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, 1998
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, 1998, there were 50,078,842 shares of common
stock outstanding.
This report contains a total of 28 pages.
1
INDEX
Page
---------
PART I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - September 30,
1998 and 1997, (Unaudited), and December 31, 1997 3/ 4
Condensed Consolidated Statements of Income - Three
months and nine months ended September 30, 1998
and 1997 (Unaudited) 5/ 6
Condensed Consolidated Statements of Shareholders'
Equity - Nine months ended September 30, 1998
and 1997 (Unaudited) 7
Condensed Consolidated Statements of Cash Flows - Nine
months ended September 30, 1998 and 1997 (Unaudited) 8
Notes to Condensed Consolidated Financial
Statements (Unaudited) 9/13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13/22
PART II - Other Information
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K
Signatures 24
Exhibit 3(ii) - Bylaws
(Included in original SEC filing only)
Exhibit 12 - Statement re: Computation of Ratios 25
Exhibit 15 - Independent Accountants' Review
Report 26
Exhibit 15A - Letter of Acknowledgement of
Independent Accountants 27
Exhibit 27 - Financial Data Schedules 28
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
Sept.30 December 31 Sept.30
1998 1997 1997
---------- ---------- ----------
(Unaudited) (Unaudited)
(In thousands)
ASSETS
Cash and due from banks $ 349,051 $ 386,832 $ 355,830
Money market investments 166,844 243,162 242,675
---------- ---------- ----------
Total cash and cash equivalents 515,895 629,994 598,505
---------- ---------- ----------
Loans held for sale 65,595 18,953 20,745
Investment securities - available for sale 22,551 - -
Investment securities - held to maturity
(market values of $2,207,194, $1,954,155
and $1,902,463) 2,184,424 1,946,944 1,896,091
Loans, net of unearned income 6,009,999 5,937,978 5,946,889
Allowance for loan losses (69,346) (68,064) (68,126)
---------- ---------- ----------
Net loans 5,940,653 5,869,914 5,878,763
---------- ---------- ----------
Other earning assets 22,414 21,444 23,269
Premises and equipment 161,230 164,301 164,494
Intangible assets 188,431 174,976 178,197
Accrued income and other assets 188,523 185,111 156,441
---------- ---------- ----------
Total Assets $9,289,716 $9,011,637 $8,916,505
========== ========== ==========
3
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
Sept.30 December 31 Sept.30
1998 1997 1997
---------- ---------- ----------
(Unaudited) (Unaudited)
(In thousands)
LIABILITIES
Deposits:
Noninterest-bearing $1,522,573 $1,460,784 $1,409,927
Interest-bearing:
Interest checking/savings plan 1,381,608 1,391,962 1,323,206
Money market accounts 928,194 772,067 745,254
Savings deposits 1,137,860 1,124,058 1,158,470
Consumer certificates of deposit 2,446,088 2,444,132 2,492,180
Large denomination
certificates of deposit 441,986 426,839 410,034
---------- ---------- ----------
Total deposits 7,858,309 7,619,842 7,539,071
Short-term borrowings 317,327 251,687 272,393
Long-term indebtedness 3,439 2,826 3,092
Accrued interest and other liabilities 125,710 126,126 106,093
---------- ---------- ----------
Total Liabilities 8,304,785 8,000,481 7,920,649
---------- ---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock, $10 par value 537 583 617
Common stock, $1 par value 50,345 51,817 51,790
Capital surplus 15,272 92,971 92,522
Retained earnings 916,514 865,785 850,927
Accumulated other comprehensive income 2,263 - -
---------- ---------- ----------
Total Shareholders' Equity 984,931 1,011,156 995,856
---------- ---------- ----------
Total Liabilities and Shareholders' Equity $9,289,716 $9,011,637 $8,916,505
========== ========== ==========
See notes to condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended
Sept.30 Sept.30
1998 1997 1998 1997
-------- -------- -------- --------
(In thousands, except per-share data)
Interest income:
Loans $131,467 $131,226 $387,767 $368,130
Loans held for sale 275 241 873 709
Investment securities -
available for sale 239 - 612 -
Investment securities -
held to maturity 29,844 27,182 86,547 83,362
Money market investments 6,924 5,866 21,360 14,540
Other earning assets 389 386 1,124 1,062
-------- -------- -------- --------
Total interest income 169,138 164,901 498,283 467,803
-------- -------- -------- --------
Interest expense:
Deposits 56,093 55,130 165,388 155,742
Short-term borrowings 4,108 3,217 10,746 8,751
Long-term indebtedness 91 58 226 166
-------- -------- -------- --------
Total interest expense 60,292 58,405 176,360 164,659
-------- -------- -------- --------
Net interest income 108,846 106,496 321,923 303,144
Provision for loan losses 5,512 3,831 15,651 12,421
-------- -------- -------- --------
Net interest income after provision
for loan losses 103,334 102,665 306,272 290,723
-------- -------- -------- --------
5
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Continued) (Unaudited)
Three Months Ended Nine Months Ended
Sept.30 Sept.30
1998 1997 1998 1997
-------- -------- -------- --------
(In thousands, except per-share data)
Net interest income after provision
for loan losses 103,334 102,665 306,272 290,723
-------- -------- -------- --------
Noninterest income:
Service charges on deposit
accounts 11,419 11,164 33,218 31,422
Insurance premiums and
commissions 2,100 1,620 5,445 4,907
Credit card service charges
and fees 3,248 3,032 9,233 8,653
Trust services 2,508 2,325 7,743 6,879
Electronic banking service fees 3,302 2,703 9,115 7,692
Income from other customer
services 3,589 3,795 10,695 10,972
Securities gains before income
tax provisions of $161,$2,
$340 and $11 460 4 971 31
Other 2,287 5,164 8,112 7,491
-------- -------- -------- --------
Total noninterest income 28,913 29,807 84,532 78,047
-------- -------- -------- --------
Noninterest expense:
Salaries and employee benefits 45,491 43,907 133,691 124,905
Occupancy 6,318 6,229 18,842 17,984
Equipment 7,453 6,812 21,500 18,955
Advertising 2,425 2,161 7,136 5,860
Printing and supplies 1,859 1,728 5,275 5,076
Credit card processing fees 2,472 2,218 6,782 6,205
FDIC assessment 284 284 818 818
Amortization of intangibles 3,799 3,377 10,858 8,064
Other 12,922 12,175 37,814 34,125
-------- -------- -------- --------
Total noninterest expense 83,023 78,891 242,716 221,992
-------- -------- -------- --------
Income before income taxes 49,224 53,581 148,088 146,778
Provision for income taxes 17,280 18,863 52,158 51,310
-------- -------- -------- --------
NET INCOME $ 31,944 $ 34,718 $ 95,930 $ 95,468
======== ======== ======== ========
Net income per share of common stock
Basic $ .62 $ .67 $ 1.86 $ 1.90
Diluted .62 .66 1.85 1.89
Average shares of common stock outstanding
Basic 51,198 52,184 51,621 50,224
Diluted 51,490 52,478 51,925 50,500
See notes to condensed consolidated financial statements.
