Filed by: First Virginia Banks, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: First Virginia Banks, Inc.
Exchange Act File No. 1-6580
THIS COMMUNICATION IS FILED PURSUANT TO RULES 165 AND 425
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
INVESTORS ARE URGED TO READ THE VARIOUS FILINGS OF FIRST VIRGINIA
BANKS, INC. AND JAMES RIVER BANKSHARES, INC. WITH THE SECURITIES
AND EXCHANGE COMMISSION, INCLUDING THE PROXY
STATEMENT/REGISTRATION STATEMENT THAT IS REQUIRED TO BE FILED
WITH RESPECT TO THE TRANSACTION DESCRIBED BELOW PRIOR TO THE VOTE
OF SHAREHOLDERS OF JAMES RIVER BANKSHARES, INC. WITH RESPECT TO
THE MERGER.
On March 5, 2001, First Virginia Banks, Inc. announced that
First Virginia Banks, Inc. and James River Bankshares, Inc. had
reached an agreement and plan of reorganization under which James
River Bankshares, Inc. would merge into First Virginia Banks,
Inc. A copy of the press release announcing the agreement is
attached hereto as Exhibit A. A copy of the analysts' materials
which are being distributed are attached as Exhibit B.
Exhibit A
#2744 CONTACT:
March 5, 2001 Richard F. Bowman (First Virginia)
FOR IMMEDIATE RELEASE (703) 241-3685
or
Donald W. Fulton, Jr. (James River)
(757) 934-8100 ext 206
JAMES RIVER BANKSHARES TO MERGE WITH FIRST VIRGINIA BANKS
The directors of James River Bankshares, Inc., a $516-million
multi-bank holding company headquartered in Suffolk, Virginia, have
agreed to affiliate with First Virginia Banks, Inc., a $9.5-billion
multi-bank holding company headquartered in Fairfax County, Virginia.
The announcement was made jointly today by G.P. Jackson, Chairman of
the Board, and Harold U. Blythe, President and Chief Executive Officer,
of James River and Barry J. Fitzpatrick, Chairman, President and Chief
Executive Officer of First Virginia.
James River operates four banks: the 9-branch, $163-million
First Colonial Bank, headquartered in Hopewell, serves
Chesterfield and Prince George Counties, and the cities of
Colonial Heights, Hopewell, and Petersburg; the 10-branch, $174-
million James River Bank/Colonial, headquartered in Suffolk,
serves the counties of Isle of Wight and York and the cities of
Chesapeake, Newport News, and Suffolk; the 5-branch, $107-million
James River Bank, headquartered in Waverly, serves the counties
of Southampton and Sussex and the cities of Emporia and
Franklin; and the 3-branch, $71-million State Bank, headquartered
in Remington, serves Fauquier County. This merger will give First
Virginia a number one or two market share in the city of Suffolk and
the counties of Prince George and Sussex and significant increases in
market share in Fauquier, Chesterfield and York counties.
"We're very pleased to be joining forces with a strong
financial company like James River whose employees and directors
share our commitment to a core value system based on community and
customer service. I know our combined efforts will have a significant
impact in the markets we will soon serve together," said Mr.
Fitzpatrick.
"It's important to us that First Virginia shares our
commitment to community involvement and to a philosophy of
providing superior customer service, "Mr. Jackson said. Mr.
Blythe agreed, adding, "First Virginia brings a wide array of
financial services, including internet banking, enhancing greatly
the opportunities for value to our customers."
James River shareholders will receive .51 shares of First
Virginia common stock for each share of their 4,556,219
outstanding shares. Based on the most recent closing price of
First Virginia, the value per share of James River Bankshares is
approximately $23.51, making a total transaction value of $107.1
million. Keefe Bruyette & Woods, a New York-based investment
banking firm specializing in the financial sector, is serving as
financial advisor to James River.
First Virginia will issue approximately 2,323,672 shares to
James River shareholders in a tax-free exchange of shares. Up to
40% of James River's shares may be exchanged for $24.00 in
cash per share in lieu of First Virginia stock. The merger will
be accounted for as a purchase transaction under the new rules
proposed by the Financial Accounting Standards Board to be
effective July 1, 2001.
