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, 1995
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 June 30, 1995, there were 33,937,782 shares of common
stock outstanding.
This report contains a total of 25 pages.
1
<PAGE>
INDEX
Page
---------
PART I - Financial Information
Item 1. Financial Statements.
Consolidated Balance Sheets - June 30,
1995 and 1994 and December 31, 1994 3/ 4
Consolidated Statements of Income - Three
months and six months ended June 30, 1995
and 1994 5/ 6
Consolidated Statements of Cash Flows - Six
months ended June 30, 1995 and 1994 7
Consolidated Statements of Shareholders'
Equity - Six months ended June 30, 1995
and 1994 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 17/20
Item 6. Exhibits and Reports on Form 8-K
Signature 21
Exhibit 11 - Statement re: Computation of
Per Share Earnings 22
Exhibit 15 - Independent Accountants' Review
Report from Ernst & Young LLP 23
Exhibit 15A - Letter of Acknowledgement from
Ernst & Young LLP, Independent Accountants 24
Exhibit 27 - Financial Data Schedule as of
June 30, 1995 and the Six months
ended June 30, 1995 25
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (Unaudited)
June 30 December 31 June 30
1995 1994 1994
---------- ---------- ----------
(In thousands)
ASSETS
Cash and noninterest-bearing
deposits in banks $ 388,726 $ 420,742 $ 330,005
Federal funds sold and securities purchased
under agreements to resell 325,223 30,000 100,000
---------- ---------- ----------
Total cash and cash equivalents 713,949 450,742 430,005
---------- ---------- ----------
Mortgage loans held for sale 17,530 13,291 21,139
Investment securities - held to maturity:
U.S. Government & its agencies 1,697,652 1,785,837 1,795,066
State and municipal obligations 229,563 280,817 240,815
Other 4,240 19,376 3,375
---------- ---------- ----------
Total investment securities (market
values of $1,933,501, $2,032,148
and $2,023,469) 1,931,455 2,086,030 2,039,256
---------- ---------- ----------
Loans 5,313,523 5,352,504 4,865,976
Deduct: Unearned income (345,790) (355,310) (357,683)
Allowance for loan losses (57,356) (58,860) (53,472)
---------- ---------- ----------
Net loans 4,910,377 4,938,334 4,454,821
---------- ---------- ----------
Other earning assets 9,193 8,987 6,343
Premises and equipment 155,335 156,051 142,726
Intangible assets 80,785 85,322 22,242
Other assets 128,801 126,625 113,027
---------- ---------- ----------
Total Assets $7,947,425 $7,865,382 $7,229,559
========== ========== ==========
3
<PAGE>
CONSOLIDATED BALANCE SHEETS (Continued) (Unaudited)
June 30 December 31 June 30
1995 1994 1994
---------- ---------- ----------
(In thousands)
LIABILITIES
Deposits:
Noninterest-bearing $1,205,842 $1,234,060 $1,081,503
Interest-bearing:
Transaction accounts 1,302,463 1,391,978 1,281,623
Money-market accounts 699,210 761,160 737,715
Savings deposits 1,250,069 1,402,889 1,366,275
Certificates of deposit:
Consumer 2,086,690 1,820,274 1,597,935
Large denomination 285,960 205,480 188,406
---------- ---------- ----------
Total deposits 6,830,234 6,815,841 6,253,457
Interest, taxes and other liabilities 67,506 59,430 57,453
Short-term borrowings and securities sold under
agreements to repurchase 211,973 179,409 174,706
Mortgage indebtedness 816 963 943
Other long-term indebtedness 2,412 2,851 3,273
---------- ---------- ----------
Total Liabilities 7,112,941 7,058,494 6,489,832
---------- ---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock, $10 par value 709 746 795
Common stock, $1 par value 33,938 34,050 32,769
Capital Surplus 106,964 111,184 76,651
Retained Earnings 692,873 660,908 629,512
---------- ---------- ----------
Total Shareholders' Equity 834,484 806,888 739,727
---------- ---------- ----------
Total Liabilities and Shareholders' Equity $7,947,425 $7,865,382 $7,229,559
========== ========== ==========
See notes to consolidated financial statements
4
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
------- ------- -------- --------
(In thousands, except per share data)
Interest income:
Interest and fees on loans $108,535 $ 93,481 $215,560 $181,246
Interest on mortgage loans
held for sale 266 478 522 1,312
Income on investment
securities - held to maturity:
U.S. Government & its agencies 25,152 26,906 50,056 55,950
State and municipal
obligations 3,001 3,214 6,303 6,363
Other 56 26 187 198
Income from federal funds sold
and securities purchased
under agreements to resell 5,485 1,674 8,118 3,544
Income on other earning assets 146 95 290 189
------- ------- -------- --------
Total interest income 142,641 125,874 281,036 248,802
------- ------- -------- --------
Interest expense:
Deposits:
Transaction accounts 7,034 7,075 14,286 14,247
