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
September 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 October 31, 1994, there were 31,455,001 shares of common
stock outstanding.
This report contains a total of 21 pages.
1
<PAGE>
INDEX
Page
---------
PART I - Financial Information
Item 1. Financial Statements.
Consolidated Balance Sheets - September 30,
1994 and 1993 and December 31, 1993 3/ 4
Consolidated Statements of Income - Three
months and nine months ended September 30,
1994 and 1993 5/ 6
Consolidated Statements of Cash Flows - Nine
months ended September 30, 1994 and 1993 7
Consolidated Statements of Shareholders'
Equity - Nine months ended September 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 6. Exhibits and Reports on Form 8-K
Signature 17
Exhibit 11 - Statement re: Computation of
Per Share Earnings 18
Exhibit 15 - Independent Accountants' Review
Report from Ernst & Young, LLP 19
Exhibit 15A - Letter of Acknowledgement from
Ernst & Young LLP, Independent Accountants 20
Exhibit 27 - Financial Data Schedule
September 30, 1994 and Nine Months
ended September 30, 1994 21
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (Unaudited)
Sept. 30 December 31 Sept. 30
1994 1993 1993
---------- ---------- ----------
(In thousands)
ASSETS
Cash and noninterest-bearing
deposits in banks $ 333,995 $ 326,136 $ 313,301
Federal funds sold and securities purchased
under agreements to resell 145,000 235,000 265,000
---------- ---------- ----------
Total cash and cash equivalents 478,995 561,136 578,301
---------- ---------- ----------
Mortgage loans held for sale 13,279 69,173 44,741
Investment securities - held to maturity:
U.S. Government & its agencies 1,664,148 1,904,717 1,856,639
State and municipal obligations 228,361 263,040 276,147
Other 9,208 8,277 8,188
---------- ---------- ----------
Total investment securities (market
values of $1,864,271, $2,228,818
and $2,211,070) 1,901,717 2,176,034 2,140,974
---------- ---------- ----------
Loans 4,958,224 4,345,780 4,331,102
Deduct: Unearned income (359,602) (327,635) (336,846)
Allowance for loan losses (53,323) (50,927) (50,775)
---------- ---------- ----------
Net loans 4,545,299 3,967,218 3,943,481
---------- ---------- ----------
Premises and equipment 141,998 137,007 136,563
Other assets 139,505 126,315 130,454
---------- ---------- ----------
Total Assets $7,220,793 $7,036,883 $6,974,514
========== ========== ==========
3
<PAGE>
CONSOLIDATED BALANCE SHEETS (Continued) (Unaudited)
Sept. 30 December 31 Sept. 30
1994 1993 1993
---------- ---------- -----------
(In thousands)
LIABILITIES
Deposits:
Noninterest-bearing $1,092,828 $1,039,933 $1,020,253
Interest-bearing:
Transaction accounts 1,265,987 1,294,867 1,233,782
Money market accounts 710,999 724,462 722,851
Savings deposits 1,311,642 1,325,943 1,311,222
Certificates of deposit:
Large denomination 190,063 165,360 166,530
Other 1,672,878 1,585,824 1,607,468
---------- ---------- ----------
Total deposits 6,244,397 6,136,389 6,062,106
Interest, taxes and other liabilities 57,872 56,126 58,022
Short-term borrowings and securities sold under
agreements to repurchase 176,082 151,859 181,578
Long-term indebtedness 4,001 1,008 1,039
---------- ---------- ----------
Total Liabilities 6,482,352 6,345,382 6,302,745
---------- ---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock, $10 par value 753 805 808
Common stock, $1 par value 32,292 32,444 32,407
Capital Surplus 58,642 68,406 67,627
Retained Earnings 646,754 589,846 570,927
---------- ---------- ----------
Total Shareholders' Equity 738,441 691,501 671,769
---------- ---------- ----------
Total Liabilities and Shareholders' Equity $7,220,793 $7,036,883 $6,974,514
========== ========== ==========
See notes to consolidated financial statements
4
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
1994 1993 1994 1993
------- ------- -------- --------
(In thousands, except per share data)
Interest income:
Interest and fees on loans $96,315 $91,087 $277,559 $271,982
Interest on mortgage loans
held for sale 300 691 1,614 1,765
Income on investment
securities - held to maturity:
U.S. Government & its agencies 25,342 28,941 81,292 88,792
State and municipal
obligations 2,922 3,671 9,435 11,397
Other 131 140 430 526
Income from federal funds sold
and securities purchased
under agreements to resell 1,937 2,212 5,481 6,300
------- ------- -------- --------
Total interest income 126,947 126,742 375,811 380,762
------- ------- -------- --------
Interest expense:
Deposits:
Transaction accounts 7,053 8,113 21,300 24,170
Money market accounts 4,869 4,999 14,133 15,352
Savings deposits 9,206 9,771 27,454 28,174
Certificates of deposit:
Large denomination 2,193 1,558 4,995 4,799
Other 15,722 16,288 45,881 49,690
Short-term borrowings 1,976 934 4,631 2,549
Long-term indebtedness 104 47 341 173
------- ------- -------- --------
Total interest expense 41,123 41,710 118,735 124,907
------- ------- -------- --------
Net interest income 85,824 85,032 257,076 255,855
Provision for loan losses 938 820 5,101 5,034
------- ------- -------- --------
Net interest income after provision
for loan losses 84,886 84,212 251,975 250,821
------- ------- -------- --------
5
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (Continued) (Unaudited)
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
1994 1993 1994 1993
------- ------- -------- --------
(In thousands, except per share data)
Net interest income after provision
for loan losses 84,886 84,212 251,975 250,821
------- ------- -------- --------
Other income:
Service charges on deposit
accounts 9,070 8,922 27,108 25,726
Insurance premiums and
commissions 1,749 1,634 4,997 4,923
Credit card service charges
and fees 2,935 2,698 8,357 7,997
Trust services 1,394 1,361 3,884 3,786
Income from other customer
services 4,692 4,212 13,079 12,617
Securities gains before
income tax provisions
of $1, $0, $338 and $9 3 - 967 26
Other 850 1,975 5,919 5,377
------- ------- -------- --------
Total other income 20,693 20,802 64,311 60,452
------- ------- -------- --------
Other expenses:
Salaries and employee benefits 35,774 34,870 104,767 100,632
Occupancy 4,868 4,564 14,387 13,646
Equipment 5,068 4,944 14,953 14,545
FDIC assessment 3,474 3,369 10,268 10,043
Other 15,446 14,705 44,994 44,509
------- ------- -------- --------
Total other expenses 64,630 62,452 189,369 183,375
------- ------- -------- --------
Income before income taxes 40,949 42,562 126,917 127,898
Provision for income taxes 13,363 14,039 41,486 40,863
------- ------- -------- --------
NET INCOME $27,586 $28,523 $ 85,431 $ 87,035
======= ======= ======== ========
Net income per share of common stock $.85 $.88 $2.63 $2.68
See notes to consolidated financial statements
6
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended
Sept. 30
1994 1993
-------- --------
(In thousands)
Net cash provided by operating activities $111,092 $117,714
Investing activities:
Proceeds from the maturity of investment securities 490,070 465,690
Proceeds from the sale of investment securities 3,010 1,102
Purchase of investment securities (230,024) (457,676)
Net increase in loans (583,038) (215,429)
Net decrease in mortgages held for sale 55,894 15,363
Purchases of premises and equipment (15,103) (9,240)
Sales of premises and equipment 949 302
Goodwill and other intangible assets acquired (7,220) (1,155)
Purchase of a bank's assets less liabilities 11,745 -
Other (4,778) (4,410)
-------- --------
Net cash used by investing activities (278,495) (205,453)
-------- --------
Financing activities:
Net increase in deposits 108,008 48,360
Net increase in short-term borrowings 24,222 30,897
Proceeds from long-term borrowing 3,722 -
Principal payments on long-term borrowings (730) (4,188)
Cash dividends - common, $.94 and $.80 per share (30,594) (25,756)
Cash dividends - preferred (40) (41)
Cash dividends paid by a bank prior to its acquisition - (204)
Stock purchased and retired (19,980) -
Proceeds from issuance of common stock 654 588
-------- --------
Net cash provided by financing activities 85,262 49,656
-------- --------
Net decrease in cash and cash
equivalents (82,141) (38,083)
Cash and cash equivalents at beginning of year 561,136 616,384
-------- --------
