SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
MARK ONE
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X
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QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarterly Period Ended September 30, 1996
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-26196
FIDELITY FINANCIAL BANKSHARES CORPORATION
(exact name of registrant as specified in its charter)
Virginia 54-1746028
(State or other jurisdiction of (I.R.S. Employer Identification No.)
of incorporation)
2809 Emerywood Parkway, Suite 500, Richmond, VA 23294_
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number - (804) 756-0200
Indicate the number of shares outstanding of each of the issuer's classes of
capital stock, as of the latest practicable date:
Common Stock, Par Value $1.00 per share,
2,298,467 shares outstanding as of November 12, 1996
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 preceeding 12 months(or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days.
Yes X No
<PAGE>
FIDELITY FINANCIAL BANKSHARES CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
Page Number
ITEM 1 Consolidated Financial Statements
Consolidated Statements of Financial Condition 3
Consolidated Statements of Operations 4 - 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7 - 9
ITEM 2 Management's Discussion and Analysis of 10 - 13
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings 14
ITEM 2 Changes in Securities 14
ITEM 3 Defaults Upon Senior Securities 14
ITEM 4 Submission of Matters to a Vote of Security Holders 14
ITEM 5 Other Information 14
ITEM 6 Exhibits and Reports on Form 8-K 14
SIGNATURES
<PAGE>
FIDELITY FINANCIAL BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- -----------
ASSETS (unaudited)
<S> <C> <C>
Cash and due from banks $ 3,675 $ 5,067
Investment securities available-for-sale 30,199 36,649
Investment securities held-to-maturity 4,492 6,462
Mortgage-backed securities available-for-sale 8,294 4,871
Loans receivable, net 269,303 247,194
Loans receivable held-for-sale 2,184 4,147
Real estate acquired in settlement of loans, net 1,203 822
Premises and equipment, net 4,575 4,681
Accrued interest receivable 2,183 2,108
Prepaid expenses and other assets 3,125 2,412
------------ ------------
$ 329,233 $ 314,413
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $ 249,184 $ 239,121
Advances from the Federal Home Loan Bank 44,414 37,210
Securities sold under agreements to repurchase 2,905 8,115
Advance payments by borrowers for taxes and 1,121 867
insurance
Other liabilities 3,862 2,263
--------- ---------
Total Liabilities 301,486 287,576
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value per share
(1,000,000 shares authorized; none issued) - -
Common stock, $1.00 par value per share
(4,000,000 shares authorized; 2,298,467
and 2,276,992 shares issued and
outstanding at September 30, 1996 and
December 31, 1995, respectively) 2,298 2,277
Additional paid-in capital 9,679 9,632
Retained earnings 15,995 14,912
Net unrealized gain (loss) on securities
available-for-sale (225) 16
-------- ---------
Total Stockholders' Equity 27,747 26,837
------------ ------------
$ 329,233 $ 314,413
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FIDELITY FINANCIAL BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
Three Months Ended
September 30,
---------------------------------
1996 1995
------------- -------------
(unaudited) (unaudited)
Interest Income
<S> <C> <C>
Real estate loans $ 5,044 $ 4,870
Other loans 931 965
Mortgage-backed securities 162 102
Investment securities 240 294
Other investments 336 289
---------- -----------
Total interest income 6,713 6,520
---------- -----------
Interest Expense
Deposits 2,937 2,915
Short-term borrowings 187 383
Long-term borrowings 481 356
---------- -----------
Total interest expense 3,605 3,654
---------- -----------
Net Interest Income 3,108 2,866
Provision for loan losses 225 88
---------- -----------
Net Interest Income After Provision for Loan Losses 2,883 2,778
---------- -----------
Noninterest income
Gain on sale of loans and mortgage-backed
securities, net 26 35
Gain on sale of investment securities available-for-sale, net - -
Operations of real estate acquired in settlement of loans - (1)
Other 184 159
---------- -----------
Total noninterest income 210 193
---------- -----------
Noninterest expense
Compensation and employee benefits 1,068 1,033
Occupancy and equipment 333 322
FDIC insurance premiums 140 130
FDIC assessment to recapitalize SAIF Fund 1,490 -
Data processing services 113 54
Professional services 141 47
Marketing 28 20
Other 147 130
---------- -----------
Total noninterest expense 3,460 1,736
---------- -----------
Earnings (Loss) Before Income Taxes (367) 1,235
