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, 1996
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, 1996, there were 32,691,539 shares of common
stock outstanding.
This report contains a total of 23 pages.
1
INDEX
Page
---------
PART I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - September 30,
1996 and 1995, (Unaudited), and December 31, 1995 3/ 4
Condensed Consolidated Statements of Income - Three
months and nine months ended September 30, 1996
and 1995 (Unaudited) 5/ 6
Condensed Consolidated Statements of Cash Flows - Nine
months ended September 30, 1996 and 1995 (Unaudited) 7
Condensed Consolidated Statements of Shareholders'
Equity - Nine months ended September 30, 1996
and 1995 (Unaudited) 8
Notes to Condensed Consolidated Financial
Statements (Unaudited) 8/11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12/18
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature 19
Exhibit 11 - Statement re: Computation of
Per Share Earnings 20
Exhibit 15 - Independent Accountants' Review
Report from Ernst & Young LLP 21
Exhibit 15A - Letter of Acknowledgement from
Ernst & Young LLP, Independent Accountants 22
Exhibit 27 - Financial Data Schedule as of September 30,
1996 and the nine months ended September 30, 1996.
(This exhibit is being filed as a separate
document in this form 10-Q, for the quarter
ended September 30, 1996.) 23
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
Sept. 30 December 31 Sept. 30
1996 1995 1995
---------- ---------- ----------
(Unaudited) (Unaudited)
(In thousands)
ASSETS
Cash and noninterest-bearing
deposits in banks $ 361,370 $ 397,858 $ 346,627
Money market investments 230,969 235,000 400,000
---------- ---------- ----------
Total cash and cash equivalents 592,339 632,858 746,627
---------- ---------- ----------
Mortgage loans held for sale 13,023 19,216 21,717
Investment securities - available for sale - 64,546 -
Investment securities - held to maturity
(market values of $1,932,972, $2,146,792
and $2,099,856 1,937,039 2,128,220 2,097,932
Loans, net of unearned income 5,293,235 5,038,076 4,977,316
Deduct: Allowance for loan losses (61,541) (57,922) (57,471)
---------- ---------- ----------
Net loans 5,231,694 4,980,154 4,919,845
---------- ---------- ----------
Other earning assets 17,307 11,528 9,198
Premises and equipment 147,494 150,168 150,879
Intangible assets 96,479 95,271 96,939
Other assets 138,212 139,575 133,707
---------- ---------- ----------
Total Assets $8,173,587 $8,221,536 $8,176,844
========== ========== ==========
3
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
Sept. 30 December 31 Sept. 30
1996 1995 1995
---------- ---------- ----------
(Unaudited) (Unaudited)
(In thousands)
LIABILITIES
Deposits:
Noninterest-bearing $1,303,113 $1,235,396 $1,210,856
Interest-bearing:
Interest checking/savings plan 1,273,543 1,342,482 1,274,882
Money market accounts 746,191 710,114 709,243
Savings deposits 1,141,188 1,184,298 1,224,810
Certificates of deposit:
Consumer 2,234,879 2,264,793 2,297,888
Large denomination 324,525 319,024 327,019
---------- ---------- ----------
Total deposits 7,023,439 7,056,107 7,044,698
Interest, taxes and other liabilities 85,557 83,353 81,689
Short-term borrowings 195,918 209,719 195,225
Long-term indebtedness 1,867 2,710 2,969
---------- ---------- ----------
Total Liabilities 7,306,781 7,351,889 7,324,581
---------- ---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock, $10 par value 655 695 707
Common stock, $1 par value 32,687 33,951 33,945
Capital surplus 57,294 107,112 107,022
Retained earnings 776,170 726,255 710,589
Net unrealized gain on securities
available for sale - 1,634 -
---------- ---------- ----------
Total Shareholders' Equity 866,806 869,647 852,263
---------- ---------- ----------
Total Liabilities and Shareholders' Equity $8,173,587 $8,221,536 $8,176,844
========== ========== ==========
See notes to condensed consolidated financial statements
4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
1996 1995 1996 1995
------- ------- -------- --------
(In thousands, except per-share data)
Interest income:
Interest and fees on loans $113,499 $110,001 $334,061 $325,561
Interest on mortgage loans
held for sale 274 314 955 836
Income from investment securities-
available for sale - - 1,152 -
Income from investment
securities - held to maturity 29,954 29,219 89,252 85,765
Income from money
market investments 3,212 5,707 12,761 13,825
Income from other earning assets 265 144 707 434
------- ------- -------- --------
Total interest income 147,204 145,385 438,888 426,421
------- ------- -------- --------
Interest expense:
Deposits 49,737 52,168 152,113 149,558
Short-term borrowings 2,354 2,983 6,975 8,149
