FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission file number 1-6580
September 30, 2000
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 October 31, 2000, there were 46,124,237 shares of common
stock outstanding.
This report contains a total of 22 pages.
1
INDEX
Page
---------
PART I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - September 30,
2000 and 1999, and December 31, 1999 (Unaudited) 3/ 4
Condensed Consolidated Statements of Income - Three
months and Nine months ended September 30, 2000
and 1999 (Unaudited) 5/ 6
Condensed Consolidated Statements of Shareholders'
Equity - Nine months ended September 30, 2000
and 1999 (Unaudited) 7/ 8
Condensed Consolidated Statements of Cash Flows - Nine
months ended September 30, 2000 and 1999 (Unaudited) 9
Notes to Condensed Consolidated Financial
Statements (Unaudited) 10/13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13/20
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 21
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures 22
Exhibit 27 - Financial Data Schedule
(Included in original SEC filing only)
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
Sept. 30 December 31 Sept. 30
2000 1999 1999
---------- ---------- ----------
(In thousands)
ASSETS
Cash and due from banks $ 295,643 $ 441,825 $ 326,758
Money market investments 115,040 110,598 80,052
---------- ---------- ----------
Total cash and cash equivalents 410,683 552,423 406,810
---------- ---------- ----------
Loans held for sale 1,284 5,558 6,686
Securities - available for sale 114,529 116,401 112,870
Securities - held to maturity (fair values of
$2,049,962, $1,876,571 and $1,996,659) 2,081,934 1,918,387 2,024,813
Loans, net of unearned income 6,337,388 6,385,400 6,351,946
Allowance for loan losses (69,975) (70,119) (69,605)
---------- ---------- ----------
Net loans 6,267,413 6,315,281 6,282,341
---------- ---------- ----------
Other earning assets 18,336 23,125 23,124
Premises and equipment 151,917 156,171 156,645
Intangible assets 160,616 170,358 173,952
Accrued income and other assets 214,242 194,109 205,419
---------- ---------- ----------
Total Assets $9,420,954 $9,451,813 $9,392,660
========== ========== ==========
3
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)(Continued)
Sept. 30 December 31 Sept. 30
2000 1999 1999
---------- ---------- ----------
(In thousands)
LIABILITIES
Deposits:
Noninterest-bearing $1,632,576 $1,546,794 $1,563,535
Interest-bearing:
Interest checking 1,451,425 1,516,246 1,441,207
Money market accounts 895,194 953,224 967,383
Savings deposits 1,020,172 1,064,799 1,115,348
Consumer certificates of deposit 2,341,532 2,314,245 2,312,057
Large denomination
certificates of deposit 473,775 468,640 447,235
---------- ---------- ----------
Total deposits 7,814,674 7,863,948 7,846,765
Short-term borrowings 486,710 420,297 384,247
Long-term debt 1,395 2,205 2,465
Accrued interest and other liabilities 146,253 134,876 121,906
---------- ---------- ----------
Total Liabilities 8,449,032 8,421,326 8,355,383
---------- ---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock, $10 par value 452 485 492
Common stock, $1 par value 46,141 49,162 49,693
Capital surplus 88 - -
Retained earnings 926,055 982,357 987,427
Accumulated other comprehensive income (loss) (814) (1,517) (335)
---------- ---------- ----------
Total Shareholders' Equity 971,922 1,030,487 1,037,277
---------- ---------- ----------
Total Liabilities and Shareholders' Equity $9,420,954 $9,451,813 $9,392,660
========== ========== ==========
See notes to condensed consolidated financial statements.