Income tax expense (benefit) (136) 452
---------- -----------
Net Earnings (Loss) $ (231) $ 783
========== ===========
Net Earnings (Loss) Per Share $ (.11) $ .34
========== =============
Dividends Declared Per Share $ .05 $ .04
========== =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FIDELITY FINANCIAL BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------
1996 1995
------------- -------------
(unaudited) (unaudited)
<S> <C> <C>
Interest Income
Real estate loans $ 14,784 $ 14,210
Other loans 2,755 2,802
Mortgage-backed securities 419 295
Investment securities 795 836
Other investments 993 818
----------- -----------
Total interest income 19,746 18,961
----------- -----------
Interest Expense
Deposits 8,795 8,170
Short-term borrowings 737 1,000
Long-term borrowings 1,208 1,130
----------- -----------
Total interest expense 10,740 10,300
----------- -----------
Net Interest Income 9,006 8,661
Provision for loan losses 385 283
----------- -----------
Net Interest Income After Provision for Loan Losses 8,621 8,378
----------- -----------
Noninterest income
Gain (loss) on sale of loans and mortgage-backed
securities, net 94 (29)
Gain on sale of investment securities available-for-sale, net 26 -
Operations of real estate acquired in settlement of loans (12) (3)
Other 530 497
----------- -----------
Total noninterest income 638 465
----------- -----------
Noninterest expense
Compensation and employee benefits 3,114 3,015
Occupancy and equipment 1,006 962
FDIC insurance premiums 411 369
FDIC special assessment to recapitalize SAIF Fund 1,490 -
Data processing services 307 286
Professional services 221 116
Marketing 59 67
Other 438 371
----------- -----------
Total noninterest expense 7,046 5,186
----------- -----------
Earnings Before Income Taxes 2,213 3,657
Income tax expense 809 1,338
----------- -----------
Net Earnings $ 1,404 $ 2,319
=========== ===========
Net Earnings Per Share $ .61 $ 1.03
=========== ===========
Dividends Declared Per Share $ .14 $ .11
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FIDELITY FINANCIAL BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------------
1996 1995
----------------- ----------------
(unaudited) (unaudited)
<S> <C> <C>
Operating activities
Net income $ 1,404 $ 2,319
Adjustments to reconcile net income to net cash absorbed
by operating activities:
Provision for loan losses 385 283
Depreciation and amortization 353 354
Originations of loans held-for-sale (21,588) (16,052)
Purchase of mortgage-backed securities (3,815) -
Proceeds from sale of loans held-for-sale 3,389 6,299
Proceeds from sale of mortgage-backed securities
available-for-sale 16,544 6,931
(Increase) decrease in prepaid expenses and other assets (777) 156
(Increase) decrease in excess servicing (11) 34
Increase (decrease) in deferred loan fees 103 (57)
Increase in other liabilities 1,599 437
Other, net 40 (26)
----------- -------------
Net cash provided (absorbed) by operating activities (2,374) 678
----------- -------------
Investing activities
Maturities of investment securities held-to-maturity 2,000 -
Purchase of investment securities available-for-sale (2,000) (1,002)
Proceeds from sales of investment securities available-for-sale 3,000 -
Loan and mortgage-backed securities principal repayments 112,683 84,002
Loan disbursements (131,795) (90,612)
Loans purchased - (3,445)
Redemption of stock in FHLB - 127
Purchase of premises and equipment (235) (168)
----------- -------------
Net cash absorbed by investing activities (16,347) (11,098)
----------- -------------
Financing activities
Cash dividends paid (297) (268)
Exercise of stock options 68 168
Net increase in deposits 10,063 19,383
Net (decrease) increase in short-term borrowings (5,210) 8,066
Proceeds from FHLB advances 63,345 62,615
Repayment of FHLB advances (56,141) (73,050)
Increase in advance payments by borrowers for
taxes and insurance 254 274
----------- -------------
Net cash provided by financing activities 12,082 17,188
----------- -------------
Increase (decrease) in cash and cash equivalents (6,639) 6,768
Cash and cash equivalents at beginning of period 31,558 19,671
----------- -------------
Cash and cash equivalents at end of period $ 24,919 $ 26,439
============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FIDELITY FINANCIAL BANKSHARES CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
1. Consolidated Financial Statements
The accompanying consolidated financial statements include the accounts
of Fidelity Financial Bankshares Corporation and its wholly-owned
subsidiary, Fidelity Federal Savings Bank and its wholly-owned,
subsidiary Fidelity Service Corporation (collectively "the
Corporation"). All significant intercompany balances and transactions
have been eliminated in consolidation.