Cash and cash equivalents at end of period $478,995 $578,301
======== ========
See notes to consolidated financial statements
7
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
Nine Months Ended
Sept. 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 85,431 87,035
Common stock purchased and retired (19,980) -
Issuance of common stock for the dividend reinvestment
plan, stock options and stock appreciation rights 654 588
-------- --------
769,351 698,475
-------- --------
Deduct dividends declared:
Preferred stock 39 40
Common stock, $.95 and $.82 per share 30,871 26,462
Dividends paid by a bank prior to its acquisition - 204
-------- --------
30,910 26,706
-------- --------
Balance at end of period $738,441 $671,769
======== ========
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 Nine Months Ended
Sept. 30 Sept. 30
1994 1993 1994 1993
------- ------- ------- -------
Balance at beginning of period $53,472 $50,727 $50,927 $49,340
Balance of acquired banks - 259 744 259
Provision charged to operating
expense 938 820 5,101 5,034
------- ------- ------- -------
54,410 51,806 56,772 54,633
Less:
Loans charged off, net of
recoveries of $988, $991,
$2,954 and $2,989 1,087 1,031 3,449 3,858
------- ------- ------- -------
Balance at September 30 $53,323 $50,775 $53,323 $50,775
======= ======= ======= =======
Percentage of net charge-offs to
average loans .10% .10% .11% .13%
Percentage of allowance for loan
losses to period-end loans 1.16 1.26
Percentage of nonperforming assets
to period-end loans .54 .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 Nine Months Ended
Sept. 30 Sept. 30
1994 1993 1994 1993
------------ ------------ ------------ ------------
$ % $ % $ % $ %
------- ---- ------- ---- ------- ---- ------- ----
Statutory rate before
tax rate change $14,574 34.0% $43,485 34.0%
Enacted tax rate change 429 1.0 1,279 1.0
------- ---- ------- ----
Statutory rate $14,332 35.0% 15,003 35.0 $44,421 35.0% 44,764 35.0
Retroactive effect
of tax rate increase - - 850 1.9 - - - -
Nontaxable interest on
municipal obligations (1,165)(2.8) (1,549)(3.6) (3,769)(3.0) (4,453)(3.5)
Deferred tax benefit
adjusted from
34% to 35% - - (432)(1.0) - - (432) (.3)
Other items 196 .5 167 .7 834 .7 984 .7
------- ---- ------- ---- ------- ---- ------- ----
Effective rate $13,363 32.7% $14,039 33.0% $41,486 32.7% $40,863 31.9%
======= ==== ======= ==== ======= ==== ======= ====
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:
Sept. 30 December 31 Sept. 30
Series Dividends 1994 1993 1993
--------- --------- -------- ----------- --------
A 5% 24,101 24,673 25,029
B 7% 9,520 10,110 10,110
C 7% 10,484 13,964 13,964
D 8% 31,183 31,712 31,712
------ ------ ------
75,288 80,459 80,815
====== ====== ======
6. COMMON STOCK
There are 60,000,000 shares of common stock, par value $1.00 per share,
authorized and 32,292,000, 32,444,000 and 32,407,000 shares were outstanding
at September 30, 1994, December 31, 1993 and September 30, 1993,
respectively. Options to purchase 307,550 shares of common stock and 8,750
stock appreciation rights were outstanding on September 30, 1994. A total of
4,756,172 shares of common stock were reserved at September 30, 1994: 109,788
shares for the conversion of preferred stock, 597,800 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 nine months ended September
30, after giving effect to dividends on preferred stock of $39,000 in 1994
and $40,000 in 1993, are based on 32,515,000 and 32,504,000 average shares
respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net income in the third quarter of $27,586,000 or $.85 per share was
down 3% as compared to the $28,523,000 or $.88 per share earned in the third
quarter of 1993. Return on average assets remained at a historically high
level of 1.52% during the third quarter and return on average shareholders'
equity totaled 15.03%. For the first nine months, net income of $85,431,000
or $2.63 per share was down 2% as compared to the $87,035,000 or $2.68 earned
during the first nine months of 1993. These earnings produced a return on
average assets of 1.59% and a return on average shareholders' equity of
15.89%.