Money-market accounts 5,557 4,732 11,251 9,264
Savings deposits 8,432 9,242 17,488 18,248
Certificates of deposit:
Consumer 26,351 15,066 47,965 30,159
Large denomination 3,442 1,320 6,400 2,803
Short-term borrowings 2,827 1,623 5,166 2,654
Long-term indebtedness 84 108 173 237
------- ------- -------- --------
Total interest expense 53,727 39,166 102,729 77,612
------- ------- -------- --------
Net interest income 88,914 86,708 178,307 171,190
Provision for loan losses 2,084 3,702 2,416 4,163
------- ------- -------- --------
Net interest income after provision
for loan losses 86,830 83,006 175,891 167,027
------- ------- -------- --------
5
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (Continued) (Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
------- ------- -------- --------
(In thousands, except per share data)
Net interest income after provision
for loan losses 86,830 83,006 175,891 167,027
------- ------- -------- --------
Other income:
Service charges on deposit
accounts 9,632 9,133 19,151 18,038
Insurance premiums and
commissions 1,478 1,616 3,308 3,248
Credit card service charges
and fees 2,993 2,874 5,650 5,422
Trust services 1,891 1,264 3,560 2,490
Income from other customer
services 4,728 4,440 8,912 8,387
Securities gains (losses)
before income tax provisions
(credits) of $(4) and $337 - (10) - 964
Other 3,863 3,338 4,442 5,131
------- ------- -------- --------
Total other income 24,585 22,655 45,023 43,680
------- ------- -------- --------
Other expenses:
Salaries and employee benefits 37,843 34,296 75,688 68,993
Occupancy 5,383 4,682 10,759 9,519
Equipment 5,062 5,029 10,137 9,885
FDIC assessment 3,801 3,397 7,603 6,794
Other 17,424 15,032 34,104 29,548
------- ------- -------- --------
Total other expenses 69,513 62,436 138,291 124,739
------- ------- -------- --------
Income before income taxes 41,902 43,225 82,623 85,968
Provision for income taxes 14,330 14,196 27,853 28,123
------- ------- -------- --------
NET INCOME $27,572 $29,029 $ 54,770 $ 57,845
======= ======= ======== ========
Net income per share of common stock $.81 $.89 $1.61 $1.78
Average primary shares of common
stock outstanding 34,042 32,573 34,089 32,555
See notes to consolidated financial statements
6
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended
June 30
1995 1994
-------- --------
(In thousands)
Net cash provided by operating activities $ 77,750 $ 73,179
Investing activities:
Proceeds from the maturity of
held to maturity securities 401,748 340,507
Proceeds from the sale of
available for sale securities - 2,183
Purchase of held to maturity securities (249,556) (219,675)
Net (increase) decrease in loans 25,559 (491,671)
Net (increase) decrease in mortgages held for sale (4,239) 48,034
Net (increase) decrease in other earning assets (205) 80
Purchases of premises and equipment (7,051) (12,523)
Sales of premises and equipment 1,468 849
Goodwill and other intangible assets acquired - (7,307)
Acquisition of a bank, net of cash acquired - 11,745
Other (1,760) 1,281
-------- --------
Net cash (used for) provided by
investing activities 165,964 (326,497)
-------- --------
Financing activities:
Net increase in deposits 14,392 117,069
Net increase in short-term borrowings 32,564 22,847
Proceeds from long-term borrowing - 3,722
Principal payments on long-term borrowings (585) (516)
Cash dividends - common, $.66 and $.62 per share (22,479) (20,108)
Cash dividends - preferred (25) (27)
Stock purchased and retired (5,292) (1,093)
Proceeds from issuance of common stock 918 293
-------- --------
Net cash provided by
financing activities 19,493 122,187
-------- --------
Net increase (decrease) in cash and
cash equivalents 263,207 (131,131)
Cash and cash equivalents at beginning of year 450,742 561,136
-------- --------
Cash and cash equivalents at end of period $713,949 $430,005
======== ========
See notes to consolidated financial statements
7
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
Six Months Ended
June 31
1995 1994
-------- --------
(In thousands)
Balance at beginning of year $806,888 $691,501
Increase attributable to an acquired bank - 11,745
Net income 54,770 57,845
Common stock purchased and retired (5,286) (1,093)
Issuance of common stock for the dividend reinvestment
plan, stock options and stock appreciation rights 917 292
-------- --------
857,289 760,290
-------- --------
Deduct dividends declared:
Preferred stock 24 26
Common stock, $.67 and $.63 per share 22,781 20,537
-------- --------
22,805 20,563
-------- --------
Balance at end of period $834,484 $739,727
======== ========
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 1994 have been reclassified for comparative
purposes.