The reorganization of Fidelity Federal Savings Bank ( the "Bank") into
the holding company form of ownership was completed effective May 26,
1995, following regulatory and stockholder approval.
Earnings per share of common stock are computed based on the weighted
average number of shares outstanding for the period. The weighted
average number of shares outstanding were 2,294,098 and 2,276,222 for
the three months ended September 30, 1996 and 1995, respectively. For
the nine months ended September 30, 1996 and 1995 the weighted average
number of shares outstanding were 2,286,773 and 2,256,036,
respectively.
2. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
In the opinion of management of the Corporation, all adjustments (which
include only normal recurring accruals) necessary for a fair
presentation of the consolidated financial statements have been
included. The results of operations for the three month and nine month
periods ended September 30, 1996 are not necessarily indicative of the
results which may be expected for the entire year. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Corporation's annual report for the
year ended December 31, 1995.
3. Stockholders' Equity and Dividend Restrictions
Payment of dividends to the Corporation by the Bank is limited by
federal regulations. See Note 13 in Notes to Consolidated Financial
Statements of the 1995 annual report for information regarding payment
of cash dividends.
On September 30, 1996, the Board of Directors declared a quarterly cash
dividend of $.05 per share, payable October 31, 1996 to stockholders of
record October 17, 1996. On July 31, 1996, the Corporation paid to
stockholders of record July 17, 1996, a quarterly cash dividend of $.05
per share. On April 30, 1996, the Corporation paid to stockholders of
record April 16, 1996, a quarterly cash dividend of $.04 per share.
<PAGE>
FIDELITY FINANCIAL BANKSHARES CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
4. Supplemental Disclosures of Cash Flow Information
Total interest paid for the three months ended September 30, 1996 and
1995 was $3,590,000 and $3,659,000, respectively. For the nine months
ended September 30, 1996 and 1995, total interest paid was $10,786,000
and $10,305,000, respectively.
Total income taxes paid for the three months ended September 30, 1996
were $574,000 as compared to $312,000 for the three months ended
September 30, 1995. Total income taxes paid for the nine months ended
September 30, 1996 and September 30, 1995 were $1,313,000 and
$1,114,000, respectively.
Loans receivable exchanged for mortgage-backed securities totaled
$6,189,000 and $6,201,000 for the three months ended September 30, 1996
and 1995, respectively. For the nine months ended September 30, 1996
and 1995, loans receivable exchanged for mortgage-backed securities
totaled $16,836,000 and $6,201,000, respectively.
Real estate acquired in settlement of loans during the three months
ended September 30, 1996 was $249,000 as compared to $88,000 for the
comparable period in 1995. Real estate acquired in settlement of loans
during the nine months ended September 30, 1996 and 1995 was $381,000
and $88,000, respectively.
For purposes of reporting cash flows, cash and cash equivalents include
cash, adjustable rate mortgage mutual funds, FHLB overnight funds and
federal funds.
<TABLE>
5. Loans Receivable
<S> <C> <C>
September 30, December 31,
----------------------------------
(Dollars in thousands) 1996 1995
--------------- -------------
(unaudited)
Real estate loans
First mortgage conventional
One to four family $ 117,067 $ 107,103
Multifamily 12,706 12,240
Nonresidential 48,215 46,415
Construction and development 72,767 61,103
Second mortgage conventional 773 750
--------- ----------
Total real estate loans 251,528 227,611
Less
Loans in process 21,494 17,467
Deferred loan fees, net 878 754
Allowance for loan losses 1,707 2,032
--------- ----------
Net real estate loans 227,449 207,358
--------- ----------
Other Loans
Consumer and installment 16,700 16,991
Commercial 26,468 23,723
--------- ----------
Total other loans 43,168 40,714
Less
Deferred loan fees, net (172) (152)
Allowance for loan losses 1,486 1,030
--------- ----------
Net other loans 41,854 39,836
--------- ----------
$ 269,303 $ 247,194
========= ==========
</TABLE>
<PAGE>
FIDELITY FINANCIAL BANKSHARES CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
6. Impaired Loans
As of January 1, 1995, the Corporation adopted Statement of Financial
Accounting Standards (SFAS) No. 114 Accounting by Creditors for
Impairment of a Loan, as amended by SFAS No. 118. Under the new
standard, a loan is considered impaired, based on current information
and events, if it is probable that the Corporation will be unable to
collect the scheduled payments of principal or interest when due
according to the contractual terms of the loan agreement. The
measurement of impaired loans is generally based on the present value
of expected future cash flows discounted at the historical effective
interest rate, except that all collateral-dependent loans are measured
for impairment based on the fair value of the collateral.