4
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
2000 1999 2000 1999
-------- -------- -------- --------
(In thousands, except per-share data)
Interest income:
Loans $129,232 $126,532 $382,412 $375,570
Loans held for sale 34 198 238 608
Securities - available for sale 1,486 1,507 4,527 2,766
Securities - held to maturity 25,294 29,146 75,752 88,810
Money market investments 6,779 2,121 15,769 11,089
Other earning assets 313 385 1,035 1,162
-------- -------- -------- --------
Total interest income 163,138 159,889 479,733 480,005
-------- -------- -------- --------
Interest expense:
Deposits 50,022 46,405 142,569 144,032
Short-term borrowings 6,828 3,995 17,538 11,073
Long-term debt 42 97 133 234
-------- -------- -------- --------
Total interest expense 56,892 50,497 160,240 155,339
-------- -------- -------- --------
Net interest income 106,246 109,392 319,493 324,666
Provision for loan losses 1,225 3,178 6,667 11,567
-------- -------- -------- --------
Net interest income after provision
for loan losses 105,021 106,214 312,826 313,099
-------- -------- -------- --------
5
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Continued)
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
2000 1999 2000 1999
-------- -------- -------- --------
(In thousands, except per-share data)
Net interest income after provision
for loan losses 105,021 106,214 312,826 313,099
-------- -------- -------- --------
Noninterest income:
Service charges on deposit
accounts 14,934 14,416 43,809 41,966
Electronic banking service fees 3,878 3,086 9,731 8,771
Trust services 3,289 3,001 9,734 8,449
Insurance premiums and
commissions 1,686 1,804 5,126 5,565
Credit card service charges
and fees - 1,201 - 5,439
Other customer services 4,139 3,623 12,139 10,671
Other 2,090 4,808 5,002 9,441
Gain on sale of credit card
portfolio - 1,432 - 17,899
Securities gains 3 - 11 832
-------- -------- -------- --------
Total noninterest income 30,019 33,371 85,552 109,033
-------- -------- -------- --------
Noninterest expense:
Salaries and employee benefits 46,897 45,973 138,511 135,214
Occupancy 6,594 6,477 19,889 18,901
Equipment 8,331 7,722 24,389 22,815
Advertising 1,461 1,893 4,176 4,751
Credit card processing fees - 1,216 - 4,579
Amortization of intangibles 3,689 3,745 11,040 11,355
Other 15,214 15,391 43,113 47,371
-------- -------- -------- --------
Total noninterest expense 82,186 82,417 241,118 244,986
-------- -------- -------- --------
Income before income taxes 52,854 57,168 157,260 177,146
Provision for income taxes 17,520 19,539 53,254 60,993
-------- -------- -------- --------
Net income $ 35,334 $ 37,629 $104,006 $116,153
======== ======== ======== ========
Earnings per share of common stock
Basic $ .76 $ .75 $ 2.19 $ 2.32
Diluted .76 .75 2.19 2.31
Average shares of common stock outstanding
Basic 46,232 50,081 47,378 50,104
Diluted 46,427 50,323 47,571 50,373
See notes to condensed consolidated financial statements.
6
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
Accum-
ulated
Other
Compre- Total
Pre- hensive Share-
ferred Common Capital Retained Income holders'
Stock Stock Surplus Earnings (Loss) Equity
------- ------- -------- -------- ------ ----------
(Dollars in thousands)
Balance January 1, 1999 $ 534 $50,094 $ 4,004 $934,703 $ 993 $ 990,328
Comprehensive income:
Net income 116,153 116,153
Unrealized losses on
securities available for
sale (1,328) (1,328)
----------
Total comprehensive income 114,825
----------
Conversion of preferred
to common stock (28) 6 22 -
Preferred stock retired (14) (26) (40)
Issuance of shares for
stock options 77 3,360 3,437
Common stock purchased
and retired (484) (7,360) (13,423) (21,267)
Dividends declared:
Preferred stock (25) (25)
Common stock
$1.00 per share (49,981) (49,981)
------- ------- -------- -------- ------ ----------
Balance Sept. 30, 1999 $ 492 $49,693 $ - $987,427 $ (335)$1,037,277
======= ======= ======== ======== ====== ==========
7
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY(Unaudited)(Continued)
Accum-
ulated
Other Total
Pre- Compre- Share-
ferred Common Capital Retained hensive holders'
Stock Stock Surplus Earnings Loss Equity
------- ------- -------- -------- ------- ----------
(Dollars in thousands)
Balance January 1, 2000 $ 485 $49,162 $ - $982,357 $(1,517)$1,030,487
Comprehensive income:
Net income 104,006 104,006
Unrealized gains on
securities available for
sale 703 703
----------
Total comprehensive income 104,709
----------
Conversion of preferred
to common stock (33) 6 27 -
Issuance of shares for
stock options 33 1,073 1,106
Common stock purchased
and retired (3,060) (1,012) (108,617) (112,689)
Dividends declared:
Preferred stock (23) (23)
Common stock
$1.10 per share (51,668) (51,668)
------- ------- ------- --------- ------- ----------
Balance Sept. 30, 2000 $ 452 $46,141 $ 88 $ 926,055 $ (814) $ 971,922
======= ======= ======= ========= ======= ==========
See notes to condensed consolidated financial statements.