Long-term indebtedness 52 79 171 252
------- ------- -------- --------
Total interest expense 52,143 55,230 159,259 157,959
------- ------- -------- --------
Net interest income 95,061 90,155 279,629 268,462
Provision for loan losses 4,648 2,462 12,799 4,878
------- ------- -------- --------
Net interest income after provision
for loan losses 90,413 87,693 266,830 263,584
------- ------- -------- --------
5
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Continued) (Unaudited)
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
1996 1995 1996 1995
------- ------- -------- --------
(In thousands, except per share data)
Net interest income after provision
for loan losses 90,413 87,693 266,830 263,584
------- ------- -------- --------
Noninterest income:
Service charges on deposit
accounts 9,978 9,771 29,574 28,922
Insurance premiums and
commissions 1,622 1,753 4,917 5,061
Credit card service charges
and fees 3,019 2,972 8,542 8,622
Trust services 1,963 1,650 5,667 5,210
Income from other customer
services 5,957 4,893 15,748 13,805
Securities gains before income
tax provision of $616 - - 1,759 -
Other 1,361 1,203 6,259 5,645
------- ------- -------- --------
Total noninterest income 23,900 22,242 72,466 67,265
------- ------- -------- --------
Noninterest expense:
Salaries and employee benefits 40,180 38,909 118,139 114,597
Occupancy 5,676 5,562 17,287 16,321
Equipment 5,813 5,164 16,939 15,301
Telephone 1,498 1,452 4,470 4,274
Printing and supplies 1,553 1,573 5,110 4,508
Postage 1,234 1,263 3,897 3,996
Credit card processing fees 2,211 1,974 6,221 5,761
FDIC assessment 1,312 (293) 1,939 7,310
Amortization of intangibles 2,031 1,321 5,913 5,660
Other 9,173 8,737 29,083 26,225
------- ------- -------- --------
Total noninterest expense 70,681 65,662 208,998 203,953
------- ------- -------- --------
Income before income taxes 43,632 44,273 130,298 126,896
Provision for income taxes 15,046 15,004 44,755 42,857
------- ------- -------- --------
NET INCOME $28,586 $29,269 $ 85,543 $ 84,039
======= ======= ======== ========
Net income per share of common stock $.87 $.86 $2.56 $2.47
Average primary shares of common
stock outstanding 32,822 34,021 33,444 34,066
See notes to condensed consolidated financial statements
6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended
Sept. 30
1996 1995
-------- --------
(In thousands)
Net cash provided by operating activities $123,346 $111,503
-------- --------
Investing activities:
Proceeds from the maturity of
held to maturity securities 675,243 522,092
Proceeds from the sale of
available for sale securities 64,682 -
Purchase of held to maturity securities (489,422) (538,853)
Net (increase) decrease in loans (264,339) 13,640
Net increase in other earning assets (5,779) (211)
Purchases of premises and equipment (7,868) (10,505)
Sales of premises and equipment 1,317 6,299
Intangible assets acquired (7,191) (17,181)
Other 3,670 3,638
-------- --------
Net cash used for investing activities (29,687) (21,081)
-------- --------
Financing activities:
Net increase (decrease) in deposits (32,668) 228,856
Net increase (decrease) in short-term borrowings (13,801) 15,816
Principal payments on long-term borrowings (843) (844)
Cash dividends - common, $1.06 and $1.00 per share (35,710) (34,018)
Cash dividends - preferred (34) (36)
Common stock purchased and retired (51,598) (5,692)
Proceeds from issuance of common stock 476 1,381
-------- --------
Net cash (used for) provided by
financing activities (134,178) 205,463
-------- --------
Net increase (decrease) in cash and
cash equivalents (40,519) 295,885
Cash and cash equivalents at beginning of year 632,858 450,742
-------- --------
Cash and cash equivalents at end of period $592,339 $746,627
======== ========
See notes to condensed consolidated financial statements
7
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
Nine Months Ended
Sept. 30
1996 1995
-------- --------
(In thousands)
Balance at beginning of year $869,647 $806,888
Net income 85,543 84,039
Common stock purchased and retired (51,598) (5,693)
Decrease in unrealized gain - securities
available for sale (1,634) -
Issuance of common stock for the dividend reinvestment
plan, stock options and stock appreciation rights 476 1,387
-------- --------
902,434 886,621
-------- --------
Deduct dividends declared:
Preferred stock 34 36
Common stock, $1.07 and $1.01 per share 35,594 34,322
-------- --------
35,628 34,358
-------- --------
Balance at end of period $866,806 $852,263
======== ========
See notes to condensed consolidated financial statements
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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. 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.