Messrs. Blythe and Fitzpatrick said that a definitive
agreement had been entered into and that the transaction is
subject to completion of a due diligence review and to approval
of James River shareholders as well as state and federal
regulatory authorities. It is anticipated that the transaction
will be closed in the early third quarter, 2001. The four James
River banks will merge with existing First Virginia member banks,
and the James River Bankshares directors will become members of
the boards of the merged banks.
First Virginia is the largest independent banking company
headquartered in Virginia and one of the 50 largest in the United
States. There are nine banks in the First Virginia group with
294 offices in Virginia, 57 offices in Maryland and 25 offices in
East Tennessee. First Virginia also operates a full-service
insurance agency, First Virginia Insurance Services, Inc. First
Virginia's common stock is traded on the New York Stock
Exchange under the symbol "FVB." James River's common stock is
traded on the NASDAQ stock market under the symbol "JRBK."
Certain statements in this release 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.
Investors and security holders are advised to read the proxy
statement/prospectus regarding the proposed transaction
referenced in this press release when it becomes available,
because it will contain important information. The proxy
statement/prospectus will be filed with the Securities and
Exchange Commission by First Virginia and James River. Security
holders may receive a free copy of the proxy statement/prospectus
(when available) and other related documents filed by First
Virginia and James River at the Commission's website at
http://www.sec.gov. Copies of the proxy statement/prospectus and
other related documents can also be obtained, without charge, by
directing a request to First Virginia Banks, Inc., 6400 Arlington
Boulevard, Falls Church, Virginia 22042-2336, Attention: Richard
F. Bowman (703) 241-3685 or to James River at 1514 Holland Road,
Suffolk, Virginia 23434, Attention Donald W. Fulton, Jr. (757)
934-8100 ext 206.
James River and its executive officers and directors may be
deemed to be participants in the solicitation of proxies from
shareholders of James River with respect to the transactions
contemplated by the Merger Agreement. Information regarding such
officers and directors is included in James River's proxy
statement for its 2000 Annual Meeting of Stockholders filed with
the Commission on March 15, 2000.
# # #
Falls Church, Virginia
EXHIBIT B
FIRST VIRGINIA BANKS, INC.
Acquisition of James River Bankshares, Inc.
Presentation Package
March 2001
FORWARD LOOKING STATEMENTS
Certain statements in this release 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.
Other factors which may affect the accuracy of our projections are
specific to First Virginia, including: (i) the cost and other effects of
material contingencies, including litigation contingencies; (ii) our ability
to expand into new markets and to maintain profit margins in the face of
pricing pressures; (iii) our ability to keep pace with technological changes;
(iv) our ability to develop competitive new products and services in a timely
manner and the acceptance of such products and services by First Virginia's
customers and potential customers; (v) our ability to effectively manage
interest rate risk, credit risk and operational risk; (vi) our ability to
manage fluctuations in the value of our assets and liabilities and off-
balance sheet exposures so as to maintain sufficient capital liquidity to
support our business; and (vii) our ability to achieve the earnings
expectations related to the businesses that we have recently acquired or may
acquire in the future, which in turn depends on a number of factors,
including: our ability to achieve in a timely manner anticipated cost savings
and revenue enhancements with respect to acquired operations; the
assimilation of acquired operations to the First Virginia corporate culture,
including the ability to instill our credit practices and efficient approach
to acquired operations; our ability to retain existing customers and
employees of acquired operations; and the continued growth of our markets
that the acquired entities serve, consistent with recent historical
experience.
TABLE OF CONTENTS
James River Bankshares, Inc. Acquisition
Table of contents............................... 1
Financial description of transaction............ 2
Other significant transaction information....... 3
Proforma Financial Highlights................... 4-5
James River Bankshares profile.................. 6-7
Summary financial data.......................... 8
Map*............................................ 9
Loan profile.................................... 10
Financial impact................................ 11
Future synergies and revenue enhancements....... 12
* Not included in electronically filed version.
FINANCIAL DESCRIPTION OF TRANSACTION:
First Virginia would acquire all of the outstanding
shares and outstanding options of James River in a tax-
free exchange of stock.
Each share of James River would be exchanged for .51
shares of First Virginia common stock resulting in a
value to James River shareholders of $23.51 - a premium
of 58% of market value as of 3/2/01. Alternatively,
up to 40% of James River's shares may be exchanged for
$24.00 in cash per share in lieu of First Virginia
stock.
Price paid is 194% of book value and 18.8 times 2000
earnings per share.