6
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
Accum-
ulated
Pre- Other Total
ferred Common Compre- Share-
Stock Stock Capital Retained hensive holders'
$10 Par $1 Par Surplus Earnings Income Equity
------- ------- -------- -------- ------ ----------
(Dollars in thousands)
Balance January 1, 1997... $ 647 $48,612 $ 27,327 $794,691 $ - $ 871,277
Net income*............... - - - 95,468 - 95,468
Increase attributable to
an acquired bank......... 5,435 157,190 162,625
Conversion of preferred
to common stock......... (30) 6 24 - - -
Issuance of shares for
stock options and stock
appreciation rights..... - 21 489 - - 510
Common stock repurchases
and related transactions - (2,284) (92,508) - (94,792)
Dividends declared:
Preferred stock......... - - - (31) - (31)
Common stock $0.77 per share - - - (39,201) - (39,201)
------- ------- -------- -------- ------ ----------
Balance Sept.30, 1997..... $ 617 $51,790 $ 92,522 $850,927 $ - $ 995,856
======= ======= ======== ======== ====== ==========
Balance January 1, 1998... $ 583 $51,817 $ 92,971 $865,785 $ - $1,011,156
Comprehensive income:
Net income.............. - - - 95,930 - 95,930
Unrealized gains on
investment securities
available for sale,
net of tax of $1,230 - - - - 2,263 2,263
----------
Total comprehensive income - - - - - 98,193
----------
Conversion of preferred
to common stock......... (46) 10 36 - - -
Issuance of shares for
stock options............ - 32 516 - - 548
Common stock repurchases
and related transactions - (1,514) (78,251) - - (79,765)
Dividends declared:
Preferred stock......... - - - (27) - (27)
Common stock $0.88 per share - - - (45,174) - (45,174)
------- ------- -------- -------- ------ ----------
Balance Sept.30, 1998..... $ 537 $50,345 $ 15,272 $916,514 $2,263 $ 984,931
======= ======= ======== ======== ====== ==========
* There are no adjustments to net income to determine comprehensive income
for the Nine months ended September 30, 1997.
See notes to condensed consolidated financial statements.
7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended
Sept.30
1998 1997
-------- --------
(In thousands)
Net cash provided by operating activities $ 75,727 $ 126,487
-------- --------
Investing activities:
Proceeds from the maturity of
held to maturity securities 1,966,447 810,930
Proceeds from the maturity or sale of
available for sale securities 118,350 -
Purchase of held to maturity securities (2,332,068) (723,718)
Purchase of available for sale securities (12,853) -
Net decrease in loans (86,391) (84,845)
Net increase in other earning assets (970) (121)
Purchases of premises and equipment (12,175) (11,337)
Sales of premises and equipment 4,035 3,699
Acquisition of banks, net of cash acquired - 38,545
Increase in intangible assets (22,923) (238)
Other 7,824 (241)
-------- --------
Net cash used for investing activities (370,724) 32,674
-------- --------
Financing activities:
Net increase (decrease) in deposits 238,467 (157,080)
Net increase in short-term borrowings 65,640 27,734)
Principal payments on long-term borrowings (715) (785)
Proceeds from long-term borrowings 1,328 -
Cash dividends - common, $.86 and $.76 per share (44,579) (38,002)
Cash dividends - preferred (27) (32)
Stock repurchases and related transactions (79,764) (94,792)
Proceeds from issuance of common stock 548 510
-------- --------
Net cash provided by (used for)
financing activities 180,898 (262,447)
-------- --------
Net decrease in cash and
cash equivalents (114,099) (103,286)
Cash and cash equivalents at beginning of year 629,994 701,791
-------- --------
Cash and cash equivalents at end of period $515,895 $598,505
======== ========
See notes to condensed consolidated financial statements.
8
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 1997 have been reclassified for
comparative purposes.
2. ACQUISITIONS
On May 24, 1997, the acquisition of Premier Bankshares Corporation by the
corporation was consummated. Premier Bankshares Corporation was the bank
holding company for Premier Bank-South, N.A., in Wytheville, Virginia; Premier
Bank-Central, N.A., in Honaker, Virginia; and Premier Bank, N.A., in Tazewell,
Virginia. These banks became wholly owned subsidiary banks of the corporation
as a result of the acquisition and have since been merged into various existing
banks of First Virginia. Shares of the corporation's common stock totaling
5.431 million were issued and were valued at $29.96 per share. The acquisition
was accounted for using the purchase method of accounting and, accordingly, the
financial information for 1997 has not been restated.
3. INVESTMENT SECURITIES
The following reflects the amortized cost of securities and the related
approximate market values (in thousands):
Sept.30, 1998 Sept 30, 1997
Amortized Market Amortized Market
Cost Value Cost Value
---------- ---------- ---------- ----------
Securities available for sale:
U.S. Government and
its agencies $ 12,068 $ 12,230 $ - $ -
Other 6,990 10,321 - -
---------- ---------- ---------- ----------
$ 19,058 $ 22,551 $ - $ -
========== ========== ========== ==========
Securities held to maturity:
U.S. Government and
its agencies $1,996,312 $2,014,883 $1,722,734 $1,726,621
State and municipal obligations 187,830 192,023 172,111 174,566
Other 282 288 1,246 1,276
---------- ---------- ---------- ----------
$2,184,424 $2,207,194 $1,896,091 $1,902,463
========== ========== ========== ==========
9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
4. LOANS
Loans consisted of (in thousands):
Sept.30
1998 1997
---------- ----------
Consumer:
Automobile installment $2,654,135 $2,401,161
Home equity, fixed- and variable-rate 930,422 984,743
Revolving credit plans,
including credit cards 131,532 198,634
Other 345,105 394,595
Real estate:
Construction and land development 122,673 126,514
Commercial mortgage 577,745 595,159
Residential mortgage 619,000 656,386
Other, including Industrial
Development Authority loans 99,001 96,854
Commercial 530,386 492,843
---------- ----------
Loans, net of unearned income
of $161,225 and $212,182 $6,009,999 $5,946,889
========== ==========
10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
5. 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
1998 1997 1998 1997
------- ------- ------- -------
Balance at beginning of period $68,533 $68,634 $68,064 $62,761
Increase attributable to
an acquired bank - - - 5,551
Increase attributable to
acquired loans - - 679 -
Provision charged to expense 5,512 3,831 15,651 12,421
------- ------- ------- -------
74,045 72,465 84,394 80,733
Less:
Loans charged off, net of
recoveries of $1,053, $1,112,
$3,304 and $2,895 4,699 4,339 15,048 12,607
------- ------- ------- -------
Balance at September 30 $69,346 $68,126 $69,346 $68,126
======= ======= ======= =======
Percentage of annualized net
charge-offs to average loans .31% .29% .34% .30%
Percentage of allowance for loan
losses to period-end loans 1.15 1.15
Percentage of nonperforming assets
to period-end loans .33 .43
6. FEDERAL INCOME TAX
The reconcilement of income tax computed at the federal statutory tax
rates to the provision for income taxes was as follows (dollars in thousands):
Three Months Ended Nine Months Ended
Sept.30 Sept.30
1998 1997 1998 1997
------------- ------------- ------------- -------------
Amount Pct Amount Pct Amount Pct Amount Pct
------- ----- ------- ----- ------- ----- ------- -----
Statutory rate $17,229 35.0% $18,754 35.0% $51,831 35.0% $51,372 35.0%
Nontaxable interest on
municipal obligations (451)(0.9) (1,047)(2.0) (2,421)(1.6) (2,925)(2.0)
Other items 502 1.0 1,156 2.2 2,748 1.9 2,863 2.0
------- ----- ------- ----- ------- ----- ------- -----
Effective rate $17,280 35.1% $18,863 35.2% $52,158 35.3% $51,310 35.0%
======= ===== ======= ===== ======= ===== ======= =====
11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
7. PREFERRED AND COMMON STOCK
There are 3,000,000 shares of preferred stock, par value $10.00 per
share, authorized. The following four series of cumulative convertible stock
were outstanding:
Sept.30 December 31 Sept.30
Series Dividends 1998 1997 1997
--------- --------- -------- ----------- --------
A 5% 18,826 20,111 20,404
B 7% 3,340 4,890 4,890
C 7% 9,786 9,788 9,836
D 8% 21,702 23,534 26,589
------- ------ ------
53,654 58,323 61,719
======= ====== ======
The Series A, Series B and Series D shares are convertible into two and
one fourth shares of common stock, and the Series C shares are convertible
into one and eight-tenths shares of common stock. All of the preferred stock
may be redeemed at the option of the corporation for $10.00 per share.
There are 175,000,000 shares of common stock, par value $1.00 per share,
authorized and 50,345,000, 51,817,000 and 51,790,000 shares were outstanding
at September 30, 1998, December 31, 1997, and September 30, 1997,
respectively. Options to purchase 602,536 shares of common stock were
outstanding on September 30, 1998. A total of 3,274,830 shares of common
stock were reserved at September 30, 1998: 116,319 shares for the conversion
of preferred stock and 3,158,511 shares for stock options.
