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
March 31, 1997
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 April 30, 1997, there were 31,804,142 shares of common
stock outstanding.
This report contains a total of 21 pages.
1
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INDEX
Page
---------
PART I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - March 31,
1997 and 1996 (unaudited) and December 31, 1996 3/ 4
Condensed Consolidated Statements of Income - Three
months ended March 31, 1997 and 1996 (unaudited) 5/ 6
Condensed Consolidated Statements of Cash Flows - Three
months ended March 31, 1997 and 1996 (unaudited) 7
Condensed Consolidated Statements of Shareholders'
Equity - Three months ended March 31, 1997
and 1996 (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 12/16
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 as of
March 31, 1997, and the three months
ended March 31, 1997 (This exhibit is being
filed as a separate document in this Form
10-Q, for the quarter ended March 31, 1997.) 21
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31 December 31 March 31
1997 1996 1996
---------- ---------- ----------
(Unaudited) (Unaudited)
(In thousands)
ASSETS
Cash and noninterest-bearing
deposits in banks $ 339,377 $ 378,171 $ 315,492
Money market investments 426,173 323,620 435,743
---------- ---------- ----------
Total cash and cash equivalents 765,550 701,791 751,235
---------- ---------- ----------
Mortgage loans held for sale 13,835 12,771 25,139
Investment securities - held to maturity
(market values of $1,803,212, $1,823,404
and $2,019,931) 1,815,004 1,820,949 2,022,033
Loans, net of unearned income 5,329,160 5,364,787 5,039,272
Less: Allowance for loan losses (62,468) (62,761) (57,751)
---------- ---------- ----------
Net loans 5,266,692 5,302,026 4,981,521
---------- ---------- ----------
Other earning assets 19,685 19,672 14,621
Premises and equipment 147,102 148,187 149,029
Intangible assets 92,609 94,381 93,688
Other assets 141,535 136,279 138,385
---------- ---------- ----------
Total Assets $8,262,012 $8,236,056 $8,175,651
========== ========== ==========
3
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CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
March 31 December 31 March 31
1997 1996 1996
---------- ---------- ----------
(Unaudited) (Unaudited)
(In thousands)
LIABILITIES
Deposits:
Noninterest-bearing $1,334,518 $1,303,950 $1,216,653
Interest-bearing:
Interest checking/savings plan 1,295,932 1,308,539 1,336,884
Money market accounts 716,406 712,550 713,262
Savings deposits 1,117,005 1,111,677 1,194,567
Certificates of deposit:
Consumer 2,256,509 2,255,803 2,234,788
Large denomination 345,913 350,131 311,464
---------- ---------- ----------
Total deposits 7,066,283 7,042,650 7,007,618
Interest, taxes and other liabilities 99,111 83,765 92,264
Short-term borrowings 236,638 234,488 199,999
Long-term indebtedness 3,700 3,876 2,433
---------- ---------- ----------
Total Liabilities 7,405,732 7,364,779 7,302,314
---------- ---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock, $10 par value 645 647 686
Common stock, $1 par value 31,804 32,408 33,671
Capital surplus 11,715 43,531 96,138
Retained earnings 812,116 794,691 742,842
---------- ---------- ----------
Total Shareholders' Equity 856,280 871,277 873,337
---------- ---------- ----------
Total Liabilities and Shareholders' Equity $8,262,012 $8,236,056 $8,175,651
========== ========== ==========
See notes to condensed consolidated financial statements.
