FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission file number 1-6580
June 30, 1994
FIRST VIRGINIA BANKS, INC.
(Exact name of registrant as specified in its charter)
Virginia 54-0497561
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
6400 Arlington Boulevard
Falls Church, Virginia 22042-2336
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code
(703) 241-4000
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, 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.
On July 29, 1994, there were 32,271,246 shares of common
stock outstanding.
This report contains a total of 23 pages.
1
<PAGE>
INDEX
Page
---------
PART I - Financial Information
Item 1. Financial Statements.
Consolidated Balance Sheets - June 30,
1994 and 1993 and December 31, 1993 3/ 4
Consolidated Statements of Income - Three
months and six months ended June 30, 1994
and 1993 5/ 6
Consolidated Statements of Cash Flows - Six
months ended June 30, 1994 and 1993 7
Consolidated Statements of Shareholders'
Equity - Six months ended June 30, 1994
and 1993 8
Notes to Consolidated Financial Statements 8/10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10/16
PART II - Other Information
Item 4. Submission of Matters to a Vote
of Security Holders 17/19
Item 6. Exhibits and Reports on Form 8-K
Signature 20
Exhibit 11 - Statement re: Computation of
Per Share Earnings 21
Exhibit 15 - Independent Accountants' Review
Report from Ernst & Young 22
Exhibit 15A - Letter of Acknowledgement from
Ernst & Young LLP, Independent Accountants 23
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (Unaudited)
June 30 December 31 June 30
1994 1993 1993
---------- ---------- ----------
(In thousands)
ASSETS
Cash and noninterest-bearing
deposits in banks $ 330,005 $ 326,136 $ 379,954
Federal funds sold and securities purchased
under agreements to resell 100,000 235,000 223,711
---------- ---------- ----------
Total cash and cash equivalents 430,005 561,136 603,665
---------- ---------- ----------
Mortgage loans held for sale 21,139 69,173 47,975
Investment securities - held to maturity:
U.S. Government & its agencies 1,795,066 1,904,717 1,836,123
State and municipal obligations 240,815 263,040 273,162
Other 9,913 8,277 11,542
---------- ---------- ----------
Total investment securities (market
values of $2,023,469, $2,228,818
and $2,193,830) 2,045,794 2,176,034 2,120,827
---------- ---------- ----------
Loans 4,865,976 4,345,780 4,275,542
Deduct: Unearned income (357,683) (327,635) (340,801)
Allowance for loan losses (53,472) (50,927) (50,987)
---------- ---------- ----------
Net loans 4,454,821 3,967,218 3,883,754
---------- ---------- ----------
Premises and equipment 142,726 137,007 136,635
Other assets 135,074 126,315 125,338
---------- ---------- ----------
Total Assets $7,229,559 $7,036,883 $6,918,194
========== ========== ==========
3
<PAGE>
CONSOLIDATED BALANCE SHEETS (Continued) (Unaudited)
June 30 December 31 June 30
1994 1993 1993
---------- ---------- -----------
(In thousands)
LIABILITIES
Deposits:
Noninterest-bearing $1,081,503 $1,039,933 $1,021,599
Interest-bearing:
Transaction accounts 1,281,623 1,294,867 1,233,456
Money market accounts 737,715 724,462 736,102
Savings deposits 1,366,275 1,325,943 1,266,229
Certificates of deposit:
Large denomination 188,406 165,360 167,250
Other 1,597,935 1,585,824 1,632,523
---------- ---------- ----------
Total deposits 6,253,457 6,136,389 6,057,159
Interest, taxes and other liabilities 57,453 56,126 51,988
Short-term borrowings and securities sold under
agreements to repurchase 174,706 151,859 155,629
Long-term indebtedness 4,216 1,008 1,070
---------- ---------- ----------
Total Liabilities 6,489,832 6,345,382 6,265,846
---------- ---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock, $10 par value 795 805 811
Common stock, $1 par value 32,769 32,444 32,405
Capital Surplus 76,651 68,406 67,587
Retained Earnings 629,512 589,846 551,545
---------- ---------- ----------
Total Shareholders' Equity 739,727 691,501 652,348
---------- ---------- ----------
Total Liabilities and Shareholders' Equity $7,229,559 $7,036,883 $6,918,194
========== ========== ==========
See notes to consolidated financial statements
4
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
------- ------- -------- --------
(In thousands, except per share data)
Interest income:
Interest and fees on loans $93,481 $90,937 $181,246 $180,895
Interest on mortgage loans
held for sale 478 487 1,312 1,074
Income on investment
securities - held to maturity:
U.S. Government & its agencies 26,906 29,436 55,950 59,851
State and municipal
obligations 3,214 3,807 6,513 7,726
Other 173 217 299 386
Income from federal funds sold
and securities purchased
under agreements to resell 1,674 2,260 3,544 4,088
------- ------- -------- --------
Total interest income 125,926 127,144 248,864 254,020
------- ------- -------- --------
Interest expense:
Deposits:
Transaction accounts 7,075 8,185 14,247 16,057
Money market accounts 4,732 5,131 9,264 10,353
Savings deposits 9,242 9,390 18,248 18,403