8
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended
Sept. 30
2000 1999
-------- --------
(In thousands)
Net cash provided by operating activities $110,913 $141,934
-------- --------
Investing activities:
Proceeds from the sale of available
for sale securities 2,253 7,550
Proceeds from the maturity of held to
maturity securities 818,260 958,527
Purchases of available for sale securities - (101,481)
Purchases of held to maturity securities (984,349) (685,364)
Net(increase) decrease in loans 41,201 (271,005)
Purchases of premises and equipment (7,103) (8,904)
Sales of premises and equipment 2,830 3,468
Intangible assets acquired (1,295) (600)
Other 23,140 (2,416)
-------- --------
Net cash used for investing activities (105,063) (100,225)
-------- --------
Financing activities:
Net decrease in deposits (49,274) (208,313)
Net increase (decrease) in short-term borrowings 66,413 (1,749)
Principal payments on long-term debt (810) (752)
Stock purchased and retired (112,689) (21,307)
Proceeds from issuance of common stock 1,106 3,437
Cash dividends paid (52,336) (49,146)
-------- --------
Net cash used for financing activities (147,590) (277,830)
-------- --------
Net decrease in cash and cash equivalents (141,740) (236,121)
Cash and cash equivalents at beginning of year 552,423 642,931
-------- --------
Cash and cash equivalents at end of period $410,683 $406,810
======== ========
Cash paid for:
Interest $155,613 $160,727
Income taxes 49,063 63,948
See notes to condensed consolidated financial statements.
9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollars in thousands, except per share data)
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 activities. 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
presented. Certain amounts previously reported in 1999 have been reclassified
for comparative purposes.
Certain information and disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted, pursuant to the rules and regulations of the
Securities and Exchange Commission. These unaudited consolidated financial
statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the corporation's annual
report to stockholders on Form 10-K for the year ended December 31, 1999.
