FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report April 15, 2003
FIRST VIRGINIA BANKS, INC.
(Exact name of registrant as specified in its charter)
Virginia 1-6580 54-0497561
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) file number) Identification 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
Not Applicable
(Former name or former address, if changed since last report)
The exhibit index as required by item 601(a) of Regulation S-K is included on
page 3 of this report.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
The following exhibits are filed herewith:
Exhibit No. Description of Exhibit
- ----------------------------------------------------------------------------
99 Press release dated April 14, 2003 with respect
to the corporation's financial results for the
quarter ended March 31, 2003
Item 9. REGULATION FD DISCLOSURE
The information included in this section is intended to be included in
"Item 12. Disclosure of Results of Operations and Financial Condition"
and is included under this Item 9 in accordance with SEC Release No. 33-8216.
On April 14, 2003, First Virginia Banks, Inc. announced financial results
for the quarter ending March 31, 2003. A copy of the press release is
attached hereto as Exhibit 99.
SIGNATURE
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 hereunto duly authorized.
FIRST VIRGINIA BANKS, INC.
(Registrant)
April 15, 2003 /s/ Richard F. Bowman
-----------------------
Richard F. Bowman,
Executive Vice President,
Treasurer and Chief Financial
Officer
EXHIBIT INDEX
Exhibit No. Description of Exhibit Page
----------------------------------------------------------------------------
99 Press release dated April 14, 2003 with respect
to the corporation's financial results for the
quarter ended March 31, 2003 4
Exhibit 99
#2884
April 14, 2003 CONTACT: Richard F. Bowman
FOR IMMEDIATE RELEASE (703) 241-3685
FIRST VIRGINIA'S FIRST QUARTER EPS INCREASES 12% TO $.66
First Virginia Banks, Inc. reported a 12% increase in 2003
first quarter earnings per share to $.66 compared to $.59 earned
in the 2002 first quarter. The return on average assets increased
to 1.68% compared to 1.60% in the prior year's first quarter, and
the return on average shareholders' equity increased to 15.23%
compared to 14.47% in 2002. Net income for the quarter totaled
$46.232 million compared to $42.219 million in 2002's first
quarter. All 2002 per-share numbers have been adjusted to reflect
the August 16, 2002, three-for-two stock split.
Barry J. Fitzpatrick, First Virginia's Chairman, President
and Chief Executive Officer, said, "I am particularly pleased
with our first quarter results given the general weakness in the
economy, which was exacerbated by the record snowstorms in our
markets and by concerns over the war in Iraq. First Virginia's
excellent asset quality and everyday attention to cost control
help us produce steady earnings despite the first quarter's
traditionally sluggish loan demand." Mr. Fitzpatrick also noted
that the proposed affiliation with BB&T Corporation was
proceeding on schedule and should occur early in the third
quarter. "We have had a very positive reaction from our customers
and our employees, and we're enthused about our ability to expand
our capabilities in serving the financial needs of our
communities," he said.
Total assets at the end of the quarter hit a new high of
$11.246 billion compared to $10.788 billion a year ago. Average
loans during the first quarter declined 3% to $6.314 billion
compared to $6.506 billion in the prior year's first quarter and
were down 2% compared to $6.433 billion in the fourth quarter of
2002. However, the lowest interest rates in years encouraged both
consumers and businesses to refinance their existing real estate
loans, producing strong demand in that area. Average outstanding
real estate loans increased by 19% compared to the prior year's
first quarter and were up at an annualized rate of 17% over the
fourth quarter. In the current economic climate, businesses have
sufficient capacity and liquidity to handle most routine cash
needs, so commercial loan demand continues to be weak. Consumer
lending was negatively impacted by the severe weather in the
corporation's market area during the first quarter and by a
spending slowdown reflecting concerns associated with the war in
Iraq. As a result, average installment loans declined 9% compared
to the prior year's first quarter, with automobile loans down 7%.
Home equity loans were down 22% representing refinance activity
into longer-term real estate loans.
Average deposits increased 5% to $9.082 billion compared to
the prior year's first quarter of $8.622 billion and were up
slightly compared to the fourth quarter. The majority of the
growth came in lower cost transaction and savings accounts.
