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, 1996
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
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No_____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
On July 31, 1996, there were 32,680,190 shares of common
stock outstanding.
This report contains a total of 26 pages.
1
<PAGE>
INDEX
Page
---------
PART I - Financial Information
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets - June 30,
1996 and 1995, (unaudited), and December 31, 1995 3/ 4
Condensed Consolidated Statements of Income - Three
months and six months ended June 30, 1996
and 1995 (Unaudited) 5/ 6
Condensed Consolidated Statements of Cash Flows - Six
months ended June 30, 1996 and 1995 (Unaudited) 7
Condensed Consolidated Statements of Shareholders'
Equity - Six months ended June 30, 1996
and 1995 (Unaudited) 8
Notes to Condensed Consolidated Financial
Statements (Unaudited) 8/11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11/18
PART II - Other Information
Item 4. Submission of Matters to a Vote of
Security Holders 19/21
Item 6. Exhibits and Reports on Form 8-K
Signature 22
Exhibit 11 - Statement re: Computation of
Per Share Earnings 23
Exhibit 15 - Independent Accountants' Review
Report from Ernst & Young LLP 24
Exhibit 15A - Letter of Acknowledgement from
Ernst & Young LLP, Independent Accountants 25
Exhibit 27 - Financial Data Schedule as of June 30,
1996 and the six months ended June 30, 1996.
(This exhibit is being filed as a separate
document in this form 10-Q, for the quarter
ended June 30, 1996). 26
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30 December 31 June 30
1996 1995 1995
---------- ---------- ----------
(Unaudited) (Unaudited)
(In thousands)
ASSETS
Cash and noninterest-bearing
deposits in banks $ 309,227 $ 397,858 $ 388,726
Money market investments 266,494 235,000 325,223
---------- ---------- ----------
Total cash and cash equivalents 575,721 632,858 713,949
---------- ---------- ----------
Mortgage loans held for sale 14,596 19,216 17,530
Investment securities - available for sale - 64,546 -
Investment securities - held to maturity
(market values of $1,981,832, $2,146,792
and $1,933,501 1,993,645 2,128,220 1,931,455
Loans, net of unearned income 5,190,411 5,038,076 4,967,733
Deduct: Allowance for loan losses (59,974) (57,922) (57,356)
---------- ---------- ----------
Net loans 5,130,437 4,980,154 4,910,377
---------- ---------- ----------
Other earning assets 14,626 11,528 9,193
Premises and equipment 148,637 150,168 155,335
Intangible assets 92,215 95,271 80,785
Other assets 143,112 139,575 128,801
---------- ---------- ----------
Total Assets $8,112,989 $8,221,536 $7,947,425
========== ========== ==========
3
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CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
June 30 December 31 June 30
1996 1995 1995
---------- ---------- ----------
(Unaudited) (Unaudited)
(In thousands)
LIABILITIES
Deposits:
Noninterest-bearing $1,251,954 $1,235,396 $1,205,842
Interest-bearing:
Interest checking/savings plan 1,295,735 1,342,482 1,302,463
Money market accounts 711,233 710,114 699,210
Savings deposits 1,174,932 1,184,298 1,250,069
Certificates of deposit:
Consumer 2,212,860 2,264,793 2,086,690
Large denomination 310,724 319,024 285,960
---------- ---------- ----------
Total deposits 6,957,438 7,056,107 6,830,234
Interest, taxes and other liabilities 95,059 83,353 67,506
Short-term borrowings 196,726 209,719 211,973
Long-term indebtedness 2,153 2,710 3,228
---------- ---------- ----------
Total Liabilities 7,251,376 7,351,889 7,112,941
---------- ---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock, $10 par value 675 695 709
Common stock, $1 par value 32,971 33,951 33,938
Capital Surplus 68,605 107,112 106,964
Retained Earnings 759,362 726,255 692,873
Net unrealized gain on securities
available for sale - 1,634 -
---------- ---------- ----------
Total Shareholders' Equity 861,613 869,647 834,484
---------- ---------- ----------
Total Liabilities and Shareholders' Equity $8,112,989 $8,221,536 $7,947,425
========== ========== ==========
See notes to condensed consolidated financial statements
4
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
------- ------- -------- --------
(In thousands, except per-share data)
Interest income:
Interest and fees on loans $111,327 $108,535 $220,562 $215,560
Interest on mortgage loans
held for sale 344 266 681 522
Income on investment securities-
available for sale - - 1,152 -
Income on investment
securities - held to maturity 29,191 28,209 59,298 56,546
Income on money market investments 5,278 5,485 9,549 8,118
Income on other earning assets 239 146 442 290
------- ------- -------- --------
Total interest income 146,379 142,641 291,684 281,036
------- ------- -------- --------