10
Loan volume moderated as compared to the exceptionally strong
volumes recorded in the second quarter but was still up strongly. Average
loans increased 15% over the prior year's third quarter, and actual loans
were up at an annualized rate of 8% over the second quarter. Automobile loans
originated through car dealers increased at an annualized rate of 26% over
the balance at the end of the second quarter, and new loan production remains
strong. Automobile loans comprise approximately 42% of the loan portfolio and
are made primarily to consumers in the Corporation's trade area on a monthly
amortizing basis in amounts under $20,000 and with terms of no more than 60
months.
Home equity loans declined slightly after growing substantially in
the first and second quarters when the Corporation had extensive production
due to heavy advertising and employee incentive programs. Credit card loans
increased 15% as compared to the end of the previous year's third quarter;
however, these loans comprise only 3% of the total loan portfolio. Average
commercial loans increased 11% as compared to the third quarter of 1993 due
to increases in floor plan lending and a general increase in loans to small
businesses. Real estate loans advanced 6% on average as compared to the prior
year's third quarter primarily due to increases in construction loans secured
by residential developments. The loan/deposit ratio increased 8 percentage
points over 1993, to 74%.
Average deposits increased 3% as compared to the prior year's third
quarter although demand deposits increased 7% and NOW accounts increased 5%.
In the past several months, competition for deposits in the Corporation's
market area has heated up as interest rates in general have moved up
substantially since the beginning of the year. Nearly 60% of the
Corporation's deposits are comprised of transaction and consumer savings
accounts that are not as sensitive to increases in interest rates. The
netinterest margin declined 10 basis points to 5.22% during the quarter,
however, as higher yielding securities and loans matured and were replaced
with loans at generally lower yields. The Corporation is slightly asset-
sensitive and, because of its reliance primarily on low-cost, stable core
deposits, generally benefits during periods of rising interest rates and
higher interest rate levels.
Due to the strong growth in loans and the modest growth in deposits,
the Corporation has allowed its investment portfolio to decline as maturing
securities are not being reinvested but are providing funds for the growth in
loans. It is the Corporation's practice to ladder its investment portfolio
with approximately equal amounts maturing each month. This provides liquidity
in periods of strong loan growth and repricing ability during periods of
changing interest rates. The Corporation does not engage in hedging or swap
transactions nor does it purchase any derivative securities or structured
notes.
Asset quality remains excellent with improvements in delinquencies,
nonperforming assets and net loan charge-offs. Nonperforming assets declined
15% compared to the previous year's third quarter and amounted to only .54%
of period-end loans. Loans past due 90 days or more declined 2 basis points
to .07% as compared to the previous year.
11
<PAGE>
Nonperforming assets and loans past due 90 days or more as of September 30,
1994 and 1993, were (dollars in thousands):
1994 1993
------- -------
(Dollars in thousands)
Nonaccruing loans $15,493 $19,366
Restructured loans 2,268 2,381
Foreclosed real estate 7,022 7,369
------- -------
Total $24,783 $29,116
======= =======
Percentage of total loans .54% .73%
======= =======
Loans past due 90 days or more $ 3,425 $ 3,638
======= =======
Percentage of total loans .07% .09%
======= =======
The provision for loan losses increased 14% to $938,000 as compared
to the prior year's third quarter due to the growth in outstanding loans. The
allowance for loan losses as of September 30, 1994, amounted to $53.323
million, an increase of 5% over the previous year's third quarter and
represented 1.16% of outstanding loans. Net charge-offs in the third quarter
declined 15% as compared to the second quarter, and for the first nine
months, declined 11% as compared to the similar period in 1993. Net charge-
offs in the third quarter represented only .10% of average loans and for the
first nine months was .11% of average loans. The allowance covers annualized
net charge-offs 11.6 times and represents 300% of nonperforming loans.