4
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended
March 31
1997 1996
-------- --------
(In thousands, except per-share data)
Interest income:
Interest and fees on loans $114,297 $109,235
Interest on mortgage loans
held for sale 166 337
Income from investment securities -
available for sale - 1,152
Income from investment
securities - held to maturity 27,064 30,107
Income from money market investments 4,706 4,271
Income from other earning assets 328 203
------- -------
Total interest income 146,561 145,305
------- -------
Interest expense:
Deposits 48,974 52,354
Short-term borrowings 2,590 2,253
Long-term indebtedness 43 62
------- -------
Total interest expense 51,607 54,669
------- -------
Net interest income 94,954 90,636
Provision for loan losses 3,342 2,290
------- -------
Net interest income after provision
for loan losses 91,612 88,346
------- -------
5
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Continued) (Unaudited)
Three Months Ended
March 31
1997 1996
------- -------
(In thousands, except per-share data)
Net interest income after provision
for loan losses 91,612 88,346
------- -------
Noninterest income:
Service charges on deposit
accounts 9,889 9,665
Insurance premiums and
commissions 1,567 1,636
Credit card service charges
and fees 2,633 2,552
Trust services 2,248 1,757
Electronic banking service fees 2,350 1,287
Income from other customer
services 3,463 3,386
Securities gains (losses) before
income tax provisions (credits)
of $(3) and $616 (9) 1,759
Other 1,092 1,386
------- -------
Total noninterest income 23,233 23,428
------- -------
Noninterest expense:
Salaries and employee benefits 39,677 38,996
Occupancy 5,808 5,944
Equipment 5,836 5,357
Advertising 1,738 2,090
Printing and supplies 1,641 1,809
Credit card processing fees 1,929 1,909
FDIC assessment 257 376
Amortization of intangibles 2,125 1,935
Other 10,730 10,071
------- -------
Total noninterest expense 69,741 68,487
------- -------
Income before income taxes 45,104 43,287
Provision for income taxes 15,707 14,904
------- -------
NET INCOME $29,397 $28,383
======= =======
Net income per share of common stock $.91 $.84
Average primary shares of common
stock outstanding 32,445 33,963
See notes to condensed consolidated financial statements.
6
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended
March 31
1997 1996
-------- --------
(In thousands)
Net cash provided by operating activities $ 33,190 $ 24,531
Investing activities:
Proceeds from the maturity of
held to maturity investment securities 199,890 198,104
Proceeds from the sale of
available for sale investment securities - 64,682
Purchase of held to maturity investment securities (195,146) (93,953)
Net (increase) decrease in loans 31,992 (3,657)
Net increase in other earning assets (13) (3,093)
Purchases of premises and equipment (2,258) (2,294)
Sales of premises and equipment 141 259
Other 15,055 15,441
-------- --------
Net cash provided by investing activities 49,661 175,489
-------- --------
Financing activities:
Net increase (decrease) in deposits 23,633 (48,488)
Net increase (decrease) in short-term borrowings 2,150 (9,720)
Principal payments on long-term borrowings (176) (277)
Cash dividends - common, $.37 1/2 and $.35 per share (12,267) (11,883)
Cash dividends - preferred (11) (12)
Stock purchased and retired (32,759) (11,347)
Proceeds from issuance of common stock 338 84
-------- --------
Net cash used for financing activities (19,092) (81,643)
-------- --------
Net increase in cash and cash equivalents 63,759 118,377
Cash and cash equivalents at beginning of year 701,791 632,858
-------- --------
Cash and cash equivalents at end of period $765,550 $751,235
======== ========
See notes to condensed consolidated financial statements.