Certain amounts previously reported in 1995 have been reclassified for
comparative purposes.
8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
2. INVESTMENT SECURITIES
The following reflects the amortized cost of securities held to maturity
and the related approximate market values (in thousands):
Sept. 30, 1996 Sept. 30, 1995
Amortized Market Amortized Market
Cost Value Cost Value
---------- ---------- ---------- ----------
U.S. Government and
its agencies $1,776,536 $1,770,767 $1,878,653 $1,878,459
State and municipal obligations 159,484 161,161 214,642 216,703
Other 1,019 1,044 4,637 4,694
---------- ---------- ---------- ----------
$1,937,039 $1,932,972 $2,097,932 $2,099,856
========== ========== ========== ==========
3. LOANS
Loans consisted of (in thousands):
Sept. 30
1996 1995
---------- ----------
Consumer:
Automobile installment $2,124,933 $1,820,063
Home equity, fixed and variable rate 1,012,478 1,148,450
Revolving credit plans,
including credit cards 200,692 197,209
Other 312,541 310,964
Real estate:
Construction and land development 114,007 114,575
Commercial mortgage 517,613 479,203
Residential mortgage 509,844 425,557
Other, including Industrial
Development Authority loans 81,585 65,325
Commercial 419,542 415,970
---------- ----------
Loans, net of unearned income
of $260,582 and $341,700 $5,293,235 $4,977,316
========== ==========
9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
4. ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses was (dollars in thousands):
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
1996 1995 1996 1995
------- ------- ------- -------
Balance at beginning of period $59,974 $57,356 $57,922 $58,860
Provision charged to expense 4,648 2,462 12,799 4,878
------- ------- ------- -------
64,622 59,818 70,721 63,738
Less:
Loans charged off, net of
recoveries of $906, $876,
$2,785 and $2,633 3,081 2,347 9,180 6,267
------- ------- ------- -------
Balance at September 30 $61,541 $57,471 $61,541 $57,471
======= ======= ======= =======
Percentage of net charge-offs to
average loans .24% .19% .24% .17%
Percentage of allowance for loan
losses to period-end loans 1.16 1.15
Percentage of nonperforming assets
to period-end loans .49 .56
5. FEDERAL INCOME TAX
The reconcilement of income tax computed at the federal statutory tax
rates to the provision for income tax was as follows (dollars in thousands):
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
1996 1995 1996 1995
------------ ------------ ------------ ------------
Statutory rate $15,271 35.0% $15,495 35.0% $45,604 35.0% $44,414 35.0%
Nontaxable interest on
municipal obligations (927)(2.1) (1,105)(2.5) (2,844)(2.2) (3,598)(2.8)
Other items 702 1.6 614 1.4 1,995 1.5 2,041 1.6
------- ---- ------- ---- ------- ---- ------- ----
Effective rate $15,046 34.5% $15,004 33.9% $44,755 34.3% $42,857 33.8%
======= ==== ======= ==== ======= ==== ======= ====
10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
6. PREFERRED STOCK
There are 3,000,000 shares of preferred stock, par value $10.00 per
share, authorized. The following four series of cumulative convertible stock
were outstanding:
Sept. 30 December 31 Sept. 30
Series Dividends 1996 1995 1995
--------- --------- -------- ----------- --------
A 5% 21,623 23,040 23,222
B 7% 5,990 6,000 7,000
C 7% 9,836 10,484 10,484
D 8% 28,069 29,996 30,011
------ ------ ------
65,518 69,520 70,717
====== ====== ======
7. COMMON STOCK
There are 60,000,000 shares of common stock, par value $1.00 per share,
authorized and 32,687,000, 33,951,000 and 33,945,000 shares were outstanding
at September 30, 1996, December 31, 1995 and September 30, 1995,
respectively. Options to purchase 296,612 shares of common stock were
outstanding on September 30, 1996. A total of 593,637 shares of common stock
were reserved at September 30, 1996: 95,325 shares for the conversion of
preferred stock and 498,312 shares for stock options and stock appreciation
rights.