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses was (in thousands):
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
------- ------- ------- -------
Balance at beginning of period $57,289 $50,312 $58,860 $50,927
Balance of an acquired bank - 744 - 744
Provision charged to operating
expense 2,084 3,702 2,416 4,163
------- ------- ------- -------
59,373 54,758 61,276 55,834
Less:
Loans charged off, net of
recoveries of $843, $978,
$1,757 and $1,966 2,017 1,286 3,920 2,362
------- ------- ------- -------
Balance at June 30 $57,356 $53,472 $57,356 $53,472
======= ======= ======= =======
Percentage of net charge-offs to
average loans .16% .12% .16% .11%
Percentage of allowance for loan
losses to period-end loans 1.15 1.19
Percentage of nonperforming assets
to period-end loans .55 .56
3. FEDERAL INCOME TAX
The reconcilement 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
1995 1994 1995 1994
------------ ------------ ------------ ------------
$ % $ % $ % $ %
------- ---- ------- ---- ------- ---- ------- ----
Statutory rate $14,666 35.0% 15,129 35.0 $28,918 35.0% 30,089 35.0
Nontaxable interest on
municipal obligations (1,196)(2.9) (1,271)(2.9) (2,493)(3.0) (2,604)(3.0)
Other items 860 2.1 338 .8 1,428 1.7 638 .7
------- ---- ------- ---- ------- ---- ------- ----
Effective rate $14,330 34.2% $14,196 32.9% $27,853 33.7% $28,123 32.7%
======= ==== ======= ==== ======= ==== ======= ====
9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. 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 1995 1994 1994
--------- --------- -------- ----------- --------
A 5% 23,344 23,721 24,372
B 7% 7,000 9,300 9,590
C 7% 10,484 10,484 13,936
D 8% 30,086 31,083 31,582
------ ------ ------
70,914 74,588 79,480
====== ====== ======
5. COMMON STOCK
There are 60,000,000 shares of common stock, par value $1.00 per share,
authorized and 33,938,000, 34,050,000 and 32,769,000 shares were outstanding
at June 30, 1995, December 31, 1994 and June 30, 1994, respectively. Options
to purchase 256,283 shares of common stock and 2,500 stock appreciation
rights were outstanding on June 30, 1995. A total of 647,610 shares of common
stock were reserved at June 30, 1995: 103,227 shares for the conversion of
preferred stock and 544,383 shares for stock options and stock appreciation
rights.
6. 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 $24,000 in 1995 and
$26,000 in 1994, are based on 34,089,000 and 32,555,000 average shares
respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net income for the second quarter of 1995 was $27,572,000 or $.81 per
share, which was up slightly compared to the first quarter income of
$27,198,000 or $.80 per share. This was down 5%, however, from the record
$29,029,000 or $.89 per share earned in the second quarter of 1994. The
figures for 1994 do not include the results of Farmers National Bancorp which
was acquired in late December and was accounted for as a purchase. The return
on average assets for the second quarter of 1.40% was less than the 1.62%
posted in the prior year's second quarter but remained above its 15-year
historic average and once again placed the Corporation among the most
10
<PAGE>
profitable banking institutions in the country. The return on average
shareholders' equity of 13.33% declined from the 16.11% earned in the prior
year's second quarter and was below the 15-year historic average due to the
increase in the level of capital.
For the first six months, net income was $54,770,000 or $1.61 per share
compared to the $57,845,000 and $1.78 per share earned in 1994. The return on
average assets and return on average shareholders' equity were 1.40% and
13.34%, respectively, compared to the 1.63% and 16.28% earned in 1994.