Noninterest income declined 1% as compared to the third quarter of
1993 and was down 8% as compared to the second quarter of 1994. The decline,
as compared to the prior year's third quarter, was due to lower levels of
loan originations from the Corporation's mortgage loan subsidiary as
refinancing activity from consumers has evaporated because of higher interest
rates. Service charges on deposit accounts increased 2% over the prior year's
third quarter due to a greater number of accounts but was less than the
increase in deposits due to a higher number of customers maintaining
sufficient balances to avoid service charges.
Noninterest expenses increased at a 3% rate in the third quarter
and for the first nine months, which was consistent with the general rate of
inflation. The Corporation's efficiency ratio of 58% for the first nine
months was up slightly compared to 1993 due to flatness in net interest
income. The Corporation continues to stress strict expense controls, and
despite its extensive branch structure, operates at considerably more
efficient levels than its peers.
The Corporation's provision for income taxes declined 5% as
compared to the previous year's third quarter, which included a retroactive
provision for an increase in the federal corporate income tax rate. For the
first nine months, the provision for income taxes increased 2% despite a 1%
decline in income resulting from a 17% drop in interest income from
tax-exempt municipal securities.
Shareholders' equity grew 10% to $738 million as compared to
September 30, 1993, but was down slightly as compared to the end of the
second quarter of 1994 due to the repurchase of 499,000 shares of common
stock. The Corporation may purchase up to 2,700,000 shares of its common
stock in connection with the anticipated acquisition of the Farmers National
Bancorp. As a result of the repurchase, the Corporation's Tier 1 leverage
ratio declined 10 basis points to 9.96% as compared to the end of the second
quarter of 1994 but was up 46 basis points as compared to the previous year's
third quarter.
12
<PAGE>
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
(Dollar amounts in thousands)
Three Months Ended Sept. 30
1994
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Investment securities-held to maturity:
U.S. Government & its agencies $1,738,427 $ 25,342 5.78%
State and municipal obligations
(Fully taxable-equivalent basis) 233,286 4,134 7.09
Other (Fully taxable-equivalent basis) 9,466 134 5.66
---------- --------
Total investment securities 1,981,179 29,610 5.94
---------- --------
Loans, net of unearned income:
Installment 3,202,289 67,305 8.33
Real estate 688,390 15,235 8.85
Other (Fully taxable-equivalent basis) 655,727 14,346 8.67
---------- --------
Total loans 4,546,406 96,886 8.53
---------- --------
Mortgage loans held for sale 15,467 300 7.75
Federal funds sold and securities
purchased under agreements to resell 161,234 1,937 4.77
---------- --------
Total earning assets and income $6,704,286 128,733 7.66
========== --------
Interest-bearing liabilities:
Transaction accounts $1,286,597 7,053 2.17
Money-market accounts 731,633 4,869 2.64
Savings deposits 1,340,515 9,206 2.72
Certificates of deposit:
Large denomination 188,492 2,193 4.62
Other 1,631,754 15,722 3.82
---------- --------
Total interest-bearing deposits 5,178,991 39,043 2.99
Short-term borrowings 195,056 1,976 4.02
Notes and mortgages 4,151 104 10.04
---------- --------
Total interest-bearing liabilities
and interest expense $5,378,198 41,123 3.03
========== --------
Net interest income and net interest margin $ 87,610 5.22%
========
Other average balances:
Demand deposits $1,078,441
Common shareholders' equity 733,378
Total shareholders' equity 734,153
Total assets 7,244,909
13
<PAGE>
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
(Dollar amounts in thousands)
Three Months Ended Sept. 30
1993
