-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, mzC+XYaxcAEQhkOKykba7JLZInIiy6MBd1hDoR9ngvAP1I+IafbVypgvNEBI5M8g wlKsJAW1tOfF4HafMF/2QA== 0000062741-94-000023.txt : 19940525 0000062741-94-000023.hdr.sgml : 19940525 ACCESSION NUMBER: 0000062741-94-000023 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940517 ITEM INFORMATION: Other events FILED AS OF DATE: 19940517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARSHALL & ILSLEY CORP/WI/ CENTRAL INDEX KEY: 0000062741 STANDARD INDUSTRIAL CLASSIFICATION: 6021 IRS NUMBER: 390968604 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-01220 FILM NUMBER: 94529125 BUSINESS ADDRESS: STREET 1: 770 N WATER ST CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4147657801 8-K 1 8-K FOR VALLEY BANCORPORATION 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): May 17, 1994. Marshall & Ilsley Corporation ------------------------------------------------------ (Exact name of registrant as specified in its charter) Wisconsin 0-1220 39-0968604 --------------- ------------ ------------------- (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) 770 North Water Street Milwaukee, Wisconsin 53202 --------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (414) 765-7801 Item 5. Other Events. Filed as an exhibit hereto and incorporated by reference herein is Valley Bancorporation's Quarterly Report on Form 10-Q for the period ended March 31, 1994. Item 7. Financial Statements and Exhibits. (c) Exhibit ------- 99 Valley Bancorporation - Quarterly Report on Form 10-Q for the period ended March 31, 1994. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: May 17, 1994 MARSHALL & ILSLEY CORPORATION By: /s/ M.A. Hatfield ------------------------- M.A. Hatfield Senior Vice President, Secretary and Treasurer EXHIBIT INDEX Sequential Exhibit No. Description Page No. 99 Valley Bancorporation - Quarterly Report on Form 10-Q for the period ended March 31, 1994. EX-99 2 EXHIBIT 99/VALLEY BANCORPORATION 10-Q FOR 03/31/94 EXHIBIT 99 CONFORMED COPY WITH EXHIBITS SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 F O R M 10 - Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1994 ----------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to _________________ Commission file number 0-2453 --------------------------------------------- VALLEY BANCORPORATION --------------------- (Exact name of registrant as specified in its charter) Wisconsin 39-6047319 ------------------------------ ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 100 W. Lawrence Street, P.O. Box 1061, Appleton, Wisconsin 54912-1061 - - ---------------------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (414) 738-3830 ---------------------- No Change ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _____X_____ No __________ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at May 1, 1994 ----- -------------------------- Common Stock, $.50 par value 20,763,122 shares VALLEY BANCORPORATION **** TABLE OF CONTENTS QUARTERLY REPORT ON FORM 10-Q FOR QUARTER ENDED MARCH 31, 1994 PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements Page No. Financial Highlights . . . . . . . . . . . . . . . 1 Quarterly Financial Summary . . . . . . . . . . . . 2 Consolidated Statements of Financial Position as of March 31, 1994, December 31, 1993 and March 31, 1993 . . . . . . . 3 Consolidated Statements of Income for the Three Months Ended March 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . 4 Consolidated Statements of Shareholders' Equity for the Three Months Ended March 31, 1994 and 1993 . . . . . . . . . . . . . 5 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . 6 Notes to Consolidated Financial Statements . . . . 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders Item 6. Exhibits and Reports on Form 8-K SIGNATURES EXHIBIT INDEX FORM 10-Q PART 1 - FINANCIAL INFORMATION ITEM 1. Financial Statements Financial Highlights* Three Months Ended March 31 1994 1993 % Change - - ------------------------------------------------------------------------------- Interest income $ 75,841,032 $ 77,771,077 (2.48) - - ------------------------------------------------------------------------------- Interest expense 31,728,586 35,115,169 (9.64) - - ------------------------------------------------------------------------------- Net interest income 44,112,446 42,655,908 3.41 - - ------------------------------------------------------------------------------- Taxable equivalent adjustment 1,221,930 1,181,610 3.41 - - ------------------------------------------------------------------------------- Taxable equivalent net interest income 45,334,376 43,837,518 3.41 - - ------------------------------------------------------------------------------- Provision for loan losses 2,181,000 2,164,700 .75 - - ------------------------------------------------------------------------------- Net income 10,338,977 10,893,654 (5.09) - - ------------------------------------------------------------------------------- Per share .50 .54 (7.41) - - ------------------------------------------------------------------------------- Weighted average shares 20,739,928 20,160,942 2.87 - - ------------------------------------------------------------------------------- Dividends per share .24 .23 4.35 =============================================================================== At March 31 - - ------------------------------------------------------------------------------- Assets $4,443,570,365 $4,277,488,684 3.88 - - ------------------------------------------------------------------------------- Investment securities 965,177,680 891,791,164 8.23 - - ------------------------------------------------------------------------------- Loans 3,154,346,748 3,011,518,170 4.74 - - ------------------------------------------------------------------------------- Reserve for loan losses 42,302,707 38,747,732 9.17 - - ------------------------------------------------------------------------------- Nonperforming loans 23,200,000 25,901,000 (10.43) - - ------------------------------------------------------------------------------- Deposits 3,778,006,115 3,690,529,013 2.37 - - ------------------------------------------------------------------------------- Shareholders' equity 365,183,367 334,600,943 9.14 - - ------------------------------------------------------------------------------- Per share 17.60 16.55 6.34 =============================================================================== Other Information - - ------------------------------------------------------------------------------- For the three month period - - ------------------------------------------------------------------------------- Return on average equity 11.12% 13.15% - - ------------------------------------------------------------------------------- Return on average assets .92% 1.02% - - ------------------------------------------------------------------------------- Net yield on earning assets 4.34% 4.42% - - ------------------------------------------------------------------------------- Efficiency ratio 69.35% 68.05% - - ------------------------------------------------------------------------------- At March 31 - - ------------------------------------------------------------------------------- Shareholders' equity as a percent of assets 8.22% 7.82% - - ------------------------------------------------------------------------------- Total risk-based capital as a percent of risk-weighted assets 11.65% 11.03% - - ------------------------------------------------------------------------------- Reserve for loan losses as a percent of loans 1.34% 1.29% - - ------------------------------------------------------------------------------- Nonperforming loans as a percent of loans .74% .86% - - ------------------------------------------------------------------------------- Employees - full time equivalents 2,620 2,646 - - ------------------------------------------------------------------------------- Banking offices 160 154 =============================================================================== *Per share data has been restated for the three for two stock split effected in the form of a 50% stock dividend distributed on August 27, 1993. Quarterly Financial Summary*
Per Share (post-split basis) -------------------------------------------- Share- Return on Stock Price Range** holders' Average Average Net Net Book ------------------- Quarter End Assets Equity Assets Assets Income Income Dividends Value Low High - - --------------------------------------------------------------------------------------------------------------------- March 31, 1994 $4,444 $365 $4,507 .92% $10.339 $.50 $.2400 $17.60 $32.38 $39.75 - - --------------------------------------------------------------------------------------------------------------------- Dec. 31, 1993 4,592 366 4,488 1.06 11.943 .58 .2350 17.65 35.00 39.63 - - --------------------------------------------------------------------------------------------------------------------- Sept. 30, 1993 4,394 350 4,361 1.06 11.581 .57 .2350 17.23 28.25 38.00 - - --------------------------------------------------------------------------------------------------------------------- June 30, 1993 4,337 343 4,307 1.07 11.485 .57 .2350 16.88 25.83 30.50 - - --------------------------------------------------------------------------------------------------------------------- March 31, 1993 4,277 335 4,284 1.02 10.894 .54 .2350 16.55 24.83 29.50 - - --------------------------------------------------------------------------------------------------------------------- Dec. 31, 1992 4,384 327 4,297 1.03 11.044 .55 .2125 16.24 23.00 26.00 - - --------------------------------------------------------------------------------------------------------------------- Sept. 30, 1992 4,303 319 4,265 1.06 11.258 .57 .2125 15.91 22.17 26.50 - - --------------------------------------------------------------------------------------------------------------------- June 30, 1992 3,957 281 3,884 .95 9.252 .50 .2125 15.21 20.00 22.50 - - --------------------------------------------------------------------------------------------------------------------- March 31, 1992 3,898 275 3,873 .85 8.226 .45 .2125 14.92 18.00 21.67 =====================================================================================================================
*Dollars in millions except per share data. Per share data has been restated for three for two stock split effected in the form of a 50% stock dividend distributed on August 27, 1993. **High and low sales prices in the NASDAQ National Market System as reported by NASDAQ. VALLEY BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (unaudited)
March 31, December 31, March 31, Assets 1994 1993 1993 - - ------------------------------------------------------------------------------------------- Cash and due from banks $ 143,616,611 $ 202,369,683 $ 168,343,140 - - ------------------------------------------------------------------------------------------- Federal funds sold and securities purchased under resale agreements 7,885,000 2,640,000 600,000 - - ------------------------------------------------------------------------------------------- Total Cash and cash equivalents 151,501,611 205,009,683 168,943,140 - - ------------------------------------------------------------------------------------------- Interest-bearing deposits with other banks 765,113 756,010 10,083,323 - - ------------------------------------------------------------------------------------------- Investments: (Note 5) Investment securities available for sale (market value $758,398,376, $772,580,974, and $31,093,676, respectively) 758,398,376 765,825,981 30,675,623 - - ------------------------------------------------------------------------------------------- Investment securities held to maturity (market value $207,308,558, $209,076,438, and $875,825,726,respectively) 206,779,304 206,376,848 861,115,541 - - ------------------------------------------------------------------------------------------- Total investments 965,177,680 972,202,829 891,791,164 - - ------------------------------------------------------------------------------------------- Mortgages held for sale 14,813,679 60,420,582 32,374,629 - - ------------------------------------------------------------------------------------------- Loans: - - ------------------------------------------------------------------------------------------- Commercial 723,062,131 723,941,280 738,440,745 - - ------------------------------------------------------------------------------------------- Real estate-construction 117,074,397 119,240,431 97,889,602 - - ------------------------------------------------------------------------------------------- Real estate-mortgage 1,696,927,013 1,611,402,801 1,670,105,401 - - ------------------------------------------------------------------------------------------- Installment (primarily simple interest) 644,104,819 650,376,812 563,785,022 - - ------------------------------------------------------------------------------------------- Total loans 3,190,485,536 3,011,518,170 3,154,346,748 - - ------------------------------------------------------------------------------------------- Reserve for loan losses (Note 7) (42,302,707) (40,410,907) (38,747,732) - - ------------------------------------------------------------------------------------------- Total loans, net 3,112,044,041 3,150,074,629 2,972,770,438 - - ------------------------------------------------------------------------------------------- Premises and equipment, net 101,232,128 103,271,225 103,507,341 - - ------------------------------------------------------------------------------------------- Other assets 98,036,113 100,457,657 98,018,649 - - ------------------------------------------------------------------------------------------- Total assets $4,443,570,365 $4,592,192,615 $4,277,488,684 =========================================================================================== Liabilities and Shareholders' Equity - - ------------------------------------------------------------------------------------------- Deposits: - - ------------------------------------------------------------------------------------------- Noninterest-bearing $ 497,662,177 $ 571,750,622 $ 450,312,759 - - ------------------------------------------------------------------------------------------- Interest-bearing 3,280,343,938 3,406,358,245 3,240,216,254 - - ------------------------------------------------------------------------------------------- Total deposits 3,778,006,115 3,978,108,867 3,690,529,013 - - ------------------------------------------------------------------------------------------- Short-term borrowings (Note 8) 182,973,313 132,004,071 109,088,703 - - ------------------------------------------------------------------------------------------- Long-term borrowings 53,235,529 53,251,185 68,296,056 - - ------------------------------------------------------------------------------------------- Other liabilities 64,172,041 62,920,639 74,973,969 - - ------------------------------------------------------------------------------------------- Total liabilities 4,078,386,998 4,226,284,762 3,942,887,741 - - ------------------------------------------------------------------------------------------- Shareholders' equity: - - ------------------------------------------------------------------------------------------- Preferred stock, cumulative, par value $1 per share, 1,000,000 shares authorized; none issued (Note 4) --- --- --- - - ------------------------------------------------------------------------------------------- Common stock, par value $.50 per share, 40,000,000 shares authorized; 20,753,522, 20,725,790, and 13,479,849 shares issued and outstanding, respectively 10,376,761 10,362,895 6,739,925 - - ------------------------------------------------------------------------------------------- Capital surplus 213,812,701 213,230,599 206,114,576 - - ------------------------------------------------------------------------------------------- Net unrealized losses on securities (6,681,426) --- --- available for sale, net of tax - - ------------------------------------------------------------------------------------------- Retained Earnings 147,675,331 142,314,359 121,746,442 - - ------------------------------------------------------------------------------------------- Total shareholders' equity 365,183,367 365,907,853 334,600,943 - - ------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $4,443,570,365 $4,592,192,615 $4,277,488,684 ===========================================================================================