The primary reason for the decline in earnings was the rise in interest
rates that increased the cost of funds at a faster pace than the increase in
the yield on earning assets. As a result, the net interest margin declined 11
basis points to 5.01% in the second quarter. Over the past year, the Federal
Reserve has been very active in increasing interest rates in an attempt to
slow down the growth in the economy and control inflation. Because of the
Corporation's slightly liability-sensitive balance sheet, these rate
increases had a negative impact on the margin. In recent months, interest
rates have begun dropping, and the rate of increase in the cost of funds has
moderated and is expected to stabilize and then decline in the third and
fourth quarters.
Earning assets increased at an annualized rate of 7% in the second quarter
and were up 9% compared to the second quarter of 1994. Following a weak
demand for loans in the first quarter, particularly in loans to consumers,
activity increased strongly toward the end of the quarter, especially
commercial loans and indirect automobile loans. Average loans declined
slightly compared to the first quarter but were up 14% compared to the second
quarter of 1994. Demand for home equity loans increased steadily during the
quarter but was still significantly below the production levels achieved
during 1994. Consumers who refinanced their first mortgages during 1993 and
1994 appear to have filled their short-term demand for this type of credit.
Average deposits increased at an annualized rate of 5% compared to the
first quarter and were up 9% compared to the prior year's second quarter,
which did not include the deposits of Farmers National Bancorp. Transaction
accounts increased slightly compared to the first quarter following seasonal
growth patterns. First quarter transaction accounts were weaker than normal
for two reasons: a shift into higher-yielding certificates of deposit, and
the late processing of tax refunds by the Internal Revenue Service. Savings
deposits and money-market accounts declined at an annualized rate of 20% and
18%, respectively, compared to the first quarter as customers shifted funds
into higher-yielding certificates of deposit that increased 31 %. By the end
of the quarter, this shifting of funds had slowed significantly, money-market
accounts began to grow again, and consumer savings stabilized.
Asset quality was relatively unchanged from both the previous quarter and
the second quarter of 1994 and remained at a very high level. Net charge-offs
during the second quarter were basically unchanged from the first quarter and
represented .16% of loans for the first six months of 1995. It is likely over
the next year that charge-offs will increase slightly to a sustainable level
of approximately 15-20 basis points which is still significantly below
industry averages for the past 15 years.
The provision for loan losses in the second quarter increased $1.75 million
over the first quarter to $2.08 million because of the increase in the volume
of loans outstanding. The provision declined 44% compared to the prior year's
second quarter when new loan volume was significantly higher. The allowance
for loan losses amounted to $57.36 million or 1.15% of loans which was
essentially unchanged from the 1.16% at the end of the first quarter and
covered annualized net loan charge-offs 7.3 times and represented 209% of
nonperforming assets at June 30,1995. Nonperforming assets declined $2.30
million compared to the first quarter, and totaled $27.46 million or .55% of
11
<PAGE>
outstanding loans. This compares to the $25.40 million or .56% of loans as of
June 30,1994, which did not include the balances acquired from Farmers
National Bancorp.
1995 1994
------- -------
(Dollars in thousands)
Nonaccruing loans $16,082 $16,224
Restructured loans 4,114 2,338
Foreclosed real estate 7,265 6,835
------- -------
Total $27,461 $25,397
======= =======
Percentage of total loans .55% .56%
======= =======
Loans past due 90 days or more $ 5,161 $ 3,441
======= =======
Percentage of total loans .10% .08%
======= =======
Noninterest income increased 9% compared to the second quarter of 1994 and
was up 20% over the first quarter of 1995. During both the second quarters of
1995 and 1994, packages of mortgage servicing rights were sold at a gain of
$2.5 and $2.4 million, respectively. The Corporation has typically bundled
and sold a package of mortgage servicing rights each year from loans
originated by its mortgage loan subsidiary. During the second quarter of
1995, the Corporation adopted SFAS 122 "Accounting for Mortgage Servicing
Rights", which increased income by $350,000. Income from trust services
increased 50% in the second quarter and was up 43% for the first six months
due, in part, to the acquisition of Farmers National but primarily due to an
increase in all areas of trust administration.