8. EARNINGS PER SHARE
Earnings per share of common stock for the nine months ended
September 30, after giving effect to dividends on preferred stock of $34,000
in 1996 and $36,000 in 1995, are based on 33,444,000 and 34,066,000 average
shares, respectively.
9. SUBSEQUENT EVENTS
On October 29, 1996, the directors of Premier Bankshares Corporation, a
$744 million multi-bank holding company headquartered in Bluefield, Virginia,
agreed to affiliate with First Virginia Banks, Inc. The shareholders of
Premier Bankshares Corporation will receive .545 shares of First Virginia
common stock for each of their 6,650,083 outstanding shares. First Virginia
will issue approximately 3,624,295 shares to Premier Bankshares Corporation
shareholders.
A definitive agreement has been entered into and the transaction is
subject to completion of a due diligence review and the approval by Premier
Bankshares Corporation shareholders as well as state and federal regulatory
authorities. The merger would be accounted for as a purchase transaction and
is anticipated to be completed early in the second quarter of 1997.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Earnings per share for the third quarter, before a one-time Savings
Association Insurance Fund (SAIF) assessment, increased 3.5% to $.89 per
share compared to $.86 per share earned in the prior year's third quarter.
During the third quarter, the corporation was assessed an after-tax charge of
$689,000 as a result of the recently enacted bill to recapitalize SAIF, which
was depleted from the failure of the savings and loan industry in the 1980s
and early 1990s. After the charge, net income in the third quarter declined
slightly to $28,586,000 compared to the $29,269,000 earned in the prior
year's third quarter. Because of a lower number of shares outstanding,
earnings per share, after the charge, increased to $.87 per share compared to
$.86 earned in the prior year's third quarter. The return on average assets
after the charge declined slightly to 1.41% compared to 1.47% in the prior
year's third quarter while the return on average shareholders' equity
declined to 13.27% compared to 13.89% in the prior year's period. Average
assets in the third quarter increased 2% compared to the prior year's
quarter.
For the first nine months, net income of $85,543,000 or $2.56 per share
was up 2% compared to the $84,039,000 and $2.47 per share earned in 1995.
The return on average assets and return on average shareholders' equity for
the nine month period were 1.40% and 13.13%, respectively, compared to the
1.42% and 13.53% earned in the same period in 1995.
The strength in loans contributed to a further increase in the net
interest margin during the quarter which advanced 10 basis points to 5.14%
compared to the second quarter, and was up 14 basis points compared to the
prior year's third quarter. Interest rates have been stable since the first
quarter but at levels slightly higher than in 1995. This has resulted in
increased yields on loans and investments as lower-yielding assets mature and
are replaced with higher-yielding assets. Conversely, the cost of funds
declined slightly as customers have shifted funds to lower-yielding
categories in order to achieve a greater degree of liquidity. For the first
nine months, the net interest margin was 5.03% compared to 5.05% in 1995.
The corporation expects to achieve a margin in excess of 5.00% during 1996,
as it has done every year since 1978.
Average loans during the third quarter increased 5.3% compared to the
1995 third quarter and averaged $5.229 billion. Consumer installment lending
was particularly strong as the production of indirect automobile loans made
through the corporation's network of automobile dealers increased 41% over
the first nine months of 1995. Despite a seasonal decline in floor plan
loans to automobile dealers compared to the second quarter, overall
commercial loans were up 4% compared to the prior year's third quarter as
demand from small- to medium-sized businesses continues. Residential real
estate lending has slowed due to a slight increase in rates, which has
dampened refinance activity. Commercial real estate loan activity, on the
other hand, continues to be relatively strong and was primarily responsible
for the overall 3% increase in average real estate loans during the third
quarter.