The accompanying notes to consolidated financial statements are an integral part of these statements. VALLEY BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited) Three months ended March 31, ------------------------- Interest Income 1994 1993 - - -------------------------------------------------------------------- Interest and fees on loans $63,873,838 $64,984,137 - - -------------------------------------------------------------------- Interest on federal funds sold and securities purchased under resale agreements 50,706 53,704 - - -------------------------------------------------------------------- Interest on interest-bearing deposits with other banks 4,979 74,018 - - -------------------------------------------------------------------- Interest on investment securities-taxable 9,467,650 10,033,418 - - -------------------------------------------------------------------- Interest on investment securities-nontaxable 2,443,859 2,625,800 - - -------------------------------------------------------------------- Total interest income 75,841,032 77,771,077 - - -------------------------------------------------------------------- Interest Expense - - -------------------------------------------------------------------- Deposits 28,915,118 32,629,990 - - -------------------------------------------------------------------- Short-term borrowings 1,459,957 705,097 - - -------------------------------------------------------------------- Long-term borrowings 1,353,511 1,780,082 - - -------------------------------------------------------------------- Total interest expense 31,728,586 35,115,169 - - -------------------------------------------------------------------- Net Interest Income 44,112,446 42,655,908 - - -------------------------------------------------------------------- Provision for loan losses (Note 7) 2,181,000 2,164,700 - - -------------------------------------------------------------------- Net Interest Income After Provision for Loan Losses 41,931,446 40,491,208 - - -------------------------------------------------------------------- Noninterest Income - - -------------------------------------------------------------------- Service charges on deposit accounts 4,142,595 3,939,212 - - -------------------------------------------------------------------- Trust service fees 3,092,514 3,346,292 - - -------------------------------------------------------------------- Other service charges, commissions and fees 3,079,593 3,058,693 - - -------------------------------------------------------------------- Insurance related 1,970,880 1,874,568 - - -------------------------------------------------------------------- Credit card 1,711,759 1,519,226 - - -------------------------------------------------------------------- Gain on sale of mortgage loans 1,026,863 1,127,347 - - -------------------------------------------------------------------- Net securities gains (losses) (21,700) 148,220 - - -------------------------------------------------------------------- Other 626,350 741,708 - - -------------------------------------------------------------------- Total noninterest income 15,628,854 15,755,266 - - -------------------------------------------------------------------- Noninterest Expense - - -------------------------------------------------------------------- Salaries and wages 18,025,204 17,391,595 - - -------------------------------------------------------------------- Pensions and other employee benefits 6,010,807 5,560,267 - - -------------------------------------------------------------------- Equipment 4,256,603 4,170,512 - - -------------------------------------------------------------------- Net occupancy 3,612,026 3,326,183 - - -------------------------------------------------------------------- FDIC insurance 2,195,235 2,041,726 - - -------------------------------------------------------------------- Credit card 968,965 842,468 - - -------------------------------------------------------------------- Other 7,226,108 7,118,200 - - -------------------------------------------------------------------- Total noninterest expense 42,294,948 40,450,951 - - -------------------------------------------------------------------- Income Before Income Taxes 15,265,352 15,795,523 - - -------------------------------------------------------------------- Provision for income taxes 4,926,375 4,901,869 - - -------------------------------------------------------------------- Net Income $10,338,977 $10,893,654 ==================================================================== - - -------------------------------------------------------------------- Net Income Per Share* (Note 6) $.50 $.54 ==================================================================== The accompanying notes to consolidated financial statements are an integral part of these statements. *Per share data has been restated for the three for two stock split effected in the form of a 50% stock dividend declared on August 27, 1993. VALLEY BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited)
Net unrealized gains/(losses) on securities Common Stock available ----------------------- Capital for sale, net Retained Shares Par Value Surplus of tax Earnings Total - - ------------------------------------------------------------------------------------------------------------- Balance, December 31, 1992 13,414,513 $ 6,707,257 $204,642,969 $ --- $115,425,710 $326,775,936 - - ------------------------------------------------------------------------------------------------------------- Net income --- --- --- --- 10,893,654 10,893,654 - - ------------------------------------------------------------------------------------------------------------- Cash dividends --- --- --- --- (4,572,922) (4,572,922) - - ------------------------------------------------------------------------------------------------------------- Common stock issued pursuant to stock option plans 65,336 32,668 1,143,357 --- --- 1,176,025 - - ------------------------------------------------------------------------------------------------------------- Other --- --- 328,250 --- --- 328,250 - - ------------------------------------------------------------------------------------------------------------- Balance, March 31, 1993 13,479,849 $ 6,739,925 $206,114,576 $ --- $121,746,442 $334,600,943 ============================================================================================================= Balance, December 31, 1993 20,725,790 $10,362,895 $213,230,599 $ --- $142,314,359 $365,907,853 - - ------------------------------------------------------------------------------------------------------------- Net unrealized gain on securities available for sale, net of tax as of January 1, 1994 --- --- --- 4,390,745 --- 4,390,745 - - ------------------------------------------------------------------------------------------------------------- Net income --- --- --- --- 10,338,977 10,338,977 - - ------------------------------------------------------------------------------------------------------------- Cash dividends --- --- --- --- (4,978,005) (4,978,005) - - ------------------------------------------------------------------------------------------------------------- Common stock issued pursuant to stock option plans 27,732 13,866 429,105 --- --- 442,971 - - ------------------------------------------------------------------------------------------------------------- Change in unrealized losses on securities available for sale, net of tax --- --- --- (11,072,171) --- (11,072,171) - - ------------------------------------------------------------------------------------------------------------- Other --- --- 152,997 --- --- 152,997 - - ------------------------------------------------------------------------------------------------------------- Balance, March 31, 1994 20,753,522 $10,376,761 $213,812,701 $(6,681,426) $147,675,331 $365,183,367 =============================================================================================================
The accompanying notes to consolidated financial statements are an integral part of these statements. VALLEY BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Three months ended March 31, ------------------------------ 1994 1993 - - ------------------------------------------------------------------------------- Operating Activities - - ------------------------------------------------------------------------------- Net Income $ 10,338,977 $ 10,893,654 - - ------------------------------------------------------------------------------- Adjustments to reconcile net income to net cash provided by operating activities: - - ------------------------------------------------------------------------------- Provision for loan losses 2,181,000 2,164,700 - - ------------------------------------------------------------------------------- Origination of loans held for resale (88,518,000) (72,172,000) - - ------------------------------------------------------------------------------- Proceeds from sale of loans held for resale 135,247,911 79,408,990 - - ------------------------------------------------------------------------------- Depreciation 3,543,231 3,433,842 - - ------------------------------------------------------------------------------- Amortization/accretion of intangibles 530,058 479,530 - - ------------------------------------------------------------------------------- Accretion of valuation adjustments (280,590) (386,176) - - ------------------------------------------------------------------------------- Amortization of premium on investment securities 2,237,659 2,339,008 - - ------------------------------------------------------------------------------- Accretion of discount on investment securities (72,724) (77,682) - - ------------------------------------------------------------------------------- Provision for (benefit of) deferred taxes 520,184 (100,978) - - ------------------------------------------------------------------------------- Other, net 5,043,921 2,583,142 - - ------------------------------------------------------------------------------- Net cash provided by operating activities 70,771,627 28,566,030 - - ------------------------------------------------------------------------------- Investing Activities - - ------------------------------------------------------------------------------- Proceeds from sales of investment securities 136,057 2,675,210 - - ------------------------------------------------------------------------------- Proceeds from matured investment securities 125,978,042 206,443,725 - - ------------------------------------------------------------------------------- Purchases of investment securities (131,379,341) (187,702,171) - - ------------------------------------------------------------------------------- Net decrease (increase) in time deposits with other banks (9,103) (6,133,400) - - ------------------------------------------------------------------------------- Net increase in loans 35,316,653 3,839,433 - - ------------------------------------------------------------------------------- Purchase of premises and equipment, net of disposals (1,458,853) (3,439,276) - - ------------------------------------------------------------------------------- Recoveries of loans charged off 574,074 605,723 - - ------------------------------------------------------------------------------- Net cash used by investing activities 29,157,529 16,289,244 - - ------------------------------------------------------------------------------- Financing Activities - - ------------------------------------------------------------------------------- Net increase (decrease) in deposits (199,855,780) (141,670,152) - - ------------------------------------------------------------------------------- Net increase in short-term borrowings 50,969,242 22,194,349 - - ------------------------------------------------------------------------------- Repayment of long-term borrowings (15,656) (14,378) - - ------------------------------------------------------------------------------- Net proceeds from issuance of common stock 442,971 1,176,025 - - ------------------------------------------------------------------------------- Dividends paid (4,978,005) (4,572,922) - - ------------------------------------------------------------------------------- Net cash provided (used) by financing activities (153,437,228) (122,887,078) - - ------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (53,508,072) (78,031,804) - - ------------------------------------------------------------------------------- Cash and cash equivalents at beginning of period 205,009,683 246,974,944 - - ------------------------------------------------------------------------------- Cash and cash equivalents at end of period $151,501,611 $168,943,140 =============================================================================== Supplemental Disclosure of Cash Flow Information Cash Paid for: - - ------------------------------------------------------------------------------- Interest (net of amount capitalized) $ 28,861,643 $ 33,206,779 - - ------------------------------------------------------------------------------- Income taxes 1,078,743 1,219,800 =============================================================================== Supplemental Disclosure of Non-Cash Investing and Financing Activities: - - ------------------------------------------------------------------------------- Loans charged off $ 863,274 $ 1,943,365 - - ------------------------------------------------------------------------------- Loans transferred to other real estate owned 577,985 1,089,323 =============================================================================== The accompanying notes to consolidated financial statements are an integral part of these statements. VALLEY BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's latest report on Form 10-K. 1. General: The consolidated financial statements include the accounts of Valley Bancorporation (Valley) and subsidiaries. All material intercompany transactions and balances are eliminated in consolidation. The accounting and reporting policies of Valley conform to generally accepted accounting principles and to general practice within the banking industry, applied on a consistent basis. Valley has not changed its accounting and reporting policies from those stated in its 1993 Form 10-K except for adoption of SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities" (see footnote 5). The consolidated statements included herein should be read in conjunction with the consolidated financial statements and footnotes contained in Valley's Form 10-K for the year ended December 31, 1993. 