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Investment securities-held to maturity:
U.S. Government & its agencies $1,851,737 $ 28,941 6.20%
State and municipal obligations
(Fully taxable-equivalent basis) 267,485 5,150 7.70
Other (Fully taxable-equivalent basis) 9,108 140 6.15
---------- --------
Total investment securities 2,128,330 34,231 6.39
---------- --------
Loans, net of unearned income:
Installment 2,707,904 63,693 9.40
Real estate 649,244 15,055 9.28
Other (Fully taxable-equivalent basis) 593,373 12,833 8.58
---------- --------
Total loans 3,950,521 91,581 9.23
---------- --------
Mortgage loans held for sale 41,538 691 6.66
Federal funds sold and securities
purchased under agreements to resell 282,814 2,212 3.10
---------- --------
Total earning assets and income $6,403,203 128,715 8.02
========== --------
Interest-bearing liabilities:
Transaction accounts $1,220,150 8,113 2.64
Money-market accounts 736,854 4,999 2.69
Savings deposits 1,301,465 9,771 2.98
Certificates of deposit:
Large denomination 166,477 1,558 3.71
Other 1,619,340 16,288 3.98
---------- --------
Total interest-bearing deposits 5,044,286 40,729 3.20
Short-term borrowings 153,769 934 2.41
Notes and mortgages 1,054 47 18.00
---------- --------
Total interest-bearing liabilities
and interest expense $5,199,109 41,710 3.18
========== --------
Net interest income and net interest margin $ 87,005 5.43%
========
Other average balances:
Demand deposits $1,005,212
Common shareholders' equity 661,215
Total shareholders' equity 662,025
Total assets 6,919,389
14
<PAGE>
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
(Dollar amounts in thousands)
Nine Months Ended Sept. 30
1994
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Investment securities-held to maturity:
U.S. Government & its agencies $1,832,439 $ 81,292 5.93%
State and municipal obligations
(Fully taxable-equivalent basis) 247,536 13,461 7.25
Other (Fully taxable-equivalent basis) 8,865 458 6.88
---------- --------
Total investment securities 2,088,840 95,211 6.09
---------- --------
Loans, net of unearned income:
Installment 3,039,614 197,028 8.64
Real estate 650,040 43,481 8.92
Other (Fully taxable-equivalent basis) 621,382 38,753 8.31
---------- --------
Total loans 4,311,036 279,262 8.69
---------- --------
Mortgage loans held for sale 31,321 1,614 6.87
Federal funds sold and securities
purchased under agreements to resell 191,744 5,481 3.82
---------- --------
Total earning assets and income $6,622,941 381,568 7.68
========== --------
Interest-bearing liabilities:
Transaction accounts $1,293,832 21,300 2.20
Money-market accounts 729,658 14,133 2.59
Savings deposits 1,344,525 27,454 2.73
Certificates of deposit:
Large denomination 173,991 4,995 3.84
Other 1,593,048 45,881 3.85
---------- --------
Total interest-bearing deposits 5,135,054 113,763 2.96
Short-term borrowings 186,038 4,631 3.33
Notes and mortgages 4,308 341 10.55
---------- --------
Total interest-bearing liabilities
and interest expense $5,325,400 118,735 2.98
========== --------
Net interest income and net interest margin $262,833 5.29%
========
Other average balances:
Demand deposits $1,054,989
Common shareholders' equity 716,256
Total shareholders' equity 717,047
Total assets 7,157,085
15
<PAGE>
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
(Dollar amounts in thousands)
Nine Months Ended Sept. 30
1993
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Investment securities-held to maturity:
U.S. Government & its agencies $1,849,384 $ 88,792 6.41%
State and municipal obligations
(Fully taxable-equivalent basis) 266,653 16,023 8.01
Other (Fully taxable-equivalent basis) 10,518 555 7.04
---------- --------
Total investment securities 2,126,555 105,370 6.62
---------- --------
Loans, net of unearned income:
Installment 2,635,356 191,526 9.69
Real estate 653,656 45,888 9.36