The corporation has adopted a shareholder rights plan which, under
certain circumstances, will give the holders of the corporation's common
stock the right to purchase shares of its preferred stock or other
securities. The rights will become exercisable if a person or entity acquires
20% or more of the corporation's voting stock, unless it is acquired pursuant
to an offer for all outstanding shares of common stock at a price and on
terms determined by the Board of Directors to be adequate and in the best
interests of the corporation and its shareholders.
If the rights become exercisable, the holder of each share of common
stock, except the person or entity acquiring 20% or more of the voting stock,
will have the right to receive upon exercise that number of one one-
hundredths share of preferred stock equal to the number of shares of common
stock having a market value of two times the exercise price of the right, to
the extent available, and then an equal number of an equivalent security.
Pursuant to recent amendments to the plan, the exercise price for each right
is now $450.00.
The corporation may redeem the rights, at its option, at any time prior
to the date they become exercisable. The rights expire on August 8, 2008. As
of September 30, 1998, each outstanding share of common stock had 4/9ths of a
right attached thereto.
12
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
8. EARNINGS PER SHARE
Earnings per share computations are as follows (in thousands, except per
share data):
Three Months Ended Nine Months Ended
Sept.30 Sept.30
1998 1997 1998 1997
------- ------- ------- -------
Basic:
Average common shares outstanding 51,198 52,184 51,621 50,224
======= ======= ======= =======
Net income $31,944 $34,718 $95,930 $95,468
Preferred stock dividends 9 10 27 31
------- ------- ------- -------
Net income applicable to
common stock $31,935 $34,708 95,903 95,437
======= ======= ======= =======
Net income per share of common stock $ .62 $ .67 $ 1.86 $ 1.90
======= ======= ======= =======
Diluted:
Average common shares outstanding 51,198 52,184 51,621 50,224
Dilutive effect of stock options 175 155 184 136
Conversion of preferred stock 117 139 120 140
------- ------- ------- -------
Total average common shares 51,490 52,478 51,925 50,500
======= ======= ======= =======
Net income $31,944 $34,718 $95,930 $95,468
======= ======= ======= =======
Net income per share of common stock $ .62 $ .66 $ 1.85 $ 1.89
======= ======= ======= =======
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
QUARTERLY RESULTS
Net income in the third quarter was $31.944 million, a decline of 8.0%
compared to the $34.718 million earned in the prior year's third quarter.
However, the third quarter of 1997 included an after-tax gain of $2.066
million from the sale of three branches related to the acquisition of Premier
Bankshares Corporation and a $1.500 million after-tax gain from the sale of
mortgage servicing rights. Excluding these non-recurring items, net income
declined 1.4%. The lower number of outstanding shares, a direct result of
the corporation's share repurchase program, caused diluted earnings per share
to decline at a lesser rate of 6% to $.62 per share compared to the $.66
earned in the prior year's third quarter but was equal to the $.62 earned in
the second quarter of 1998. The return on assets during the third quarter
was 1.37% compared to the 1.55% earned in the prior year, while the return on
equity was 12.53% compared to 13.89% in the prior year's third quarter.
13
For the first nine months of 1998, net income was $95.930 million, up
slightly compared to the $95.468 million earned in 1997. Average year to
date outstanding shares increased in 1998 as a result of the issuance of
shares for the Premier Bankshares acquisition in mid 1997. As a consequence,
earnings per share declined 2% to $1.85 per share compared to the $1.89 per
share earned in 1997. The return on average assets for the nine-month period
was 1.39% compared to 1.49% in 1997, and the return on average equity was
12.45% compared to 13.76% in 1997.
In contrast to the preceding three quarters, loan demand was strong in
the third quarter with average loans rising to $6.018 billion, an 8.7%
annualized rate of growth over the second quarter. Indirect automobile loans
rose at a 21% annualized rate over the second quarter as the corporation
experienced its best quarter ever in new automobile loan production.
Commercial loans declined slightly despite strong loan demand due to a
normal, seasonal decline in loans to automobile dealers for inventory
financing. The corporation also had success in promoting its 15-year fixed-
rate mortgage loan product, which grew at a 108% annualized rate over the
second quarter. At the end of the quarter, $51.5 million in credit card
loans were reclassified into the loans held for sale category as the
corporation prepared to sell one of its affinity card programs as required by
an agreement with the bank's partner. This sale, scheduled for early in the
fourth quarter, will produce a one-time gain of approximately $1.4 million.
Average deposits increased 3.7% in the third quarter to $7.869 billion
compared to $7.589 billion in the prior year's third quarter primarily due to
the acquisition of 12 branches on Maryland's eastern shore in the first and
second quarters. In addition, the corporation is experiencing strong new
account activity in its Virginia branches caused by the acquisitions and
conversions by out-of-state banks of three of the five largest banks in
Virginia. The other major bank holding company in Virginia is scheduled to
be acquired in December, leaving First Virginia as the only remaining large
bank holding company headquartered in the state. The corporation's super-
community banking orientation with local management and boards of directors
places it in a favorable position to capitalize on these acquisitions.
Lower-cost transaction accounts, such as regular and interest checking
plans and insured money market accounts, experienced the most growth over the
past year and have permitted the corporation to keep its overall cost of
funds one of the lowest in the industry. In the third quarter, the cost of
funds declined two basis points to 3.57% compared to the prior year's third
quarter and, for the first nine months, the cost of funds has risen only two
basis points. The net interest margin declined five basis points to 5.14%
compared to the 5.19% in the second quarter and declined 12 basis points
compared to the 5.26% earned in the prior year's third quarter. Only a
handful of banks ever achieve net interest margins in excess of 5.00%, a
level the corporation has achieved every year since 1978.
Asset quality remains excellent. Nonperforming assets declined 23% from
a year ago. Total nonperforming assets at September 30, 1998, were $19.784
million representing a record low .33% of outstanding loans, compared to
$25.603 million and .43% of outstanding loans as of September 30, 1997 and
$20.384 million and .34% of loans at the end of the prior quarter. Potential
problem loans, those loans which are currently performing in accordance with
contractual terms but where management has concerns over the ability of the
borrower to continue to comply with those terms, totaled $28.001 million at
September 30, 1998, a 17% decline from the $33.840 million at December 31,
1997.
14
A summary of nonperforming and delinquent loans is as follows:
1998 1997
------- -------
(Dollars in thousands)
Nonaccruing loans $12,953 $15,476
Restructured loans 2,245 4,561
Foreclosed real estate 4,586 5,566
------- -------
Total $19,784 $25,603
======= =======
Percentage of total loans .33% .43%
======= =======
Loans past due 90 days or more $17,929 $13,229
======= =======
Percentage of total loans .30% .22%
======= =======
Annualized net charge-offs in the third quarter declined five basis
points to .31% compared to the second quarter and were up two basis points
compared to the .29% achieved in the third quarter of 1997. Net charge-offs
declined in every category of loans during the quarter reflecting the overall
excellent quality of First Virginia's loan portfolio. For the first nine
months, net charge-offs were .34% of loans, up slightly from the .30% in the
first nine months of 1997. The provision for loan losses increased 44% to
$5.512 million compared to the prior year's third quarter of $3.831 million
primarily as a result of the increase in outstanding loans. The allowance
for loan losses remained at 1.15% of outstanding loans, unchanged from the
prior year's third quarter and from the second quarter of 1998 and covers
annualized net charge-offs 3.46 times. Loans past due 90 days or more
increased from the end of the second quarter to $17.929 million, and
represented .30% of outstanding loans at September 30, 1998, compared to
$13.229 million and .22% of outstanding loans at September 30, 1997.
Noninterest income increased 10.2% in the third quarter, excluding the
gains on the sale of branches and mortgage servicing rights in the prior
year's third quarter. Income from the corporation's insurance activities
rose 29.6% in the third quarter with most of that coming from the
corporation's insurance agency whose income was up 34.2% during the first
nine months. Title insurance sales rose 50.8%, commercial lines advanced
25.7% and insurance products sold through the banks rose 34.7%. Income from
trust and asset management rose 7.9% during the quarter and was up 12.6% for
the first nine months. Fee income from electronic banking services rose
22.2% during the quarter. The largest source of noninterest income, service
charges on deposit accounts, increased a modest 2.3%. A comprehensive review
of deposit service charge methods was completed late in the third quarter,
and the implementation of new value-based methods should result in double
digit increases in these fees over the next several quarters. During the
quarter, some equity securities were sold producing a gain of $460 thousand.