2. SECURITIES
The following reflects the amortized cost of securities and the related
approximate fair values:
Sept. 30, 2000 Sept. 30, 1999
Amortized Fair Amortized Fair
Cost Value Cost Value
---------- ---------- ---------- ----------
Available for sale:
U.S. Government and its agencies $ 104,704 $ 103,826 $ 107,885 $ 106,877
Other 11,081 10,703 5,503 5,993
---------- ---------- ---------- ----------
Total $ 115,785 $ 114,529 $ 113,388 $ 112,870
========== ========== ========== ==========
Held to maturity:
U.S. Government and its agencies $1,779,083 $1,749,952 $1,663,838 $1,637,971
State and municipal obligations 302,851 300,010 360,727 358,438
Other - - 248 250
---------- ---------- ---------- ----------
Total $2,081,934 $2,049,962 $2,024,813 $1,996,659
========== ========== ========== ==========
10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
3. LOANS
Loans consisted of:
Sept. 30
2000 1999
---------- ----------
Consumer:
Automobile $3,206,979 $3,162,937
Home equity, fixed- and variable-rate 767,346 840,062
Revolving credit loans,
including credit cards 30,809 27,917
Other 262,212 323,261
Real estate:
Construction and land development 163,664 142,906
Commercial mortgage 586,364 542,049
Residential mortgage 628,348 643,342
Other, including Industrial
Development Authority loans 110,948 106,064
Commercial 580,718 563,408
---------- ----------
Total loans, net of unearned income
of $133,059 and $146,159 $6,337,388 $6,351,946
========== ==========
4. ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses was:
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
2000 1999 2000 1999
------- ------- ------- -------
Balance at beginning of period $71,053 $68,313 $70,119 $70,312
Provision charged to operating expense 1,225 3,178 6,667 11,567
Reserve on loans sold - - - (4,323)
------- ------- ------- -------
Balance before charge-offs 72,278 71,491 76,786 77,556
Charge-offs 3,122 2,862 9,524 11,184
Recoveries 819 976 2,713 3,233
------- ------- ------- -------
Balance at September 30 $69,975 $69,605 $69,975 $69,605
======= ======= ======= =======
Percentage of annualized net
charge-offs to average loans .14% .12% .14% .17%
Percentage of allowance for loan
losses to period-end loans 1.10 1.10
11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
5. FEDERAL INCOME TAX
The reconcilement of income tax computed at the federal statutory tax
rates to the provision for income taxes was as follows:
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
2000 1999 2000 1999
------------- ------------- ------------- -------------
Amount Pct Amount Pct Amount Pct Amount Pct
------- ----- ------- ----- ------- ----- ------- -----
Statutory rate $18,499 35.0% $20,009 35.0% $55,041 35.0% $62,001 35.0%
Nontaxable interest on
municipal obligations(1,151)(2.2) (1,163)(2.0) (3,627)(2.3) (3,704)(2.1)
State taxes, net of
Federal tax benefit 275 0.5 212 0.4 947 0.6 767 0.4
Nondeductible goodwill 567 1.1 587 1.0 1,703 1.1 1,785 1.0
Other items (670)(1.3) (106)(0.2) (810)(0.5) 144 0.1
------- ----- ------- ----- ------- ----- ------- -----
Effective rate $17,520 33.1% $19,539 34.2% $53,254 33.9% $60,993 34.4%
======= ===== ======= ===== ======= ===== ======= =====
6. PREFERRED AND COMMON STOCK
There are 3,000,000 shares of preferred stock, par value $10.00 per
share, authorized. The following four series of cumulative convertible stock
were outstanding:
Sept. 30 December 31 Sept. 30
Series Dividends 2000 1999 1999
--------- --------- -------- ----------- --------
A 5% 16,586 16,878 16,988
B 7% 3,290 3,290 3,290
C 7% 5,372 8,108 8,108
D 8% 19,927 20,242 20,842
------- ------ ------
Total preferred shares 45,175 48,518 49,228
======= ====== ======
The Series A, Series B and Series D shares are convertible into two and
one-fourth shares of common stock, and the Series C shares are convertible
into one and eight-tenths shares of common stock. All of the preferred stock
may be redeemed at the option of the corporation for $10.00 per share.
There are 175,000,000 shares of common stock, par value $1.00 per share,
authorized and 46,141,000, 49,162,000 and 49,693,000 shares were outstanding
at September 30, 2000, December 31, 1999, and September 30, 1999,
respectively. Options to purchase 897,400 shares of common stock were
outstanding on September 30, 2000. A total of 3,113,899 shares of common
stock were reserved at September 30, 2000: 99,224 shares for the conversion
of preferred stock and 3,014,675 shares for stock options.