Interest expense:
Deposits 50,022 50,816 102,376 97,390
Short-term borrowings 2,368 2,827 4,621 5,166
Long-term indebtedness 57 84 119 173
------- ------- -------- --------
Total interest expense 52,447 53,727 107,116 102,729
------- ------- -------- --------
Net interest income 93,932 88,914 184,568 178,307
Provision for loan losses 5,861 2,084 8,151 2,416
------- ------- -------- --------
Net interest income after provision
for loan losses 88,071 86,830 176,417 175,891
------- ------- -------- --------
5
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Continued) (Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
------- ------- -------- --------
(In thousands, except per share data)
Net interest income after provision
for loan losses 88,071 86,830 176,417 175,891
------- ------- -------- --------
Noninterest income:
Service charges on deposit
accounts 9,931 9,632 19,596 19,151
Insurance premiums and
commissions 1,659 1,478 3,295 3,308
Credit card service charges
and fees 2,971 2,993 5,523 5,650
Trust services 1,947 1,891 3,704 3,560
Income from other customer
services 5,118 4,728 9,791 8,912
Securities gains before income
tax provision of $616 - - 1,759 -
Other 3,512 3,863 4,898 4,442
------- ------- -------- --------
Total noninterest income 25,138 24,585 48,566 45,023
------- ------- -------- --------
Noninterest expense:
Salaries and employee benefits 38,963 37,843 77,959 75,688
Occupancy 5,667 5,383 11,611 10,759
Equipment 5,769 5,062 11,126 10,137
Telephone 1,547 1,432 2,972 2,822
Printing and supplies 1,748 1,488 3,557 2,935
Postage 1,204 1,341 2,663 2,733
Credit card processing fees 2,101 1,959 4,010 3,787
FDIC assessment 251 3,801 627 7,603
Amortization of intangibles 1,947 2,686 3,882 4,339
Other 10,633 8,518 19,910 17,488
------- ------- -------- --------
Total noninterest expense 69,830 69,513 138,317 138,291
------- ------- -------- --------
Income before income taxes 43,379 41,902 86,666 82,623
Provision for income taxes 14,805 14,330 29,709 27,853
------- ------- -------- --------
NET INCOME $28,574 $27,572 $ 56,957 $ 54,770
======= ======= ======== ========
Net income per share of common stock $.85 $.81 $1.69 $1.61
Average primary shares of common
stock outstanding 33,554 34,042 33,759 34,089
See notes to condensed consolidated financial statements
6
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended
June 30
1996 1995
-------- --------
(In thousands)
Net cash provided by operating activities $ 72,207 $ 73,511
Investing activities:
Proceeds from the maturity of
held to maturity securities 459,690 401,748
Proceeds from the sale of
available for sale securities 64,682 -
Purchase of held to maturity securities (328,983) (249,556)
Net (increase) decrease in loans (158,434) 25,559
Net increase in other earning assets (3,098) (205)
Purchases of premises and equipment (5,319) (7,051)
Sales of premises and equipment 1,069 1,468
Other 16,467 (1,765)
-------- --------
Net cash provided by investing activities 46,074 170,208
-------- --------
Financing activities:
Net increase (decrease) in deposits (98,669) 14,392
Net increase (decrease) in short-term borrowings (12,993) 32,564
Principal payments on long-term borrowings (557) (585)
Cash dividends - common, $.70 and $.66 per share (23,668) (22,479)
Cash dividends - preferred (23) (25)
Stock purchased and retired (39,688) (5,286)
Proceeds from issuance of common stock 180 917
-------- --------
Net cash (used for) provided by
financing activities (175,418) 19,498
-------- --------
Net increase (decrease) in cash and
cash equivalents (57,137) 263,207
Cash and cash equivalents at beginning of year 632,858 450,742
-------- --------
Cash and cash equivalents at end of period $575,721 $713,949
======== ========
See notes to condensed consolidated financial statements
7
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CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
Six Months Ended
June 30
1996 1995
-------- --------
(In thousands)
Balance at beginning of year $869,647 $806,888
Net income 56,957 54,770
Common stock purchased and retired (39,688) (5,286)
Decrease in unrealized gain - securities
available for sale (1,634) -
Issuance of common stock for the dividend reinvestment
plan, stock options and stock appreciation rights 180 917
-------- --------
885,462 857,289
-------- --------
Deduct dividends declared:
Preferred stock 23 24
Common stock, $.71 and $.67 per share 23,826 22,781
-------- --------
23,849 22,805
-------- --------
Balance at end of period $861,613 $834,484
======== ========
See notes to condensed consolidated financial statements
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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 unaudited
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 1995 have been reclassified for
comparative purposes.