2. Interim Period Adjustments: The consolidated financial statements contained herein reflect all adjustments (which are of a normal recurring nature) which are, in the opinion of the management, necessary for a fair statement of the results of operations for the unaudited interim periods. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the entire year. 3. Business Combinations: On November 6, 1993, Valley completed the cash acquisition of the $112 million-asset Pierce County Bank and Trust Company ("Pierce County"). Pierce County serves western Wisconsin markets through seven branch offices. This transaction was accounted for as a purchase and therefore not included in Valley's results of operations or statements of financial position prior to the date of acquisition. Valley and Marshall & Ilsley Corporation (M&I) have entered into an Agreement and Plan of Merger, dated as of September 19, 1993 (the "Merger Agreement"), which provides for the combination of the two companies through a merger of Valley into M&I (the "Merger"). Under the Merger Agreement, each share of Valley common stock, par value $.50 per share ("Valley Common Stock"), outstanding at the time the Merger is consummated (other than any shares owned by M&I for its own account) will be converted into the right to receive 1.72 (the "Exchange Rate") shares of M&I common stock, par value $1.00 per share ("M&I Common Stock"), in a tax-free reorganization to be accounted for as a pooling of interests. Resulting fractional share interests will be paid in cash in lieu of issuing fractional shares. Then outstanding Valley employee and director stock options will be converted at the Exchange Rate into options to acquire M&I Common Stock. The consummation of the Merger is currently expected to occur in the second quarter of 1994, and has been approved by the shareholders of both companies and received all requisite regulatory approvals. As a result of the merger various assets, specifically computer and software have impaired value and will be written off, subsequent to the merger. The current book value of tax assets is approximately $11.6 million. In connection with the Merger Agreement, the parties entered into a Stock Option Agreement, dated as of September 19, 1993 (the "Stock Option Agreement"), by which Valley granted M&I an option (the "Option") to purchase up to 4,045,795 newly issued shares of Valley Common Stock (19.9% of the number of shares outstanding and subject to adjustment to maintain that percentage) at an exercise price of $35.75 per share, exercisable upon the occurrence of certain events and subject to certain conditions set forth in the Stock Option Agreement. The Stock Option Agreement also provides M&I the right to receive a termination fee to the extent that the Option has not been exercised after the occurrence of an event which makes the Option exercisable. The Option will expire upon consummation of the Merger. 4. Shareholder Rights Plan: On October 21, 1988, Valley declared a distribution of one preferred share purchase right (a "Right") for each outstanding share of Valley Common Stock. As a result of the three for two stock split on August 27, 1993, each outstanding share of Valley Common Stock now evidences two-thirds of a Right. Detailed provisions of the Rights are set forth in a Rights Agreement, dated as of October 21, 1988, between Valley and The First National Bank of Boston. The Rights Agreement may be amended by the Valley Board of Directors with the concurrence of a majority of the Board's independent directors. As required by the Merger Agreement, the Rights Agreement has been amended by Amendment No. 1 thereto, dated as of September 19, 1993, to provide that (a) neither M&I nor any affiliate of M&I shall be deemed an Acquiring Person, and (b) the execution, delivery and performance of the Merger Agreement and the Stock Option Agreement does not and will not result in a Shares Acquisition Date or Distribution Date (as such terms are defined in the Rights Agreement), provided that M&I and its affiliates acquire Valley Common Stock only in the manner specified. Under the Merger Agreement, the shares of M&I Common Stock into which the outstanding shares of Valley Common Stock will be converted in the Merger will be deemed to have been issued in full satisfaction of all rights pertaining to such shares of Valley Common Stock, including the Rights. 5. Investment Securities: The book and fair values of investment securities are as follows: 5. Investment Securities: The book and fair values of investment securities are as follows: Note 5: Investment Securities
Amortized Gross Unrealized Fair March 31, 1994 Cost Gains (Losses) Value - - -------------------------------------------------------------------------------------------------------------------------- Investment securities available for sale: - - -------------------------------------------------------------------------------------------------------------------------- U.S. Government $419,262,794 $ 952,234 $( 6,482,113) $413,732,915 - - -------------------------------------------------------------------------------------------------------------------------- CMOs 185,983,555 205,427 ( 5,007,314) 181,181,668 - - -------------------------------------------------------------------------------------------------------------------------- Federal Agencies 122,993,366 725,238 ( 1,278,696) 122,439,908 - - -------------------------------------------------------------------------------------------------------------------------- Other 37,278,831 880,423 (600) 38,158,654 - - -------------------------------------------------------------------------------------------------------------------------- Corporates 2,885,231 --- --- 2,885,231 - - -------------------------------------------------------------------------------------------------------------------------- Total investment securities available for sale $768,403,777 $ 2,763,322 $(12,768,723) $758,398,376 - - -------------------------------------------------------------------------------------------------------------------------- Investment securities held to maturity: - - -------------------------------------------------------------------------------------------------------------------------- State and political subdivisions $206,779,304 $ 1,159,783 $( 630,529) $207,308,558 - - -------------------------------------------------------------------------------------------------------------------------- Total investment securities held to maturity $206,779,304 $ 1,159,783 $( 630,529) $207,308,558 - - -------------------------------------------------------------------------------------------------------------------------- Total investments $975,183,081 $ 3,923,105 $(13,399,252) $965,706,934 ========================================================================================================================== Amortized Gross Unrealized Fair March 31, 1993 Cost Gains (Losses) Value - - -------------------------------------------------------------------------------------------------------------------------- Investment securities available for sale: - - -------------------------------------------------------------------------------------------------------------------------- Mortgage pass-throughs $ 20,441,747 $ 364,719 $ --- $ 20,806,466 - - -------------------------------------------------------------------------------------------------------------------------- Corporates 10,233,876 53,334 --- 10,287,210 - - -------------------------------------------------------------------------------------------------------------------------- Total investment securities available for sale $ 30,675,623 $ 418,053 $ --- $ 31,093,676 - - -------------------------------------------------------------------------------------------------------------------------- Investment securities held to maturity: - - -------------------------------------------------------------------------------------------------------------------------- U.S. Government $309,900,573 $ 6,183,658 $ (33,147) $316,051,084 - - -------------------------------------------------------------------------------------------------------------------------- CMOs 230,732,050 2,282,754 (503,087) 232,511,717 - - -------------------------------------------------------------------------------------------------------------------------- Federal agencies 99,388,214 1,261,473 (222) 100,649,465 - - -------------------------------------------------------------------------------------------------------------------------- Other 44,180,288 1,143,348 --- 45,323,636 - - -------------------------------------------------------------------------------------------------------------------------- State and political subdivisions 176,914,416 4,425,592 (50,184) 181,289,824 - - -------------------------------------------------------------------------------------------------------------------------- Total investment securities held to maturity $861,115,541 $15,296,825 $ (586,640) $875,825,726 - - -------------------------------------------------------------------------------------------------------------------------- Total investments $891,791,164 $15,714,878 $ (586,640) $906,919,402 ==========================================================================================================================
The book and fair values of investment securities at March 31, 1994, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Investment securities available for sale --------------------------------------- Amortized Fair March 31, 1994 Cost Value - - ------------------------------------------------------------------------------ Due in 1 year or less $201,561,240 $204,619,939 - - ------------------------------------------------------------------------------ Due after 1 through 5 years 352,575,816 341,116,313 - - ------------------------------------------------------------------------------ Due after 5 through 10 years 12,841,847 20,211,340 - - ------------------------------------------------------------------------------ Due after 10 years 15,441,319 11,269,116 - - ------------------------------------------------------------------------------ Total excluding CMOs $582,420,222 $577,216,708 - - ------------------------------------------------------------------------------ CMOs 185,983,555 181,181,668 - - ------------------------------------------------------------------------------ Total $768,403,777 $758,398,376 ============================================================================== Investment securities held to maturity --------------------------------------- Amortized Fair March 31, 1994 Cost Value - - ------------------------------------------------------------------------------ Due in 1 year or less $ 56,645,895 $ 56,780,730 - - ------------------------------------------------------------------------------ Due after 1 through 5 years 102,061,831 102,757,705 - - ------------------------------------------------------------------------------ Due after 5 through 10 years 38,416,334 37,895,764 - - ------------------------------------------------------------------------------ Due after 10 years 9,655,244 9,874,359 - - ------------------------------------------------------------------------------ Total excluding CMOs $206,779,304 $207,308,558 - - ------------------------------------------------------------------------------ CMOs --- --- - - ------------------------------------------------------------------------------ Total $206,779,304 $207,308,558 ============================================================================== Proceeds from sales of investments in the first three months of 1994 were $136,057. Gross gains of $1,162 and gross losses of $22,862 were realized on security transactions in the first three months of 1994. In May 1993, the FASB issued SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities." This statement addresses the accounting and reporting for investments in equity securities that have readily determinable fair values and for all investments in debt securities. The statement calls for classification and accounting for investments in three categories; held-to-maturity to be accounted for at amortized cost, trading securities to be accounted for at fair value with unrealized gains and losses included in earnings, and available- for-sale securities to be accounted for at fair value with unrealized gains and losses excluded from earnings and reported in a separate component of shareholder's equity. Valley adopted this statement on January 1, 1994, and shows a decrease to shareholders' equity of $6.7 million as of March 31, 1994. If this new standard had been adopted by Valley at December 31, 1993, the result would have increased shareholders' equity by the net unrealized gain of $4,390,745, after tax. 6. Net Income Per Share: Net income per share was computed based on the weighted average number of common shares outstanding (20,739,928 in 1994 and 20,160,942 in 1993 post-split basis). A three for two stock split effected in the form of a 50% stock dividend was declared July 20, 1993, payable August 27, 1993 to shareholders of record August 6, 1993. The common stock per share and average share information for 1993 has been retroactively restated for the stock split. The effect of outstanding stock options on net income per share is not material. 7. Reserve for Loan Losses: An analysis of the reserve for loan losses is as follows: Note 7: Reserve for Loan Losses March 31, --------------------------------------- 1994 1993 - - ------------------------------------------------------------------------------ Balance, beginning of year $40,410,907 $37,920,674 - - ------------------------------------------------------------------------------ Provision charged to expense 2,181,000 2,164,700 - - ------------------------------------------------------------------------------ Recoveries 574,074 605,723 - - ------------------------------------------------------------------------------ Loans charged off (863,274) (1,943,365) - - ------------------------------------------------------------------------------ Net loans charged off (289,200) (1,337,642) - - ------------------------------------------------------------------------------ Balance, end of period $42,302,707 $38,747,732 ============================================================================== 8. Short-Term Borrowings: Short-term borrowings consisted of the following: Note 8: Short-Term Borrowings