Average demand deposit and interest checking accounts increased
10% compared to the prior year's first quarter while money market
accounts increased 22%. Average consumer savings accounts also
showed moderately strong growth, increasing 7% compared to the
prior year. Higher cost certificates of deposit declined 8%
during the first quarter compared to the prior year's first
quarter. While interest rates were stable during the first
quarter, they were at 40-year lows, placing significant downward
pressure on First Virginia's net interest margin. Loans and
investments made in prior years at higher rates continued to
mature and proceeds were reinvested at these lower rates. As a
consequence, the yield on earning assets, led by a 125 basis
point drop in the yield on the corporation's investment
portfolio, declined 105 basis points in the first quarter
compared to the prior year's first quarter. The cost of funds, on
the other hand, declined 89 basis points and, combined with the
decline in the yield on earning assets, lowered the net interest
margin to 4.61%.
First Virginia continues to maintain its record for
excellent asset quality. Net charge-offs in the first quarter
were $2.285 million or .14% of average loans compared to $2.631
million or .16% of average loans in the first quarter of 2002.
Nonperforming assets remained at a record low level, declining to
..20% of outstanding loans or $12.803 million compared to .30% or
$19.898 million at the end of the prior year's first quarter.
Loans past due 90 days or more declined to $8.842 million or .14%
of loans at March 31, 2003, compared to $10.105 million or .16%
of loans at December 31, 2002, and $11.249 million or .17% of
loans at March 31, 2002. All of these ratios are significantly
below national peer group averages. The allowance for loan losses
remained unchanged at 1.11%. The provision for loan losses
declined during the quarter to $1.122 million compared to $3.517
million in the prior year's first quarter as a consequence of
lower net charge-offs, lower nonperforming and delinquent loans
as well as a slowdown in new loan demand. The corporation
continues to have no exposure to international loans or shared
national credits.
Noninterest income increased 25% compared to the first
quarter of 2002. Excluding a $5.806 million pretax gain from the
sale of equity securities of a bank acquired by another financial
institution, noninterest income increased 7% from the prior
year's first quarter. Service charge income from commercial
accounts increased 9% and internet banking income rose 30%;
however, overall service fee income on deposit accounts increased
only 2% as adverse weather negatively impacted consumer activity-
based fees. Electronic banking income increased 11%, led by a 29%
increase in income from the corporation's CheckCard product.
Insurance income declined 6% compared to the prior year's first
quarter, the result of a 41% decline in credit insurance fees
that were impacted by new regulations effective in late 2002
which dramatically reduced the corporation's ability to sell
credit insurance on consumer debt. Commission income from
insurance brokerage sales increased 20% during the quarter,
confirming the success of the corporation's sales effectiveness
of these products. Other miscellaneous income increased 26% due
to increases in credit card commissions, mortgage fee income and
other miscellaneous categories of income.
Noninterest expense was virtually unchanged compared to the
prior year's first quarter, with total expenses of $85.191
million in 2003 versus $84.755 million in 2002. Excluding a
$2.000 million non-tax-deductible investment banking fee paid in
connection with the proposed merger with BB&T Corporation,
noninterest expense actually declined 2% compared to the prior
year, maintaining the corporation's tradition of strong expense
control and producing an efficiency ratio of 52.9% versus 53.7%
in 2002. Total employment costs increased less than 1% as lower
health care costs offset a 125% increase in pension expense to
$1.679 million. The corporation's effective tax rate for the
first quarter of 2003 increased to 34.8% compared to 33.5% in the
prior year's first quarter. This increase was a result of the
investment banking fee and state income taxes on the securities
gains.
Total shareholders' equity was $1.167 billion at March 31,
2003, compared to $1.173 billion at March 31, 2002. Net book
value per share increased 4% to $17.01 compared to $16.33 at the
end of the prior year's first quarter. The corporation's Tier 1
capital leverage ratio was 9.05%, maintaining First Virginia's
position as one of the best capitalized banks in the nation.
During the first quarter, the corporation repurchased 2,381,150
shares of stock, thus completing the program authorized by the
Board of Directors in September 1999. In February, a new
repurchase program of 3,000,000 shares was approved, and on March
31, 2003 the corporation had 2,053,400 shares remaining in this
program. At the end of the quarter, there were 68.589 million
shares of common stock outstanding.
First Virginia is the largest independent banking company
headquartered in Virginia and one of the 50 largest in the United
States. There are currently eight banks in the First Virginia
group with 297 offices in Virginia, 55 offices in Maryland and 11
offices in East Tennessee. First Virginia also operates a full-
service insurance agency, First Virginia Insurance Services, Inc.
The corporation's common stock is traded on the New York Stock
Exchange under the symbol "FVB." For more information about First
Virginia and its products and services, please visit our website
at firstvirginia.com.
