expenses
increased $80,000 and $12,000 for the same periods when compared to
1995. As mentioned earlier, these increased expenses were impacted by
the purchase of the seven additional branches during 1995. The most
significant changes in other operating expenses for the nine months
ended September 30, 1996 when compared to 1995 were a decrease in FDIC
assessments of $659,000 and an increase in the amortization of goodwill
of $272,000, which resulted from the branch acquisitions. Less
significant increases and decreases account for the difference.
INVESTMENTS, LOANS, AND DEPOSITS
Net loans increased $68,085,000, or 17.00%, while investments
decreased $57,242,000 (21.40%), fed funds sold decreased $24,105,000 and
cash and due from banks decreased $2,706,000 from December 1995. Total
assets decreased $17,628,000. Demand deposits increased by $7,506,000.
Interest-bearing demand, savings, large denomination certificates and other
time deposits decreased $6,670,000, $6,582,000, $2,329,000 and $4,097,000
from December 1995. These deposit decreases were primarily the result of a
settling of the deposits purchased with the Nationsbank branches and the
effect of conservative pricing of deposit products, given the current interest
rate environment. Short-term debt, which includes fed funds purchased and
repurchase agreements, decreased $5,175,000 over year end 1995.
ALLOWANCE FOR LOAN AND LEASE LOSSES
The allowance for loan and lease losses on September 30, 1996 was
$5,367,000 compared to $5,430,000 at December 31, 1995, and $5,635,000
at September 30, 1995. The ratio of allowance for loan and lease losses
to total loans net of unearned income was 1.13% at September 30, 1996.
Charge-offs were $688,000 for the first nine months of 1996 compared to
$798,000 for the same period in 1995. Recoveries of $250,000 were
booked in the first nine months of 1996; $274,000 in 1995. Management
believes the allowance is adequate at the September 30,1996 level, with
year to date provisions made of $375,000.
CAPITAL RESOURCES
Total stockholders equity or capital amounted to $76,518,000 at
September 30, 1996. The leverage ratio at June 30, 1996 was 9.16%.
LIQUIDITY AND INTEREST SENSITIVITY
Premier's cash and cash equivalent, defined as cash and due from banks,
is a product of its operating, investing and financing activities. Cash
from operations for the nine months ended September 30, 1996 amounted to
$10,75,000 compared to $480,000 for the same period last year. The
difference being caused primarily by increases and decreases in other assets
and other liabilities. The net cash used in financing activities of
$19,739,000 for 1996 reflects a short-term change in the Company's trend of
increases in deposits. The net cash provided by Investing Activities of
$6,758,000 during 1996 reverses another trend of net funds used in this
activity and reflects the net decrease in investments over increases in loans.
This net decrease was partially necessary to offset the funds used in
financing activities discussed earlier. In 1996, Management chose the
liquidation of selected investments rather than a more aggressive pursuant of
higher cost deposits.
Almost the entire deposit base is made up of core deposits with
only 7.77% of total deposits composed of certificates of deposit of
$100,000 and over. At September 30, 1996, federal funds and investment
securities maturing within one year amounted to $21,921,000, or 3.37% of
total deposits. In addition, $74,891,000 of investment securities or
11.53% of deposits, mature within the 1-5 year range.
The policy of Premier is to maintain the relationship between rate-
sensitive assets and rate-sensitive liabilities which will maximize
future profit levels, given existing expectations of interest rate
movements.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - Pending Affiliations
On August 29, 1996, the Corporation signed an agreement with Big Stone Gap
Bank & Trust Company (Target) to purchase all of outstanding 80,000 shares
of Target for $50 per share. The total market value of the transaction
will be $4,000,000. The transaction will be accounted for as a purchase
acquisition. The Target had assets of approximately $22,000,000. The
Target's shareholders have approved the affiliation. The Corporation is
awaiting regulatory approval from the Office of the Comptroller of the Currency
before consummating the affiliation.
On October 29, 1996, the Corporation signed a definitive agreement to
affiliate with First Virginia Banks, Inc., an $8.2-billion multi-bank holding
company headquartered in Fairfax, Virginia. The Corporation's shareholders will
receive .545 shares of First Virginia Banks, Inc. common stock for each of their
6,650,083 shares outstanding. First Virginia Banks, Inc. will issue
approximately 3,624,295 shares of common stock in this tax-free exchange.
The pending merger will be accounted for as a purchase transaction. The
consummation of this pending merger is subject to completion of due diligence
review, approval of the Corporation's shareholders as well as federal and state
regulatory authorities.
Item 6. Exhibits and reports on Form 8-K
a) Exhibits - None
b) Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
PREMIER BANKSHARES CORPORATION
Date: November 14, 1996 BY /s/ James R. Wheeling
James R. Wheeling, President
Date: November 14, 1996 BY /s/ Ellen Simpson
Ellen Simpson, Secretary
(Accounting Officer)