8
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
2. INVESTMENT SECURITIES
The following reflects the amortized cost of securities held to maturity
and the related approximate market values (in thousands):
June 30, 1996 June 30, 1995
Amortized Market Amortized Market
Cost Value Cost Value
---------- ---------- ---------- ----------
U.S. Government and
its agencies $1,825,682 $1,812,823 $1,697,652 $1,698,285
State and municipal obligations 166,914 167,927 229,563 230,908
Other 1,049 1,082 4,240 4,308
---------- ---------- ---------- ----------
$1,993,645 $1,981,832 $1,931,455 $1,933,501
========== ========== ========== ==========
3. LOANS
Loans consisted of (in thousands):
June 30
1996 1995
---------- ----------
Consumer:
Automobile installment $2,001,329 $1,748,320
Home equity, fixed and variable rate 1,029,423 1,139,076
Revolving credit plans,
including credit cards 201,567 188,468
Other 321,245 302,965
Real estate:
Construction and land development 111,007 125,449
Commercial mortgage 511,495 472,132
Residential mortgage 494,070 461,196
Other, including Industrial
Development Authority loans 79,471 61,655
Commercial 440,804 468,472
---------- ----------
Loans, net of unearned income
of $282,676 and $345,790 $5,190,411 $4,967,733
========== ==========
9
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
4. ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses was (in thousands):
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
------- ------- ------- -------
Balance at beginning of period $57,751 $57,289 $57,922 $58,860
Provision charged to operating
expense 5,861 2,084 8,151 2,416
------- ------- ------- -------
63,612 59,373 66,073 61,276
Less:
Loans charged off, net of
recoveries of $893, $843,
$1,879 and $1,757 3,638 2,017 6,099 3,920
------- ------- ------- -------
Balance at June 30 $59,974 $57,356 $59,974 $57,356
======= ======= ======= =======
Percentage of net charge-offs to
average loans .28% .16% .24% .16%
Percentage of allowance for loan
losses to period-end loans 1.16 1.15
Percentage of nonperforming assets
to period-end loans .54 .55
5. FEDERAL INCOME TAX
The reconcilement of income tax computed at the federal statutory tax
rates to the provision for income tax is as follows (dollars in thousands):
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
------------ ------------ ------------ ------------
$ % $ % $ % $ %
------- ---- ------- ---- ------- ---- ------- ----
Statutory rate $15,183 35.0% 14,666 35.0 $30,333 35.0% 28,918 35.0
Nontaxable interest on
municipal obligations (962)(2.2) (1,196)(2.9) (1,917)(2.2) (2,493)(3.0)
Other items 584 1.3 860 2.1 1,293 1.5 1,428 1.7
------- ---- ------- ---- ------- ---- ------- ----
Effective rate $14,805 34.1% $14,330 34.2% $29,709 34.3% $27,853 33.7%
======= ==== ======= ==== ======= ==== ======= ====
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
6. 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 1996 1995 1995
--------- --------- -------- ----------- --------
A 5% 22,331 23,040 23,344
B 7% 5,990 6,000 7,000
C 7% 9,968 10,484 10,484
D 8% 29,204 29,996 30,086
------ ------ ------
67,493 69,520 70,914
====== ====== ======
7. COMMON STOCK
There are 60,000,000 shares of common stock, par value $1.00 per share,
authorized and 32,971,000, 33,951,000 and 33,938,000 shares were outstanding
at June 30, 1996, December 31, 1995 and June 30, 1995, respectively. Options
to purchase 309,590 shares of common stock were outstanding on June 30, 1996.