First Virginia would issue approximately 2,323,672
shares to James River shareholders. The total value of
the transaction is $107.1 million and represents about
4% of First Virginia's market capitalization.
James River has issued a stock option to First
Virginia to acquire up to 19.9% of its shares, under certain
circumstances, at a price of $17 per share.
For accounting purposes, the transaction will be
accounted for as a purchase under the new rules proposed
by the Financial Accounting Standards Board to be effective
July 1, 2001.
Estimated closing date is early third quarter, 2001.
OTHER SIGNIFICANT TRANSACTION INFORMATION:
The four James River banks would merge with existing
First Virginia member banks, which are state chartered
banks and members of the Federal Reserve.
There are no market concentration issues associated
with the merger. There will be no required branch
divestitures anticipated as a result of the merger.
The acquisition of James River represents an in-market
transaction for First Virginia with merger-related cost savings
attributable to administrative and processing efficiencies of the
merged banks of approximately 36%.
Regulatory and James River shareholder approvals will be
required.
FINANCIAL HIGHLIGHTS AS OF DECEMBER 31, 2000
($000's)
First Virginia James River
Banks, Inc. Bankshares, Inc.
-------------- ----------------
Balances at End of Period:
Total assets $ 9,516,469 $ 516,125
Loans 6,366,464 365,214
Deposits 7,825,816 437,468
Equity 992,706 55,227
Book Value per share 21.50 12.12
Income Statement Items:
Net income $ 142,031 $ 5,755
Noninterest expenses 322,145 16,965
Provision for loan losses 9,428 673
Key Performace Ratios:
Return on average assets 1.51 % 1.16 %
Return on shareholders' equity 14.36 10.94
Equity to asset ratio 10.43 10.70
Net interest margin 4.96 4.94
Efficiency ratio 56.31 64.91
FINANCIAL HIGHLIGHTS AS OF DECEMBER 31, 2000
($000's)
First Virginia James River
Banks, Inc. Bankshares, Inc.
-------------- ----------------
Capital Ratios:
Equity to asset 10.43 % 10.70 %
Tier 1 capital 12.20 14.30
Tier 1 leverage ratio 8.99 10.25
Total risk-based capital ratio 13.22 15.56
Asset Quality:
Nonperforming assets $ 21,863 $ 2,468
Nonperforming assets as a
percent of loans 0.34 % 0.67 %
Allowance for loan losses as
percent of loans 1.10 1.42
Annualized net charge-off ratio 0.14 0.08
JAMES RIVER BANKSHARES CORPORATE PROFILE
James River has four member banks that operate 27
branch locations in Virginia. James River also operates a
network of 22 ATMs throughout their geographic markets.
Nineteen of James River's branches are in 3 discrete MSAs
that represent 79% of James River's total deposits. These 3
MSAs -- Norfolk-Virginia Beach-Newport News, VA-NC;
Richmond-Petersburg, VA; and Washington,DC-MD-VA-WV have strong
demographic characteristics and offer logical complements and
natural extensions to First Virginia's existing markets.
32% of James River's deposits are in the Norfolk-VA
Beach-Newport News, VA-NC MSA. The Norfolk-Virginia
Beach-Newport News RMA, also referred to as Hampton Roads,
has approximately 1.5 million residents and represents
about 23% of Virginia's total population. Hampton Roads is
home to the second busiest and fastest growing commercial
port on the East Coast.
32% of James River's deposits are in the Richmond-Petersburg,
VA MSA. The Greater Richmond area is home to the state
capital of Virginia. It has a population of nearly 1
million and represents about 14% of the state's total
population. Richmond is a leading center for manufacturing,
finance, trade, and corporate headquarters.
15% of James River's deposits are in the Washington,
DC-MD-VA-WV MSA. The Northern Virginia portion of the
Greater Washington MSA is one of the fastest growing regions
in the country. It hosts many of the nation's leading
high-technology centers for computer software, information
technology, and telecommunications. James River's market
share is in Fauquier County, located in the southwestern
portion of Northern Virginia, 45 miles from Washington, D.C.
JAMES RIVER BANKSHARES CORPORATE PROFILE (continued)
James River has the #1 market share in the city of Suffolk
with 24% of total deposits and the #2 share in Sussex
County with 34% of the market. James River provides
First Virginia entrance into Sussex County which is adjacent
to Surry County in which First Virginia currently operates
and maintains a #1 market share. James River has the #1
market share in Prince George County with 33% of total
deposits. Prince George County borders the cities of
Hopewell, Petersburg, and Colonial Heights all of which
are included in the Richmond-Petersburg MSA.