12
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
7. EARNINGS PER SHARE
Earnings per share computations are as follows:
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
2000 1999 2000 1999
------- ------- ------- -------
Basic:
Net income $35,334 $37,629 $104,006 $116,153
Preferred stock dividends 7 8 23 25
------- ------- ------- -------
Net income applicable to common stock $35,327 $37,621 $103,983 $116,128
======= ======= ======= =======
Average common shares outstanding 46,232 50,081 47,378 50,104
======= ======= ======= =======
Earnings per share of common stock $ .76 $ .75 $ 2.19 $ 2.32
======= ======= ======= =======
Diluted:
Net income $35,334 $37,629 $104,006 $116,153
======= ======= ======= =======
Average common shares outstanding 46,232 50,081 47,378 50,104
Dilution effect of stock options 96 134 89 159
Conversion of preferred stock 99 108 104 110
------- ------- ------- -------
Total average common shares 46,427 50,323 47,571 50,373
======= ======= ======= =======
Earnings per share of common stock $ .76 $ .75 $ 2.19 $ 2.31
======= ======= ======= =======
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
QUARTERLY RESULTS:
First Virginia's earnings per share, excluding nonrecurring income,
increased 9% in the third quarter of 2000 to $.75 per share compared to $.69
per share earned in the prior year's third quarter. Net income in the third
quarter totaled $35.334 million or $.76 per share compared to $37.629 million
or $.75 per share in 1999. Net income in the 2000 third quarter included
$664 thousand in after-tax gains on the sale and closure of substantially all
activities of the corporation's mortgage loan company while the 1999 third
quarter included $3.041 million in after-tax gains on the sale of a portion
of the corporation's credit card activities and benefits received upon the
demutualization of an insurance company in which the company had life
insurance policies. The return on average assets and average shareholders'
equity from recurring income was 1.47% and 14.36%, respectively, in the 2000
third quarter compared to 1.46% and 13.24% in the prior year's third quarter.
Cash basis recurring income, which excludes the effects of intangible assets
and their related amortization and nonrecurring income items, equaled $37.710
million in the third quarter compared to $37.653 million in the prior year's
13
third quarter. The recurring cash basis return on average tangible assets
equaled 1.63% in the third quarter, and the return on average tangible
shareholders' equity was 18.77%.
For the first nine months of 2000, earnings per share, excluding
nonrecurring income, increased 6% to $2.17 compared to the $2.04 earned in
the comparable period of 1999. Net income for the first nine months of 2000
totaled $104.006 million or $2.19 per share compared to $116.153 million or
$2.31 per share earned in 1999. Net income for the first nine months of 2000
included $664 thousand in nonrecurring after-tax income while the 1999 period
included $13.744 million in nonrecurring income. The return on average
assets and average shareholders' equity from recurring income was 1.46% and
13.91%, respectively, for the first nine months of 2000 compared to 1.44% and
13.31% in the first nine months of 1999. Cash basis recurring income equaled
$112.416 million for the first nine months of 2000 compared to $111.671
million in the first nine months of 1999. The recurring cash basis return on
average tangible assets equaled 1.62% in the first nine months of 2000, and
the return on average tangible shareholders' equity was 18.14%.
Average loans declined 1% during the third quarter to $6.357 billion
compared to $6.425 billion in the second quarter. Indirect automobile loans
remained relatively unchanged despite a combination of the low rates offered
by some competitors and a general weakness in sales, which caused the
automobile manufacturers and their captive finance companies to offer rebates
and low-interest rate financing to sell cars. First Virginia still
originated over $350 million in automobile loans during the quarter. The
corporation continues to be one of the highest rated banks nationwide
according to the J.D. Power & Associates 2000 Dealer Satisfaction Study.
Business lending remained moderately strong as the corporation continued its
strategy of increasing the percentage of the loan portfolio comprised of
prime quality business loans. The seasonal decline in loans to automobile
dealers for inventory financing resulted in a 2% drop in average outstanding
commercial loans compared to the second quarter. However, business loans are
up 8% for the first nine months of 2000 compared to 1999.
Average deposits declined 1% compared to the second quarter to $7.835
billion. Despite the decline in deposits, the corporation has been
successful in attracting business customers. For the first nine months
average business demand deposits, plus repurchase agreements and commercial
paper from customers participating in First Virginia's business cash
management programs, increased by 10% to $1.234 billion.