Deposit growth remained sluggish at First Virginia as it has for all
banks nationwide during 1996. Average deposits grew at a 2% pace over the
prior year's third quarter with most of the growth occurring in relatively
lower-cost categories. Demand deposits and insured money market accounts
both increased 5% over 1995 levels while interest checking accounts were
12
basically unchanged. Certificates of deposit increased 4%, however, most of
this growth occurred in the shorter maturities and the corporation's no-
penalty nine-month certificate as consumers sacrificed yield in order to
maintain liquidity. The overall cost of funds declined 22 basis points to
3.51% as a consequence of lower interest rates and this shift to liquidity.
The corporation maintains a highly liquid position on both the asset and
liability sides of the balance sheet and is relatively unaffected by changes
in interest rate levels.
Asset quality continued at an excellent level with nonperforming assets
as a percentage of total loans declining to their lowest levels since 1979.
Nonperforming assets of $26.029 million equalled .49% of total loans at the
end of the third quarter compared to $28.163 million and .56% of loans at the
end of the prior year's third quarter. The ratio of annualized net charge-
offs to average loans for the third quarter increased to .24% compared to
.19% in the prior year's third quarter but were down compared to the .28% in
the second quarter. For the first nine months, the ratio increased 7 basis
points to .24% compared to the .17% in 1995.
A summary of nonperforming and delinquent loans was as follows:
Sept. 30
1996 1995
------- -------
(Dollars in thousands)
Nonaccruing loans $15,206 $15,939
Restructured loans 4,448 4,458
Foreclosed real estate 6,375 7,766
------- -------
Total $26,029 $28,163
======= =======
Percentage of total loans .49% .56%
======= =======
Loans past due 90 days or more $10,362 $ 6,122
======= =======
Percentage of total loans .20% .12%
======= =======
The provision for loan losses for the third quarter increased 89% over
1995 to $4.648 million due primarily to the increase in outstanding loans
and, to a lesser extent, a gradual increase in net charge-offs. For the nine
months, the provision for loan losses was up $7.921 million to $12.799
million, caused chiefly by the increase in outstanding loans. The allowance
for loan losses was $61.541 million at September 30, 1996, and represented
1.16% of loans compared to $57.471 million and 1.15% at September 30, 1995.
The allowance covered annualized net charge-offs 5.03 times at September 30,
1996. Loans past due 90 days or more increased slightly to $10.362 million
or .20% of outstanding loans compared to $7.265 million and .14% of loans at
the end of the prior quarter.
Noninterest income increased 7% compared to the prior year's third
quarter and was up 8% for the first nine months of 1996 compared to 1995.
Income from trust services increased 19% during the third quarter of 1996 as
the corporation's efforts to expand this area have, over the past several
13
years, begun producing solid increases in assets under management. Income
from other customer services increased 22%, mainly from electronic banking
services. Income from the corporation's new initiatives in automobile
leasing and title insurance sales produced gains in income over 1995 of 207%
and 244%, respectively.
Noninterest expenses increased 8% compared to the prior year's third
quarter primarily as a result of changes in deposit insurance premiums.
During the third quarter, the corporation was assessed a one-time charge of
$1.1 million as part of an act of Congress to recapitalize the savings and
loan insurance fund at the expense of banks. The banking industry will also
be required in future years to fund a portion of FICO bond interest costs and
this will cost First Virginia approximately $900,000 per year. These bonds
were originally issued to fund the bailout of the savings and loan industry.
In contrast, in the prior year's third quarter, the corporation recognized a
$293,000 net credit to income due to a rebate from the bank deposit insurance
fund which had become over-capitalized. Equipment expense increased 13% due
to an upgrade in the corporation's branch automation programs. The
efficiency ratio during the third quarter, including the SAIF assessment, was
57.0% and, for the first nine months, was 57.2% compared to the 58.4%
achieved in the first nine months of 1995.
During the third quarter, the corporation repurchased 294,100 shares of
stock. This caused a decline in average shareholders' equity to $861.4
million compared to the second quarter's $869.9 million. The corporation may
repurchase up to an additional 4.0 million shares under a new program
authorized by the Board of Directors in October of 1996. First Virginia's
equity to asset ratio of 10.60% remains one of the strongest of the 100
largest banks in the country.