Noninterest expenses increased 1% compared to the first quarter and were up
11% compared to the second quarter of 1994 although this was caused primarily
by two acquisitions in 1994 that were accounted for as purchases. Excluding
the expenses of the acquired banks from 1995 indicates a rate of increase of
under 2%, less than the rate of inflation. For the first six months, the
efficiency ratio increased 3% to 61% compared to 1994. Most of this increase
was due to the decline in the net interest margin and to a $2.2 million
increase in goodwill expense from the acquisition of Farmers National
Bancorp.
Shareholders' equity grew at an annualized rate of 5% in the second quarter
over the first quarter and the ratio of shareholders' equity to total assets
remained unchanged at 10.5% compared to the first quarter. Book value per
share increased to $24.57 and was up 9% compared to its value on June 30,
1994. The Corporation purchased and retired 146,800 shares of its common
stock during the quarter as part of a remaining 1.0 million share repurchase
program and will continue to repurchase shares as market conditions permit.
12
<PAGE>
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
(Dollar amounts in thousands)
Three Months Ended June 30
1995
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Investment securities-held to maturity:
U.S. Government & its agencies $1,671,909 $ 25,152 6.03%
State and municipal obligations
(Fully taxable-equivalent basis) 242,302 4,244 7.00
Other (Fully taxable-equivalent basis) 4,647 55 4.77
---------- --------
Total investment securities 1,918,858 29,451 6.12
---------- --------
Loans, net of unearned income:
Installment 3,251,948 70,320 8.65
Real estate 916,974 20,292 8.85
Other (Fully taxable-equivalent basis) 753,058 18,521 9.84
---------- --------
Total loans 4,921,980 109,133 8.89
---------- --------
Mortgage loans held for sale 13,038 266 8.15
Federal funds sold and securities
purchased under agreements to resell 364,094 5,485 6.04
Other earning assets 9,192 146 6.35
---------- --------
Total earning assets and income $7,227,162 144,481 7.99
========== --------
Interest-bearing liabilities:
Transaction accounts $1,315,066 7,034 2.15
Money-market accounts 707,774 5,557 3.15
Savings deposits 1,257,928 8,432 2.69
Certificates of deposit:
Consumer 2,049,247 26,351 5.14
Large denomination 276,740 3,442 4.99
---------- --------
Total interest-bearing deposits 5,606,755 50,816 3.64
Short-term borrowings 215,165 2,827 5.27
Long-term indebtedness 3,388 84 9.95
---------- --------
Total interest-bearing liabilities
and interest expense $5,825,308 53,727 3.70
========== --------
Net interest income and net interest margin $ 90,754 5.01%
========
Other average balances:
Demand deposits $1,160,135
Common shareholders' equity 826,805
Total shareholders' equity 827,522
Total assets 7,873,367
13
<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) 2,134 46 8.65
---------- --------
Total investment securities 2,107,061 31,610 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
Other earning assets 6,343 95 6.01
---------- --------
Total earning assets and income $6,649,962 127,540 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:
Consumer 1,566,715 15,066 3.86
Large denomination 169,477 1,320 3.12
---------- --------
Total interest-bearing deposits 5,132,481 37,435 2.92
Short-term borrowings 198,981 1,623 3.27
Long-term indebtedness 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 $ 88,374 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
14
<PAGE>
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
(Dollar amounts in thousands)
Six Months Ended June 30
1995
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Investment securities-held to maturity:
U.S. Government & its agencies $1,682,325 $ 50,056 6.00%
State and municipal obligations
(Fully taxable-equivalent basis) 253,987 8,938 7.04
Other (Fully taxable-equivalent basis) 6,577 187 5.68
---------- --------
Total investment securities 1,942,889 59,181 6.10
---------- --------
Loans, net of unearned income:
Installment 3,268,653 140,185 8.58
Real estate 915,492 40,479 8.84
Other (Fully taxable-equivalent basis) 749,912 36,089 9.68
---------- --------
Total loans 4,934,057 216,753 8.82
---------- --------
Mortgage loans held for sale 12,531 522 8.32
Federal funds sold and securities
purchased under agreements to resell 273,129 8,118 5.99
Other earning assets 9,141 290 6.36