Other (Fully taxable-equivalent basis) 604,156 36,271 8.02
---------- --------
Total loans 3,893,168 273,685 9.35
---------- --------
Mortgage loans held for sale 35,478 1,765 6.63
Federal funds sold and securities
purchased under agreements to resell 271,978 6,300 3.09
---------- --------
Total earning assets and income $6,327,179 387,120 8.16
========== --------
Interest-bearing liabilities:
Transaction accounts $1,204,621 24,170 2.68
Money-market accounts 752,565 15,352 2.73
Savings deposits 1,261,812 28,174 2.98
Certificates of deposit:
Large denomination 167,893 4,799 3.85
Other 1,639,433 49,690 4.05
---------- --------
Total interest-bearing deposits 5,026,324 122,185 3.25
Short-term borrowings 144,153 2,549 2.36
Notes and mortgages 1,492 173 15.46
---------- --------
Total interest-bearing liabilities
and interest expense $5,171,969 124,907 3.23
========== --------
Net interest income and net interest margin $262,213 5.53%
========
Other average balances:
Demand deposits $ 974,194
Common shareholders' equity 640,858
Total shareholders' equity 641,674
Total assets 6,846,883
16
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 - K
----------------------------------
a) Exhibit 11 - Statement re: Computation of Per Share
Earnings (Page 18)
Exhibit 15 - Independent Accountants' Review Report
from Ernst & Young, LLP (Page 19)
Exhibit 15A - Letter of Acknowledgement from
Ernst & Young LLP, Independent Accountants (Page 20)
Exhibit 27 - Financial Data Schedule (Page 21)
b) A Form 8-K was not required to be filed during the quarter
ended September 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
November 7, 1994 __________________________
Richard F. Bowman,
Senior Vice President
and Treasurer
17
<PAGE>
EXHIBIT 11
FIRST VIRGINIA BANKS, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
1994 1993 1994 1993
------- ------- ------- -------
(In thousands, except per share data)
PRIMARY:
Average common shares outstanding 32,343 32,409 32,419 32,399
Dilutive effect of stock options 93 87 96 105
------- ------- ------- -------
Total average common shares 32,436 32,496 32,515 32,504
======= ======= ======= =======
Net income $27,586 $28,523 $85,431 $87,035
Provision for preferred dividends 12 13 39 40
------- ------- ------- -------
Net income applicable to common
stock $27,574 $28,510 $85,392 $86,995
======= ======= ======= =======
Net income per share of common
stock $.85 $.88 $2.63 $2.68
======= ======= ======= =======
FULLY DILUTED:
Average common shares outstanding 32,343 32,409 32,419 32,399
Dilutive effect of stock options 93 91 96 107
Conversion of preferred stock 110 117 113 117
------- ------- ------- -------
Total average common shares 32,546 32,617 32,628 32,623
======= ======= ======= =======
Net income $27,586 $28,523 $85,431 $87,035
======= ======= ======= =======
Net income per share of common
stock $.85 $.87 $2.62 $2.67
======= ======= ======= =======
18
<PAGE>
EXHIBIT 15
ERNST & YOUNG LLP
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 September 30, 1994 and
1993, the related consolidated statements of income for the three-month
and nine-month periods ended September 30, 1994 and 1993, and the
consolidated statements of shareholders' equity and cash flows for the
nine-month periods ended September 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 LLP
Washington, D. C.
October 7, 1994
19
<PAGE>
EXHIBIT 15A
ERNST & YOUNG LLP
1225 Connecticut Avenue, N.W.
Washington, D.C. 20036
November 7, 1994
Board of Directors
First Virginia Banks, Inc.
We are aware of the incorporation by reference in the Registration
Statement Number 33-56127 on Form S-4 dated November 3, 1994,
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, July 11,
and October 7, 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,
June 30, and September 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
20
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