A total of 609,937 shares of common stock were reserved at June 30, 1996:
98,247 shares for the conversion of preferred stock and 511,690 shares for
stock options and stock appreciation rights.
8. 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 $23,000 in 1996 and
$24,000 in 1995, are based on 33,759,000 and 34,089,000 average shares,
respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net income for the second quarter increased 4% to $28.574 million
compared to the $27.572 million earned in the second quarter of 1995. Due to
a lower number of shares outstanding in 1996, earnings per share increased at
a slightly higher rate of 5% to $.85 per share compared to the $.81 per share
earned in 1995. The return on average assets remained unchanged at an
excellent level of 1.40%, while the return on average shareholders' equity of
13.14% improved over the first quarter's 13.00% but was down slightly
compared to the prior year quarter's 13.33%. Average assets in the second
quarter of 1996 increased 4% to $8.150 billion compared to the prior year's
quarter.
11
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For the first six months, net income of $56.957 million was up 4%
compared to the $54.770 million earned in 1995, while earnings per share
increased 5% to $1.69 per share compared to the previous year's $1.61. The
return on average assets for the first six months of 1996 equaled the 1.40%
earned in 1995 while the return on average shareholders' equity of 13.07%
declined slightly from the 13.34% earned in 1995 due to an increase in the
corporation's equity.
Encouragingly, the net interest margin increased for the second
consecutive quarter. After dipping to 4.85% in the fourth quarter of 1995,
the net interest margin has been steadily increasing and returned above 5.00%
in the second quarter to 5.04%. This compared favorably to the 5.01% earned
in the prior year's second quarter. The combination of increasing yields on
the reinvestment of maturing loans and investments, a greater mix of earning
assets in relatively higher-yielding loans and a continued, modest decline in
the cost of funds, resulted in the increase in margin and if this trend
continues, then the margin should achieve a level of 5.00% or better as it
has for every year since 1978.
The pickup in loan activity at the end of the first quarter continued
throughout the second quarter. For the first six months of 1996, automobile
loan production is up over 40% compared to the first six months of 1995 and
consumer installment loan production in the branches is up over 25%.
Increased activity in new loan production offices and existing consumer
markets has resulted in an increase in production each month this year as the
corporation continues to maintain its primary focus on the highest quality
retail paper. Commercial loan demand has strengthened considerably, and the
volume of new loan inquiries for business expansion and development resulted
in an increase in annualized average commercial loans outstanding of 9%
compared to the first quarter. Residential real estate loan activity
weakened in the latter part of the quarter as rising interest rates dampened
refinancing activity and spending for new homes in the corporation's market
areas. However, the improving economy resulted in an increase in commercial
real estate lending activity. Overall, total loans outstanding increased at
an annualized rate of 12% on a linked quarter basis.
Average deposits increased slightly compared to the first quarter and
were up 3% compared to the prior year's second quarter, mirroring the
flatness in deposits nationwide. The strength of the stock market has led to
record consumer purchases of mutual funds, which has been responsible for
some of the lack of growth in deposits. A change in the mix of deposits
helped to lower the overall cost of funds as average demand deposits
increased on an annualized basis over the first quarter by 15% while average
interest checking, money market and consumer savings plans were all
relatively unchanged. Higher-costing certificates of deposit declined 6% on
an annualized basis compared to the first quarter, and their cost declined by
11 basis points.
Asset quality remains at a historically high level, although some
measurements have declined slightly compared to the much better-than-normal
ratios of the last several years. The increased laxity of bankruptcy laws in
the past several years has diminished the protection a creditor has in
recovering its loans, and this has been particularly apparent in the credit
card and real estate loan areas. While First Virginia's ratios are
considerably better than the industry, we have seen a gradual increase in
12
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recent quarters in charge-offs and delinquencies. Annualized net charge-offs
in the second quarter increased eight basis points to .28% compared to the
first quarter and, for the first six months, were .24% compared to the .16%
in the same period of 1995. Due in part to the increase in net charge-offs,
and in a larger part to the growth in loans, the provision for loan losses
increased to $5.861 million compared to $2.290 million in the first quarter
and $2.084 million in the second quarter of 1995. The reserve for loan
losses was increased slightly to 1.16% from 1.15% and covers annualized net
charge-offs 4.92 times.