Certificates of deposit:
Large denomination 1,320 1,620 2,802 3,241
Other 15,066 16,500 30,159 33,402
Short-term borrowings 1,623 802 2,655 1,615
Long-term indebtedness 108 48 237 126
------- ------- -------- --------
Total interest expense 39,166 41,676 77,612 83,197
------- ------- -------- --------
Net interest income 86,760 85,468 171,252 170,823
Provision for loan losses 3,702 2,024 4,163 4,213
------- ------- -------- --------
Net interest income after provision
for loan losses 83,058 83,444 167,089 166,610
------- ------- -------- --------
5
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (Continued) (Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
------- ------- -------- --------
(In thousands, except per share data)
Net interest income after provision
for loan losses 83,058 83,444 167,089 166,610
------- ------- -------- --------
Other income:
Service charges on deposit
accounts 9,133 8,620 18,038 16,802
Insurance premiums and
commissions 1,616 1,666 3,248 3,289
Credit card service charges
and fees 2,874 2,792 5,422 5,300
Trust services 1,264 1,243 2,490 2,425
Income from other customer
services 4,440 4,133 8,387 8,404
Securities gains (losses) before
income tax provisions (credits)
of $(4), $8, $337 and $8 (10) 25 964 26
Other 3,286 1,603 5,069 3,402
------- ------- -------- --------
Total other income 22,603 20,082 43,618 39,648
------- ------- -------- --------
Other expenses:
Salaries and employee benefits 34,296 33,061 68,993 65,762
Occupancy 4,682 4,581 9,519 9,083
Equipment 5,029 4,809 9,885 9,601
FDIC assessment 3,397 3,337 6,794 6,674
Other 15,032 15,032 29,548 29,802
------- ------- -------- --------
Total other expenses 62,436 60,820 124,739 120,922
------- ------- -------- --------
Income before income taxes 43,225 42,706 85,968 85,336
Provision for income taxes 14,196 13,414 28,123 26,824
------- ------- -------- --------
NET INCOME $29,029 $29,292 $ 57,845 $ 58,512
======= ======= ======== ========
Net income per share of common stock $.89 $.90 $1.78 $1.80
See notes to consolidated financial statements
6
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended
June 30
1994 1993
-------- --------
(In thousands)
Net cash provided by operating activities $ 73,179 $ 73,178
Investing activities:
Proceeds from the maturity of investment securities 336,896 335,440
Proceeds from the sale of investment securities 5,794 -
Purchase of investment securities (219,675) (296,225)
Net increase in loans (491,671) (154,988)
Net decrease in mortgages held for sale 48,034 12,130
Purchases of premises and equipment (12,523) (6,243)
Sales of premises and equipment 849 200
Goodwill and other intangible assets acquired (7,307) (948)
Purchase of a bank's assets less liabilities 11,745 -
Other 1,362 (3,101)
-------- --------
Net cash used by investing activities (326,496) (113,735)
-------- --------
Financing activities:
Net increase in deposits 117,069 43,413
Net increase in short-term borrowings 22,847 4,948
Proceeds from long-term borrowing 3,722 -
Principal payments on long-term borrowings (516) (4,157)
Cash dividends - common, $.62 and $.52 per share (20,108) (16,739)
Cash dividends - preferred (27) (27)
Cash dividends paid by a bank prior to its acquisition - (150)
Stock purchased and retired (1,093) -
Proceeds from issuance of common stock 292 550
-------- --------
Net cash provided by financing activities 122,186 27,838
-------- --------
Net decrease in cash and cash
equivalents (131,131) (12,719)
Cash and cash equivalents at beginning of year 561,136 616,384
-------- --------
Cash and cash equivalents at end of period $430,005 $603,665
======== ========
See notes to consolidated financial statements
7
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
Six Months Ended
June 30
1994 1993
-------- --------
(In thousands)
Balance at beginning of year $691,501 $607,399
Increase attributable to an acquired bank 11,745 3,453
Net income 57,845 58,512
Common stock purchased and retired (1,093) -
Issuance of common stock for the dividend reinvestment
plan, stock options and stock appreciation rights 292 550
-------- --------
760,290 669,914
-------- --------
Deduct dividends declared:
Preferred stock 26 27
Common stock, $.63 and $.54 per share 20,537 17,389
Dividends paid by a bank prior to its acquisition - 150
-------- --------
20,563 17,566
-------- --------
Balance at end of period $739,727 $652,348
======== ========
See notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The foregoing unaudited consolidated financial statements include the
accounts of the Corporation and all of its subsidiaries. The Corporation's
subsidiaries are predominantly engaged in banking. Foreign banking activities
and operations other than banking are not significant. All material
intercompany transactions and accounts have been eliminated. The consolidated
financial statements include all adjustments (consisting only of normal
recurring accruals) which, in the opinion of management, are necessary for a
fair presentation of the results of operations for each of the periods.