15
Noninterest expenses increased 5.2% over the prior year's third quarter.
Salaries and employee benefit expenses rose 3.6% compared to the prior year's
third quarter. Despite adding a net four branches since the end of the prior
year's third quarter, including the 12 branches acquired on the Maryland
eastern shore, the number of employees declined 1%, reflecting efficiencies
achieved in consolidating operations and enhancing technology in various
areas of the bank. Equipment expense increased 9.4%, primarily as a result
of Year 2000 upgrades. Amortization of intangibles increased 12.5% during
the quarter and is up 34.6% for the first nine months. All of the
corporation's most recent acquisitions have been accounted for using the
purchase method, giving rise to goodwill and other intangibles that are
written off over lives of 5-25 years. The corporation continues to maintain
an efficiency ratio in the top quartile of all banks. In the third quarter
the efficiency ratio was 57.3%, and for the first nine months the ratio was
56.9% compared to 55.9% in the first nine months of 1997.
Total shareholders' equity declined by 1% to $984.931 million at
September 30, 1998, compared to $995.856 million at September 30, 1997.
During the third quarter of 1998, the corporation resumed the stock
repurchase program previously authorized by the Board of Directors.
Consequently, the corporation purchased 1,513,600 shares of stock in the
quarter resulting in the slight decline in total shareholders' equity. There
remain an additional 1,752,950 shares in the current authorization and, as
market conditions permit, the corporation will continue to purchase shares
under the stock repurchase program. At the end of the third quarter, First
Virginia's equity to asset ratio was an exceptionally strong 10.60% compared
to an average of 8.57% for the 184 largest banking companies surveyed by
Keefe, Bruyette & Woods at the end of the second quarter.
YEAR 2000
The Year 2000 issue is the result of computer programs using two digits
rather than four to define the applicable year. Any of the corporation's
computer programs that have time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations,
including among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
First Virginia began preparing its computer systems and applications for
the Year 2000 in 1993. This process involves modifying or replacing the
corporation's affected hardware and software as well as ensuring that
external service providers, significant vendors and large customers are
taking the appropriate action to remedy their Year 2000 issues. First
Virginia developed a five phase approach to resolve it's Year 2000 issues.
This approach involves the following phases: awareness, assessment,
renovation, validation and implementation. The awareness and assessment
phases involve identifying the systems affected, analyzing the scope and
magnitude of the problem, and developing an action plan to address each area
affected. Management has identified 67 systems as "mission critical," which
are defined as those systems which would severely impair operations or cause
a significant loss of revenue if not remediated. This includes systems
maintained on the corporation's own computers as well as those systems
processed by external service providers. To date, First Virginia has
completed all aspects of the awareness and assessment phases.
16
The renovation phase involves modifying or replacing the corporation's
affected systems. Of the systems identified as mission critical, 85% have
completed the renovation phase. The final two phases, validation and
implementation, involve testing and certification that the systems are
compliant with all Year 2000 issues and are also 85% completed. The
remainder of the mission-critical systems are expected to be tested and
certified by the end of March, 1999. The corporation is also developing a
business resumption and remediation contingency plan for use in the event the
Year 2000 mission-critical systems fail to achieve Year 2000 readiness, which
will be in place by September 30, 1999.
First Virginia has contacted non-mission-critical external service
providers, significant suppliers and large customers to determine the extent
to which they may be affected by Year 2000 issues and to determine whether
they are taking the appropriate steps to remedy their own Year 2000 issues.
To date, First Virginia is not aware of any external service providers,
vendors or large customers whose failure to resolve their own Year 2000
issues would have a material adverse effect on First Virginia's results of
operations. However, the corporation has no means of ensuring that external
agents or large customers will be ready and the effect of their non-
compliance is not determinable. The corporation will continue to monitor the
progress of non-mission-critical external service providers, significant
suppliers and large customers throughout the remainder of 1998 and 1999 and
will determine if a contingency plan is necessary for those external parties
by September 30, 1999.
Management of the corporation believes it has an effective program in
place to resolve the Year 2000 issue in a timely manner. The services of an
independent third party have been engaged to review the corporation's plan
and readiness for Year 2000 mission-critical issues. In addition, the
corporation's primary regulator, the Federal Reserve, conducts a quarterly
examination and evaluation of the corporation's progress. As noted above,
all phases have not yet been completed. In the event that First Virginia is
unable to complete all necessary phases of the plan, First Virginia may be
unable to process transactions, invoice customers or collect payments and
perform other operations. In addition, disruptions in the economy generally
resulting from Year 2000 issues could also materially adversely affect the
corporation. The corporation currently has no contingency plans in place in
the event it does not complete all phases of the Year 2000 program but is
developing such plans in accordance with the schedule outlined above.
First Virginia estimates that the total cumulative cost of the project
will be approximately $24 million of which $17 million has already been
expended. This includes both internal and external personnel costs related
to modifying the systems, as well as the cost of purchasing or leasing
hardware or software. Purchased hardware and software will be capitalized in
accordance with normal policy. Personnel and all other costs related to the
project are being expensed as incurred. These costs are not expected to have
a material effect on the corporation's results of operations.
The costs of the project and the expected completion dates are based on
management's best estimates, which were derived utilizing numerous
assumptions of future events, including the continued availability of certain
resources and other factors. However, there can be no guarantee that these
estimates will be achieved, and actual results could differ materially from
those anticipated. Specific factors that could influence the results may
include, but are not limited to, the availability and cost of personnel
17
trained in this area, the ability to locate and correct all relevant computer
codes, the availability of alternative systems in the event of failure of
mission-critical systems, the ability of third-party intermediaries to be
Year 2000 ready, and similar uncertainties.
FORWARD-LOOKING STATEMENTS
Certain statements in this discussion may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements involve known and unknown risks
including, but not limited to, changes in general economic and business
conditions, interest-rate fluctuations, competition within and without the
banking industry, new products and services in the banking industry, risks
inherent in making loans, including repayment risks and fluctuating
collateral values, changing trends in customer profiles and changes in laws
and regulations applicable to the corporation. Although the corporation
believes that its expectations with respect to the forward-looking statements
are based upon reasonable assumptions within the bounds of its knowledge of
its business and operations, there can be no assurance that actual results,
performance or achievements of the corporation will not differ materially
from any future results, performance or achievements expressed or implied by
such forward-looking statements.