March 31, December 31, March 31, 1994 1993 1993 - - --------------------------------------------------------------------------------------- Security repurchase agreements $162,794,117 $ 73,048,347 $101,074,098 - - --------------------------------------------------------------------------------------- U.S. Treasury demand notes 4,829,196 7,605,724 6,664,605 - - --------------------------------------------------------------------------------------- Lines of credit 14,000,000 50,000,000 --- - - --------------------------------------------------------------------------------------- Other 1,350,000 1,350,000 1,350,000 - - --------------------------------------------------------------------------------------- Total $182,973,313 $132,004,071 $109,088,703 =======================================================================================
The average rates paid on these funds were 3.15%, 2.81% and 2.79% for the periods ending March 31, 1994, December 31, 1993 and March 31, 1993, respectively. The demand notes payable to the U.S. Treasury accrue interest at .25% below the weekly federal funds rate and are fully collateralized by subsidiary banks' investment securities. Securities sold under repurchase agreements are periodically borrowed on a short-term basis by subsidiary banks at prevailing rates for these funds. Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations The following discussion will cover results of operations, asset quality, financial position and capital resources. The information included in this discussion is intended to assist readers in their analysis of, and should be read in conjunction with, the consolidated financial statements presented elsewhere in this report. Results of Operations Overview In the first quarter of 1994, Valley reported net income of $10.339 million, a decrease of $.555 million, or 5.1%, from the $10.894 million in the first quarter of 1993. Earnings per share in the first quarter of 1994 were $.50 compared with $.54 (adjusted for three for two stock split on August 27, 1993) in the first quarter of 1993, a 7.4% decrease. Weighted average shares outstanding in the first three months of 1994 increased to 20,739,928 compared with 20,160,942 (adjusted) in the first three months of 1993. Valley's earnings were lower than expected. Due to the impending merger with Marshall & Ilsley Corporation ("M&I"), Valley Senior Management, on its own initiative, began to reconfigure Valley with a view towards realizing expected efficiencies from the merger. This effort caused a diminution of focus resulting in a negative impact on product sales and net income. Table 1 highlights the major factors affecting the changes in earnings per share for the first three months of the last three years. Table 1: Changes in Earnings and Earnings Per Share
Three months ended March 31, ----------------------------------------------------------------------------------- Income/Expense Change ----------------------------------------------------------------------------------- 1994 1993 1992 1994/1993 1993/1992 (dollars in thousands) Dollars Dollars Dollars Dollars Per Share** Dollars Per Share* - - ---------------------------------------------------------------------------------------------------------------------------- Net Income, prior period N/A N/A N/A $10,894 $.54 $ 8,226 $.45 - - ---------------------------------------------------------------------------------------------------------------------------- Increase(decrease) attributable to: - - ---------------------------------------------------------------------------------------------------------------------------- Interest Income* $77,063 $78,952 $81,213 (1,889) (.09) (2,261) (.12) - - ---------------------------------------------------------------------------------------------------------------------------- Interest Expense 31,729 35,115 41,121 3,386 .17 6,006 .33 - - ---------------------------------------------------------------------------------------------------------------------------- Net Interest Income 45,334 43,837 40,092 1,497 .08 3,745 .21 - - ---------------------------------------------------------------------------------------------------------------------------- Provision for loan losses 2,181 2,165 2,275 (16) --- 110 .01 - - ---------------------------------------------------------------------------------------------------------------------------- Noninterest Income: - - ---------------------------------------------------------------------------------------------------------------------------- Service charges on deposit accounts 4,143 3,939 3,592 204 .01 347 .02 - - ---------------------------------------------------------------------------------------------------------------------------- Trust service fees 3,092 3,346 3,229 (254) (.01) 117 .01 - - ---------------------------------------------------------------------------------------------------------------------------- Other service charges, commissions and fees 3,080 3,059 2,407 21 --- 652 .03 - - ---------------------------------------------------------------------------------------------------------------------------- Insurance related 1,971 1,875 1,747 96 --- 128 .01 - - ---------------------------------------------------------------------------------------------------------------------------- Credit card 1,712 1,519 1,348 193 .01 171 .01 - - ---------------------------------------------------------------------------------------------------------------------------- Net securities gains (22) 148 402 (170) (.01) (254) (.02) - - ---------------------------------------------------------------------------------------------------------------------------- Other 1,653 1,869 800 (216) (.01) 1,069 .06 - - ---------------------------------------------------------------------------------------------------------------------------- Total noninterest income 15,629 15,755 13,525 (126) (.01) 2,230 .12 - - ---------------------------------------------------------------------------------------------------------------------------- Noninterest Expense: - - ---------------------------------------------------------------------------------------------------------------------------- Salaries and wages 18,025 17,392 16,102 (633) (.03) (1,290) (.07) - - ---------------------------------------------------------------------------------------------------------------------------- Pensions and other employee benefits 6,011 5,560 5,027 (451) (.02) (533) (.03) - - ---------------------------------------------------------------------------------------------------------------------------- Equipment 4,257 4,171 4,088 (86) (.01) (83) --- - - ---------------------------------------------------------------------------------------------------------------------------- Net occupancy 3,612 3,326 2,893 (286) (.01) (433) (.02) - - ---------------------------------------------------------------------------------------------------------------------------- FDIC Insurance 2,195 2,042 1,922 (153) (.01) (120) (.01) - - ---------------------------------------------------------------------------------------------------------------------------- Credit card 969 842 736 (127) (.01) (106) (.01) - - ---------------------------------------------------------------------------------------------------------------------------- Other 7,226 7,118 7,290 (108) --- 172 .01 - - ---------------------------------------------------------------------------------------------------------------------------- Total noninterest expense 42,295 40,451 38,058 (1,844) (.09) (2,393) (.13) - - ---------------------------------------------------------------------------------------------------------------------------- FTE income before taxes 16,487 16,976 13,284 (489) (.02) 3,692 .20 - - ---------------------------------------------------------------------------------------------------------------------------- Income taxes 4,926 4,901 3,235 (25) --- (1,666) (.09) - - ---------------------------------------------------------------------------------------------------------------------------- Taxable equivalent adjustment 1,222 1,181 1,823 (41) (.01) 642 .03 - - ---------------------------------------------------------------------------------------------------------------------------- Additional shares outstanding --- --- --- --- (.01) --- (.05) - - ---------------------------------------------------------------------------------------------------------------------------- Net change --- --- --- (555) (.04) 2,668 .09 - - ---------------------------------------------------------------------------------------------------------------------------- Net income, current period $10,339 $10,894 $ 8,226 $10,339 $.50 $10,894 $.54 ============================================================================================================================
* Income computed on a fully taxable equivalent basis. ** Per share data has been restated for the three for two stock split effected in the form of a 50% stock dividend declared on August 27, 1993. Valley's return on average equity decreased in the first three months of 1994 to 11.12%, down from the 13.15% reported in 1993. Return on average assets was .92% and 1.02% in the first three months of 1994 and 1993. Table 2 highlights certain relationships between significant financial ratios. The remainder of this discussion provides a more detailed explanation of factors affecting the change in results of operations and the change in financial position of Valley for the reported periods. Table 2: Financial Ratios Three months Years ended ended December 31, March 31, ---------------------------------------------------------------------- 1994 1993 1993 1992 1991 ---------------------------------------------------------------------- Return on average assets .92% 1.02% 1.05% .98% .82% ---------------------------------------------------------------------- Divided by ---------------------------------------------------------------------- Average equity as a % of average assets 8.25 7.73 7.89 7.31 7.00 ---------------------------------------------------------------------- Equals ---------------------------------------------------------------------- Return on average equity (%) 11.12 13.15 13.33 13.35 11.68 ---------------------------------------------------------------------- Multiplied by ---------------------------------------------------------------------- Earnings retained (%) 51.85 58.02 58.58 58.71 52.14 ---------------------------------------------------------------------- Equals ---------------------------------------------------------------------- Internal capital growth (%) 5.77 7.63 7.81 7.84 6.09 ====================================================================== Net Interest Income Net interest income is the most significant component of earnings. For analytical purposes, interest earned on tax exempt assets, such as industrial development revenue bonds and state and municipal obligations, is adjusted to a fully-taxable equivalent (FTE) basis. This adjustment is based upon the federal corporate income tax rate of 35% for first quarter 1994 and 34% for first quarter 1993, and any interest expense which is disallowed as a deduction in connection with carrying tax exempt assets. This FTE adjustment facilitates a meaningful comparison between taxable and nontaxable earning assets. Table 3 shows the sources of interest income and expense between years and the variances resulting from fluctuations in interest rate (rate) and changes in the amount (volume) of earning assets and interest- bearing liabilities. Net interest income on an FTE basis increased to $45.334 million in the first three months of 1994, compared with $43.837 million in the first three months of 1993. This increase of $1.497 million was due primarily to a greater increase in the volume of average earning assets (a $217.472 million increase) than in average interest-bearing liabilities (a $135.931 million increase), which accounted for $3.908 million of the increase in net interest income. Increased loans (a $146.304 million increase) primarily accounted for the increase in average earning assets. Approximately 44% of average earning asset growth was external, due to the Pierce County Bank & Trust Company ("Pierce County") acquisition, while the remaining 56% was internally generated. Average savings deposits (a $103.341 million increase) comprised the majority of the increase in average interest-bearing liabilities. The continued extraordinary volume of mortgage loan refinancings has negatively impacted Valley's net interest income. The impact on earning assets from the declining rate environment (a decrease of $6.020 million) was offset by aggressive repricing of interest-bearing liabilities (a $3.608 million decrease). The resulting $2.411 million decrease in net interest income was offset by a $3.908 million increase in net interest income from increased average balances, resulting in the $1.497 million increase in net interest income between the first three months of 1994 and 1993. Valley's net interest margin declined to 4.34% in the first three months of 1994, down from 4.42% for the first three months of 1993. Table 3: Changes in Net Interest Income - Taxable Equivalent Basis