Certain amounts previously reported in 1993 have been reclassified for
comparative purposes.
2. ACQUISITIONS
On June 17, 1994, FNB Financial Corporation, Knoxville, Tennessee, (a
one bank holding company of the First National Bank of Knoxville) was
acquired for cash of $1,442,417 and common stock amounting to 342,295 shares.
On the date of the acquisition, FNB Financial Corporation's assets were
$100.2 million and its shareholders' equity was $7.9 million. The acquisition
was accounted for as a purchase, and goodwill of $6.9 million, which is to be
amortized over 10 years, was recorded as a result of the acquisition.
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses was (in thousands):
Three Months Ended Six months Ended
June 30 June 30
1994 1993 1994 1993
------- ------- ------- -------
Balance at beginning of period $50,312 $50,456 $50,927 $49,340
Balance of acquired banks 744 - 744 259
Provision charged to operating
expense 3,702 2,024 4,163 4,213
------- ------- ------- -------
54,758 52,480 55,834 53,812
Less:
Loans charged off, net of
recoveries of $978, $927,
$1,966 and $1,998 1,286 1,493 2,362 2,825
------- ------- ------- -------
Balance at June 30 $53,472 $50,987 $53,472 $50,987
======= ======= ======= =======
Percentage of net charge-offs to
average loans .12% .15% .11% .15%
Percentage of allowance for loan
losses to period-end loans 1.19 1.30
Percentage of nonperforming assets
to period-end loans .56 .73
4. FEDERAL INCOME TAX
The reconciliation of income tax computed at the federal statutory tax
rates to provision for income tax is as follows (dollars in thousands):
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
------------ ------------ ------------ ------------
$ % $ % $ % $ %
------- ---- ------- ---- ------- ---- ------- ----
Statutory rate $15,129 35.0% $14,520 34.0% $30,089 35.0% $29,014 34.0%
Nontaxable interest on
municipal obligations (1,271)(2.9) (1,428)(3.3) (2,604)(3.0) (2,908)(3.4)
Other items 338 .8 322 .8 638 .7 718 .8
------- ---- ------- ---- ------- ---- ------- ----
Effective rate $14,196 32.9% $13,414 31.5% $28,123 32.7% $26,824 31.4%
======= ==== ======= ==== ======= ==== ======= ====
9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. PREFERRED STOCK
There are 3,000,000 shares of preferred stock, par value $10.00 per
share, authorized. The following four series of cumulative convertible stock
were outstanding:
June 30 December 31 June 30
Series Dividends 1994 1993 1993
--------- --------- ------- ----------- --------
A 5% 24,372 24,673 25,216
B 7% 9,590 10,110 10,110
C 7% 13,936 13,964 13,964
D 8% 31,582 31,712 31,840
------ ------ ------
79,480 80,459 81,130
====== ====== ======
6. COMMON STOCK
There are 60,000,000 shares of common stock, par value $1.00 per share,
authorized and 32,769,000, 32,444,000 and 32,405,000 shares were outstanding
at June 30, 1994, December 31, 1993 and June 30, 1993, respectively. Options
to purchase 325,763 shares of common stock and 11,250 stock appreciation
rights were outstanding on June 30, 1994. A total of 4,782,136 shares of
common stock were reserved at June 30, 1994: 115,039 shares for the
conversion of preferred stock, 618,513 shares for stock options and stock
appreciation rights and 4,048,584 shares for future acquisitions.
7. EARNINGS PER SHARE
Earnings per share of common stock for the six months ended June 30,
after giving effect to dividends on preferred stock of $26,000 in 1994 and
$27,000 in 1993, are based on 32,555,000 and 32,507,000 average shares
respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
We are pleased to report an increase in second quarter earnings to
$29,029,000 as compared to the first quarter earnings of $28,816,000.
Earnings per share were unchanged from the $.89 earned in the first quarter
but were down 1% from the record $.90 per share and $29,292,000 earned in the
second quarter of 1993. These earning levels continue to place First Virginia
as one of the top earning banking organizations among the 100 largest banks
in the country. For the quarter, earnings resulted in a 1.62% return on
average assets and a 16.11% return on average shareholders' equity.