18
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
(Dollars in thousands)
Three Months Ended Sept.30
1998
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Investment securities-available for sale:
U.S. Government and its agencies $ 12,809 $ 176 5.44%
Other 10,388 63 2.45
Investment securities-held to maturity:
U.S. Government and its agencies 1,820,145 27,775 6.08
State and municipal obligations
(Fully taxable-equivalent basis) 158,980 2,711 6.82
Other (Fully taxable-equivalent basis) 707 15 8.41
---------- --------
Total investment securities 2,003,029 30,740 6.11
---------- --------
Loans, net of unearned income:
Installment 4,028,554 88,213 8.34
Real estate 1,089,609 24,207 8.89
Other (Fully taxable-equivalent basis) 900,277 19,709 8.77
---------- --------
Total loans 6,018,440 132,129 8.74
---------- --------
Mortgage loans held for sale 14,119 275 7.81
Money market investments 495,558 6,924 5.54
Other earning assets 22,149 389 7.03
---------- --------
Total earning assets and income $8,553,295 170,457 7.94
========== --------
Interest-bearing liabilities:
Interest checking/savings plan $1,404,620 4,953 1.40
Money market accounts 913,048 7,963 3.46
Savings deposits 1,146,869 6,555 2.27
Consumer certificates of deposit 2,455,237 30,794 4.97
Large denomination
certificates of deposit 435,458 5,828 5.31
---------- --------
Total interest-bearing deposits 6,355,259 56,093 3.50
Short-term borrowings 336,997 4,108 4.84
Long-term indebtedness 3,584 90 10.10
---------- --------
Total interest-bearing liabilities
and interest expense $6,695,840 60,291 3.57
========== --------
Net interest income and net interest margin $110,166 5.14%
========
Other average balances:
Demand deposits $1,513,307
Common shareholders' equity 1,014,258
Total shareholders' equity 1,019,750
Total assets 9,356,096
19
AVERAGE BALANCES AND INTEREST RATES (Continued) (Unaudited)
(Dollar amounts in thousands)
Three Months Ended Sept.30
1997
------------------------------
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 1,618,743 24,814 6.10
State and municipal obligations
(Fully taxable-equivalent basis) 176,458 3,238 7.34
Other (Fully taxable-equivalent basis) 8,196 44 2.13
---------- --------
Total investment securities 1,803,397 28,096 6.23
---------- --------
Loans, net of unearned income:
Installment 3,798,141 83,773 8.76
Real estate 1,252,222 27,432 8.76
Other (Fully taxable-equivalent basis) 904,071 20,792 9.10
---------- --------
Total loans 5,954,434 131,997 8.84
---------- --------
Mortgage loans held for sale 13,082 241 7.38
Money market investments 422,936 5,866 5.50
Other earning assets 24,114 386 6.41
---------- --------
Total earning assets and income $8,217,963 166,586 8.08
========== --------
Interest-bearing liabilities:
Interest checking/savings plan $1,354,972 5,841 1.71
Money market accounts 736,953 5,684 3.06
Savings deposits 1,175,133 6,819 2.30
Certificates of deposit:
Consumer 2,514,150 31,319 4.94
Large denomination 405,929 5,467 5.34
---------- --------
Total interest-bearing deposits 6,187,137 55,130 3.54
Short-term borrowings 265,540 3,217 4.81
Long-term indebtedness 3,278 58 7.09
---------- --------
Total interest-bearing liabilities
and interest expense $6,455,955 58,405 3.59
========== --------
Net interest income and net interest margin $108,181 5.26%
========
Other average balances:
Demand deposits $1,401,941
Common shareholders' equity 999,284
Total shareholders' equity 999,916
Total assets 8,974,147
20
AVERAGE BALANCES AND INTEREST RATES (Continued) (Unaudited)
(Dollars in thousands)
Nine Months Ended Sept.30
1998
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
Interest-earning assets:
Investment Securities-available for sale:
U.S. Government and its agencies $ 10,227 $ 421 5.50%
Other 10,411 191 2.45
Investment Securities-held to maturity:
U.S. Government and its agencies 1,770,079 80,496 6.07
State and municipal obligations
(Fully taxable-equivalent basis) 153,530 8,115 7.05
Other (Fully taxable-equivalent basis) 1,170 57 6.49
---------- --------
Total investment securities 1,945,417 89,280 6.13
---------- --------
Loans, net of unearned income:
Installment 3,991,647 261,206 8.75
Real estate 1,048,239 69,399 8.83
Other (Fully taxable-equivalent basis) 897,248 59,116 8.84
---------- --------
Total loans 5,937,134 389,721 8.76
---------- --------
Mortgage loans held for sale 15,289 873 7.62
Money market investments 518,285 21,360 5.51
Other earning assets 21,832 1,124 6.87
---------- --------
Total earning assets and income $8,437,957 502,358 7.95
========== --------
Interest-bearing liabilities:
Interest checking/savings plans $1,396,312 15,219 1.46
Money market accounts 864,536 22,148 3.43
Savings deposits 1,147,085 19,614 2.29
Consumer certificates of deposit 2,455,522 91,294 4.97
Large denomination
certificates of deposit 429,487 17,113 5.33
---------- --------
Total interest-bearing deposits 6,292,942 165,388 3.51
Short-term borrowings 299,487 10,746 4.80
Long-term indebtedness 3,372 226 8.93
---------- --------
Total interest-bearing liabilities
and interest expense $6,595,801 176,360 3.57
========== --------
Net interest income and net interest margin $325,998 5.16%
========
Other average balances:
Demand deposits $1,485,697
Common shareholders' equity 1,021,047
Total shareholders' equity 1,027,081
Total assets 9,233,074
21
AVERAGE BALANCES AND INTEREST RATES (Continued) (Unaudited)
(Dollar amounts in thousands)
Nine Months Ended Sept.30
1997
------------------------------
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 1,690,846 77,361 6.11
State and municipal obligations
(Fully taxable-equivalent basis) 153,852 8,128 7.04
Other (Fully taxable-equivalent basis) 3,391 100 3.94
---------- --------
Total investment securities 1,848,089 85,589 6.19
---------- --------
Loans, net of unearned income:
Installment 3,677,888 240,212 8.73
Real estate 1,110,608 72,749 8.73
Other (Fully taxable-equivalent basis) 847,940 57,373 9.01
---------- --------
Total loans 5,636,436 370,334 8.78
---------- --------
Mortgage loans held for sale 11,961 709 7.91
Money market investments 359,573 14,540 6.56
Other earning assets 21,623 1,064 5.41
---------- --------
Total earning assets and income $7,877,682 472,236 8.01
========== --------
Interest-bearing liabilities:
Interest checking/savings plan $1,324,983 17,386 1.75
Money market accounts 725,711 16,245 2.99
Savings deposits 1,144,365 19,493 2.28
Consumer certificates of deposit 2,380,907 87,747 4.93
Large denomination
certificates of deposit 375,598 14,871 5.29
---------- --------
Total interest-bearing deposits 5,951,564 155,742 3.50
Short-term borrowings 249,245 8,751 4.69
Long-term indebtedness 3,517 166 6.31
---------- --------
Total interest-bearing liabilities
and interest expense $6,204,326 164,659 3.55
========== --------
Net interest income and net interest margin $307,577 5.22%
========
Other average balances:
Demand deposits $1,330,853
Common shareholders' equity 924,445
Total shareholders' equity 925,085
Total assets 8,560,494
22
PART II - OTHER INFORMATION
Item 5. Other information
-----------------
On October 28, 1998, First Virginia's Board of Directors amended two
sections of First Virginia's Bylaws. Article I, Section 11 of the Bylaws was
amended to state that, in order for a stockholder to nominate a candidate for
a director, written notice of the nomination must be delivered to, or mailed
and received at, the principal executive offices of First Virginia not less
than ninety (90) days nor more than one hundred twenty (120) days prior to
the date of the scheduled annual meeting, regardless of postponements,
deferrals or adjournments of that meeting to a later date, unless First
Virginia gives less than seventy (70) days notice or prior public disclosure
of the meeting, in which case the stockholder must give notice within ten
(10) days after notice of the meeting is mailed or other public disclosure of
the meeting is made. Formerly such notice had to be given not less than
sixty (60) nor more than ninety (90) days prior to the date of the scheduled
annual meeting.
Article I, Section 12 of the Bylaws was amended to state that in order
for a stockholder to bring other business before an annual meeting of
stockholders, written notice must be delivered to, or mailed and received at
the principal executive offices of First Virginia not less than ninety (90)
days nor more than one hundred twenty (120) days prior to the scheduled
meeting, regardless of any postponements, deferrals or adjournments of that
meeting to a later date, unless First Virginia gives less than seventy (70)
days notice or prior public disclosure of the meeting, in which case the
stockholder must give notice within ten (10) days after notice of the meeting
is mailed or other public disclosure of the meeting is made. Formerly the
notice had to be given not less than sixty (60) nor more than ninety (90)
days prior to the date of the scheduled annual meeting.
These Bylaw amendments were effective on the date of their adoption and
will apply to any stockholder's notice of nominations or business for First
Virginia's 1999 Annual Meeting. These advance notice requirements are
separate from and in addition to the requirements a stockholder must meet to
have a proposal included in First Virginia's Proxy Statement. As stated in
First Virginia's Proxy Statement for its 1998 Annual Meeting, the deadline
for stockholder proposals intended to be presented at the 1999 Annual Meeting
and included in First Virginia's 1999 Proxy Statement was November 7, 1998.