The net interest margin declined five basis points to 4.95% compared to
the 5.00% recorded in the second quarter and for the first nine months dipped
below 5.00% for the first time in 22 years. The margin was negatively
impacted by both the decline in loans and an increase in the cost of funds,
the result of increased competition for deposits. The lack of deposit growth
is a problem for banks nationwide and has led many banks to purchase higher
cost, more volatile sources of funds from brokered or other borrowing
sources. First Virginia has not borrowed funds from outside sources.
First Virginia's excellent asset quality continued to improve during the
quarter. Nonperforming assets as a percentage of outstanding loans and
foreclosed real estate declined six basis points to a record low of .29%
compared to .35% at the end of the third quarter of 1999. The provision for
14
loan losses declined in the third quarter to $1.225 million compared to
$3.178 million expensed in the prior year's third quarter, primarily the
result of the decrease in loans during the quarter. Net loan charge-offs in
the third quarter of $2.303 million were slightly less than the $2.307
million charged off in this year's second quarter. Both represented an
annualized charge-off rate of .14%.
A summary of nonperforming and delinquent loans is as follows:
Sept. 30
2000 1999
------- -------
(Dollars in thousands)
Nonaccruing loans $13,458 $15,082
Restructured loans 1,830 1,919
Properties acquired by foreclosure 3,327 5,303
------- -------
Total nonperforming assets $18,615 $22,304
======= =======
Percentage of total loans
and foreclosed real estate .29% .35%
======= =======
Loans 90 days past due $10,315 $12,819
======= =======
Percentage of total loans .16% .20%
======= =======
Noninterest income declined 10% in the 2000 third quarter compared to
the 1999 third quarter. The 1999 third quarter included $4.679 million in
nonrecurring gains compared to $1.098 million in nonrecurring gains in 2000.
Excluding these gains, noninterest income increased by 1% in 2000. The Visa
check card was introduced in the second quarter of 2000, and it continues to
be extremely popular. Income from this source more than doubled in the third
quarter to $1.028 million, which made it responsible for the 26% increase in
fee income from electronic banking services. Income from trust and asset
management services increased 10% to $3.289 million and is up 15% for the
first nine months of 2000. Service charges on deposit accounts increased 4%
compared to the prior year's third quarter. Fees from commercial account
processing, a specialty the corporation has developed over the past several
years, were particularly strong.
During the third quarter the corporation closed most of the operations
of its mortgage loan subsidiary, and a net pre-tax gain of $1.098 million was
recorded on the sale of certain assets less closure expenses. First mortgage
loans are now offered primarily through the corporation's web site on the
Internet.
Noninterest expense declined slightly during the quarter compared to the
1999 third quarter and is down 2% for the first nine months of 2000. For the
first nine months, the efficiency ratio of 56.2% was virtually unchanged from
the prior year's figure of 56.0%
15
Total shareholders' equity of $972 million was unchanged at September 30
compared to the end of the second quarter; however, the leverage ratio
increased slightly to 8.78% compared to 8.72% at June 30, the result of a
small decline in average assets. The corporation continued to repurchase its
stock during the third quarter, acquiring 493,000 shares under its share
repurchase program. For the first nine months, the corporation has
repurchased 3,052,000 shares. There are 2.147 million shares remaining that
may be repurchased under the six million share authorization approved by the
Board of Directors in September of 1999.
FORWARD-LOOKING STATEMENTS:
Certain statements in this discussion may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements involve known and unknown risks
including, but not limited to, changes in general economic and business
conditions, interest-rate fluctuations, competition within and without the
banking industry, new products and services in the banking industry, risks
inherent in making loans, including repayment risks and fluctuating
collateral values, changing trends in customer profiles and changes in laws
and regulations applicable to the corporation. Although the corporation
believes that its expectations with respect to the forward-looking statements
are based upon reasonable assumptions within the bounds of its knowledge of
its business and operations, there can be no assurance that actual results,
performance or achievements of the corporation will not differ materially
from any future results, performance or achievements expressed or implied by
such forward-looking statements.