Average Balances Average Rates Interest 1994-1993 --------------------- --------------------------------- --------------------------- Three months ended Three months Three months March 31, ended March 31, ended March 31, Income ---------------------- Increase/ --------------------------------- Expense Volume Rate (dollars in thousands) 1994 1993 (Decrease) 1994 1993 1994 1993 Variance Variance Variance - - ----------------------------------------------------------------------------------------------------------------------------- Loans(1) $3,192,336 $3,046,032 $146,304 8.00% 8.53% $63,874 $64,984 $(1,110) $3,037 $(4,147) - - ----------------------------------------------------------------------------------------------------------------------------- Funds sold 6,577 8,827 (2,250) 3.10 2.45 51 54 (3) (16) 13 - - ----------------------------------------------------------------------------------------------------------------------------- Investment securities- 776,668 725,071 51,597 4.88 5.58 9,472 10,107 (635) 687 (1,322) taxable(2) - - ----------------------------------------------------------------------------------------------------------------------------- Investment securities- 205,751 183,930 21,821 7.13 8.28 3,666 3,807 (141) 423 (564) nontaxable - - ----------------------------------------------------------------------------------------------------------------------------- Total earning assets 4,181,332 3,963,860 217,472 7.37 7.97 77,063 78,952 (1,889) 4,131 (6,020) - - ----------------------------------------------------------------------------------------------------------------------------- Reserve for loan losses (41,459) (38,798) (2,661) - - -------------------------------------------------------------- Cash and due from banks 173,094 164,480 8,614 - - -------------------------------------------------------------- Premises and equipment 102,518 103,643 (1,125) - - -------------------------------------------------------------- Other assets 91,538 90,425 1,113 - - -------------------------------------------------------------- Total assets $4,507,023 $4,283,610 $223,413 ============================================================== N.O.W. and money market deposits $ 800,602 $ 773,698 $ 26,904 1.85 2.25 3,704 4,357 (653) 147 (800) - - ----------------------------------------------------------------------------------------------------------------------------- Savings deposits 441,395 338,054 103,341 2.14 2.33 2,366 1,971 395 564 (169) - - ----------------------------------------------------------------------------------------------------------------------------- Time deposits 2,090,005 2,153,459 (63,454) 4.37 4.89 22,845 26,302 (3,457) (757) (2,700) - - ----------------------------------------------------------------------------------------------------------------------------- Short-term borrowings 185,372 101,136 84,236 3.15 2.79 1,460 705 755 653 102 - - ----------------------------------------------------------------------------------------------------------------------------- Long-term borrowings 53,244 68,340 (15,096) 10.17 10.42 1,354 1,780 (426) (385) (41) - - ----------------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 3,570,618 3,434,687 135,931 3.55 4.09 31,729 35,115 (3,386) 222 (3,608) - - ----------------------------------------------------------------------------------------------------------------------------- Demand deposits 506,277 452,717 53,560 - - -------------------------------------------------------------- Accrued expenses and other liabilities 58,284 64,907 (6,623) - - -------------------------------------------------------------- Shareholders' equity 371,844 331,299 40,545 - - -------------------------------------------------------------- Total liabilities and shareholders' equity $4,507,023 $4,283,610 $223,413 ============================================================== Rate spread 3.82 3.88 - - ----------------------------------------------------------------------------------------------------------------------------- Net interest margin/revenue 4.34% 4.42% $45,334 $43,837 $1,497 $3,908 $(2,411) =============================================================================================================================
Changes in interest due to volume and rate were defined as follows: Volume variance-change in average balance multiplied by prior year rate; Rate variance-change in rate multiplied by prior year average balance; and Rate/Volume variance-change in average balance multiplied by the change in rate. The change in interest due to both rate and volume has been allocated proportionately to volume variance and rate variance based on the relationship of the absolute dollar change in each. (1) Nonperforming loans and mortgages held for sale are included in average balances used to determine average rates. (2) Includes time deposits with other banks and investment securities available for sale. The net interest margin was affected not only by the increase in average balances and declining interest rates, as noted above, but also by changes in the mix of earning assets and interest-bearing liabilities. Table 4 shows the sources and mix of net interest income. As shown in this table, the mix of nontaxable interest income to total interest on earning assets declined significantly from 1992 to 1994. The decrease in the level of nontaxable interest income resulted from Valley's use of other investment alternatives in response to the decrease in the FTE yields of "bank qualified" municipal obligations, in relation to other taxable investment alternatives. Valley's commitment to lending is evident in the increase in the relationship of interest and fees on loans as a percent of total interest on earning assets for the years shown. Provision for Loan Losses In the first three months of 1994, the provision for loan losses amounted to $2.181 million compared with $2.165 million in the first three months of 1993. The 1994 provision for the first three months comprises two elements: 1) a general increase in the reserve for loan losses from 1.27% of loans at December 31, 1993 to 1.34% at March 31, 1994 (amounting to $1.892 million); and 2) restoration of the reserve for the first three months of 1994 net charge-offs (amounting to $.289 million). Noninterest Income Total noninterest income amounted to $15.629 million in the first three months of 1994 compared to $15.755 million in 1993 and $13.525 million in 1992, a .8% decrease in 1994 from 1993 and a 16.5% increase in 1993 from 1992. All categories of noninterest income reflect increases due to Valley's acquisitions of United Savings and Loan Association ("United") in July 1992 and Pierce County in November 1993. Their results of operations are included in Valley's from the dates of acquisition forward. Table 5 shows the major categories of noninterest income for the first three months of 1994, 1993 and 1992, and the percentage change between years. Major changes in noninterest income categories over the periods shown include insurance related income, gain on sales of mortgage loans and annuity commissions. Service charges on deposit accounts make up the largest portion of noninterest income. Service charges increased by $.204 million, or 5.2% over the amounts recorded in the first three months of 1993. Valley recognized accretion of negative goodwill in the amount of $.394 million in the first three months of 1994 and 1993, substantially all of which is attributable to the United acquisition. The negative goodwill attributable to United is being accreted over a 10 year period, in equal annual amounts of $1.537 million. Net securities losses amounted to $0.22 million in the first three months of 1994 compared to net securities gains of $.148 million and $.402 million in 1993 and 1992, respectively. All securities sold were classified as securities available for sale. Table 4: Sources of Net Interest Income
Three months ended March 31, --------------------------------------------------------------------------------- (dollars in thousands) 1994 Mix 1993 Mix 1992 Mix - - --------------------------------------------------------------------------------------------------------------------- Interest Income - - --------------------------------------------------------------------------------------------------------------------- Loans (1) $63,874 82.9% $64,984 82.3% $63,623 78.4% - - --------------------------------------------------------------------------------------------------------------------- Funds sold 51 .1 54 .1 261 .3 - - --------------------------------------------------------------------------------------------------------------------- Taxable securities (2) 9,472 12.3 10,107 12.8 11,455 14.1 - - --------------------------------------------------------------------------------------------------------------------- Nontaxable securities 3,666 4.7 3,807 4.8 5,874 7.2 - - --------------------------------------------------------------------------------------------------------------------- Total earning assets $77,063 100.0% $78,952 100.0% $81,213 100.0% - - --------------------------------------------------------------------------------------------------------------------- Interest Expense - - --------------------------------------------------------------------------------------------------------------------- N.O.W. & money market deposits $ 3,704 11.7% $ 4,357 12.4% $5,480 13.3% - - --------------------------------------------------------------------------------------------------------------------- Savings deposits 2,366 7.4 1,971 5.6 2,320 5.6 - - --------------------------------------------------------------------------------------------------------------------- Time deposits 22,845 72.0 26,302 74.9 30,380 73.9 - - --------------------------------------------------------------------------------------------------------------------- Short-term borrowings 1,460 4.6 705 2.0 1,017 2.5 - - --------------------------------------------------------------------------------------------------------------------- Long-term borrowings 1,354 4.3 1,780 5.1 1,924 4.7 - - --------------------------------------------------------------------------------------------------------------------- Total interest-bearing funds $31,729 100.0% $35,115 100.0% $41,121 100.0% - - --------------------------------------------------------------------------------------------------------------------- Net interest income -- taxable equivalent basis $45,334 $43,837 $40,092 ===================================================================================================================== Average Rates - - --------------------------------------------------------------------------------------------------------------------- Earning assets 7.37% 7.97% 9.14% - - --------------------------------------------------------------------------------------------------------------------- Interest-bearing funds 3.55 4.09 5.24 - - --------------------------------------------------------------------------------------------------------------------- Net yield on earning assets 3.82 4.42 4.51 ===================================================================================================================== (1) Includes mortgages held for sale. (2) Includes time deposits with other banks and investment securities available for sale. Table 5: Noninterest Income
Three months ended March 31, % Increase (Decrease) -------------------------------- ----------------------- (dollars in thousands) 1994 1993 1992 1994-1993 1993-1992 - - -------------------------------------------------------------------------------------------------------- Service charges on deposit accounts $ 4,143 $ 3,939 $ 3,592 5.2 9.7 - - -------------------------------------------------------------------------------------------------------- Trust service fees 3,092 3,346 3,229 (7.6) 3.6 - - -------------------------------------------------------------------------------------------------------- Other service charges, commissions and fees 3,080 3,059 2,407 .1 27.1 - - -------------------------------------------------------------------------------------------------------- Credit card 1,712 1,519 1,348 12.7 12.7 - - -------------------------------------------------------------------------------------------------------- Insurance related 1,588 1,334 1,382 19.0 (3.5) - - -------------------------------------------------------------------------------------------------------- Gain on sale of mortgage loans 1,027 1,127 598 (8.9) 88.5 - - -------------------------------------------------------------------------------------------------------- Accretion of negative goodwill 394 394 -- -- NMF - - -------------------------------------------------------------------------------------------------------- Annuity commissions 383 541 365 (29.2) 48.2 - - -------------------------------------------------------------------------------------------------------- Other 232 348 202 (33.3) 72.3 - - -------------------------------------------------------------------------------------------------------- Subtotal 15,651 15,607 13,123 .3 18.9 - - -------------------------------------------------------------------------------------------------------- Net securities gains (22) 148 402 NMF (63.2) - - -------------------------------------------------------------------------------------------------------- Total noninterest income $15,629 $15,755 $13,525 (.8) 16.5 ========================================================================================================
Noninterest Expense Total noninterest expense amounted to $42.295 million in the first three months of 1994 compared to $40.451 million in 1993 and $38.058 million in 1992, a 4.6% increase in 1994 from 1993 and a 6.3% increase in 1993 from 1992. All categories of noninterest expense reflect increases due to Valley's acquisitions of United in July 1992 and Pierce County in November 1993. Their results of operations are included in Valley's from the dates of acquisition forward. Table 6 shows the major categories of noninterest expense for the first three months of 1994, 1993 and 1992, and the percentage change between years. The largest component of noninterest expense is salaries and wages. Salaries and wages increased to $18.025 million for the first three months of 1994, up from $17.392 for the first three months of 1993 and $16.102 million for the first three months of 1991. Pensions and other employee benefits totalled $6.011 in the first quarter of 1994 compared to $5.560 million in the first quarter of 1993 and $5.027 million for the first quarter of 1992. These two categories make up over 56% of Valley's total noninterest expense. In 1992, the Financial Accounting Standards Board (FASB) issued SFAS No. 112 "Employers' Accounting for Post Employment Benefits." This statement requires accrual accounting for the estimated cost of benefits provided to former employees after employment, but before retirement. Valley is required to adopt the new standard no later than 1994. Valley currently accrues for severance benefits when identified and therefore, has determined that adoption of the new standard will not have a material impact. Other expenses include a wide range of miscellaneous expense types. Other expenses for the first three months of 1994 were $1.026 million, $.802 million for the first three months of 1993, and $1.352 million for the first three months of 1992. Table 6: Noninterest Expense