As of September 30, 1996 the Corporation's recorded investment in loans
for which impairment has been recognized in accordance with SFAS No.
114 totaled $647,000, as compared to none for the same period in 1995.
For the quarters ended September 30, 1996 and 1995, the average
recorded investment in impaired loans was $648,000 and none,
respectively. For the nine months ended September 30, 1996 and 1995,
the average recorded investment in impaired loans was $505,000 and
none, respectively. For the quarter and nine months ended September 30,
1996, interest income recognized on impaired loans totaled $13,000 and
$30,000, respectively, as compared to none for the two comparable
periods in 1995.
7. Merger Agreement
On August 22, 1996, Fidelity Financial Bankshares Corporation signed a
definitive agreement to be acquired by Southern National Corporation
(NYSE: SNB) in a stock transaction, currently expected to be accounted
for as a purchase. In connection with the acquisition, Fidelity Federal
Savings Bank will be merged into BB&T (Branch Banking and Trust) of
Virginia, one of three banking subsidiaries operated by Southern
National under the BB&T name. Fidelity Financial Bankshares Corporation
President Barry D. Crawford will become the Regional President of the
Richmond Region, which will be one of sixteen regions in the BB&T
system that includes the Carolinas and Virginia. The transaction is
expected to be completed during the first quarter of 1997 and is
subject to approval of regulators and the stockholders of Fidelity
Financial Bankshares Corporation and customary closing conditions.
<PAGE>
FIDELITY FINANCIAL BANKSHARES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1996
Fidelity Financial Bankshares Corporation ("the Corporation") was incorporated
in Virginia in 1995 to serve as the holding company of Fidelity Federal Savings
Bank ("the Bank"). The stockholders of the Bank approved the Plan of
Reorganization at the Fidelity Federal Annual Meeting on April 25, 1995, and the
reorganization was consummated on May 26, 1995 with the Bank becoming the
wholly-owned subsidiary of Fidelity Financial Bankshares Corporation. The Bank,
incorporated in 1986, is a federally chartered capital stock savings bank with
its principal offices in Richmond, Virginia.
This Management's Discussion and Analysis should be read in conjunction with
Management's Discussion and Analysis contained in the Corporation's annual
report to stockholders, which focuses upon relevant matters occurring during the
year commencing January 1, 1995 and ending December 31, 1995. The ensuing
discussion focuses upon material matters as of and for the three months and nine
months ended September 30, 1996.
FINANCIAL CONDITION AND CAPITAL ADEQUACY
FINANCIAL CONDITION
Assets of the Corporation were $329.2 million at September 30, 1996, an increase
of 5% over assets of $314.4 million at December 31, 1995. Loans receivable and
mortgage-backed securities totaled $279.8 million at September 30, 1996, an
increase of 9% over loans receivable and mortgage-backed securities of $256.2
million at December 31, 1995. Deposits increased 4% from $239.1 million at
December 31, 1995, to $249.2 million at September 30, 1996. Stockholders' equity
totaled $27.7 million at September 30, 1996, which represents a book value of
$12.07 per share.
Loan disbursements increased sharply during the three and nine months ended
September 30, 1996 as compared to the same period in 1995. Closings were $ 54.7
million for the quarter ended September 30, 1996, as compared to $38.0 million
for the same period of 1995. For the nine months ended September 30, 1996, loan
disbursements totaled $162.5 million, increasing from $112.7 million for the
comparable period of 1995.