7
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CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
Three Months Ended
March 31
1997 1996
-------- --------
(In thousands)
Balance at beginning of year $871,277 $869,647
Net income 29,397 28,383
Common stock purchased and retired (32,759) (11,347)
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 338 84
-------- --------
868,253 885,133
-------- --------
Deduct dividends declared:
Preferred stock 11 11
Common stock, $.37 1/2 and $.35 per share 11,962 11,785
-------- --------
11,973 11,796
-------- --------
Balance at end of period $856,280 $873,337
======== ========
See notes to consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. GENERAL
The foregoing unaudited condensed 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 condensed 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 1996 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):
March 31, 1997 March 31, 1996
Amortized Market Amortized Market
Cost Value Cost Value
---------- ---------- ---------- ----------
U.S. Government and
its agencies $1,686,660 $1,673,723 $1,833,572 $1,829,590
State and municipal obligations 128,333 129,467 186,414 188,250
Other 11 22 2,047 2,091
---------- ---------- ---------- ----------
$1,815,004 $1,803,212 $2,022,033 $2,019,931
========== ========== ========== ==========
3. LOANS
Loans consisted of (in thousands):
March 31
1997 1996
---------- ----------
Consumer:
Automobile installment $2,185,721 $1,895,856
Home equity, fixed and variable rate 959,328 1,055,896
Revolving credit plans,
including credit cards 198,502 199,316
Other 273,475 300,508
Real estate:
Construction and land development 109,024 102,515
Commercial mortgage 526,606 479,440
Residential mortgage 547,106 490,993
Other, including Industrial
Development Authority loans 88,617 68,915
Commercial 440,781 445,833
---------- ----------
Loans, net of unearned income
of $220,799 and $303,724 $5,329,160 $5,039,272
========== ==========
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
March 31
1997 1996
------- -------
Balance at beginning of period $62,761 $57,922
Provision charged to operating
expense 3,342 2,290
------- -------
66,103 60,212
Less:
Loans charged off, net of
recoveries of $851 and $986 3,635 2,461
------- -------
Balance at March 31 $62,468 $57,751
======= =======
Percentage of annualized net
charge-offs to average loans .27% .20%
Percentage of allowance for loan
losses to period-end loans 1.17 1.15
Percentage of nonperforming assets
to period-end loans .45 .60
5. 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
March 31
1997 1996
------------- -------------
Amount Percent Amount Percent
------- ----- ------- -----
Statutory rate $15,787 35.0% $15,150 35.0%
Nontaxable interest on
municipal obligations (873)(1.9) (955)(2.2)
Other items 793 1.7 709 1.6
------- ---- ------- ----
Effective rate $15,707 34.8% $14,904 34.4%
======= ==== ======= ====
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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:
Number of Shares
--------------------------------
March 31 December 31 March 31
Series Dividends 1997 1996 1996
--------- --------- -------- ----------- --------
A 5% 21,364 21,511 22,641
B 7% 5,750 5,750 5,990
C 7% 9,836 9,836 10,484
D 8% 27,591 27,591 29,495
------ ------ ------
64,541 64,688 68,610
====== ====== ======
The Series A, Series B and Series D shares are convertible into one and
one-half shares of common stock, and the Series C shares are convertible into
one and two-tenths shares of common stock. All of the preferred stock may be
redeemed at the option of the corporation for $10.00 per share.
7. COMMON STOCK
There are 60,000,000 shares of common stock, par value $1.00 per share,
authorized and 31,804,000, 32,408,000 and 33,671,000 shares were outstanding
at March 31, 1997, December 31, 1996, and March 31, 1996, respectively.
Options to purchase 291,934 shares of common stock were outstanding on
March 31, 1997. A total of 552,146 shares of common stock were reserved at
March 31, 1997: 93,862 shares for the conversion of preferred stock and
458,284 shares for stock options and stock appreciation rights.
8. EARNINGS PER SHARE
Earnings per share of common stock for the three months ended March 31,
after giving effect to dividends on preferred stock of $11,000 in 1997 and
$11,000 in 1996, are based on 32,445,000 and 33,963,000 average shares,
respectively.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings Per Share, which is required to be adopted on
December 31, 1997. At that time, the corporation will change the method
currently used to compute earnings per share and to restate all prior
periods. The impact is expected to have no material effect for the first
quarters ended March 31, 1997 and March 31, 1996. The impact of Statement
No. 128 on the calculation of fully diluted earnings per share for these
quarters is not expected to be material.