23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 - K
----------------------------------
Exhibit 3(ii) - By-Laws (Included in original SEC filing only)
Exhibit 12 - Statement re: Computation of Ratios (Page 25)
Exhibit 15 - Independent Accountants' Review Report (Page 26)
Exhibit 15A - Letter of Acknowledgement from
Independent Accountants (Page 27)
Exhibit 27 - Financial Data Schedules (Page 28)
b) A Form 8-K was not required to be filed during the quarter
ended September 30, 1998.
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 13, 1998 __________________________
Richard F. Bowman,
Senior Vice President,
Treasurer and
Chief Financial Officer
24
Exhibit 3 (ii)
BYLAWS
OF
FIRST VIRGINIA BANKS, INC.
(With Amendments through October 28, 1998)
ARTICLE I
MEETING OF STOCKHOLDERS
Section 1. Annual Meetings. The annual meeting of the stockholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held on such date each year that
shall be established by the board of directors; however, if no such date is
established, then the annual meeting shall be on the fourth Wednesday in
April each year, if not a legal holiday, and if so, then on the next
succeeding business day.
Section 2. Special Meetings. Except as provided in Article II, Section 4
of these bylaws, special meetings of the stockholders shall be called by the
president or secretary only at the written request of a majority of the
directors, provided that, if as of the date of the request for such special
meeting there is a Related Person as defined in Article X of the Articles of
Incorporation, such majority shall include a majority of the Continuing
Directors, as defined in Article X of the Articles of Incorporation or by the
holders of four-fifths (80%) of the voting power of all of the then
outstanding shares of capital stock of the corporation entitled to vote
generally in the election of directors. The request shall state the purpose
or purposes for which the meeting is to be called. The notice of every
special meeting of stockholders shall state the purpose for which it is
called.
Section 3. Hour and Place of Meeting. All meetings of the stockholders may
be held at such hour and place within or without the State of Virginia as may
be provided in the notice of meeting.
Section 4. Notice of Meetings. Written notice of the annual and of any
special meeting of the stockholders shall be given not less than ten days nor
more than sixty days before the meeting (except as a different time is
specified by law), by or at the direction of the board of directors or the
person calling the meeting, to each holder of record of shares of the
corporation entitled to vote at the meeting, in person or by mail sent to the
address recorded on the stock transfer books of the corporation on the date
mailed, unless otherwise required by law. If any stockholder shall fail or
decline to furnish mailing address, then such notice need not be sent to him
unless required by law. All such notices should state the day, hour, place
and purpose(s) of the meeting, and the matters to be considered.
Section 5. Voting List. A complete list of the stockholders entitled to
vote at any meeting or any adjournment thereof, with the address of and
number of shares held by each on the record date, shall, for a period of ten
days prior to such meeting, be kept on file at the registered office or
principal place of business of the corporation or at the office of the
transfer agent or registrar and shall be subject to inspection by any
stockholder at any time during usual business hours except as such right of
inspection may be subject to limitations prescribed by law. Such list shall
also be produced and kept open at the time and place of the meeting and shall
be open to inspection by any stockholder during the whole time of the
meeting. Whenever the production or exhibition of any voting list, or of the
stock transfer books of the corporation, shall be required by law, the
production of a copy thereof certified correct by the transfer agent shall be
deemed to be substantial compliance with such requirement.
Section 6. Quorum. A majority of the shares entitled to vote, represented
in person or by proxy, shall constitute a quorum at a meeting of
stockholders. Once a quorum has been duly convened, the quorum shall not be
deemed broken by the departure of any stockholder or holder of a proxy. In
the absence of a quorum, the stockholders present in person or by proxy, by
majority vote and without notice other than by announcement at the meeting,
may adjourn the meeting from time to time until a quorum shall be present.
At any such adjourned meeting at which a quorum shall be present, any
business may be transacted which could have been transacted at the meeting as
originally called.
Section 7. Organization. At all meetings of the stockholders, the chairman
of the board, or in his absence the vice chairmen, in the order of their
appointment, or in their absence the president, or in the absence of all of
them a person chosen by a majority of the stockholders represented in person
or by proxy and entitled to vote at the meeting shall preside as chairman of
the meeting. The secretary of the corporation, or in his absence or if he be
appointed chairman of the meeting, an assistant secretary shall act as
secretary at all meetings of the stockholders; but if neither the secretary
nor any assistant secretary be present and able to act as such, the chairman
may appoint any person to act as secretary of the meeting.
Section 8. Conduct of Meetings. Parliamentary rules as formulated by
Cushman, Robert's or Sturgis' Manual shall govern the conduct of all meetings
of the stockholders upon verbal announcement thereof by the chairman, except
that where such rules conflict with the provisions of these bylaws, the
statutes of Virginia, or the Articles of Incorporation, the provisions of the
said bylaws, statutes or Articles shall prevail. The chairman of all
meetings of the stockholders may announce from time to time such rules and
guidelines for the conduct of business as he may determine in his discretion.
Section 9. Voting. Except as otherwise provided by law or by Articles of
Serial Designation with respect to any class or classes of preferred stock
outstanding, each stockholder shall be entitled to one vote for each share of
stock held by him and registered in his name on the books of the corporation
on the date fixed by the resolution of the board of directors as the record
date for the determination of the stockholders entitled to notice of and to
vote at such meeting as more fully set forth elsewhere in these bylaws. Such
vote may be given in person or by proxy appointed by an instrument in writing
executed by a stockholder or his duly authorized attorney, and delivered to
the secretary of the meeting. No proxy shall be valid after eleven months
from its date, unless otherwise provided therein. If a quorum is present,
the affirmative vote of a majority of the shares represented at the meeting
and entitled to vote on the subject matter shall be the act of the stock-
holders, except when a larger vote or a vote by class is required by the
Articles of Incorporation, any other provision of these bylaws or the laws of
the state of Virginia and except that in elections of directors those
receiving the greatest number of votes shall be deemed elected even though
not receiving a majority.
Section 10. Counting of Votes. The chairman shall appoint three tellers to
count the vote respecting the election of directors and any other questions
put to vote, whether such vote is by written ballot or by a show of hands or
by viva voce', and at least two out of three tellers shall certify in writing
the results of any such voting. Written ballots shall not be required unless
first decided upon by the chairman on matters to be brought before the
stockholders and a teller may but need not be, a stockholder of the
corporation.