10
For the first six months, net income of $57,845,000 or $1.78 per share was
down 1% as compared to the $58,512,000 or $1.80 per share earned in the first
six months of 1993. Net income before taxes increased slightly as compared to
1993; however, due to the increase in the corporate tax rate enacted in
August of 1993, after-tax earnings declined slightly.
Record loan production volumes were achieved in the second quarter.
Average loans increased 11% as compared to the second quarter of 1993, and
increased at an annualized rate of 29% as compared to the end of the first
quarter of 1994 and excluding the loans acquired in the merger with FNB
Financial Corporation. All categories of loans participated in the increase,
with particular strength in the Corporation's specialty areas of indirect
automobile financing and home equity loans. Commercial loans were also strong
as floor plan loans to automobile dealers, construction loans for residential
developments, and general demand for business loans were robust due to the
strengthening economy. Loan growth began to slow late in the quarter but was
still advancing at a strong pace. The strong growth in loans increased the
loan/deposit ratio 7 percentage points to 72% as compared to 65% at the end
of the prior year's second quarter. The Corporation's long term goal is to
increase the loan/deposit ratio to the 80% level.
Deposit growth continued to be modest as average outstandings increased 3%
as compared to the prior year's second quarter. Encouragingly, core deposit
areas continued to grow at a relatively healthy pace, and by quarter's end
consumer certificates of deposit also began growing for the first time in
several years. Demand deposits increased 8% as compared to the prior year's
second quarter, and NOW accounts were up 7% while consumer savings accounts
increased at an 8% pace. Increases in interest rates in general have resulted
in some consumers looking to investments yielding higher rates than bank
deposits.
The change in the mix of assets away from investment securities and into
higher-yielding loans and an increase in interest rates in general helped to
increase net interest income for the quarter over both the prior year's
second quarter and the first quarter of 1994. Due to a slight asset-sensitive
position, the Corporation benefits from increases in interest rates and
coupled with the strong loan growth, the compression in the net interest
margin anticipated earlier this year has not occurred. The Corporation should
enjoy a flat to increasing margin for the remainder of the year. In the
second quarter, the net interest margin of 5.32% was up slightly over the
5.28% margin achieved in the first quarter, although it was down 20 basis
points as compared to the second quarter of 1993.
Asset quality continued to improve from its already excellent levels. Net
loan charge-offs declined 12% as compared to the prior year's second quarter
and represented an annualized rate of .12% of average loans in the second
quarter as compared to the .15% rate in the 1993 second quarter. For the
first six months of 1994, net loan charge-offs are down 16%. The provision
for loan losses increased 83% as compared to the prior year's second quarter
to $3.702 million and was up significantly as compared to the first quarter
of 1994. This increase in the provision was due entirely to the dramatic
increase in the volume of loans outstanding as actual charge-offs,
nonperforming loans, and delinquencies all declined. As of June 30 1994, the
allowance for loan losses amounted to $53.472 million or 1.19% of loans,
which was down two basis points from the March 31, 1994 ratio, and down 11
basis points from the June 30, 1993 percentage. The allowance covers net
charge-offs 11.3 times and represents 211% of nonperforming assets at June
30, 1994.
11
Nonperforming assets declined an additional 4% in the second quarter of
1994, as compared to the first quarter. Loan delinquencies also declined and
are at record low levels.
1994 1993
------- -------
(Dollars in thousands)
Nonaccruing loans $16,224 $20,205
Restructured loans 2,338 2,316
Foreclosed real estate 6,835 6,165
------- -------
Total $25,397 $28,686
======= =======
Percentage of total loans .56% .73%
======= =======
Loans past due 90 days or more $ 3,441 $ 3,586
======= =======
Percentage of total loans .08% .09%
======= =======
Noninterest income increased 13% as compared to the second quarter of 1993
and was up 8% over the first quarter of 1994. During the second quarter, a
package of mortgage servicing rights was sold at a gain of $2.4 million. The
Corporation typically bundles and sells one package of mortgage servicing
rights each year from loans originated by its mortgage loan subsidiary. By
bundling the sale into one package rather than selling the loans individually
with servicing released, the Corporation achieves a higher rate of return. In
1993, a package was sold in the fourth quarter. Service charges on deposit
accounts increased 6% over the prior year's second quarter due to a greater
number of accounts outstanding and increased activity.
Noninterest expenses increased at a 3% rate in both the second quarter and
for the first six months which was consistent with the general rate of
inflation. Advertising expenses increased 21% over 1993 due to promotions in
connection with loan campaigns. The Corporation had an efficiency ratio of
57.9% in the second quarter, reflecting the continued tight controls over
expenses that the company maintains.
The provision for income taxes increased 6% as compared to the previous
year's second quarter, primarily due to an increase in the federal income tax
rate from 34% to 35%. The effective tax rate of 32.71% increased 128 basis
points over the 31.43% rate achieved in the first six months of 1993 due to
the increase in the federal income tax rate and to a decline in the
proportion of interest income coming from tax-exempt municipal securities.