Three months ended March 31, % Increase (Decrease) ------------------------------- ----------------------- (dollars in thousands) 1994 1993 1992 1994-1993 1993-1992 - - ------------------------------------------------------------------------- ----------------------- Salaries and wages $18,025 $17,392 $16,102 3.6 8.0 - - ------------------------------------------------------------------------- ----------------------- Pensions and other employee benefits 6,011 5,560 5,027 8.1 10.6 - - ------------------------------------------------------------------------- ----------------------- Equipment 4,257 4,171 4,088 2.1 2.0 - - ------------------------------------------------------------------------- ----------------------- Net occupancy 3,612 3,326 2,893 8.6 15.0 - - ------------------------------------------------------------------------- ----------------------- FDIC insurance 2,195 2,042 1,922 7.5 6.2 - - ------------------------------------------------------------------------- ----------------------- Communication/Delivery 1,715 1,652 1,575 3.8 4.9 - - ------------------------------------------------------------------------- ----------------------- Professional services 1,438 1,386 1,256 3.8 10.4 - - ------------------------------------------------------------------------- ----------------------- Business development 1,199 1,554 1,413 (22.8) 10.0 - - ------------------------------------------------------------------------- ----------------------- Credit card 969 842 736 15.1 14.4 - - ------------------------------------------------------------------------- ----------------------- Processing costs 924 851 834 8.6 2.0 - - ------------------------------------------------------------------------- ----------------------- Intangible amortization 924 873 860 5.8 1.5 - - ------------------------------------------------------------------------- ----------------------- Other 1,026 802 1,352 27.9 (40.7) - - ------------------------------------------------------------------------- ----------------------- Total noninterest expense $42,295 $40,451 $38,058 4.6 6.3 ========================================================================= =======================
Income Taxes Income tax expense was $4.926 million in the first three months of 1994 compared to $4.901 million in the first three months of 1993. The increase in tax expense in 1994 of $.025 million resulted primarily from two factors: 1) the federal corporate tax rate increase from 34% to 35%; and 2) a decrease in nontaxable interest income of $.182 million. Financial Position Total average assets were $4.507 billion in the first quarter of 1994, an increase of $223 million over the first quarter of 1993. Approximately $110 million of this growth was due to the acquisition of Pierce County and $113 million was internally generated. Average earning assets have consistently accounted for over 90% of total average assets. Average earning assets represented 92.8% of total average assets for the first quarter of 1994 compared to 92.5% in the first quarter of 1993. Average loans increased to $3.192 billion in the first quarter of 1994 compared to $3.046 billion in the first quarter of 1993. Valley also produced approximately $129 million of real estate loans in the first three months of 1994, not included in the March 31, 1994 period end balances, which were packaged and sold into the secondary market. Valley's general policy is not to retain long-term fixed rate mortgages in its loan portfolio. Loans as a percent of assets have increased to 71.0% at March 31, 1994 compared to 69.5% at December 31, 1993 and 70.4% at March 31, 1993. Table 7 shows the loan portfolio mix at March 31, 1994. Table 10 provides an analysis of average balances, mix, interest, average rates and key ratios for the five most recent quarters. Valley adopted SFAS No. 107 "Disclosures About Fair Value of Financial Instruments" in the fourth quarter of 1992. There have been no changes to the methodology and assumptions used to estimate fair values at December 31, 1993, and the relative mix of financial instruments on the balance sheet as well as off- balance sheet instruments have not significantly changed since December 31, 1993. Management believes the estimated fair values disclosed at December 31, 1993 continue to depict the relationship of carrying value to estimated fair value for financial instruments. Asset Quality The most significant risk of loss in a financial institution is from its loan portfolio. Valley manages its loan portfolio to limit risk through initial review of credit applications, approval of loans by a review committee and loan documentation and compliance procedures. Valley also has a corporate credit administration and loan review staff. This staff performs loan reviews at subsidiary banks. This review process assists banks in early recognition of problem credits. This staff also provides expertise in loan workouts to limit credit losses. Valley's banks prepare quarterly problem loan action reports (PLARs) to monitor nonperforming loans and determine the adequacy of the reserve. All loans classified for regulatory purposes as loss, doubtful or substandard are included in the PLARs. The PLARs also include all loans classified as nonperforming. Table 7: Loan Portfolio Review March 31, ------------------------ (dollars in thousands) 1994 MIX - - -------------------------------------------------------------- Commercial real estate $ 824,663 26.1% - - -------------------------------------------------------------- Real estate-mortgage (1st lien) 754,013 23.9 - - -------------------------------------------------------------- Commercial 592,692 18.8 - - -------------------------------------------------------------- Consumer 360,216 11.4 - - -------------------------------------------------------------- Agricultural 204,187 6.5 - - -------------------------------------------------------------- Real estate-mortgage (2nd lien) 154,751 4.9 - - -------------------------------------------------------------- Real estate-construction 117,074 3.7 - - -------------------------------------------------------------- Check credit and credit card 62,851 2.0 - - -------------------------------------------------------------- Student 66,287 2.1 - - -------------------------------------------------------------- Leasing 17,613 .6 - - -------------------------------------------------------------- Total loans 3,154,347 100.0% - - -------------------------------------------------------------- Reserve for loan losses (42,303) - - -------------------------------------------------------------- Total loans, net $3,112,044 ============================================================== Loans as a % of assets 70.9% ============================================================== Senior management also reviews the PLARs quarterly with the corporate credit administration and loan review staff to determine if there are any trends or uncertainties which management reasonably expects will materially impact future operating results, liquidity, or capital resources. In addition, senior management determines if there is any information regarding large credits that may cause management to question the ability of such borrowers to comply with loan repayment terms. Valley's lending philosophy is to make high-quality loans to Wisconsin consumers and businesses, allowing the banks to efficiently monitor and control credit risk. The majority of the portfolio is composed of loans to individuals and small and medium-sized businesses. Consistent with its corporate-wide lending and investment policies, Valley's banks' portfolios have no foreign loans, energy loans or out-of-market credit card balances. Valley's loan underwriting policies discourage the making of out-of-market real estate loans and loans relating to highly leveraged transactions. Valley's banks do not hold non- investment grade debt securities in their investment portfolios and Valley does not invest in any interest only or principal only investment securities. Loan loss exposure is also limited through industry diversification. Valley's loan portfolio is well diversified with no excessive concentration in any one industry. Agricultural loans at Valley represent approximately 6.5% of the portfolio at March 31, 1994, while loans to finance non-owner occupied commercial real estate development amounted to approximately $485 million, or 15.2% of December 31, 1993 loans outstanding. Valley does a limited amount of equipment lease financing, comprising mainly leases to individuals and small and medium businesses. Leases outstanding remained at $17.6 million at March 31, 1994 compared to $17.6 million at March 31, 1993. In accordance with regulatory standards, loans are placed in nonaccrual status when they reach a prescribed delinquency stage, generally when payments are 90 days past due or when other events occur which make the collection of all principal and interest owing on the loan questionable. Nonperforming loans, which include nonaccrual loans, loans past due 90 days or more and loans with restructured terms, totalled $23.200 million at March 31, 1994 compared to $20.586 million and $25.901 million reported at December 31, 1993 and March 31, 1993, respectively. Nonperforming loans as a percent of loans outstanding decreased to .74% at March 31, 1994 as compared to .65% and .86% at December 31, 1993 and March 31, 1993, respectively. Nonperforming assets, which include nonperforming loans and other real estate owned acquired in foreclosure, totaled $25.337 million at March 31, 1994, or .57% of total assets, compared to $22.880 million or .50% of total assets and $30.233 million or .71% of total assets at December 31, 1993 and March 31, 1993, respectively. In addition to the loans classified as nonperforming, there were other loans aggregating approximately $66 million at March 31, 1994 and $60 million at March 31, 1993, where management is closely following the borrowers' ability to continue to comply with loan repayment terms. Current conditions do not warrant classification of these loans as nonperforming, nor is any loss of principal on these loans considered likely at this time. The reserve for loans losses (reserve) totaled $42.303 million or 1.34% of total loans at March 31, 1994 up from $38.748 million or 1.28% of total loans at March 31, 1993 and $40.411 or 1.27% of total loans at December 31, 1993. The level of reserve is established based upon management's assessment of overall risk in the loan portfolio. Valley uses a loan grading system to continuously monitor problem credits. A loan is graded based upon a number of factors, which include collateral values, financial condition of borrowers and assessment of ultimate collectibility. The reserve is based upon reasonable estimates, from which actual losses may vary. Reserve estimates are reviewed quarterly and evaluated based upon current conditions relating to individual customers and the economy in general. Adjustments to the reserve are reflected through the provision for loan losses. Valley implemented a new method of establishing and evaluating the reserve levels at all of its affiliate banks, based upon current regulatory methodology, in the fourth quarter of 1992. This method sets reserve requirements based upon a combination of estimated potential losses plus an additional percentage of the remaining balance of problem loans, and establishes a general reserve based upon the loan composition of the bank's loan portfolio. Loans charged off, net of recoveries, totaled $.289 million in the first three months of 1994 compared with $1.338 million in the first three months of 1993. Net loans charged off as a percent of average loans was .01% in the first three months of 1994 and .04% in the first three months of 1993. Valley has an environmental policy which establishes procedures to limit the exposure for loss related to environmental problems on any properties foreclosed upon or properties securing extensions of credit by Valley. This policy generally requires the borrower to complete an environmental questionnaire and calls for an on site inspection of the real estate securing the loan. The policy also requires that, prior to taking title to any real property by foreclosure, an investigation must be made of the property to determine if there is any potential environmental liability. Table 8 shows balances of nonperforming loans and assets, reserve and key asset quality performance ratios. Table 8: Nonperforming Assets and Reserve for Loan Losses March 31, December 31, March 31, (dollars in thousands) 1994 1993 1993 - - ------------------------------------------------------------------------------ Nonperforming Assets: - - ------------------------------------------------------------------------------ Nonaccrual loans $19,139 $16,306 $21,359 - - ------------------------------------------------------------------------------ Restructured loans 2,054 2,068 3,128 - - ------------------------------------------------------------------------------ Loans past due 90 days or more 2,007 2,212 1,414 - - ------------------------------------------------------------------------------ Total nonperforming loans 23,200 20,586 25,901 - - ------------------------------------------------------------------------------ Other real estate owned 2,137 2,294 4,332 - - ------------------------------------------------------------------------------ Total nonperforming assets $25,337 $22,880 $30,233 - - ------------------------------------------------------------------------------ Nonperforming loans as a % of loans .74% .65% .86% - - ------------------------------------------------------------------------------ Nonperforming assets as a % of assets .57% .50% .71% - - ------------------------------------------------------------------------------ Reserve for Loan Losses: - - ------------------------------------------------------------------------------ At period end $42,303 $40,411 $38,748 - - ------------------------------------------------------------------------------ As a % of loans 1.34% 1.27% 1.28% - - ------------------------------------------------------------------------------ As a % of nonperforming loans 182.34% 196.30% 149.60% - - ------------------------------------------------------------------------------ As a % of nonaccrual loans 221.03% 247.83% 181.41% ============================================================================== Capital Resources Shareholders' equity increased to $365.183 million at March 31, 1994 compared to $334.601 million at March 31, 1993. The increase of $30.582 million between years was comprised mainly of net earnings retained. Table 9 shows Valley's consolidated capital structure and risk-based capital ratios for March 31, 1994, December 31, 1993 and March 31, 1993. Valley's total capital ratio of 11.65% at March 31, 1994 is well above the regulatory minimum of 8.00%. Valley's Tier I ratio of 10.40% at March 31, 1994 is also well above the regulatory minimum of 4.00%. Table 9: Capital Resources