Section 11. Stockholder Nominations. (a) Nominations of candidates for
election as directors at any annual meeting of stockholders may be made (i)
by, or at the direction of, a majority of the directors (provided that, if as
of the date of the nomination there is a Related Person as defined in Article
XI of the Articles of Incorporation, such majority shall include a majority
of the Continuing Directors, as defined in Article XI of the Articles of
Incorporation (such directors, whether or not they include the Continuing
Directors shall be referred to as the "directors" for the purposes of this
Section 11)) or (ii) by any stockholder of record entitled to vote at such
annual meeting. Only persons nominated in accordance with procedures set
forth in Section 11(b) shall be eligible for election as directors at an
annual meeting. (b) Nominations, other than those made by, or at the
direction of, a majority of the directors, shall be made pursuant to timely
notice in writing to the secretary of the corporation as set forth in this
Section 11(b). To be timely, a stockholder's notice shall be delivered to,
or mailed and received at, the principal executive offices of the Corporation
not less than ninety (90) days nor more than one hundred twenty (120) days
prior to the date of the scheduled annual meeting, regardless of
postponements, deferrals, or adjournments of that meeting to a later date;
provided, however, that if less than seventy (70) days' notice or prior
public disclosure of the date of the scheduled annual meeting is given or
made, notice by the stockholder to be timely must be so delivered or received
not later than the close of business on the tenth (10th) day following the
earlier of the day on which such notice of the date of the scheduled annual
meeting was mailed or the day on which such public disclosure was made. Such
stockholder's notice shall set forth (i) as to each person whom the
stockholder proposes to nominate for election as a director (a) the name,
age, business address and residence address of such person, (b) the principal
occupation or employment of such person, (c) the class and number of shares
of the Corporation's equity securities which are beneficially owned (as such
term is defined in Rule 13d-3 or 13d-5 under the Securities Exchange Act of
1934 (the "Exchange Act")) by such person on the date of such stockholder
notice and (d) any other information relating to such person that would be
required to be disclosed pursuant to Schedule 13D under the Exchange Act in
connection with the acquisition of shares, and pursuant to Regulation 14A
under the Exchange Act, in connection with the solicitation of proxies with
respect to nominees for election as directors, regardless of whether such
person is subject to the provisions of such regulations, including, but not
limited to, information required to be disclosed by Items 4(b) and 6 of
Schedule 14A under the Exchange Act and information which would be required
to be filed on Schedule 14B under the Exchange Act with the Securities and
Exchange Commission and (ii) as to the stockholder giving the notice (a) the
name and address, as they appear on the corporation's books, of such
stockholder and any other stockholder who is a record or beneficial owner of
any equity securities of the corporation and who is known by such stockholder
to be supporting such nominee(s) and (b) the class and number of shares of
the corporation's equity securities which are beneficially owned, as defined
above, and owned of record by such stockholder on the date of such
stockholder notice and the number of shares of the corporation's equity
securities beneficially owned and owned of record by any person known by such
stockholder to be supporting such nominee(s) on the date of such stockholder
notice. At the request of a majority of the directors, any person nominated
by, or at the direction of, the Board of Directors for election as a director
at an annual meeting shall furnish to the secretary of the corporation that
information required to be set forth in a stockholder's notice of nomination
which pertains to the nominee.
(c) No person shall be elected as a director of the corporation unless such
person is nominated in accordance with the procedures set forth in Section 11
and is eligible to serve as a director under Article II of these bylaws.
Ballots bearing the names of all the persons who have been nominated for
election as directors at an annual meeting in accordance with the procedures
set forth in Section 11 and are eligible to serve as a director under Article
II of these bylaws shall be provided for use at the annual meeting. (d) A
majority of the directors may reject any nomination by a stockholder not
timely made in accordance with the requirements of Section 11(b). If a
majority of the directors determines that the information provided in a
stockholder's notice does not satisfy the informational requirements of
Section 11(b) in any material respect, the secretary of the corporation shall
promptly notify such stockholder of the deficiency in the notice. The
stockholder shall have an opportunity to cure the deficiency by providing
additional information to the secretary within five (5) days from the date
such deficiency notice is given to the stockholder, or such shorter time as
may be reasonably deemed appropriate by a majority of the directors. If the
deficiency is not cured within such period, or if a majority of the directors
reasonably determines that the additional information provided by the
stockholder, together with the information previously provided, does not
satisfy the requirements of Section 11(b) in any material respect, then the
board of directors may reject such stockholder's nomination. The secretary
of the corporation shall notify a stockholder in writing whether his or her
nomination has been made in accordance with the time and informational
requirements of Section 11(b). Notwithstanding the procedure set forth in
this paragraph, if the majority of the directors does not make a
determination as to the validity of any nominations by a stockholder, the
chairman of the annual meeting shall determine and declare at the annual
meeting whether a nomination was not made in accordance with the terms of
Section 11(b). If the chairman of such meeting determines that a nomination
was not made in accordance with the terms of Section 11(b), he or she shall
so declare at the annual meeting and the defective nomination shall be
disregarded.
Section 12. Business to be Brought Before the Meeting. (a) At an annual
meeting of stockholders, only such business shall be conducted, and only such
proposals shall be acted upon as shall have been brought before the annual
meeting (i) by, or at the direction of, the majority of the directors
(provided that, if as of the date of the nomination there is a Related Person
as defined in Article XI of the Articles of Incorporation, such majority
shall include a majority of the Continuing Directors, as defined in Article
XI of the Articles of Incorporation (such directors, whether or not they
include the Continuing Directors shall be referred to as the "directors" for
the purposes of this Section 12)); or (ii) by any stockholder of the
corporation who complies with the notice procedures set forth in Section
12(b).
(b) For a proposal to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing
to the secretary of the corporation. To be timely, a stockholder's notice
must be delivered to, or mailed and received at, the principal executive
offices of the corporation not less than ninety (90) days nor more than one
hundred twenty (120) days prior to the scheduled annual meeting, regardless
of any postponements, deferrals or adjournments of that meeting to a later
date; provided, however, that if less than seventy (70) days' notice or prior
public disclosure of the date of the scheduled annual meeting is given or
made, notice by the stockholder, to be timely, must be so delivered or
received not later than the close of business on the tenth (10th) day
following the earlier of the day on which such notice of the date of the
scheduled annual meeting was mailed or the day on which such public
disclosure was made. A stockholder's notice to the secretary shall set forth
as to each matter the stockholder proposes to bring before the annual meeting
(i) a brief description of the proposal desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address, as they appear on the corporation's
books, of the stockholder proposing such business and any other stockholder
who is the record or beneficial owner (as defined in Section 11(a) of these
bylaws) of any equity security of the corporation known by such stockholder
to be supporting such proposal, (iii) the class and number of shares of the
corporation's equity securities which are beneficially owned (as defined in
Section 11(a) of these bylaws) and owned of record by the stockholder giving
the notice on the date of such stockholder notice and by any other record or
beneficial owners of the corporation's equity securities known by such
stockholder to be supporting such proposal on the date of such stockholder
notice, and (iv) any financial or other interest of the stockholder in such
proposal.
(c) A majority of the directors may reject any stockholder proposal not
timely made in accordance with the terms of Section 12(b). If a majority of
the directors determines that the information provided in a stockholder's
notice does not satisfy the informational requirements of Section 12(b) in
any material respect, the secretary of the corporation shall promptly notify
such stockholder of the deficiency in the notice. The stockholder shall have
the opportunity to cure the deficiency by providing additional information to
the secretary within such period of time, not to exceed five (5) days from
the date such deficiency notice is given to the stockholder, as the majority
of the directors shall reasonably determine. If the deficiency is not cured
within such period, or if the majority of the directors determines that the
additional information provided by the stockholder, together with information
previously provided, does not satisfy the requirements of this Section 12(b)
in any material respect, then a majority of the directors may reject such
stockholder's proposal. The secretary of the corporation shall notify a
stockholder in writing whether such person's proposal has been made in
accordance with the time and information requirements of Section 12(b).
Notwithstanding the procedures set forth in this paragraph, if the majority
of the directors does not make a determination as to the validity of any
stockholder proposal, the chairman of the annual meeting shall determine and
declare at the annual meeting whether the stockholder proposal was made in
accordance with the terms of Section 12(b). If the chairman of such meeting
determines that a stockholder proposal was not made in accordance with the
terms of Section 12(b), he or she shall so declare at the annual meeting and
any such proposal shall not be acted upon at the annual meeting.
(d) This provision shall not prevent the consideration and approval or
disapproval at the annual meeting of reports of officers, directors and
committees of the Board of Directors, but, in connection with such reports,
no new business shall be acted upon at such annual meeting unless stated,
filed and received as herein provided.
ARTICLE II
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the corporation
shall be managed by the board of directors subject to any requirement of
stockholder action.
Section 2. Number. The number of directors shall be fourteen (14).
Section 3. Terms of Directors. A person shall be elected to serve a term
of three years or to fill the unexpired term of the class to which the
directorship position has been assigned. A person appointed by the board to
fill the unexpired term of a directorship position shall stand for election
to that directorship position at the next stockholders' meeting at which
directors are elected. Except as required by law, no person who has reached
the age of 72 years shall be eligible to serve as a director, except that a
director who reaches the age of 72 years may continue to serve the unexpired
portion of the term for the class of the directorship position held by such
person. Notwithstanding the above, any person who has served or may serve as
chairman of the corporation in good standing until retirement and any person
who served as chairman of a subsidiary bank of the corporation on November 1,
1994, shall continue to be eligible to serve as a director for any class of
directorship position whose term shall not expire before such chairman shall
reach the age of 75 years.