On October 29, 1996, the directors of Premier Bankshares Corporation, a
$744 million multi-bank holding company headquartered in Bluefield, Virginia,
agreed to affiliate with First Virginia Banks, Inc. The shareholders of
Premier Bankshares Corporation will receive .545 shares of First Virginia
common stock for each of their 6,650,083 outstanding shares. First Virginia
will issue approximately 3,624,295 shares to Premier Bankshares Corporation
shareholders.
A definitive agreement has been entered into and the transaction is
subject to completion of a due diligence review and the approval by Premier
Bankshares Corporation shareholders as well as state and federal regulatory
authorities. The merger would be accounted for as a purchase transaction and
is anticipated to be completed early in the second quarter of 1997.
14
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
(Dollar amounts in thousands)
Three Months Ended Sept. 30
1996
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Investment securities-available for sale:
U.S. Government $ - $ - - %
Investment securities-held to maturity:
U.S. Government & its agencies 1,827,752 27,900 6.08
State and municipal obligations
(Fully taxable-equivalent basis) 162,356 2,770 6.83
Other (Fully taxable-equivalent basis) 1,028 25 9.77
---------- --------
Total investment securities 1,991,136 30,695 6.10
---------- --------
Loans, net of unearned income:
Installment 3,505,482 75,688 8.63
Real estate 972,326 21,708 8.93
Other (Fully taxable-equivalent basis) 751,635 16,752 8.84
---------- --------
Total loans 5,229,443 114,148 8.74
---------- --------
Mortgage loans held for sale 11,694 274 9.38
Money market investments 241,340 3,213 5.30
Other earning assets 15,790 265 6.71
---------- --------
Total earning assets and income $7,489,403 148,595 7.91
========== --------
Interest-bearing liabilities:
Interest checking/savings plan $1,287,590 5,935 1.83
Money market accounts 738,521 5,565 3.00
Savings deposits 1,158,494 6,582 2.26
Certificates of deposit:
Consumer 2,206,155 27,605 4.96
Large denomination 321,257 4,050 5.00
---------- --------
Total interest-bearing deposits 5,712,017 49,737 3.46
Short-term borrowings 203,440 2,354 4.60
Long-term indebtedness 2,052 52 10.22
---------- --------
Total interest-bearing liabilities
and interest expense $5,917,509 52,143 3.51
========== --------
Net interest income and net interest margin $ 96,452 5.14%
========
Other average balances:
Demand deposits $1,248,217
Common shareholders' equity 860,767
Total shareholders' equity 861,434
Total assets 8,105,571
15
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
(Dollar amounts in thousands)
Three Months Ended Sept. 30
1995
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Investment securities-available for sale:
U.S. Government $ - $ - - %
Investment securities-held to maturity:
U.S. Government & its agencies 1,743,253 26,405 6.01
State and municipal obligations
(Fully taxable-equivalent basis) 220,314 3,809 6.92
Other (Fully taxable-equivalent basis) 6,214 97 6.25
---------- --------
Total investment securities 1,969,781 30,311 6.09
---------- --------
Loans, net of unearned income:
Installment 3,299,512 72,588 8.79
Real estate 944,483 20,926 8.86
Other (Fully taxable-equivalent basis) 722,284 17,090 9.37
---------- --------
Total loans 4,966,279 110,604 8.92
---------- --------
Mortgage loans held for sale 16,613 314 7.57
Money market investments 367,983 5,707 6.15
Other earning assets 9,256 144 6.28
---------- --------
Total earning assets and income $7,329,912 147,080 7.99
========== --------
Interest-bearing liabilities:
Interest checking/savings plan $1,291,256 6,536 2.01
Money market accounts 704,009 5,304 2.99
Savings deposits 1,230,017 7,788 2.51
Certificates of deposit:
Consumer 2,128,296 28,657 5.34
Large denomination 303,258 3,883 5.08
---------- --------
Total interest-bearing deposits 5,656,836 52,168 3.66
Short-term borrowings 207,921 2,983 5.69
Long-term indebtedness 3,132 79 10.09
---------- --------
Total interest-bearing liabilities
and interest expense $5,867,889 55,230 3.73
========== --------
Net interest income and net interest margin $ 91,850 5.00%
========
Other average balances:
Demand deposits $1,190,101