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.
Falls Church, Virginia
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except per share data)
(Unaudited)
March 31 December 31 March 31
2003 2002 2002
----------- ----------- -----------
ASSETS
Cash and due from banks $ 405,426 $ 370,387 $ 285,248
Money market investments 101,776 210,339 210,084
----------- ----------- -----------
Total cash and cash equivalents 507,202 580,726 495,332
----------- ----------- -----------
Securities-avail for sale 904,044 925,699 1,426,149
Securities-held to maturity 3,044,607 2,825,013 1,763,626
----------- ----------- -----------
Total securities 3,948,651 3,750,712 3,189,775
----------- ----------- -----------
Loans, net of unearned income 6,272,838 6,377,866 6,553,729
Allowance for loan losses (69,850) (71,013) (72,823)
----------- ----------- -----------
Net loans 6,202,988 6,306,853 6,480,906
----------- ----------- -----------
Other earning assets 35,003 36,383 31,768
Premises and equipment 146,276 147,894 152,624
Intangible assets 188,085 190,279 197,686
Accrued income/other assets 217,791 214,740 240,001
----------- ----------- -----------
Total assets $11,245,996 $11,227,587 $10,788,092
=========== =========== ===========
LIABILITIES
Deposits
Noninterest-bearing $ 2,150,372 $ 2,064,033 $ 1,867,819
Interest-bearing
Interest checking 1,897,706 1,878,680 1,716,809
Money market 1,482,164 1,468,356 1,272,783
Savings 1,168,407 1,126,497 1,095,193
Consumer cert of deposit 2,177,139 2,206,206 2,354,662
Large denomination
cert of deposit 465,178 466,719 483,503
----------- ----------- -----------
Total deposits 9,340,966 9,210,491 8,790,769
----------- ----------- -----------
Short-term borrowings 567,898 617,589 638,994
Long-term debt 8,478 13,488 13,516
Accrued interest/other liab 161,488 147,674 172,141
----------- ----------- -----------
Total liabilities 10,078,830 9,989,242 9,615,420
----------- ----------- -----------
SHAREHOLDERS' EQUITY
Preferred stock, $10 par 324 381 416
Common stock, $1 par 68,589 70,899 71,777
Capital surplus 0 19,406 51,470
Retained earnings 1,096,123 1,141,923 1,059,329
Accumulated other
comprehensive income (loss) 2,130 5,736 (10,320)
----------- ----------- -----------
Total shareholders' equity 1,167,166 1,238,345 1,172,672
----------- ----------- -----------
Total liabilities and
shareholders' equity $11,245,996 $11,227,587 $10,788,092
=========== =========== ===========
Common shareholders'
equity per share $ 17.01 $ 17.46 $ 16.33
CONSOLIDATED RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended
March 31
2003 2002
-------- --------
Interest income $141,100 $159,447
Interest expense 25,373 40,943
-------- --------
Net interest income 115,727 118,504
Provision for loan losses 1,122 3,517
-------- --------
Net after provision for loan losses 114,605 114,987
-------- --------
Noninterest income
Service charges on deposit accounts 17,317 16,921
Electronic banking fees 4,949 4,469
Trust and asset management fees 3,503 3,367
Insurance premiums and commissions 2,198 2,342
Other 7,765 6,146
Securities gains 5,806 0
-------- --------
Total noninterest income 41,538 33,245
-------- --------
Noninterest expense
Salaries and employee benefits 50,709 50,381
Occupancy 6,923 7,175
Equipment 7,863 8,368
Amortization of intangibles 2,194 2,262
Other 15,502 16,569
Merger related expense 2,000 0
-------- --------
Total noninterest expense 85,191 84,755
-------- --------
Income before income taxes 70,952 63,477
Provision for income taxes 24,720 21,258
-------- --------
Net income $46,232 $42,219
======== ========
Net income per share of common stock
Basic $0.66 $0.59
Diluted $0.66 $0.59
Average shares of common stock outstanding
Basic 69,919 71,769
Diluted 70,405 72,158
Cash dividends declared
per common share $0.2800 $0.2667
PERFORMANCE RATIOS, ANNUALIZED
Return on assets 1.68 % 1.60 %
Return on equity 15.23 % 14.47 %
Efficiency ratio 52.9 % 53.7 %