Shareholders' equity grew 13% to $740 million, which was more than the 5%
growth in assets, and the book value per share totaled $22.55. The
Corporation's Tier I leverage ratio increased 77 basis points to 10.06%
making First Virginia one of the five best capitalized banks in the country.
The Corporation generally does not sell any of its securities before they
mature and has the intention and ability to continue to do so. Accordingly,
all of the Corporation's securities are classified as held-to-maturity, and
no adjustment has been made to either earnings or shareholders' equity for
changes in market value. The Corporation maintains a liquid and short-term
position in most of its assets and liabilities. Accordingly, it does not need
to engage in any hedging or swap transactions nor does it employ any
derivative instruments.
12
<PAGE>
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
(Dollar amounts in thousands)
Three Months Ended June 30
1994
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Investment securities-held to maturity:
U.S. Government & its agencies $1,848,266 $ 26,906 5.84%
State and municipal obligations
(Fully taxable-equivalent basis) 256,661 4,658 7.26
Other (Fully taxable-equivalent basis) 8,672 193 8.90
---------- --------
Total investment securities 2,113,599 31,757 6.02
---------- --------
Loans, net of unearned income:
Installment 3,060,071 65,642 8.58
Real estate 642,517 14,810 9.22
Other (Fully taxable-equivalent basis) 628,778 13,231 8.44
---------- --------
Total loans 4,331,366 93,683 8.65
---------- --------
Mortgage loans held for sale 26,798 478 7.13
Federal funds sold and securities
purchased under agreements to resell 178,394 1,674 3.76
---------- --------
Total earning assets and income $6,650,157 127,592 7.68
========== --------
Interest-bearing liabilities:
Transaction accounts $1,304,188 7,075 2.18
Money-market accounts 733,803 4,732 2.59
Savings deposits 1,358,298 9,242 2.73
Certificates of deposit:
Large denomination 169,477 1,320 3.12
Other 1,566,715 15,066 3.86
---------- --------
Total interest-bearing deposits 5,132,481 37,435 2.92
Short-term borrowings 198,981 1,623 3.27
Notes and mortgages 4,365 108 9.91
---------- --------
Total interest-bearing liabilities
and interest expense $5,335,827 39,166 2.94
========== --------
Net interest income and net interest margin $ 88,426 5.32%
========
Other average balances:
Demand deposits $1,066,936
Common shareholders' equity 720,086
Total shareholders' equity 720,881
Total assets 7,179,737
13
<PAGE>
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
(Dollar amounts in thousands)
Three Months Ended June 30
1993
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Investment securities-held to maturity:
U.S. Government & its agencies $1,835,981 $ 29,436 6.43%
State and municipal obligations
(Fully taxable-equivalent basis) 264,759 5,322 8.04
Other (Fully taxable-equivalent basis) 10,607 241 9.09
---------- --------
Total investment securities 2,111,347 34,999 6.65
---------- --------
Loans, net of unearned income:
Installment 2,628,787 64,276 9.78
Real estate 660,629 15,417 9.33
Other (Fully taxable-equivalent basis) 613,984 11,813 7.72
---------- --------
Total loans 3,903,400 91,506 9.38
---------- --------
Mortgage loans held for sale 32,467 487 6.00
Federal funds sold and securities
purchased under agreements to resell 296,225 2,260 3.06
---------- --------
Total earning assets and income $6,343,439 129,252 8.16
========== --------
Interest-bearing liabilities:
Transaction accounts $1,213,575 8,185 2.71
Money-market accounts 753,514 5,131 2.73
Savings deposits 1,261,404 9,390 2.99
Certificates of deposit:
Large denomination 169,534 1,620 3.83
Other 1,645,136 16,500 4.02
---------- --------
Total interest-bearing deposits 5,043,163 40,826 3.25
Short-term borrowings 137,318 802 2.34
Notes and mortgages 1,080 48 17.78
---------- --------
Total interest-bearing liabilities
and interest expense $5,181,561 41,676 3.23
========== --------