Nonperforming assets declined 4% to $28.203 million and represent .54%
of outstanding loans compared to $29.525 million and .59% of outstanding
loans at the end of the first quarter and .55% of outstanding loans at June
30, 1995. Loans past due 90 days or more declined to $7.075 million or .14%
of outstanding loans compared to $7.385 million and .15% at the end of the
prior quarter and $5.161 million and .10% of loans at the end of the second
quarter of 1995. A summary of nonperforming and delinquent loans is as
follows:
1996 1995
------- -------
(Dollars in thousands)
Nonaccruing loans $15,493 $16,082
Restructured loans 5,862 4,114
Foreclosed real estate 6,848 7,265
------- -------
Total $28,203 $27,461
======= =======
Percentage of total loans .54% .55%
======= =======
Loans past due 90 days or more $ 7,075 $ 5,161
======= =======
Percentage of total loans .14% .10%
======= =======
Noninterest income increased 2% compared to the prior year's second
quarter and was up 7% compared to the first quarter. During the second
quarter, the corporation followed its normal annual practice of selling a
package of mortgage servicing rights that produced a gain of $1.5 million
compared to the $2.5 million and $2.4 million gains in the prior two years'
second quarters. Fee income from auto lease origination activity is up 6.5
times compared to the first six months of 1995 while title insurance
commissions are up 5.6 times over 1995. Both of these products were
introduced in early 1995 and continue to grow strongly. Most other income
categories increased consistent with normal volume and inflation
expectations.
Noninterest expenses increased slightly compared to the prior year's
second quarter and were 2% higher than in the first quarter. During the
quarter, the corporation recognized a $1.2 million charge-off of a suspected
kite and also increased the loan loss provision by $.8 million for potential
losses on loans to the same party. With the assessment on bank deposits
virtually eliminated for 1996, FDIC insurance expense declined $3.5 million
13
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compared to the prior year's second quarter. Equipment expense increased 14%
during the second quarter compared to the 1995 quarter as a result of the
corporation's upgrade of the branch automation system which will serve to
further enhance customer service and sales. Reflecting the increase in
revenues and the corporation's continued efforts to control costs, the
efficiency ratio for the second quarter improved further to 56.2% compared to
the 58.5% achieved in the first quarter.
During the quarter, the corporation purchased 707,600 shares of common
stock and completed the repurchase plan authorized by the Board of Directors
in 1994 to retire 2.7 million shares of stock. In May, the Board authorized
a new repurchase program to buy an additional 2.5 million shares of stock -
approximately 7.6% of the outstanding shares. During the quarter, the
dividend was increased by $.01 to $.36, which marked 1996 as the 20th
consecutive year in which the dividend has been increased. At June 30, 1996,
the corporation's equity to asset ratio was 10.62% compared to 10.50% at the
end of the prior year's second quarter and was one of the strongest of the
100 largest banks in the country.