March 31, December 31, March 31, 1994 1993 1993 - - -------------------------------------------------------------------------------------------------------- Capital Structure - - -------------------------------------------------------------------------------------------------------- Long-term debt $ 53,235,529 $ 53,251,185 $ 68,296,056 - - -------------------------------------------------------------------------------------------------------- Shareholders' equity 365,183,367 365,907,853 334,600,943 - - -------------------------------------------------------------------------------------------------------- Total capitalization $ 418,418,896 $ 419,159,038 $ 402,896,999 - - -------------------------------------------------------------------------------------------------------- Tangible equity $ 330,267,672 $ 330,653,918 $ 300,039,061 - - -------------------------------------------------------------------------------------------------------- Intangible Assets - - -------------------------------------------------------------------------------------------------------- Goodwill - parent $ 17,113,345 $ 17,362,541 $ 18,110,135 - - -------------------------------------------------------------------------------------------------------- Core deposit premium - parent 1,259,607 1,512,782 2,290,553 - - -------------------------------------------------------------------------------------------------------- Subsidiaries: - - -------------------------------------------------------------------------------------------------------- Goodwill 13,913,814 13,621,866 10,899,328 - - -------------------------------------------------------------------------------------------------------- Core deposit premium 2,419,361 2,514,175 2,799,095 - - -------------------------------------------------------------------------------------------------------- Other identifiable intangibles 209,568 242,571 462,771 - - -------------------------------------------------------------------------------------------------------- Total intangibles $ 34,915,695 $ 35,253,935 $ 34,561,882 ======================================================================================================== Risk-Based Capital - - -------------------------------------------------------------------------------------------------------- Tier I capital: - - -------------------------------------------------------------------------------------------------------- Shareholders' equity $ 365,183,367 $ 365,907,853 $ 334,600,943 - - -------------------------------------------------------------------------------------------------------- Minority interest 155,102 330,030 164,895 - - -------------------------------------------------------------------------------------------------------- Less intangibles (34,915,695) (35,253,935) (34,203,956) - - -------------------------------------------------------------------------------------------------------- Total Tier I capital $ 330,422,774 $ 330,983,948 $ 300,203,956 ======================================================================================================== Tier II capital: - - -------------------------------------------------------------------------------------------------------- Allowable reserve for loan losses $ 42,302,707 $ 40,410,907 $ 38,747,732 - - -------------------------------------------------------------------------------------------------------- Qualifying long-term debt --- --- 3,000,000 - - -------------------------------------------------------------------------------------------------------- Total Tier II capital $ 42,302,707 $ 40,410,907 $ 41,747,732 ======================================================================================================== Total capital $ 372,725,481 $ 371,394,855 $ 341,951,688 ======================================================================================================== Risk-Weighted Assets $3,177,914,000 $3,294,529,000 $3,099,836,000 - - -------------------------------------------------------------------------------------------------------- Risk-based capital ratios: - - -------------------------------------------------------------------------------------------------------- Tier I 10.40% 10.05% 9.68% - - -------------------------------------------------------------------------------------------------------- Total 11.65% 11.27% 11.03% - - -------------------------------------------------------------------------------------------------------- Tier I Leverage 7.56% 7.26% 7.08% ======================================================================================================== Table 10: Quarterly Average Balances, Mix, Interest, Average Rates and Key Ratios
First Quarter - 1994 Fourth Quarter - 1993 ------------------------------------------ ----------------------------------------- Average Average Average Average (dollars in thousands) Balance Mix Interest Rate Balance Mix Interest Rate - - -------------------------------------------------------------------------------- ----------------------------------------- Assets - - -------------------------------------------------------------------------------- ----------------------------------------- Earning Assets: - - -------------------------------------------------------------------------------- ----------------------------------------- Loans, net of unearned discount (1) $3,192,336 70.8 % $63,874 8.00 % $3,191,052 71.1 % $65,969 8.27 % - - -------------------------------------------------------------------------------- ----------------------------------------- Funds sold 6,577 0.2 51 3.10 4,411 0.1 27 2.45 - - -------------------------------------------------------------------------------- ----------------------------------------- Investment securities - - -------------------------------------------------------------------------------- ----------------------------------------- Taxable (2) 776,668 17.2 9,472 4.88 758,015 16.9 9,595 5.06 - - -------------------------------------------------------------------------------- ----------------------------------------- Nontaxable 205,751 4.6 3,666 7.13 202,845 4.5 3,806 7.50 - - -------------------------------------------------------------------------------- ----------------------------------------- Total investment securities 982,419 21.8 13,138 5.35 960,860 21.4 13,401 5.58 - - -------------------------------------------------------------------------------- ----------------------------------------- Total earning assets 4,181,332 92.8 77,063 7.37 4,156,323 92.6 79,397 7.64 - - -------------------------------------------------------------------------------- ----------------------------------------- Reserve for loan losses (41,459) -0.9 (40,215) -0.9 - - -------------------------------------------------------------------------------- ----------------------------------------- Cash and due from banks 173,094 3.8 180,769 4.0 - - -------------------------------------------------------------------------------- ----------------------------------------- Premises and equipment, net 102,518 2.3 102,982 2.3 - - -------------------------------------------------------------------------------- ----------------------------------------- Other assets 91,538 2.0 88,435 2.0 - - -------------------------------------------------------------------------------- ----------------------------------------- Total assets $4,507,023 100.0 % $4,488,294 100.0 % ================================================================================ ========================================= Liabilities and Shareholders' Equity - - -------------------------------------------------------------------------------- ----------------------------------------- Interest-bearing liabilities: - - -------------------------------------------------------------------------------- ----------------------------------------- N.O.W. and money market deposits $ 800,602 17.7 % $ 3,704 1.85 % $798,684 17.8 % $ 4,056 2.03 % - - -------------------------------------------------------------------------------- ----------------------------------------- Savings deposits 441,395 9.8 2,366 2.14 437,181 9.7 2,660 2.43 - - -------------------------------------------------------------------------------- ----------------------------------------- Time deposits 2,090,005 46.4 22,845 4.37 2,121,063 47.3 24,177 4.56 - - -------------------------------------------------------------------------------- ----------------------------------------- Short-term borrowings 185,372 4.1 1,460 3.15 103,529 2.3 761 2.94 - - -------------------------------------------------------------------------------- ----------------------------------------- Long-term borrowings 53,244 1.2 1,354 10.17 53,150 1.1 1,352 10.17 - - -------------------------------------------------------------------------------- ----------------------------------------- Total interest-bearing liabilities 3,570,618 79.2 31,729 3.55 3,513,607 78.2 33,006 3.76 - - -------------------------------------------------------------------------------- ----------------------------------------- Demand deposits 506,277 11.2 541,159 12.1 - - -------------------------------------------------------------------------------- ----------------------------------------- Accrued expenses and other liabilities 58,284 1.3 74,707 1.7 - - -------------------------------------------------------------------------------- ----------------------------------------- Total liabilities 4,135,179 91.7 4,129,473 92.0 - - -------------------------------------------------------------------------------- ----------------------------------------- Shareholders' equity 371,844 8.3 358,821 8.0 - - -------------------------------------------------------------------------------- ----------------------------------------- Total liabilities and shareholders' equity $4,507,023 100.0 % $4,488,294 100.0 % ================================================================================ ========================================= Taxable equivalent net interest income and rate spread $45,334 3.82 % $46,391 3.88 % - - --------------------------------------------------------------------------------- ---------------------------------------- Net yield on earning assets 4.34 % 4.45 % ================================================================================= ======================================== (1) Non-performing loans and mortgages held for sale are included in average balances used to determine average rates. (2) Includes time deposits with other banks and investment securities available for sale. Key Average Balances Ratios - - --------------------------------------------------------------------------------- ---------------------------------------- Loans to assets 70.83 % 71.10 % - - --------------------------------------------------------------------------------- ---------------------------------------- Earning assets to total assets 92.77 92.60 - - --------------------------------------------------------------------------------- ---------------------------------------- Reserve for loan losses to loans 1.30 1.26 - - --------------------------------------------------------------------------------- ---------------------------------------- Net loans charged off as a % of loans 0.01 0.10 - - --------------------------------------------------------------------------------- ---------------------------------------- Long-term borrowings to shareholders equity 14.32 14.81 - - --------------------------------------------------------------------------------- ---------------------------------------- Shareholders' equity to total assets 8.25 7.99 - - --------------------------------------------------------------------------------- ----------------------------------------
Table 10: Quarterly Average Balances, Mix, Interest, Average Rates and Key Ratios
Third Quarter - 1993 Second Quarter - 1993 ------------------------------------------- ---------------------------------------- Average Average Average Average (dollars in thousands) Balance Mix Interest Rate Balance Mix Interest Rate - - --------------------------------------------------------------------------------- ---------------------------------------- Assets - - --------------------------------------------------------------------------------- ----------------------------------------- Earning Assets: - - --------------------------------------------------------------------------------- ----------------------------------------- Loans, net of unearned discount (1) $3,123,147 71.6 % $65,667 8.41 % $3,086,578 71.7 % $65,643 8.51 % - - --------------------------------------------------------------------------------- ----------------------------------------- Funds sold 8,329 0.2 39 1.88 2,137 0.1 12 2.25 - - --------------------------------------------------------------------------------- ----------------------------------------- Investment securities - - --------------------------------------------------------------------------------- ----------------------------------------- Taxable (2) 714,578 16.4 9,328 5.22 718,727 16.7 9,620 5.35 - - --------------------------------------------------------------------------------- ----------------------------------------- Nontaxable 188,948 4.3 4,071 8.62 178,550 4.1 3,633 8.14 - - --------------------------------------------------------------------------------- ----------------------------------------- Total investment securities 903,526 20.7 13,399 5.93 897,277 20.8 13,253 5.91 - - --------------------------------------------------------------------------------- ----------------------------------------- Total earning assets 4,035,002 92.5 79,105 7.84 3,985,992 92.6 78,908 7.92 - - --------------------------------------------------------------------------------- ----------------------------------------- Reserve for loan losses (40,449) -0.9 (39,946) -0.9 - - --------------------------------------------------------------------------------- ----------------------------------------- Cash and due from banks 176,398 4.1 166,796 3.8 - - --------------------------------------------------------------------------------- ----------------------------------------- Premises