Common shareholders' equity 841,951
Total shareholders' equity 842,660
Total assets 7,975,500
16
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
(Dollar amounts in thousands)
Nine Months Ended Sept.30
1996
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Investment securities-available for sale:
U.S. Government $ 20,494 $ 1,152 7.51%
Investment securities-held to maturity:
U.S. Government & its agencies 1,836,455 82,583 6.01
State and municipal obligations
(Fully taxable-equivalent basis) 176,594 8,985 6.78
Other (Fully taxable-equivalent basis) 1,654 101 8.17
---------- --------
Total investment securities 2,014,703 91,669 6.05
---------- --------
Loans, net of unearned income:
Installment 3,414,044 222,185 8.68
Real estate 957,057 63,457 8.84
Other (Fully taxable-equivalent basis) 749,107 50,230 8.92
---------- --------
Total loans 5,120,208 335,872 8.77
---------- --------
Mortgage loans held for sale 15,325 955 8.31
Money market investments 320,866 12,761 5.31
Other earning assets 14,290 709 6.61
---------- --------
Total earning assets and income $7,505,886 443,118 7.86
========== --------
Interest-bearing liabilities:
Interest checking/savings plan $1,311,492 18,240 1.86
Money market accounts 724,401 16,284 3.00
Savings deposits 1,173,561 20,128 2.29
Certificates of deposit:
Consumer 2,227,125 85,532 5.13
Large denomination 315,295 11,929 5.05
---------- --------
Total interest-bearing deposits 5,751,874 152,113 3.53
Short-term borrowings 203,004 6,975 4.59
Long-term indebtedness 2,328 171 9.84
---------- --------
Total interest-bearing liabilities
and interest expense $5,957,206 159,259 3.57
========== --------
Net interest income and net interest margin $283,859 5.03%
========
Other average balances:
Demand deposits $1,223,253
Common shareholders' equity 867,814
Total shareholders' equity 868,492
Total assets 8,128,799
17
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
(Dollar amounts in thousands)
Nine Months Ended Sept. 30
1995
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Investment securities-available for sale:
U.S. Government $ - $ - - %
Investment securities-held to maturity:
U.S. Government & its agencies 1,702,858 76,461 6.00
State and municipal obligations
(Fully taxable-equivalent basis) 242,639 12,747 7.00
Other (Fully taxable-equivalent basis) 6,454 284 5.87
---------- --------
Total investment securities 1,951,951 89,492 6.10
---------- --------
Loans, net of unearned income:
Installment 3,279,053 212,773 8.65
Real estate 925,264 61,405 8.85
Other (Fully taxable-equivalent basis) 740,601 53,179 9.58
---------- --------
Total loans 4,944,918 327,357 8.85
---------- --------
Mortgage loans held for sale 13,906 836 8.01
Money market investments 305,095 13,825 6.06
Other earning assets 9,180 434 6.33
---------- --------
Total earning assets and income $7,225,050 431,944 7.97
========== --------
Interest-bearing liabilities:
Interest checking/savings plan $1,316,474 20,822 2.11
Money market accounts 717,989 16,555 3.08
Savings deposits 1,272,410 25,276 2.66
Certificates of deposit:
Consumer 2,028,930 76,622 5.04
Large denomination 275,642 10,283 4.99
---------- --------
Total interest-bearing deposits 5,611,445 149,558 3.56
Short-term borrowings 204,127 8,149 5.34
Long-term indebtedness 3,391 252 9.92
---------- --------
Total interest-bearing liabilities
and interest expense $5,818,963 157,959 3.63
========== --------
Net interest income and net interest margin $273,985 5.05%
========
Other average balances:
Demand deposits $1,159,588
Common shareholders' equity 827,552
Total shareholders' equity 828,274
Total assets 7,871,074
18
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 - K
----------------------------------
a) Exhibit 11 - Statement re: Computation of Per Share
Earnings (Page 20)
Exhibit 15 - Independent Accountants' Review Report
from Ernst & Young LLP (Page 21)
Exhibit 15A - Letter of Acknowledgement from
Ernst & Young LLP, Independent Accountants (Page 22)
Exhibit 27 - Financial Data Schedule (Page 23)
b) A Form 8-K was not required to be filed during the quarter
ended September 30, 1996.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by its
principal financial officer thereunto duly authorized.