11
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net income for the first quarter increased 3.6% to $29,397,000, or $.91
per share, compared to the $28,383,000 and $.84 per share earned in the first
quarter of 1996. As a result of the corporation's share repurchase program,
the lower number of average shares outstanding caused earnings per share to
increase at an even greater pace of 8.3% to $.91, compared to the $.84 per
share earned in the 1996 first quarter. Earnings per share declined from the
$.94 per share earned in the fourth quarter of 1996 as a result of the sale
of foreclosed real estate at a gain in the fourth quarter. Improvements were
made in virtually every category of performance measurement, and First
Virginia continues its tradition as one of the most consistently profitable
and well capitalized of the major banking companies.
The return on average assets increased to 1.44% in the first quarter
compared to the 1.40% level achieved in the prior year's first quarter, and
the return on average shareholders' equity increased to 13.49% compared to
13.00%. An improved mix of earning assets contributed to the increase in
income as the net interest margin rose 20 basis points to 5.10% compared to
4.90% in the first quarter of 1996. Relatively higher-yielding average
outstanding loans increased 6.3% and comprised 70.7% of earning assets
compared to 67.0% in the prior year's first quarter.
The growth in loans was fueled by increased volumes in the consumer
installment portfolio with the corporation's indirect automobile loans
outstanding up 18.0% compared to March 31, 1996. Over the past several years
the corporation has expanded into geographic areas not served by its banking
affiliates as the corporation has leveraged its expertise in the high-quality
end of the automobile lending market. Commercial loan demand was moderately
strong, and average loans in this area were up 5.4% compared to the first
quarter of 1996. The competition for high-quality commercial loans is keen,
however, and the corporation has seen a continued tendency on the part of
some competitors to lower their rates and loosen the terms for these types of
loans. Home equity lending is traditionally weak in the first quarter, and
recent increases in interest rates have further reduced demand for real
estate-oriented loans.
Average deposits were flat compared to the first quarter of 1996 and
equaled $6.973 billion. The corporation is maintaining its percentage share
of total deposits in its market, but competition from sources outside the
banking industry is keeping the overall level of deposits in the banking
industry relatively unchanged. The extremely strong stock market of the past
several years has attracted a number of investors who would previously have
placed their funds in banking products. The corporation is addressing this
competition in a number of ways, including the increased marketing of nonbank
products such as mutual funds, annuities and other investment products
through its own representatives. In addition, alternatives to the
traditional delivery system of bank products through a branch network have
been developed. They include supermarket banking office locations,
electronic delivery of products, and telemarketing and direct mail to
potential customers using sophisticated market research models.
Asset quality improved as nonperforming loans declined 19.5% to $24.220
million and represented only .45% of outstanding loans compared to $30.077
million and .60% at the end of the previous year's first quarter. Net
charge-offs increased to $3.634 million or .27% of average outstanding loans
12
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compared to the $2.461 million or .20% of loans in the prior year's first
quarter, but were down compared to the .28% of loans and $3.715 million in
the fourth quarter. Loans past due 90 days or more were $8.290 million or
.16% of outstanding loans compared to $7.385 million and .15% of loans at the
end of the prior year's first quarter. The allowance for loan losses at
March 31, 1997, of $62.468 million represented 1.17% of outstanding loans,
unchanged from the end of the fourth quarter and up slightly compared to the
1.15% at March 31, 1996. The allowance for loan losses covered net charge-
offs 4.30 times and amounted to 258% of nonperforming assets. The provision
for loan losses increased $1.052 million to $3.342 million as a result of
increased loan volume and the increase in net charge-offs.
A summary of nonperforming and delinquent loans is as follows:
1997 1996
------- -------
(Dollars in thousands)
Nonaccruing loans $15,053 $16,751
Restructured loans 4,189 5,789
Foreclosed real estate 4,978 7,537
------- -------
Total $24,220 $30,077
======= =======
Percentage of total loans .45% .60%
======= =======
Loans past due 90 days or more $ 8,290 $ 7,385
======= =======
Percentage of total loans .16% .15%
======= =======
Noninterest income declined .8% compared to the prior year's first
quarter when the sale of securities produced a gain of $1.759 million.