---------- --------
Total earning assets and income $7,171,747 284,864 7.96
========== --------
Interest-bearing liabilities:
Transaction accounts $1,329,292 14,286 2.17
Money-market accounts 725,096 11,251 3.13
Savings deposits 1,293,957 17,488 2.73
Certificates of deposit:
Consumer 1,978,423 47,965 4.89
Large denomination 261,605 6,400 4.93
---------- --------
Total interest-bearing deposits 5,588,373 97,390 3.51
Short-term borrowings 202,200 5,166 5.15
Long-term indebtedness 3,522 173 9.83
---------- --------
Total interest-bearing liabilities
and interest expense $5,794,095 102,729 3.58
========== --------
Net interest income and net interest margin $182,135 5.07%
========
Other average balances:
Demand deposits $1,144,078
Common shareholders' equity 820,212
Total shareholders' equity 820,941
Total assets 7,817,995
15
<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) 2,402 73 6.13
---------- --------
Total investment securities 2,137,405 65,399 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
Other earning assets 6,303 189 6.05
---------- --------
Total earning assets and income $6,583,204 252,772 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:
Consumer 1,573,374 30,159 3.87
Large denomination 166,621 2,803 3.39
---------- --------
Total interest-bearing deposits 5,112,721 74,721 2.95
Short-term borrowings 181,301 2,654 2.95
Long-term indebtedness 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 $175,160 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
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 28, 1995. 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
Edward L. Breeden, III Stock Stock Stock
====================== ----------- ------- -----------
Votes For:
Individual votes 14,186,974 40,077 14,227,051
Broker/Nominee votes 13,617,717 259 13,617,976
----------- ------- -----------
Total Management proxy votes for 27,804,691 40,336 27,845,027
Floor Vote For - Individual/In person 1 0 1
----------- ------- -----------
Total votes for 27,804,692 40,336 27,845,028
Votes Withheld:
Individual votes 182,086 557 182,643
Broker/Nominee votes 57,902 0 57,902
----------- ------- -----------
Total votes 28,044,680 40,893 28,085,573
Shares present but not voted 20,891 0 20,891
----------- ------- -----------
Shares for a Quorum 28,065,571 40,893 28,106,464
Shares not present nor voted:
Individual votes 2,912,025 30,143 2,942,168
Broker/Nominee votes 3,081,284 2,885 3,084,169
----------- ------- -----------
Total Shares Outstanding 34,058,880 73,921 34,132,801
=========== ======= ===========
17
<PAGE>
Management nominee: Common Preferred Total
Gilbert R. Giordano Stock Stock Stock
=================== ----------- ------- -----------
Votes For:
Individual votes 14,183,601 39,977 14,223,578
Broker/Nominee votes 13,617,717 259 13,617,976
----------- ------- -----------
Total Management proxy votes for 27,801,318 40,236 27,841,554
Floor Vote For - Individual/In person 1 0 1
----------- ------- -----------
Total votes for 27,801,319 40,236 27,841,555
Votes Withheld:
Individual votes 185,459 657 186,116
Broker/Nominee votes 57,902 0 57,902
----------- ------- -----------
Total votes 28,044,680 40,893 28,085,573
Shares present but not voted 20,891 0 20,891
----------- ------- -----------
Shares for a Quorum 28,065,571 40,893 28,106,464
Shares not present nor voted:
Individual votes 2,912,025 30,143 2,942,168
Broker/Nominee votes 3,081,284 2,885 3,084,169
----------- ------- -----------
Total Shares Outstanding 34,058,880 73,921 34,132,801
=========== ======= ===========
Management nominee:
Eric C. Kendrick
================
Votes For:
Individual votes 14,189,194 40,077 14,229,271
Broker/Nominee votes 13,617,717 259 13,617,976
----------- ------- -----------
Total Management proxy votes for 27,806,911 40,336 27,847,247
Floor Vote For - Individual/In person 1 0 1
----------- ------- -----------
Total votes for 27,806,912 40,336 27,847,248
Votes Withheld:
Individual votes 179,866 557 180,423
Broker/Nominee votes 57,902 0 57,902
----------- ------- -----------
Total votes 28,044,680 40,893 28,085,573
Shares present but not voted 20,891 0 20,891
----------- ------- -----------
Shares for a Quorum 28,065,571 40,893 28,106,464
Shares not present nor voted:
Individual votes 2,912,025 30,143 2,942,168
Broker/Nominee votes 3,081,284 2,885 3,084,169
----------- ------- -----------
Total Shares Outstanding 34,058,880 73,921 34,132,801