Net interest income and net interest margin $ 87,576 5.52%
========
Other average balances:
Demand deposits $ 987,849
Common shareholders' equity 641,184
Total shareholders' equity 641,999
Total assets 6,869,597
14
<PAGE>
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
(Dollar amounts in thousands)
Six Months Ended June 30
1994
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Investment securities-held to maturity:
U.S. Government & its agencies $1,880,225 $ 55,950 6.00%
State and municipal obligations
(Fully taxable-equivalent basis) 254,778 9,376 7.36
Other (Fully taxable-equivalent basis) 8,900 324 7.28
---------- --------
Total investment securities 2,143,903 65,650 6.17
---------- --------
Loans, net of unearned income:
Installment 2,958,382 128,432 8.68
Real estate 630,547 29,560 9.38
Other (Fully taxable-equivalent basis) 603,925 24,336 8.13
---------- --------
Total loans 4,192,854 182,328 8.71
---------- --------
Mortgage loans held for sale 39,378 1,312 6.66
Federal funds sold and securities
purchased under agreements to resell 207,264 3,544 3.45
---------- --------
Total earning assets and income $6,583,399 252,834 7.70
========== --------
Interest-bearing liabilities:
Transaction accounts $1,297,508 14,247 2.21
Money-market accounts 728,654 9,264 2.56
Savings deposits 1,346,564 18,248 2.73
Certificates of deposit:
Large denomination 166,621 2,802 3.39
Other 1,573,374 30,159 3.87
---------- --------
Total interest-bearing deposits 5,112,721 74,720 2.95
Short-term borrowings 181,301 2,655 2.95
Notes and mortgages 4,096 237 11.57
---------- --------
Total interest-bearing liabilities
and interest expense $5,298,118 77,612 2.95
========== --------
Net interest income and net interest margin $175,222 5.31%
========
Other average balances:
Demand deposits $1,043,077
Common shareholders' equity 709,712
Total shareholders' equity 710,511
Total assets 7,110,891
15
<PAGE>
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
(Dollar amounts in thousands)
Six Months Ended June 30
1993
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Investment securities-held to maturity:
U.S. Government & its agencies $1,848,188 $ 59,851 6.53%
State and municipal obligations
(Fully taxable-equivalent basis) 266,230 10,902 8.19
Other (Fully taxable-equivalent basis) 11,234 416 7.41
---------- --------
Total investment securities 2,125,652 71,169 6.74
---------- --------
Loans, net of unearned income:
Installment 2,598,481 127,833 9.84
Real estate 656,072 30,833 9.40
Other (Fully taxable-equivalent basis) 609,636 23,385 7.74
---------- --------
Total loans 3,864,189 182,051 9.43
---------- --------
Mortgage loans held for sale 32,217 1,074 6.67
Federal funds sold and securities
purchased under agreements to resell 266,471 4,088 3.09
---------- --------
Total earning assets and income $6,288,529 258,382 8.24
========== --------
Interest-bearing liabilities:
Transaction accounts $1,196,727 16,057 2.71
Money-market accounts 760,551 10,353 2.75
Savings deposits 1,241,657 18,403 2.99
Certificates of deposit:
Large denomination 168,612 3,241 3.88
Other 1,649,647 33,402 4.08
---------- --------
Total interest-bearing deposits 5,017,194 81,456 3.27
Short-term borrowings 139,274 1,615 2.34
Notes and mortgages 1,705 126 14.78
---------- --------
Total interest-bearing liabilities
and interest expense $5,158,173 83,197 3.25
========== --------
Net interest income and net interest margin $175,185 5.57%
========
Other average balances:
Demand deposits $ 959,760
Common shareholders' equity 630,751
Total shareholders' equity 631,570
Total assets 6,810,186
16
PART II - OTHER INFORMATION
Item 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
a) An Annual Meeting of the Shareholders was held on Friday,
April 22, 1994. Proxies for the meeting were solicited pursuant to Regulation
14 under the Act.
b) There was no solicitation in opposition to the management nominees
as listed in the proxy statement and all such nominees were elected. The
following directors were elected at the meeting.