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AVERAGE BALANCES AND INTEREST RATES (Unaudited)
(Dollar amounts in thousands)
Three Months Ended June 30
1996
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Investment securities-available for sale:
U.S. Government $ - $ - - %
Investment securities-held to maturity:
U.S. Government & its agencies 1,813,048 26,965 5.98
State and municipal obligations
(Fully taxable-equivalent basis) 176,555 2,998 6.79
Other (Fully taxable-equivalent basis) 1,894 37 7.82
---------- --------
Total investment securities 1,991,497 30,000 6.01
---------- --------
Loans, net of unearned income:
Installment 3,400,558 74,036 8.71
Real estate 952,040 20,980 8.81
Other (Fully taxable-equivalent basis) 755,933 16,889 8.95
---------- --------
Total loans 5,108,531 111,905 8.79
---------- --------
Mortgage loans held for sale 17,359 344 7.92
Money market investments 402,757 5,278 5.27
Other earning assets 14,626 238 6.54
---------- --------
Total earning assets and income $7,534,770 147,765 7.84
========== --------
Interest-bearing liabilities:
Interest checking/savings plan $1,322,190 6,068 1.85
Money market accounts 718,510 5,322 2.98
Savings deposits 1,181,491 6,659 2.27
Certificates of deposit:
Consumer 2,219,898 28,112 5.08
Large denomination 310,388 3,861 5.00
---------- --------
Total interest-bearing deposits 5,752,477 50,022 3.50
Short-term borrowings 210,660 2,368 4.52
Long-term indebtedness 2,326 57 9.83
---------- --------
Total interest-bearing liabilities
and interest expense $5,965,463 52,447 3.54
========== --------
Net interest income and net interest margin $ 95,318 5.04%
========
Other average balances:
Demand deposits $1,233,255
Common shareholders' equity 869,193
Total shareholders' equity 869,872
Total assets 8,150,046
15
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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-available for sale:
U.S. Government $ - $ - - %
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
Money market investments 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:
Interest checking/savings plan $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
16
<PAGE>
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
(Dollar amounts in thousands)
Six Months Ended June 30
1996
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Investment securities-available for sale:
U.S. Government $ 30,854 $ 1,152 7.51%
Investment securities-held to maturity:
U.S. Government & its agencies 1,840,854 54,682 5.97
State and municipal obligations
(Fully taxable-equivalent basis) 183,791 6,216 6.76
Other (Fully taxable-equivalent basis) 1,971 76 7.73
---------- --------
Total investment securities 2,057,470 62,126 6.04
---------- --------
Loans, net of unearned income:
Installment 3,367,814 146,488 8.70
Real estate 949,339 41,749 8.80
Other (Fully taxable-equivalent basis) 747,818 33,478 8.97
---------- --------
Total loans 5,064,971 221,715 8.79
---------- --------
Mortgage loans held for sale 17,161 681 7.94
Money market investments 361,065 9,549 5.32
Other earning assets 13,532 442 6.55
---------- --------
Total earning assets and income $7,514,199 294,513 7.84
========== --------
Interest-bearing liabilities:
Interest checking/savings plan $1,323,574 12,305 1.87
Money market accounts 717,264 10,719 3.01
Savings deposits 1,181,177 13,546 2.31
Certificates of deposit:
Consumer 2,237,732 57,928 5.22
Large denomination 312,264 7,878 5.07
---------- --------
Total interest-bearing deposits 5,772,011 102,376 3.57
Short-term borrowings 202,783 4,621 4.58
Long-term indebtedness 2,468 119 9.67
---------- --------
Total interest-bearing liabilities
and interest expense $5,977,262 107,116 3.60
========== --------
Net interest income and net interest margin $187,397 4.97%
========
Other average balances:
Demand deposits $1,210,628
Common shareholders' equity 870,858
Total shareholders' equity 871,543
Total assets 8,140,535
17
<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-available for sale:
U.S. Government $ - $ - - %
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
Money market investments 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:
Interest checking/savings plan $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
18
<PAGE>
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 26, 1996. 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
Paul H. Geithner, Jr. Stock Stock Stock
===================== ----------- ------- -----------
Votes For:
Individual votes 12,239,963 35,147 12,275,110
Broker/Nominee votes 15,093,772 3,429 15,097,201
----------- ------- -----------
Total Management proxy votes for 27,333,735 38,576 27,372,311
Floor Vote For - Individual/In Person 86 0 86
----------- ------- -----------
Total votes for 27,333,821 38,576 27,372,397
Votes Withheld:
Individual votes 100,910 21 100,931