Excluding this gain on sale of securities in 1996, noninterest income
increased 7.2%, led by a 27.9% increase in fees from trust services and a
16.9% increase in other customer service fees, primarily electronic banking
fees. Compared to the fourth quarter of 1996, noninterest income declined
10.6%, caused primarily by a gain on the sale of foreclosed real estate in
the fourth quarter of $1.470 million and to normal seasonal declines in
transaction-based activity fees in the first quarter.
Noninterest expenses increased only 1.8% compared to the prior year's
first quarter as employment expenses were largely unchanged from the 1996
quarter. Milder than normal temperatures and lower utility charges led to a
2.3% decline in occupancy expenses. FDIC expense declined 31.7% as the
higher assessment rate on SAIF deposits was reduced following the special
assessment in the third quarter of 1996. With the combination of a modest
increase in expenses and a larger increase in income, the efficiency ratio
improved to 56.7% in the first quarter compared to 58.5% in the prior year's
first quarter.
Average shareholders' equity declined slightly during the quarter to
$871.591 million compared to the $873.662 million in the prior year's first
quarter. The decline in equity was a result of the corporation's continuing
share repurchase program, which has retired 6.5% of outstanding shares since
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the end of 1995. During the first quarter of 1997, the corporation purchased
611,800 shares of its common stock. At March 31, 1997, the ratio of equity
to total assets was 10.36% compared to 10.68% at March 31, 1996, which meant
First Virginia continued to rate as one of the best capitalized of the 100
largest banking companies in the country.
In May, the shareholders of Premier Bankshares Corporation, a $744
million multibank holding company headquartered in Bluefield, Virginia, will
vote to approve the proposed affiliation with First Virginia Banks, Inc. The
merger will be accounted for as a purchase transaction and is anticipated to
be completed in the second quarter of 1997.
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AVERAGE BALANCES AND INTEREST RATES (Unaudited)
(Dollar amounts in thousands)
Three Months Ended March 31
1997
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Investment securities-held to maturity:
U.S. Government and its agencies $1,683,655 $ 25,342 6.08%
State and municipal obligations
(Fully taxable-equivalent basis) 136,679 2,315 6.77
Other (Fully taxable-equivalent basis) 809 15 7.38
---------- --------
Total investment securities 1,821,143 27,672 6.07
---------- --------
Loans, net of unearned income:
Installment 3,577,372 76,572 8.57
Real estate 980,702 21,245 8.67
Other (Fully taxable-equivalent basis) 779,513 17,163 8.88
---------- --------
Total loans 5,337,587 114,980 8.69
---------- --------
Mortgage loans held for sale 9,554 166 6.94
Money market investments 362,392 4,706 5.27
Other earning assets 19,678 328 6.69
---------- --------
Total earning assets and income $7,550,354 147,852 7.87
========== --------
Interest-bearing liabilities:
Interest checking/savings plans $1,291,468 5,713 1.79
Money market accounts 715,796 5,220 2.96
Savings deposits 1,107,509 6,156 2.25
Certificates of deposit:
Consumer 2,262,927 27,447 4.92
Large denomination 346,668 4,438 5.19
---------- --------
Total interest-bearing deposits 5,724,368 48,974 3.47
Short-term borrowings 231,241 2,590 4.54
Long-term indebtedness 3,767 43 4.54
---------- --------
Total interest-bearing liabilities
and interest expense $5,959,376 51,607 3.51
========== --------
Net interest income and net interest margin $ 96,245 5.10%
========
Other average balances:
Demand deposits $1,248,133
Common shareholders' equity 870,945
Total shareholders' equity 871,591
Total assets 8,169,319
15
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AVERAGE BALANCES AND INTEREST RATES (Unaudited)
(Dollar amounts in thousands)
Three Months Ended March 31
1996
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Investment securities-available for sale:
U.S. Government $ 61,769 $ 1,152 7.50%
Investment securities-held to maturity:
U.S. Government and its agencies 1,868,599 27,717 5.97
State and municipal obligations
(Fully taxable-equivalent basis) 191,026 3,218 6.74
Other (Fully taxable-equivalent basis) 2,048 39 7.65
---------- --------
Total investment securities 2,123,442 32,126 6.05
---------- --------
Loans, net of unearned income:
Installment 3,335,071 72,452 8.69
Real estate 946,638 20,769 8.78
Other (Fully taxable-equivalent basis) 739,702 16,589 8.98
---------- --------
Total loans 5,021,411 109,810 8.78
---------- --------
Mortgage loans held for sale 16,964 337 7.95
Money market investments 319,373 4,271 5.38
Other earning assets 12,439 204 6.57
---------- --------
Total earning assets and income $7,493,629 146,748 7.83
========== --------
Interest-bearing liabilities:
Interest checking/savings plans $1,324,958 6,237 1.89
Money market accounts 716,017 5,397 3.03
Savings deposits 1,180,863 6,887 2.35
Certificates of deposit:
Consumer 2,255,566 29,816 5.32
Large denomination 314,140 4,017 5.14
---------- --------
Total interest-bearing deposits 5,791,544 52,354 3.64
Short-term borrowings 194,907 2,253 4.65
Long-term indebtedness 2,609 62 9.53
---------- --------
Total interest-bearing liabilities
and interest expense $5,989,060 54,669 3.67
========== --------
Net interest income and net interest margin $ 92,079 4.90%
========
Other average balances:
Demand deposits $1,188,001
Common shareholders' equity 872,972
Total shareholders' equity 873,662
Total assets 8,130,426
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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 (This exhibit is being filed
as a separate document in this Form 10-Q, for the quarter
ended March 31, 1997 (Page 21)
b) A Form 8-K was not required to be filed during the quarter
ended March 31, 1997.
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
May 12, 1997 ___________________________
Richard F. Bowman,
Senior Vice President,
Treasurer and Chief
Financial Officer
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EXHIBIT 11
FIRST VIRGINIA BANKS, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
Three Months Ended
March 31
1997 1996
------- -------
(In thousands, except per-share data)
PRIMARY:
Average common shares outstanding 32,367 33,884
Dilutive effect of stock options 78 79
------- -------
Total average common shares 32,445 33,963
======= =======
Net income $29,397 $28,383
Provision for preferred dividends 11 11
------- -------
Net income applicable to common
stock $29,386 $28,372
======= =======
Net income per share of common
stock $.91 $.84
======= =======
FULLY DILUTED:
Average common shares outstanding 32,367 33,884
Dilutive effect of stock options 78 81
Conversion of preferred stock 94 100
------- -------
Total average common shares 32,539 34,065
======= =======
Net income $29,397 $28,383
======= =======
Net income per share of common
stock $.90 $.83
======= =======
18
<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., as of March 31, 1997 and 1996, and the related
condensed consolidated statements of income, cash flows and shareholders'
equity for the three-month periods ended March 31, 1997 and 1996. 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., as of December 31, 1996, and the related consolidated
statements of income, cash flows, and shareholders' equity for the year
then ended (not presented herein) and in our report dated January 21,
1997, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 1996, 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.
April 8, 1997
19
<PAGE>
EXHIBIT 15A
ERNST & YOUNG LLP
1225 Connecticut Avenue, N.W.
Washington, D.C. 20036
May 12, 1997
Board of Directors
First Virginia Banks, Inc.
We are aware of the incorporation by reference in the Registration
Statement Number 333-24003 on Form S-4 dated April 10, 1997; 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 report dated April 8, 1997, relating to the
unaudited condensed consolidated interim financial statements of First
Virginia Banks, Inc., which are included in its Form 10-Q for the quarter
ended March 31, 1997.
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
20
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