Management nominee: Common Preferred Total
E. Cabell Brand Stock Stock Stock
=============== ----------- ------- -----------
Votes For:
Individual votes 13,230,398 43,138 13,273,536
Broker/Nominee votes 13,300,978 2,786 13,303,764
----------- ------- -----------
Total Management proxy votes for 26,531,376 45,924 26,577,300
Votes Withheld:
Individual votes 137,422 520 137,942
Broker/Nominee votes 316,274 0 316,274
----------- ------- -----------
Total Management proxy votes 26,985,072 46,444 27,031,516
Shares present but not voted 37,349 0 37,349
----------- ------- -----------
Shares for a Quorum 27,022,421 46,444 27,068,865
Shares not present nor voted:
Individual votes 2,784,807 31,950 2,816,757
Broker/Nominee votes 2,637,079 1,855 2,638,934
----------- ------- -----------
Total Shares Outstanding 32,444,307 80,249 32,524,556
=========== ======= ===========
Management nominee:
Elsie C. Gruver
===============
Votes For:
Individual votes 13,254,322 43,138 13,297,460
Broker/Nominee votes 13,300,978 2,786 13,303,764
----------- ------- -----------
Total Management proxy votes for 26,555,300 45,924 26,601,224
Votes Withheld:
Individual votes 113,498 520 114,018
Broker/Nominee votes 316,274 0 316,274
----------- ------- -----------
Total Management proxy votes 26,985,072 46,444 27,031,516
Shares present but not voted 37,349 0 37,349
----------- ------- -----------
Shares for a Quorum 27,022,421 46,444 27,068,865
Shares not present nor voted:
Individual votes 2,784,807 31,950 2,816,757
Broker/Nominee votes 2,637,079 1,855 2,638,934
----------- ------- -----------
Total Shares Outstanding 32,444,307 80,249 32,524,556
=========== ======= ===========
17
Management nominee: Common Preferred Total
W. Lee Phillips, Jr. Stock Stock Stock
==================== ----------- ------- -----------
Votes For:
Individual votes 13,260,677 43,138 13,303,815
Broker/Nominee votes 13,300,978 2,786 13,303,764
----------- ------- -----------
Total Management proxy votes for 26,561,655 45,924 26,607,579
Votes Withheld:
Individual votes 107,143 520 107,663
Broker/Nominee votes 316,274 0 316,274
----------- ------- -----------
Total Management proxy votes 26,985,072 46,444 27,031,516
Shares present but not voted 37,349 0 37,349
----------- ------- -----------
Shares for a Quorum 27,022,421 46,444 27,068,865
Shares not present nor voted:
Individual votes 2,784,807 31,950 2,816,757
Broker/Nominee votes 2,637,079 1,855 2,638,934
----------- ------- -----------
Total Shares Outstanding 32,444,307 80,249 32,524,556
=========== ======= ===========
Management nominee:
Josiah P. Rowe, III
===================
Votes For:
Individual votes 13,257,855 43,128 13,300,983
Broker/Nominee votes 13,300,978 2,786 13,303,764
----------- ------- -----------
Total Management proxy votes for 26,558,833 45,914 26,604,747
Votes Withheld:
Individual votes 109,965 530 110,495
Broker/Nominee votes 316,274 0 316,274
----------- ------- -----------
Total Management proxy votes 26,985,072 46,444 27,031,516
Shares present but not voted 37,349 0 37,349
----------- ------- -----------
Shares for a Quorum 27,022,421 46,444 27,068,865
Shares not present nor voted:
Individual votes 2,784,807 31,950 2,816,757
Broker/Nominee votes 2,637,079 1,855 2,638,934
----------- ------- -----------
Total Shares Outstanding 32,444,307 80,249 32,524,556
=========== ======= ===========
18
Management nominee: Common Preferred Total
Albert F. Zettlemoyer Stock Stock Stock
===================== ----------- ------- ------------
Votes For:
Individual votes 13,253,144 43,138 13,296,282
Broker/Nominee votes 13,355,302 2,786 13,358,088
----------- ------- -----------
Total Management proxy votes for 26,608,446 45,924 26,654,370
Votes Withheld:
Individual votes 114,676 520 115,196
Broker/Nominee votes 261,950 0 261,950
----------- ------- -----------
Total Management proxy votes 26,985,072 46,444 27,031,516
Shares present but not voted 37,349 0 37,349
----------- ------- -----------
Shares for a Quorum 27,022,421 46,444 27,068,865
Shares not present nor voted:
Individual votes 2,784,807 31,950 2,816,757
Broker/Nominee votes 2,637,079 1,855 2,638,934
----------- ------- -----------
Total Shares Outstanding 32,444,307 80,249 32,524,556
=========== ======= ===========
c) Among other matters voted on at the meeting was the following:
i) The appointment of the independent auditors.
Common Preferred Total
Stock Stock Stock
----------- ------- -----------
Votes For:
Individual votes 13,154,468 42,749 13,197,217
Broker/Nominee votes 13,570,476 2,686 13,573,162
----------- ------- -----------
Total Management proxy votes for 26,724,944 45,435 26,770,379
Votes Against:
Individual votes 63,870 120 63,990
Broker/Nominee votes 13,546 0 13,546
----------- ------- -----------
Total shares voted 26,802,360 45,555 26,847,915
Votes Abstain:
Individual votes 149,482 789 150,271
Broker/Nominee votes 33,230 100 33,330
----------- ------- -----------
Total votes received 26,985,072 46,444 27,031,516
Shares present but not voted 37,349 0 37,349
Shares not present nor voted:
Individual votes 2,784,807 31,950 2,816,757
Broker/Nominee votes 2,637,079 1,855 2,638,934
----------- ------- -----------
Total Shares Outstanding 32,444,307 80,249 32,524,556
=========== ======= ===========
19
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 - K
----------------------------------
a) Exhibit 11 - Statement re: Computation of Per Share
Earnings (Page 21)
Exhibit 15 - Independent Accountants' Review Report
from Ernst & Young (Page 22)
Exhibit 15A - Letter of Acknowledgement from
Ernst & Young LLP, Independent Accountants (Page 23)
b) A Form 8-K was not required to be filed during the quarter
ended June 30, 1994. On July 12, 1994 a Form 8-K was filed announcing the
proposed acquisition of Farmers National Bancorp. Under the Agreement,
shareholders of Farmers National Bancorp will receive 1.5 shares of First
Virginia Common Stock for each of their 2,699,056 outstanding shares. Up to
30% of the outstanding Farmers National Bancorp Common Stock may be
exchanged for $58.53 in cash at the option of the shareholders of Farmers
National Bancorp. No financial statements were filed with the Form 8-K.