ASSET QUALITY INDICATORS
(Dollars in thousands)
(Unaudited)
ALLOWANCE FOR LOAN LOSSES
Three Months Ended
March 31
2003 2002
-------- --------
Beginning of period $ 71,013 $ 71,937
Provision for losses 1,122 3,517
-------- --------
Balance before charge-offs 72,135 75,454
Net charge-offs
Charge-offs (3,324) (3,572)
Recoveries 1,039 941
-------- --------
Net charge-offs (2,285) (2,631)
-------- --------
End of period $ 69,850 $ 72,823
======== ========
Annualized net charge-offs/Average Loans 0.14 % 0.16 %
Allowance/loans 1.11 % 1.11 %
Allowance/net charge-offs 7.64 x 6.92 x
Allowance/Nonperforming loans 6.36 x 4.05 x
Allowance + equity/NPAs 96.63 x 62.59 x
NONPERFORMING ASSETS
March 31
2003 2002
-------- --------
Nonaccruing loans $ 10,482 $ 17,081
Restructured loans 497 915
Foreclosed real estate 1,824 1,902
-------- --------
Total $ 12,803 $ 19,898
======== ========
Percentage of total loans 0.20 % 0.30 %
AVERAGE BALANCES AND INTEREST RATES
(Dollars in thousands)
(Unaudited)
Three months ended Mar. 31, 2003
---------------------------------
Interest
Average Income/
Balance Expense Rate
----------- ---------- ------
Earning assets
Securities
Available for sale* $ 991,230 $ 9,398 3.79 %
Held to maturity* 2,343,964 25,894 4.42
Loans net of unearned income
Installment 3,747,437 61,438 6.63
Real estate 1,678,406 29,975 7.23
Commercial and other* 888,173 13,900 6.33
----------- ----------
Total loans 6,314,016 105,313 6.75
----------- ----------
Money market investments 583,568 1,800 1.25
Other earning assets* 35,049 441 5.03
----------- ----------
Total earning assets 10,267,827 142,846 5.61
Noninterest-earning assets 762,100 ----------
-----------
Total assets $11,029,927
===========
Interest-bearing liabilities
Deposits
Interest checking $ 1,859,292 965 0.21
Money market 1,478,669 3,700 1.01
Savings 1,143,388 932 0.33
Certificates of deposit
Consumer 2,190,379 15,474 2.87
Large denomination 456,995 3,382 3.00
----------- ----------
Total 7,128,723 24,453 1.39
Short-term borrowings 577,889 778 0.55
Long-term debt 9,928 142 5.73
----------- ----------
Total interest-bearing
liabilities 7,716,540 25,373 1.33
Noninterest-bearing liabilities
Demand deposits 1,953,336
Other liabilities 145,986
Preferred shareholders' equity 378
Common shareholders' equity 1,213,687
-----------
Total liabilities and
shareholders' equity $11,029,927
===========
Net interest income and margin $ 117,473 4.61 %
==========
*Fully taxable-equivalent
Three months ended Mar. 31, 2002
---------------------------------
Interest
Average Income/
Balance Expense Rate
----------- ---------- ------
Earning assets
Securities
Available for sale* $ 1,439,798 $ 18,714 5.20 %
Held to maturity* 1,533,772 22,028 5.75
Loans net of unearned income
Installment 4,113,205 74,798 7.35
Real estate 1,406,085 27,590 7.94
Commercial and other* 987,198 16,702 6.85
----------- ----------
Total loans 6,506,488 119,090 7.40
----------- ----------
Money market investments 274,466 1,184 1.75
Other earning assets* 28,365 418 5.89
----------- ----------
Total earning assets 9,782,889 161,434 6.66
Noninterest-earning assets 801,169 ----------
-----------
Total assets $10,584,058
===========
Interest-bearing liabilities
Deposits
Interest checking $ 1,682,658 1,015 0.24
Money market 1,212,319 5,390 1.80
Savings 1,067,896 1,976 0.75
Certificates of deposit
Consumer 2,393,453 25,406 4.30
Large denomination 494,260 5,395 4.43
----------- ----------
Total 6,850,586 39,182 2.32
Short-term borrowings 621,918 1,546 1.01
Long-term debt 15,323 215 5.62
----------- ----------
Total interest-bearing
liabilities 7,487,827 40,943 2.22
Noninterest-bearing liabilities
Demand deposits 1,771,902
Other liabilities 156,904
Preferred shareholders' equity 420
Common shareholders' equity 1,167,005
-----------
Total liabilities and
shareholders' equity $10,584,058
===========
Net interest income and margin $ 120,491 4.96 %
==========
*Fully taxable-equivalent