Broker/Nominee votes 80,204 0 80,204
----------- ------- -----------
Total votes 27,514,935 38,597 27,553,532
Shares present but not voted 15,762 0 15,762
----------- ------- -----------
Shares for a Quorum 27,530,697 38,597 27,569,294
Shares not present nor voted:
Individual votes 4,242,701 28,470 4,271,171
Broker/Nominee votes 2,178,777 1,792 2,180,569
----------- ------- -----------
Total Shares Outstanding 33,952,175 68,859 34,021,034
=========== ======= ===========
19
<PAGE>
Management nominee: Common Preferred Total
L. H. Ginn, III Stock Stock Stock
=============== ----------- ------- -----------
Votes For:
Individual votes 12,241,166 35,136 12,276,302
Broker/Nominee votes 15,093,772 3,429 15,097,201
----------- ------- -----------
Total Management proxy votes for 27,334,938 38,565 27,373,503
Floor Vote For - Individual/In Person 86 0 86
----------- ------- -----------
Total votes for 27,335,024 38,565 27,373,589
Votes Withheld:
Individual votes 99,707 32 99,739
Broker/Nominee votes 80,204 0 80,204
----------- ------- -----------
Total votes 27,514,935 38,597 27,553,532
Shares present but not voted 15,762 0 15,762
----------- ------- -----------
Shares for a Quorum 27,530,697 38,597 27,569,294
Shares not present nor voted:
Individual votes 4,242,701 28,470 4,271,171
Broker/Nominee votes 2,178,777 1,792 2,180,569
----------- ------- -----------
Total Shares Outstanding 33,952,175 68,859 34,021,034
=========== ======= ===========
Management nominee:
T. Keister Greer
================
Votes For:
Individual votes 12,176,368 35,015 12,211,383
Broker/Nominee votes 15,093,022 3,429 15,096,451
----------- ------- -----------
Total Managemet proxy votes for 27,269,390 38,444 27,307,834
Floor Vote For - Individual/In Person 86 0 86
----------- ------- -----------
Total votes for 27,269,476 38,444 27,307,920
Votes Withheld:
Individual votes 164,505 153 164,658
Broker/Nominee votes 80,954 0 80,954
----------- ------- -----------
Total votes 27,514,935 38,597 27,553,532
Shares present but not voted 15,762 0 15,762
----------- ------- -----------
Shares for a Quorum 27,530,697 38,597 27,569,294
Shares not present nor voted:
Individual votes 4,242,701 28,470 4,271,171
Broker/Nominee votes 2,178,777 1,792 2,180,569
----------- ------- -----------
Total Shares Outstanding 33,952,175 68,859 34,021,034
=========== ======= ===========
20
<PAGE>
Management nominee: Common Preferred Total
Edward M. Holland Stock Stock Stock
================= ----------- ------- -----------
Votes For:
Individual votes 12,233,637 35,145 12,268,782
Broker/Nominee votes 15,093,772 3,429 15,097,201
----------- ------- -----------
Total Management proxy votes for 27,327,409 38,574 27,365,983
Floor Vote For - Individual/In Person 86 0 86
----------- ------- -----------
Total votes for 27,327,495 38,574 27,366,069
Votes Withheld:
Individual votes 107,236 23 107,259
Broker/Nominee votes 80,204 0 80,204
----------- ------- -----------
Total votes 27,514,935 38,597 27,553,532
Shares present but not voted 15,762 0 15,762
----------- ------- -----------
Shares for a Quorum 27,530,697 38,597 27,569,294
Shares not present nor voted:
Individual votes 4,242,701 28,470 4,271,171
Broker/Nominee votes 2,178,777 1,792 2,180,569
----------- ------- -----------
Total Shares Outstanding 33,952,175 68,859 34,021,034
=========== ======= ===========
c) Among other matters voted on at the meeting was the following:
i) The appointment of the independent auditors.
Votes For:
Individual votes 12,204,015 34,392 12,238,407
Broker/Nominee votes 15,134,374 3,429 15,137,803
----------- ------- -----------
Total Management proxy votes for 27,338,389 37,821 27,376,210
Floor Vote For - Individual/In Person 86 0 86
----------- ------- -----------
Total votes for 27,338,475 37,821 27,376,296
Votes Against:
Individual votes 63,016 0 63,016
Broker/Nominee votes 17,259 0 17,259
----------- ------- -----------
Total shares voted 27,418,750 37,821 27,456,571
Votes Abstain:
Individual votes 73,842 776 74,618
Broker/Nominee votes 22,343 0 22,343
----------- ------- -----------
Total votes received 27,514,935 38,597 27,553,532
Shares present but not voted 15,762 0 15,762
Shares not present nor voted:
Individual votes 4,242,701 28,470 4,271,171
Broker/Nominee votes 2,178,777 1,792 2,180,569
----------- ------- -----------
Total Shares Outstanding 33,952,175 68,859 34,021,034
=========== ======= ===========
21
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 - K
----------------------------------
a) Exhibit 11 - Statement re: Computation of Per Share
Earnings (Page 23)
Exhibit 15 - Independent Accountants' Review Report
from Ernst & Young LLP (Page 24)
Exhibit 15A - Letter of Acknowledgement from
Ernst & Young LLP, Independent Accountants (Page 25)
Exhibit 27 - Financial Data Schedule (Page 26)
b) A Form 8-K was not required to be filed during the quarter
ended June 30, 1996.