=========== ======= ===========
18
<PAGE>
Management nominee: Common Preferred Total
John B. Melvin Stock Stock Stock
============== ----------- ------- -----------
Votes For:
Individual votes 14,187,814 40,047 14,227,861
Broker/Nominee votes 13,616,817 259 13,617,076
----------- ------- -----------
Total Management proxy votes for 27,804,631 40,306 27,844,937
Floor Vote For - Individual/In person 1 0 1
----------- ------- -----------
Total votes for 27,804,632 40,306 27,844,938
Votes Withheld:
Individual votes 181,246 587 181,833
Broker/Nominee votes 58,802 0 58,802
----------- ------- -----------
Total votes 28,044,680 40,893 28,085,573
Shares present but not voted 20,891 0 20,891
----------- ------- -----------
Shares for a Quorum 28,065,571 40,893 28,106,464
Shares not present nor voted:
Individual votes 2,912,025 30,143 2,942,168
Broker/Nominee votes 3,081,284 2,885 3,084,169
----------- ------- -----------
Total Shares Outstanding 34,058,880 73,921 34,132,801
=========== ======= ===========
Management nominee:
Robert H. Zalokar
=================
Votes For:
Individual votes 14,171,237 39,907 14,211,144
Broker/Nominee votes 13,617,717 259 13,617,976
----------- ------- -----------
Total Management proxy votes for 27,788,954 40,166 27,829,120
Floor Vote For - Individual/In person 1 0 1
----------- ------- -----------
Total votes for 27,788,955 40,166 27,829,121
Votes Withheld:
Individual votes 197,823 727 198,550
Broker/Nominee votes 57,902 0 57,902
----------- ------- -----------
Total votes 28,044,680 40,893 28,085,573
Shares present but not voted 20,891 0 20,891
----------- ------- -----------
Shares for a Quorum 28,065,571 40,893 28,106,464
Shares not present nor voted:
Individual votes 2,912,025 30,143 2,942,168
Broker/Nominee votes 3,081,284 2,885 3,084,169
----------- ------- -----------
Total Shares Outstanding 34,058,880 73,921 34,132,801
=========== ======= ===========
19
<PAGE>
Management nominee: Common Preferred Total
Barry J. Fitzpatrick Stock Stock Stock
==================== ----------- ------- -----------
Votes For:
Individual votes 14,158,006 39,977 14,197,983
Broker/Nominee votes 13,617,717 259 13,617,976
----------- ------- -----------
Total Management proxy votes for 27,775,723 40,236 27,815,959
Floor Vote For - Individual/In person 1 0 1
----------- ------- -----------
Total votes for 27,775,724 40,236 27,815,960
Votes Withheld:
Individual votes 211,054 657 211,711
Broker/Nominee votes 57,902 0 57,902
----------- ------- -----------
Total votes 28,044,680 40,893 28,085,573
Shares present but not voted 20,891 0 20,891
----------- ------- -----------
Shares for a Quorum 28,065,571 40,893 28,106,464
Shares not present nor voted:
Individual votes 2,912,025 30,143 2,942,168
Broker/Nominee votes 3,081,284 2,885 3,084,169
----------- ------- -----------
Total Shares Outstanding 34,058,880 73,921 34,132,801
=========== ======= ===========
c) Among other matters voted on at the meeting was the following:
i) The appointment of the independent auditors.
Votes For:
Individual votes 14,150,778 39,452 14,190,230
Broker/Nominee votes 13,626,112 259 13,626,371
----------- ------- -----------
Total Management proxy votes for 27,776,890 39,711 27,816,601
Floor Vote For - Individual/In person 1 0 1
----------- ------- -----------
Total votes for 27,776,891 39,711 27,816,602
Votes Against:
Individual votes 52,484 150 52,634
Broker/Nominee votes 21,907 0 21,907
----------- ------- -----------
Total shares voted 27,851,282 39,861 27,891,143
Votes Abstain:
Individual votes 165,798 1,032 166,830
Broker/Nominee votes 27,600 0 27,600
----------- ------- -----------
Total votes received 28,044,680 40,893 28,085,573
Shares present but not voted 20,891 0 20,891
Shares not present nor voted:
Individual votes 2,912,025 30,143 2,942,168
Broker/Nominee votes 3,081,284 2,885 3,084,169
----------- ------- -----------
Total Shares Outstanding 34,058,880 73,921 34,132,801
=========== ======= ===========
20
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 - K
----------------------------------
a) Exhibit 11 - Statement re: Computation of Per Share
Earnings (Page 22)
Exhibit 15 - Independent Accountants' Review Report
from Ernst & Young LLP (Page 23)
Exhibit 15A - Letter of Acknowledgement from
Ernst & Young LLP, Independent Accountants (Page 24)
Exhibit 27 - Financial Data Schedule (Page 25)
b) A Form 8-K was not required to be filed during the quarter
ended June 30, 1995.