and equipment, net 102,109 2.3 103,613 2.4 - - --------------------------------------------------------------------------------- ----------------------------------------- Other assets 88,076 2.0 90,309 2.1 - - --------------------------------------------------------------------------------- ----------------------------------------- Total assets $4,361,136 100.0 % $4,306,764 100.0 % ================================================================================= ========================================= Liabilities and Shareholders' Equity - - --------------------------------------------------------------------------------- ----------------------------------------- Interest-bearing liabilities: - - --------------------------------------------------------------------------------- ----------------------------------------- N.O.W. and money market deposits $ 774,879 17.8 % $ 4,103 2.12 % $ 757,764 17.6 % $ 4,131 2.18 % - - --------------------------------------------------------------------------------- ----------------------------------------- Savings deposits 414,966 9.5 3,085 2.97 455,898 10.6 2,602 2.28 - - --------------------------------------------------------------------------------- ----------------------------------------- Time deposits 2,064,502 47.3 23,780 4.61 2,038,633 47.3 24,803 4.87 - - --------------------------------------------------------------------------------- ----------------------------------------- Short-term borrowings 133,059 3.1 920 2.76 102,948 2.4 711 2.76 - - --------------------------------------------------------------------------------- ----------------------------------------- Long-term borrowings 63,256 1.4 1,811 11.45 68,330 1.6 1,780 10.42 - - --------------------------------------------------------------------------------- ----------------------------------------- Total interest-bearing liabilities 3,450,662 79.1 33,699 3.91 3,423,573 79.5 34,027 3.98 - - --------------------------------------------------------------------------------- ----------------------------------------- Demand deposits 501,348 11.5 473,705 11.0 - - --------------------------------------------------------------------------------- ----------------------------------------- Accrued expenses and other liabilities 61,931 1.4 70,186 1.6 - - --------------------------------------------------------------------------------- ----------------------------------------- Total liabilities 4,013,941 92.0 3,967,464 92.1 - - --------------------------------------------------------------------------------- ----------------------------------------- Shareholders' equity 347,195 8.0 339,300 7.9 - - --------------------------------------------------------------------------------- ----------------------------------------- Total liabilities and shareholders' equity $4,361,136 100.0 % $4,306,764 100.0 % ================================================================================= ========================================= Taxable equivalent net interest income and rate spread $45,406 3.93 % $44,881 3.94 % - - --------------------------------------------------------------------------------- ----------------------------------------- Net yield on earning assets 4.50 % 4.50 % - - --------------------------------------------------------------------------------- ----------------------------------------- (1) Non-performing loans and mortgages held for sale are included in average balances used to determine average rates. (2) Includes time deposits with other banks and investment securities available for sale. Key Average Balances Ratios - - --------------------------------------------------------------------------------- ----------------------------------------- Loans to assets 71.61 % 71.67 % - - --------------------------------------------------------------------------------- ----------------------------------------- Earning assets to total assets 92.52 92.55 - - --------------------------------------------------------------------------------- ----------------------------------------- Reserve for loan losses to loans 1.30 1.29 - - --------------------------------------------------------------------------------- ----------------------------------------- Net loans charged off as a % of loans 0.06 0.05 - - --------------------------------------------------------------------------------- ----------------------------------------- Long-term borrowings to shareholders equity 18.22 20.14 - - --------------------------------------------------------------------------------- ----------------------------------------- Shareholders' equity to total assets 7.96 7.87 - - --------------------------------------------------------------------------------- -----------------------------------------
Table 10: Quarterly Average Balances, Mix, Interest, Average Rates and Key Ratios
First Quarter - 1993 ------------------------------------------- Average Average (dollars in thousands) Balance Mix Interest Rate - - --------------------------------------------------------------------------------- Assets - - --------------------------------------------------------------------------------- Earning Assets: - - --------------------------------------------------------------------------------- Loans, net of unearned discount (1) $3,046,032 71.1 % $64,984 8.53 % - - --------------------------------------------------------------------------------- Funds sold 8,827 0.2 54 2.45 - - --------------------------------------------------------------------------------- Investment securities - - --------------------------------------------------------------------------------- Taxable (2) 725,071 16.9 10,108 5.58 - - --------------------------------------------------------------------------------- Nontaxable 183,930 4.3 3,807 8.28 - - --------------------------------------------------------------------------------- Total investment securities 909,001 21.2 13,915 6.12 - - --------------------------------------------------------------------------------- Total earning assets 3,963,860 92.5 78,953 7.97 - - --------------------------------------------------------------------------------- Reserve for loan losses (38,798) -0.9 - - --------------------------------------------------------------------------------- Cash and due from banks 164,480 3.9 - - --------------------------------------------------------------------------------- Premises and equipment, net 103,643 2.4 - - --------------------------------------------------------------------------------- Other assets 90,425 2.1 - - --------------------------------------------------------------------------------- Total assets $4,283,610 100.0 % ================================================================================= Liabilities and Shareholders' Equity - - --------------------------------------------------------------------------------- Interest-bearing liabilities: - - --------------------------------------------------------------------------------- N.O.W. and money market deposits $773,698 18.1 % $4,357 2.25 % - - --------------------------------------------------------------------------------- Savings deposits 338,054 7.9 1,971 2.33 - - --------------------------------------------------------------------------------- Time deposits 2,153,459 50.3 26,302 4.89 - - --------------------------------------------------------------------------------- Short-term borrowings 101,136 2.3 705 2.79 - - --------------------------------------------------------------------------------- Long-term borrowings 68,340 1.6 1,780 10.42 - - --------------------------------------------------------------------------------- Total interest-bearing liabilities 3,434,687 80.2 35,115 4.09 - - --------------------------------------------------------------------------------- Demand deposits 452,717 10.6 - - --------------------------------------------------------------------------------- Accrued expenses and other liabilities 64,907 1.5 - - --------------------------------------------------------------------------------- Total liabilities 3,952,311 92.3 - - --------------------------------------------------------------------------------- Shareholders' equity 331,299 7.7 - - --------------------------------------------------------------------------------- Total liabilities and shareholders' equity $4,283,610 100.0 % ================================================================================= Taxable equivalent net interest income and rate spread $43,838 3.88 % - - --------------------------------------------------------------------------------- Net yield on earning assets 4.42 % - - --------------------------------------------------------------------------------- (1) Non-performing loans and mortgages held for sale are included in average balances used to determine average rates. (2) Includes time deposits with other banks and investment securities available for sale. Key Average Balances Ratios - - --------------------------------------------------------------------------------- Loans to assets 71.11 % - - --------------------------------------------------------------------------------- Earning assets to total assets 92.54 - - --------------------------------------------------------------------------------- Reserve for loan losses to loans 1.27 - - --------------------------------------------------------------------------------- Net loans charged off as a % of loans 0.04 - - --------------------------------------------------------------------------------- Long-term borrowings to shareholders equity 20.63 - - --------------------------------------------------------------------------------- Shareholders' equity to total assets 7.73 - - ---------------------------------------------------------------------------------
PART II-OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. As previously reported, the Agreement and Plan of Merger between Valley Bancorporation ("Valley") and Marshall & Ilsley Corporation ("M&I") dated as of September 19, 1993 (the "Merger Agreement") was approved at the special meeting of Valley shareholders held on February 15, 1994. Of the 20,721,290 outstanding shares of Valley Common Stock entitled to vote on the Merger Agreement, the Inspector of Election certified that 16,635,928 shares, or approximately 80.3%, were voted for such approval, 612,406 shares were voted against, and there were 147,365 abstentions. There were no broker non-votes. The Merger Agreement provides for the combination of the two companies through a merger of Valley with and into M&I (the "Merger"). The Merger Agreement was also approved at a special meeting of M&I shareholders held on February 15, 1994. On April 11, 1994, the Board of Governors of the Federal Reserve System approved the Merger. The Merger is presently expected to be consummated on May 31, 1994. See Note 3 of Notes to Consolidated Financial Statements in Item 1 of Part I of this report. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: See Exhibit Index following the Signature page in this report, which is incorporated herein by reference. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter for which this report is filed. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VALLEY BANCORPORATION ---------------------- Date May 11, 1994 By /s/ Peter M. Platten, III ----------------- ------------------------- Peter M. Platten, III President and Chief Executive Officer Date May 11, 1994 By /s/ Gary A. Lichtenberg ----------------- ------------------------- Gary A. Lichtenberg Senior Vice President/ Chief Financial Officer and Secretary VALLEY BANCORPORATION (the "Registrant") (Commission File No. 0-2453) ***** EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q FOR QUARTER ENDED MARCH 31, 1994 Incorporated Sequential Exhibit Herein By Filed Page Number Description Reference To Herewith No. 4.3 (d) March 11, 1994 letter X agreement extending "Revolving Termination Date" under Amended and Restated Credit Agreement, dated as of September 30, 1989, between Registrant and Continental Bank, N.A. to June 30, 1994 11.1 Computation of Net X Income Per Common Share Exhibit 4.3(d) (3/31/94 10-Q) [Continental Bank Letterhead] 231 South LaSalle Street Chicago, Illinois 60697 312 828 4682 FAX: 312 967 6982 Continental Bank Jennings F. Werner Vice President Financial Institutions March 11, 1994 Mr. Gary A. Lichtenberg SVP & CFO Valley Bancorporation 100 W. Lawrence Street Appleton, WI 54912 RE: Credit Agreement dated September 30, 1989 between VALLEY BANCORPORATION and CONTINENTAL BANK, N.A. Dear Gary: Pursuant to the terms of the above captioned Credit Agreement, the undersigned hereby approves and agrees to an extension of the "REVOLVING TERMINATION DATE" from March 31, 1994, to June 30, 1994. Please acknowledge your Agreement of the new "REVOLVING TERMINATION DATE" by signing and returning a copy of this letter. Regards, /s/ Jennings F. Werner APPROVED & AGREED ---------------------------- BY: /s/ GARY A. LICHTENBERG ---------------------------- PRINT: GARY A. LICHTENBERG ---------------------------- TITLE: SVP - CFO ---------------------------- DATE: 3/15/94 ---------------------------- Exhibit 11.1 (3/31/94 10-Q) VALLEY BANCORPORATION COMPUTATION OF NET INCOME PER COMMON SHARE Three Months Ended March 31, -------------------------- 1994 1993 -------------------------- PRIMARY: Weighted average common shares outstanding during each period 20,739,928 20,160,942 Incremental shares relating to: Dilutive stock options outstanding at end of each period (1) 287,869 176,487 Impact of 1993 3:2 stock split 0 88,243 -------------------------- 21,027,797 20,425,672 -------------------------- FULLY DILUTED: Weighted average common shares outstanding during each period 20,739,928 20,160,942 Incremental shares relating to: Dilutive stock options outstanding at end of each period (2) 288,999 251,305 Impact of 1993 3:2 stock split 0 125,653 -------------------------- 21,028,927 20,537,900 -------------------------- NET INCOME FOR EACH PERIOD $10,339,000 $10,893,654 PER COMMON SHARE AMOUNTS: Primary $0.49 $0.53 Fully diluted $0.49 $0.53 As presented in statement of income based on weighted average common shares outstanding $0.50 $0.54 % DILUTIVE (PRIMARY) 1.3690% 1.2961% % DILUTIVE (FULLY DILUTIVE) 1.3743% 1.8354% Notes: (1) Based on treasury stock method using average market price. (2) Based on treasury stock method using period-end market price, if higher than average market price. _________________________ The effect of stock options on primary earnings per share and on fully diluted earnings per share for each of the years is less than 3%, and therefore, is not considered materially dilutive in computing earnings per share as presented in the Consolidated Statements of Income. -----END PRIVACY-ENHANCED MESSAGE-----