Deposit growth has occurred as the Bank has aggressively priced its six month
and longer certificates of deposit. Of the $10.1 million growth in deposits for
the nine months, the nine month and longer certificates increased $8.1 million,
while certificates under nine months and transaction accounts and money market
deposit accounts collectively increased $2.0 million.
CAPITAL ADEQUACY
The following regulatory capital requirements of the Bank are based on analysis
of the applicable regulations, but interpretative guidance may alter the Bank's
analysis. Based upon the following levels of regulatory capital the Bank
continues to meet the regulatory definition of "well capitalized." This
classification is determined solely for the purposes of applying certain
regulations and may not constitute an accurate representation of the Bank's
overall financial condition.
<PAGE>
FIDELITY FINANCIAL BANKSHARES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1996
CAPITAL ADEQUACY, (Continued)
At September 30, 1996, the Bank's tangible capital totaled $25,842,000, (7.85%
of adjusted assets) which exceeded the regulatory requirement of $4,936,000,
(1.50% of adjusted assets) by $20,906,000.
The Bank's core capital at September 30, 1996, totaled $25,842,000, (7.85% of
adjusted assets) which exceeded the regulatory requirement of $9,871,000 (3.00%
of adjusted assets) by $15,971,000.
The risk-based capital of the Bank was $27,952,000 (11.86% of risk-weighted
assets) at September 30, 1996, which exceeded the regulatory requirement of
$18,858,000 (8.00% of risk-weighted assets) by $9,094,000.
RESULTS OF OPERATIONS
On September 30, 1996, President Clinton signed into law, legislation requiring
a special assessment to recapitalize the Savings Association Insurance Fund.
Thrift institutions or non-thrift institutions which had acquired deposits from
thrift institutions over the years were levied this one time charge. To cover
this special SAIF assessment, the Corporation recorded an after tax charge of
$945,000, or $.41 per share. Annual FDIC premiums will be reduced due to the
recapitalization and pretax savings are projected to be $400,000 for the
Corporation in 1997.
The Corporation incurred a loss for the quarter ended September 30, 1996, of
$231,000 or $.11 per share as compared to net earnings of $783,000 or $.34 per
share for the comparable period in 1995. The principal reason for the loss was
the one-time special SAIF recapitalization assessment of $945,000 after-tax, and
to a lesser extent, after-tax expenses associated with the pending merger with
Southern National Corporation of $48,000. Excluding these charges, earnings for
the third quarter of 1996, would have been $762,000 or $.33 per share, down 3%
from $783,000 or $.34 per share for 1995.
For the nine months ended September 30, 1996, earnings were $1,404,000 or $.61
per share, compared to $2,319,000 or $1.03 per share in 1995. Excluding the SAIF
assessment and merger expenses, earnings would have been $2,397,000 or $1.05 per
share.
Net interest income increased 8% from $2,866,000 in the third quarter of 1995 to
$3,108,000 in the comparable period of 1996. Such increase occurred because the
net interest margin increased from 3.81% in the third quarter of 1995 to 3.92%
in the third quarter of 1996, and average interest-earning assets increased from
$298.5 million in the third quarter of 1995 to $315.7 million in 1996. For the
nine months ended September 30, 1996, net interest income increased 4% from
$8,661,000 in 1995 to $9,006,000 in 1996, due to the increase in average
interest earning assets from $292.1 million in 1995 to $308.9 million in 1996,
which more than offset a decrease in the net interest margin from 3.96% in the
first nine months 1995 to 3.89% in the first nine months 1996.
<PAGE>
FIDELITY FINANCIAL BANKSHARES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1996
RESULTS OF OPERATIONS, (Continued)
Nonperforming assets increased to $3.8 million or 1.14% of assets at September
30, 1996 from $2.9 million or .91% of assets at December 31, 1995. Nonperforming
assets at September 30, 1996 consist of real estate acquired in settlement of
loans of $1.2 million and nonperforming loans of $2.6 million. During the third
quarter of 1996, the Corporation experienced some weakness in one segment of its
commercial business loan portfolio related to a single customer relationship
totaling $4.9 million in loans at September 30, 1996. The collateral for such
loans includes certain leases. Subsequent to September 30, 1996, the Corporation
exercised certain collateral rights and took control of the leases
collateralizing the customers' loans and transferred servicing of the leases to
a subcontractor. As of September 30, 1996, the Bank has recorded a specific
reserve of $.6 million related to resolution of the entire customer relationship
of $4.9 million.