16
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
(Dollars in thousands)
Three Months Ended Sept. 30
2000
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Securities-available for sale:
U.S. Government and its agencies $ 104,243 $ 1,358 5.18%
Other* 10,339 128 6.11
Securities-held to maturity:
U.S. Government and its agencies 1,483,318 21,760 5.86
State, municipal and other* 302,122 4,459 5.90
---------- --------
Total securities 1,900,022 27,705 5.83
---------- --------
Loans, net of unearned income:
Installment 4,209,941 86,285 8.16
Real estate 1,119,682 21,341 7.59
Other* 1,027,117 22,329 8.73
---------- --------
Total loans 6,356,740 129,955 8.14
---------- --------
Loans held for sale 1,794 34 7.56
Money market investments 409,880 6,779 6.58
Other earning assets 18,335 313 6.84
---------- --------
Total earning assets and income $8,686,771 164,786 7.56
========== --------
Interest-bearing liabilities:
Interest checking $1,480,751 2,317 0.62
Money market accounts 912,500 7,502 3.27
Savings deposits 1,036,901 3,906 1.50
Consumer certificates of deposit 2,322,146 29,593 5.07
Large denomination certificates of deposit 472,830 6,704 5.64
---------- --------
Total interest-bearing deposits 6,225,128 50,022 3.20
Short-term borrowings 479,891 6,828 5.66
Long-term debt 1,576 42 10.60
---------- --------
Total interest-bearing liabilities
and interest expense $6,706,595 56,892 3.37
========== --------
Net interest income and net interest margin $107,894 4.95%
========
*Fully taxable-equivalent basis
Other average balances:
Demand deposits $1,609,550
Preferred shareholders' equity 453
Common shareholders' equity 965,423
Total assets 9,407,234
17
AVERAGE BALANCES AND INTEREST RATES (Unaudited)(Continued)
(Dollars in thousands)
Three Months Ended Sept. 30
1999
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Securities-available for sale:
U.S. Government and its agencies $ 107,553 $ 1,402 5.17%
Other* 7,056 105 5.97
Securities-held to maturity:
U.S. Government and its agencies 1,731,958 24,891 5.73
State, municipal and other* 364,087 5,409 5.94
---------- --------
Total securities 2,210,654 31,807 5.74
---------- --------
Loans, net of unearned income:
Installment 4,196,663 84,733 8.03
Real estate 1,111,111 22,899 8.24
Other* 954,022 19,635 8.24
---------- --------
Total loans 6,261,796 127,267 8.09
---------- --------
Loans held for sale 7,624 198 10.40
Money market investments 166,223 2,121 5.06
Other earning assets 23,120 387 6.68
---------- --------
Total earning assets and income $8,669,417 161,780 7.43
========== --------
Interest-bearing liabilities:
Interest checking $1,462,918 2,912 0.79
Money market accounts 982,561 7,494 3.03
Savings deposits 1,137,053 4,316 1.51
Consumer certificates of deposit 2,305,477 26,363 4.54
Large denomination certificates of deposit 439,689 5,320 4.80
---------- --------
Total interest-bearing deposits 6,327,698 46,405 2.91
Short-term borrowings 372,261 3,995 4.26
Long-term debt 2,646 97 14.84
---------- --------
Total interest-bearing liabilities
and interest expense $6,702,605 50,497 2.99
========== --------
Net interest income and net interest margin $111,283 5.12%
========
*Fully taxable-equivalent basis
Other average balances:
Demand deposits $1,594,289
Preferred shareholders' equity 496
Common shareholders' equity 1,044,625
Total assets 9,460,434
18
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
(Dollars in thousands)
Nine Months Ended Sept. 30
2000
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Securities-available for sale:
U.S. Government and its agencies $ 105,291 $ 4,114 5.22%
Other* 9,962 412 6.83
Securities-held to maturity:
U.S. Government and its agencies 1,491,325 64,489 5.77
State, municipal and other* 322,457 14,271 5.90
---------- --------