FIRST VIRGINIA BANKS, INC.
/s/ Richard F. Bowman
November 12, 1996 __________________________
Richard F. Bowman,
Senior Vice President
and Treasurer
19
EXHIBIT 11
FIRST VIRGINIA BANKS, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
1996 1995 1996 1995
------- ------- ------- -------
(In thousands, except per-share data)
PRIMARY:
Average common shares outstanding 32,733 33,940 33,362 33,986
Dilutive effect of stock options 89 81 82 80
------- ------- ------- -------
Total average common shares 32,822 34,021 33,444 34,066
======= ======= ======= =======
Net income $28,586 $29,269 $85,543 $84,039
Provision for preferred dividends 11 12 34 36
------- ------- ------- -------
Net income applicable to common
stock $28,575 $29,257 $85,509 $84,003
======= ======= ======= =======
Net income per share of common
stock $.87 $.86 $2.56 $2.47
======= ======= ======= =======
FULLY DILUTED:
Average common shares outstanding 32,733 33,940 33,362 33,986
Dilutive effect of stock options 93 85 84 85
Conversion of preferred stock 95 103 98 104
------- ------- ------- -------
Total average common shares 32,921 34,128 33,544 34,175
======= ======= ======= =======
Net income $28,586 $29,269 $85,543 $84,039
======= ======= ======= =======
Net income per share of common
stock $.87 $.86 $2.55 $2.46
======= ======= ======= =======
20
EXHIBIT 15
Independent Accountants' Review Report
Board of Directors
First Virginia Banks, Inc.
We have reviewed the accompanying condensed consolidated balance
sheets of First Virginia Banks, Inc. as of September 30, 1996 and
1995, the related condensed consolidated statements of income for the
three-month and nine-month periods ended September 30, 1996 and 1995,
and the related condensed consolidated statements of cash flows and
shareholders' equity for the nine-month periods ended September 30,
1996 and 1995. These financial statements are the responsibility of
the Corporation's management.
We conducted our reviews in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data, and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we
do not express such an opinion.
Based on our reviews, we are not aware of any material modifications
that should be made to the accompanying condensed consolidated
financial statements referred to above for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of First Virginia
Banks, Inc. as of December 31, 1995, and the related consolidated
statements of income, shareholders' equity, and cash flows for the
year then ended (not presented herein) and in our report dated
January 17, 1996, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information
set forth in the accompanying condensed consolidated balance sheet as
of December 31, 1995, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been
derived.
/S/ Ernst & Young LLP
_____________________
Ernst & Young LLP
Washington, D. C.
October 29, 1996
21
EXHIBIT 15A
ERNST & YOUNG LLP
1225 Connecticut Avenue, N.W.
Washington, D.C. 20036
November 12, 1996
Board of Directors
First Virginia Banks, Inc.
We are aware of the incorporation by reference in the First Virginia
Banks, Inc. Post-effective Amendment No. 1 to Registration Statement
Number 33-38024 on Form S-8 dated January 10, 1994, Registration Statement
Number 33-51587 on Form S-3 dated December 20, 1993, Registration
Statement Number 33-54802 on Form S-8 dated November 20, 1992,
Registration Statement Number 33-31890 on form S-3 dated November 1, 1989,
Post-effective Amendment Number 2 to Registration Statement Number 2-77151
on Form S-8 dated October 30, 1987, Registration Statement Number 33-17358
on Form S-8 dated September 28, 1987 and Registration Statement Number 33-
15360 on Form S-3 dated June 26, 1987 of our reports dated April 9, 1996,
July 9, 1996, and October 9, 1996 relating to the unaudited condensed
consolidated interim financial statements of First Virginia Banks, Inc.,
that are included in its Forms 10-Q for the quarters ended March 31, 1996,
June 30, 1996 and September 30, 1996.
Pursuant to Rule 436 (c) of the Securities Act of 1933, our reports
are not a part of the registration statement prepared or certified by
accountants within the meaning of Section 7 or 11 of the Securities Act of
1933.
/s/ Ernst & Young LLP
_____________________
Ernst & Young LLP
22