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 12, 1996 __________________________
Richard F. Bowman,
Senior Vice President
and Treasurer
22
<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
1996 1995 1996 1995
------- ------- ------- -------
(In thousands, except per-share data)
PRIMARY:
Average common shares outstanding 33,474 33,964 33,679 34,011
Dilutive effect of stock options 80 78 80 78
------- ------- ------- -------
Total average common shares 33,554 34,042 33,759 34,089
======= ======= ======= =======
Net income $28,574 $27,572 $56,957 $54,770
Provision for preferred dividends 12 12 23 24
------- ------- ------- -------
Net income applicable to common
stock $28,562 $27,560 $56,934 $54,746
======= ======= ======= =======
Net income per share of common
stock $.85 $.81 $1.69 $1.61
======= ======= ======= =======
FULLY DILUTED:
Average common shares outstanding 33,474 33,964 33,679 34,011
Dilutive effect of stock options 80 86 80 84
Conversion of preferred stock 98 103 99 104
------- ------- ------- -------
Total average common shares 33,652 34,153 33,858 34,199
======= ======= ======= =======
Net income $28,574 $27,572 $56,957 $54,770
======= ======= ======= =======
Net income per share of common
stock $.85 $.81 $1.68 $1.60
======= ======= ======= =======
23
<PAGE>
EXHIBIT 15
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, 1996 and 1995,
the related condensed consolidated statements of income for the three-
month and six-month periods ended June 30, 1996 and 1995, and the related
condensed consolidated statements of cash flows and shareholders' equity
for the six-month periods ended June 30, 1996 and 1995. 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, 1995, 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, 1996, 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, 1995, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been
derived.
/S/ Ernst & Young LLP
_____________________
Ernst & Young LLP
Washington, D. C.
July 9, 1996
24
<PAGE>
EXHIBIT 15A
ERNST & YOUNG LLP
1225 Connecticut Avenue, N.W.
Washington, D.C. 20036
August 12, 1996
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 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 9, 1996 and July 9, 1996 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, 1996 and June 30, 1996.
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
_____________________
Ernst & Young LLP
25
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000037032
<NAME> FIRST VIRGINIA BANKS, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 309,227
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 266,494
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 1,993,645
<INVESTMENTS-MARKET> 1,981,832
<LOANS> 5,190,411
<ALLOWANCE> 59,974
<TOTAL-ASSETS> 8,112,989
<DEPOSITS> 6,957,438
<SHORT-TERM> 196,726
<LIABILITIES-OTHER> 95,059
<LONG-TERM> 2,153
<COMMON> 32,971
0
675
<OTHER-SE> 827,967
<TOTAL-LIABILITIES-AND-EQUITY> 8,112,989
<INTEREST-LOAN> 221,243
<INTEREST-INVEST> 60,450
<INTEREST-OTHER> 9,991
<INTEREST-TOTAL> 291,684
<INTEREST-DEPOSIT> 102,376
<INTEREST-EXPENSE> 4,740
<INTEREST-INCOME-NET> 184,568
<LOAN-LOSSES> 8,151
<SECURITIES-GAINS> 1,759
<EXPENSE-OTHER> 138,317
<INCOME-PRETAX> 86,666
<INCOME-PRE-EXTRAORDINARY> 86,666
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56,957
<EPS-PRIMARY> 1.69
<EPS-DILUTED> 1.68
<YIELD-ACTUAL> 7.84
<LOANS-NON> 15,493
<LOANS-PAST> 7,065
<LOANS-TROUBLED> 5,862
<LOANS-PROBLEM> 6,848
<ALLOWANCE-OPEN> 57,922
<CHARGE-OFFS> 7,978
<RECOVERIES> 1,879
<ALLOWANCE-CLOSE> 59,974
<ALLOWANCE-DOMESTIC> 59,974
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