Total securities 1,929,035 83,286 5.77
---------- --------
Loans, net of unearned income:
Installment 4,241,639 255,544 8.04
Real estate 1,122,476 63,413 7.54
Other* 1,028,093 65,566 8.55
---------- --------
Total loans 6,392,208 384,523 8.03
---------- --------
Loans held for sale 3,608 238 8.78
Money market investments 340,117 15,769 6.19
Other earning assets 19,898 1,035 6.94
---------- --------
Total earning assets and income $8,684,866 484,851 7.45
========== --------
Interest-bearing liabilities:
Interest checking $1,506,173 6,825 0.61
Money market accounts 941,922 22,097 3.13
Savings deposits 1,054,626 11,894 1.51
Consumer certificates of deposit 2,306,653 82,783 4.79
Large denomination certificates of deposit 468,656 18,970 5.41
---------- --------
Total interest-bearing deposits 6,278,030 142,569 3.03
Short-term borrowings 441,726 17,538 5.30
Long-term debt 1,845 133 9.62
---------- --------
Total interest-bearing liabilities
and interest expense $6,721,601 160,240 3.18
========== --------
Net interest income and net interest margin $324,611 4.99%
========
*Fully taxable-equivalent basis
Other average balances:
Demand deposits $1,586,737
Preferred shareholders' equity 472
Common shareholders' equity 990,413
Total assets 9,426,869
19
AVERAGE BALANCES AND INTEREST RATES (Unaudited)(Continued)
(Dollars in thousands)
Nine Months Ended Sept. 30
1999
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Securities-available for sale:
U.S. Government and its agencies $ 65,707 $ 2,544 5.18%
Other* 7,133 223 4.17
Investment Securities-held to maturity:
U.S. Government and its agencies 1,778,409 76,890 5.77
State, municipal and other* 341,249 15,261 5.96
---------- --------
Total securities 2,192,498 94,918 5.78
---------- --------
Loans, net of unearned income:
Installment 4,073,408 250,422 8.21
Real estate 1,116,968 69,231 8.26
Other* 954,104 58,045 8.16
---------- --------
Total loans 6,144,480 377,698 8.21
---------- --------
Loans held for sale 9,527 608 8.51
Money market investments 308,264 11,089 4.81
Other earning assets 22,911 1,164 6.77
---------- --------
Total earning assets and income $8,677,680 485,477 7.47
========== --------
Interest-bearing liabilities:
Interest checking $1,474,087 9,582 0.87
Money market accounts 983,290 22,370 3.04
Savings deposits 1,140,187 14,409 1.69
Consumer certificates of deposit 2,349,674 82,140 4.74
Large denomination certificates of deposit 423,838 15,531 4.80
---------- --------
Total interest-bearing deposits 6,380,076 144,032 3.02
Short-term borrowings 366,876 11,073 4.04
Long-term debt 2,884 234 10.84
---------- --------
Total interest-bearing liabilities
and interest expense $6,749,836 155,339 3.08
========== --------
Net interest income and net interest margin $330,138 5.08%
========
*Fully taxable-equivalent basis
Other average balances:
Demand deposits $1,577,079
Preferred shareholders' equity 506
Common shareholders' equity 1,025,592
Total assets 9,472,565
20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
As of September 30, 2000, there have been no material changes
in information regarding quantitative and qualitative
disclosures about market risk from the information presented
as of December 31, 1999 in the corporation's annual report
on Form 10-K.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 - K
----------------------------------
a) Exhibit 27 - Financial Data Schedule (included in original
SEC filing only)
b) No reports on Form 8-K were filed during the quarter ended
September 30, 2000.
21
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 hereunto duly authorized.
FIRST VIRGINIA BANKS, INC.
/s/ Richard F. Bowman
November 9, 2000 --------------------------
Richard F. Bowman,
Executive Vice President,
Treasurer and
Chief Financial Officer
22