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
July 28, 1995 __________________________
Richard F. Bowman,
Senior Vice President
and Treasurer
21
<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
1995 1994 1995 1994
------- ------- ------- -------
(In thousands, except per share data)
PRIMARY:
Average common shares outstanding 33,964 32,478 34,011 32,458
Dilutive effect of stock options 78 95 78 97
------- ------- ------- -------
Total average common shares 34,042 32,573 34,089 32,555
======= ======= ======= =======
Net income $27,572 $29,029 $54,770 $57,845
Provision for preferred dividends 12 13 24 26
------- ------- ------- -------
Net income applicable to common
stock $27,560 $29,016 $54,746 $57,819
======= ======= ======= =======
Net income per share of common
stock $.81 $.89 $1.61 $1.78
======= ======= ======= =======
FULLY DILUTED:
Average common shares outstanding 33,964 32,478 34,011 32,458
Dilutive effect of stock options 86 95 84 97
Conversion of preferred stock 103 115 104 115
------- ------- ------- -------
Total average common shares 34,153 32,688 34,199 32,670
======= ======= ======= =======
Net income $27,572 $29,029 $54,770 $57,845
======= ======= ======= =======
Net income per share of common
stock $.81 $.89 $1.60 $1.77
======= ======= ======= =======
22
<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 condensed consolidated balance sheets of
First Virginia Banks, Inc. and subsidiaries as of June 30, 1995 and 1994,
and the related condensed consolidated statements of income for the three-
month and six-month periods ended June 30, 1995 and 1994, and the related
condensed consolidated statements of cash flows and shareholders' equity
for the six-month periods ended June 30, 1995 and 1994. 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 condensed 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, 1994, 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 17, 1995, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated balance sheet as of
December 31, 1994, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been
derived.
/s/ Ernst & Young LLP
Washington, D. C.
July 7, 1995
23
<PAGE>
EXHIBIT 15A
ERNST & YOUNG LLP
1225 Connecticut Avenue, N.W.
Washington, D.C. 20036
July 28, 1995
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 and Registration Statement Number 33-
15360 on Form S-3 dated June 26, 1987 of our reports dated April 7, 1995
and July 7, 1995 relating to the unaudited condensed consolidated interim
financial statements of First Virginia Banks, Inc. and subsidiaries which
are included in its Forms 10-Q for the quarters ended March 31, 1995 and
June 30, 1995.
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
24
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000037032
<NAME> FIRST VIRGINIA BANKS, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1995
<CASH> 388,726
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 325,223
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 1,931,455
<INVESTMENTS-MARKET> 1,933,501
<LOANS> 4,967,733
<ALLOWANCE> 57,356
<TOTAL-ASSETS> 7,947,425
<DEPOSITS> 6,830,234
<SHORT-TERM> 211,973
<LIABILITIES-OTHER> 67,506
<LONG-TERM> 3,228
<COMMON> 33,938
0
709
<OTHER-SE> 799,837
<TOTAL-LIABILITIES-AND-EQUITY> 7,947,425
<INTEREST-LOAN> 216,082
<INTEREST-INVEST> 56,546
<INTEREST-OTHER> 8,408
<INTEREST-TOTAL> 281,036
<INTEREST-DEPOSIT> 97,390
<INTEREST-EXPENSE> 5,339
<INTEREST-INCOME-NET> 178,307
<LOAN-LOSSES> 2,416
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 138,291
<INCOME-PRETAX> 82,623
<INCOME-PRE-EXTRAORDINARY> 82,623
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,770
<EPS-PRIMARY> 1.61
<EPS-DILUTED> 1.60
<YIELD-ACTUAL> 7.96
<LOANS-NON> 16,082
<LOANS-PAST> 5,161
<LOANS-TROUBLED> 4,114
<LOANS-PROBLEM> 7,265
<ALLOWANCE-OPEN> 58,860
<CHARGE-OFFS> 5,677
<RECOVERIES> 1,757
<ALLOWANCE-CLOSE> 57,356
<ALLOWANCE-DOMESTIC> 57,356
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