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
its principal financial officer thereunto duly authorized.
FIRST VIRGINIA BANKS, INC.
/s/ Richard F. Bowman
August 8, 1994 __________________________
Richard F. Bowman, Vice
President and Treasurer
20
<PAGE>
EXHIBIT 11
FIRST VIRGINIA BANKS, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
------- ------- ------- -------
(In thousands, except per share data)
PRIMARY:
Average common shares outstanding 32,478 32,399 32,458 32,394
Dilutive effect of stock options 95 107 97 113
------- ------- ------- -------
Total average common shares 32,573 32,506 32,555 32,507
======= ======= ======= =======
Net income $29,029 $29,292 $57,845 $58,512
Provision for preferred dividends 13 14 26 27
------- ------- ------- -------
Net income applicable to common
stock $29,016 $29,278 $57,819 $58,485
======= ======= ======= =======
Net income per share of common
stock $.89 $.90 $1.78 $1.80
======= ======= ======= =======
FULLY DILUTED:
Average common shares outstanding 32,478 32,399 32,458 32,394
Dilutive effect of stock options 95 111 97 115
Conversion of preferred stock 115 117 115 118
------- ------- ------- -------
Total average common shares 32,688 32,627 32,670 32,627
======= ======= ======= =======
Net income $29,029 $29,292 $57,845 $58,512
======= ======= ======= =======
Net income per share of common
stock $.89 $.90 $1.77 $1.79
======= ======= ======= =======
21
<PAGE>
EXHIBIT 15
ERNST & YOUNG
1225 Connecticut Avenue, N.W.
Washington, D.C. 20036
Independent Accountants' Review Report
Board of Directors
First Virginia Banks, Inc.
We have reviewed the accompanying consolidated balance sheets of First
Virginia Banks, Inc. and subsidiaries as of June 30, 1994 and 1993, the
related consolidated statements of income for the three-month and six-
month periods ended June 30, 1994 and 1993, and the consolidated
statements of shareholders' equity and cash flows for the six-month
periods ended June 30, 1994 and 1993. These financial statements are
the responsibility of the Corporation's management.
We conducted our reviews in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data, and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with
generally accepted auditing standards, which will be performed for the
full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our reviews, we are not aware of any material modifications
that should be made to the accompanying consolidated financial
statements referred to above for them to be in conformity with
generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of First Virginia
Banks, Inc. and subsidiaries as of December 31, 1993, and the related
consolidated statements of income, shareholders' equity, and cash flows
for the year then ended (not presented herein) and in our report dated
January 13, 1994, we expressed an unqualified opinion on those
consolidated financial statements.
/s/ Ernst & Young
Washington, D. C.
July 11, 1994
22
<PAGE>
EXHIBIT 15A
ERNST & YOUNG LLP
1225 Connecticut Avenue, N.W.
Washington, D.C. 20036
August 8, 1994
Board of Directors
First Virginia Banks, Inc.
We are aware of the incorporation by reference in the
Post-effective Amendment No. 1 to Registration Statement Number
33-38024 on Form S-8 dated January 10, 1994, Registration Statement
Number 33-51587 on Form S-3 dated December 20, 1993, Registration
Statement Number 33-54802 on Form S-8 dated November 20, 1992,
Registration Statement Number 33-31890 on Form S-3 dated November 1,
1989, Post-effective Amendment Number 3 to Registration Statement
Number 2-67507 on Form S-3 dated January 7, 1988, Post-effective
Amendment Number 2 to Registration Statement Number 2-77151 on Form S-8
dated October 30, 1987, Registration Statement Number 33-17358 on Form
S-8 dated September 28, 1987, Registration Statement Number 33-15360 on
Form S-3 dated June 26, 1987, of our reports dated April 11, 1994 and
July 11, 1994 relating to the unaudited consolidated interim financial
statements of First Virginia Banks, Inc. and subsidiaries which are
included in its Form 10-Q for the quarters ended March 31, 1994 and
June 30, 1994.
Pursuant to Rule 436 (c) of the Securities Act of 1933, our report
is not a part of the registration statement prepared or certified by
accountants within the meaning of Section 7 or 11 of the Securities Act
of 1933.
/s/ Ernst & Young LLP
23