The provision for loan losses was $225,000 and $385,000 for the third quarter
and nine months ended September 30, 1996, as compared to $88,000 and $283,000
for the comparable periods in 1995. During the third quarter and nine months
ended September 30, 1996, net loan chargeoffs totaled $142,000 and $254,000,
respectively, as compared to $5,000 and $64,000, respectively, for the similar
periods of 1995. The total allowance for loan losses at September 30, 1996 was
$3,193,000 or 1.16% of loans receivable, as compared to $3,062,000 or 1.20% of
loans receivable at December 31, 1995. The total allowance for loan losses
amounted to 84% of nonperforming assets and 125% of nonperforming loans at
September 30, 1996.
Noninterest income for the quarter ended September 30, 1996 was $210,000,
compared to $193,000 for the third quarter of 1995. The primary reason for such
increase was an increase in loan servicing fees and prepayment penalties. This
was partially offset by a decrease in gains on the sale of loans and
mortgage-backed securities from $35,000 in 1995 to $26,000 in 1996.
Noninterest income for the nine months ended September 30, 1996 was $638,000
increasing from $465,000 for the same period in 1995. The primary reason for
such increase was the gain on sale of loans and mortgage-backed securities of
$94,000 in 1996, compared to a loss of $29,000 in 1995. In addition, the gain on
sale of investment securities available-for-sale was $26,000 in 1996 compared to
none in 1995.
Included in noninterest expenses for the quarter and nine months ended September
30, 1996, was the one-time special SAIF recapitalization pretax assessment of
$1,490,000 and pretax merger expenses of $76,000. Excluding these expenses,
noninterest expenses increased 9% from $1,736,000 in the third quarter of 1995
to $1,894,000 in 1996. For the nine months ended September 30, 1996, noninterest
expenses, excluding the special SAIF assessment and merger expenses, increased
6% from $5,186,000 for 1995 to $5,480,000 in 1996.
Income tax benefit for the quarter ended September 30, 1996 was $136,000 or an
effective benefit rate of 37.1% as compared to an expense of $452,000 or an
effective rate of 36.6% for the comparable period in 1995. For the nine months
ended September 30, 1996, income tax expense was $809,000 or an effective rate
of 36.6%, compared to $1,338,000 or an effective rate of 36.6% for the same
period in 1995.
<PAGE>
FIDELITY FINANCIAL BANKSHARES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1996
LIQUIDITY
Liquidity represents the Bank's ability to fund loans and withdrawals of
deposits. Total assets qualifying as regulatory liquidity as of September 30,
1996 were $18.8 million. This is $5.1 million in excess of the regulatory
required liquidity amount of $13.7 million. The Bank is in compliance with all
regulatory liquidity requirements at September 30, 1996.
The Bank increased its advances from the FHLB and other borrowings by $2.0
million from December 31, 1995 to September 30, 1996. Such increase in
borrowings was used to fund the growth in loans receivable and mortgage-backed
securities.
<PAGE>
FIDELITY FINANCIAL BANKSHARES CORPORATION
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
The Corporation is not engaged in any material legal
proceedings at the present time.
ITEM 2. Changes in Securities
Not Applicable
ITEM 3. Defaults Upon Senior Securities
Not Applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
Not Applicable
ITEM 5. Other Information
Not Applicable
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits Are Not Applicable
(b) A Form 8-K was filed during the quarter ended
September 30, 1996 for the August 22, 1996
announcement of the Corporation and Southern National
Corporation ("SNC") entering into a definitive
agreement, whereby SNC will acquire the Corporation.
<PAGE>
SIGNATURES
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 the
undersigned thereunto duly authorized.
FIDELITY FINANCIAL BANKSHARES CORPORATION
/s/ Barry D. Crawford
Barry D. Crawford
President, Principal Executive Officer
and a Director
DATE: November 13, 1996
/s/ Gerald L. Martin
Gerald L. Martin
Executive Vice President, Principal
Financial Officer, Treasurer and a
Director
DATE: November 13, 1996
/s/ William S. Miller, Jr.
William S. Miller, Jr.
Principal Accounting Officer
DATE: November 13, 1996
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<S> <C>
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<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Sep-30-1996
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0
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