The combined banks will result in net increases in market
share in Fauquier County, Chesterfield County, and York
County all located in MSAs. The combined banks will result
in the #3 market position in the counties of Fauquier and
Chesterfield and the #5 market position in York County.
James River's asset quality has been consistently strong.
Net charge-offs as a percentage of loans averaged .09% over the
past five years.
James River has achieved steady improvements in earnings
performance over the past five years while continually expanding
into new and existing markets with de novo branching and its
latest acquisition of the State Bank in Fauquier County, in 1999.
JAMES RIVER BANKSHARES, INC. - SUMMARY FINANCIAL DATA
SELECTED FINANCIAL INFORMATION
(dollars in thousands)
Years ended Dec. 31, 2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
NET INCOME $ 5,755 $ 4,304 $ 4,655 $ 4,365 $ 2,417
BALANCE SHEET ITEMS
Total assets $ 516,125 $ 487,364 $ 488,873 $ 454,812 $ 381,608
Total deposits 437,468 418,020 433,899 404,277 342,332
Total loans 365,214 328,856 312,008 293,429 240,913
Total shareholders'
equity 55,227 50,998 51,179 47,743 37,603
Book value per share 12.12 11.05 11.21 10.57 10.20
RATIOS
Return on average assets 1.16 % 0.88 % 0.99 % 0.97 % 0.67 %
Return on average equity 10.94 8.42 9.33 9.51 6.71
Loan to deposit ratio 83.48 78.67 71.91 72.58 70.37
Net charge-offs to
average loans 0.07 0.10 0.06 0.11 0.08
Shareholders' equity to
total assets 10.70 10.46 10.47 10.50 9.85
JAMES RIVER LOAN PORTFOLIO
As of 12/31/00, ($000s)
Totals Mix
--------- ------
Real Estate Loans
Construction $ 13,447 3.68 %
Commercial 80,907 22.15
Multifamily 16,817 4.60
1-4 family residential 144,716 39.62
Farmland 5,215 1.43
--------- ------
Total real estate 261,102 71.49
Commercial & Industrial Loans 61,987 16.97
Loans to Individuals
Credit cards 825 0.23
Other 36,038 9.87
--------- ------
Total loans to individuals 36,863 10.09
Farm Loans 3,222 0.88
Other Loans 2,040 0.56
--------- ------
TOTAL LOANS $ 365,214 100.00 %
========= ======
FINANCIAL IMPACT
($000's)
FVBI Pro Forma
Stand-alone Combined
----------- -----------
2001 IBES Projected earnings for FVBI $ 145,350 $ 145,350
2000 actual earnings for JRBK 5,755
Amortization of deposit intangible (1) (1,312)
After tax net synergies (2) 3,973
----------- -----------
Pro forma net income $ 145,350 $ 153,766
----------- -----------
Shares outstanding (000) 46,143 48,467
=========== ===========
Earnings per share $ 3.15 $ 3.17
=========== ===========
Notes:
(1) Assumes proposed purchase accounting rules. Deposit intangibles of 3%
of deposits amortized over 10 years. Excess of purchase price over book
value, less deposit intangibles, would be allocated to goodwill.
(2) Assumes approximately 36% net pre-tax expense reductions.
FUTURE SYNERGIES AND REVENUE ENHANCEMENTS
The consolidation of James River's banks into existing
First Virginia member banks in the same markets will allow for an
approximate 36% reduction in administrative and operating costs:
- 6 to 7 branches may be consolidated in overlapping
markets. These branches in most instances are less
than 2 miles apart.
- data processing fees will be reduced due to the
elimination of James River's outside data services
provider.
- general and administrative expenses will be reduced
due to the elimination of duplicate, back-office
functions including administrative, operational, and
executive staffing expenses; professional fees; and
occupancy expenses.
The introduction of additional First Virginia products such
as trust services, insurance, investments, and credit cards will
increase non-interest income. Non-interest income revenue
enhancements have not been assumed in determining the financial
impact for First Virginia.
Operating EPS is expected to be accretive assuming
conservative pro-forma synergy and no revenue growth assumptions.
Merger-related charges will be expensed in 2001 primarily
relating to severance, data processing, and branch consolidation
and will total approximately 5% of the total transaction value.