Section 4. Vacancies. Any vacancy on the board of directors for any cause,
except a vacancy created by an increase by more than two in the number of
directors, may be filled for the unexpired portion of the term by a majority
vote of all of the remaining directors, though less than a quorum, given at a
regular meeting or at a special meeting called for that purpose. In case the
entire board shall die or resign, any stockholder may call a special meeting
of the stockholders upon notice as hereinbefore provided for meetings of the
stockholders, at which special meeting the directors for the unexpired
portion of the term may be elected.
Section 5. Fees. Nonemployee directors shall not receive any stated salary
for their services, but, by resolution of the board of directors, they may
receive a retainer, a fixed sum for attendance at each regular or special
meeting of the board and any meeting of any committee, and reimbursement for
expenses of attendance, if any, at board and committee meetings. Nothing
herein contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
Section 6. Senior Advisory Board. The board of directors may appoint a
senior advisory board, the eligible members of which shall be such directors
of the corporation who served on the board of directors at the age of 72
years or who shall have resigned from the board because of poor health and
requested a transfer to it. The members of such board shall serve at the
pleasure of the corporation's board of directors until the next annual
meeting of stockholders. At the board meeting following each annual meeting
of stockholders, such member may be reappointed if such member has not then
reached the age of 75 years or, for any member who served as a director until
the age of 75 years, if such member has not then reached the age of 78;
however, under no circumstance shall a member be appointed more than two
times after the initial appointment. Members of the senior advisory board
shall receive notice of and be entitled to attend all regular meetings of the
corporation's board of directors and shall receive the same fees and expenses
as are paid to members, but will not be entitled to vote at such meetings.
Section 7. Stock Ownership of Directors. Every director shall be the owner
of stock of the corporation having a book value of not less than Five
Thousand Dollars ($5,000). Such stock must be unpledged and unencumbered at
the time such director becomes a director and during the whole of his term as
such. Any director violating the provisions of this section shall
immediately vacate his office.
ARTICLE III
DIRECTORS' MEETINGS
Section 1. Regular Meetings. Regular meetings of the board of directors
shall be held without other notice than this bylaw immediately after, and at
the same place as, the annual meeting of stockholders. Additional regular
meetings shall be held at least monthly. The board of directors may provide
by resolution the time and place, either within or without this state, for
the holding of additional regular meetings without other notice than such
resolution.
Section 2. Special Meetings. Special meetings of the board of directors
shall be held whenever called by the chairman of the board, by the president,
or by any two of the directors. Notice of each such meeting shall be mailed
to each director, addressed to his residence or usual place of business, at
least three days before the day on which the meeting is to be held, or shall
be sent to such place by telegraph or mailgram, or be delivered personally or
by telephone, not later than the day before the day on which the meeting is
to be held. Neither the business to be transacted at, nor the purpose of,
any special meeting need be specified in the notice or waiver of notice of
such meeting.
Section 3. Organization. At all meetings of the board of directors, the
chairman, or in his absence the vice chairmen in the order of their
appointment, or in their absence, the president (or in his absence the
executive vice president if a member of the board), or, in the absence of all
of them, any director selected by the board of directors shall act as chair-
man; and the secretary of the corporation, or, in his absence or if he be
elected chairman of the meeting, an assistant secretary, shall act as
secretary; but if neither the secretary nor any assistant secretary be
present and able to act as such, the chairman may appoint any person present
to act as secretary of the meeting.
Section 4. Quorum and Manner of Acting. Unless otherwise provided by law
or the Articles of Incorporation, a majority of the number of directors fixed
by the bylaws at the time of any regular or special meeting shall constitute
a quorum for the transaction of business at such meeting, and the act of a
majority of the directors present at any such meeting at which a quorum is
present shall be the act of the board of directors. In the absence of a
quorum, a majority of those present may adjourn the meeting from time to time
until a quorum be had. Notice of any such adjourned meeting need not be
given.
Section 5. Order of Business. At all meetings of the board of directors
business may be transacted in such order as from time to time the board may
determine.
Section 6. Action Without a Meeting. Any action which is required to be
taken at a meeting of the directors or of a director's committee may be taken
without a meeting if a consent in writing, setting forth the action so to be
taken, shall be signed either before or after such action by all of the
directors or by all of the members of the committee, as the case may be, and
such consent is filed in the minute book of the proceedings of the board or
committee. Such consent shall have the same force and effect as a unanimous
vote.
Section 7. Telephone Meetings. Members of the board of directors or any
committee designated thereby may participate in a meeting of such board or
committee by means of conference telephone or similar communications
equipment whereby all persons participating in the meeting can hear each
other, and a written record can be made of the action taken at the meeting.
ARTICLE IV
COMMITTEES OF THE BOARD
Section 1. Executive Committee. The board of directors, by a resolution
adopted by a majority of the number of directors, may designate three or more
directors, to include the chairman, the vice chairmen, if one or more be
appointed, and the president, to constitute an executive committee. Members
of the executive committee shall serve until removed, until their successors
are designated or until the executive committee is dissolved by the board of
directors. All vacancies which may occur in the executive committee shall be
filled by the board of directors. The executive committee, when the board of
directors is not in session, may exercise all of the powers of the board of
directors except to approve an amendment to the Articles of Incorporation,
these bylaws, a plan of merger or consolidation, a plan of exchange under
which the corporation would be acquired, the sale, lease or exchange, or the
mortgage or pledge for a consideration other than money, of all, or
substantially all, the property and assets of the corporation otherwise than
in the usual and regular course of its business, the voluntary dissolution of
the corporation, or revocation of voluntary dissolution proceedings, and may
authorize the seal of the corporation to be affixed as required. The
executive committee may make its own rules for the holding and conduct of its
meetings (except that at least two members of the committee shall be
necessary to constitute a quorum), the notice thereof required and the
keeping of its records, and shall report all of its actions to the board of
directors.
Section 2. Management Compensation and Benefits Committee. The board of
directors shall, by resolution, appoint a Management Compensation and
Benefits Committee that shall be comprised entirely of "outside directors" as
that term is defined under proposed Item 402(j)(2) of Regulation S-K of the
Securities and Exchange Commission; that is, "directors who do not have
employment or consulting arrangements with the corporation or its affiliates
and who are not employed by an entity that has an employee of the corporation
serving as a member of a committee which establishes that entity's
compensation policy." (If, in the final SEC rules, Item 402(j)(2) of the
SEC's Regulation S-K includes a different definition of "outside directors"
than that described above, then these Bylaws will follow the definition as
stated in the final rules, as amended from time to time.) Such committee
shall fix its own rules and procedures and shall meet at least once each
year. The committee shall have the authority to establish the level of
compensation (including bonuses) and benefits of management of the
corporation. Such committee shall also have all of the authority vested
under any stock option or other equity-based compensation plan of the
corporation including but not limited to the authority to grant stock
options, stock appreciation rights, restricted or phantom stock, etc. to the
corporation's management.
Section 3. Public Policy Committee. The board of directors shall, by
resolution, appoint not less than three nor more than six of its members to
constitute a public policy committee. The board shall likewise designate the
chairman of the committee. In addition, the chairman of the board shall be
an ex-officio member of the public policy committee and shall be entitled to
vote on all matters coming before the committee. The committee shall
recommend to the board of directors the total amount of funds to be allocated
each calendar year for charitable contributions to be made by the
corporation. The committee shall have authority to approve contributions by
the corporation within the dollar limits set by the approved annual budget
and may delegate some or all of its authority for final approval to the chief
executive officer provided that all contributions approved by the chief
executive officer are subsequently reported to the committee for review. The
committee shall exercise general supervision over the corporation's matching
gifts program and shall have authority to add and/or delete those colleges
and universities eligible for inclusion in the program. The committee shall
monitor on an ongoing basis the programs developed for compliance with the
Community Reinvestment Act as well as Title VII of the Civil Rights Act of
1964 (Equal Employment Opportunity) and as a result may make recommendations
to the chief executive officer in respect thereto. The committee shall
perform such other duties and functions as shall be assigned to said
committee from time to time by the board of directors. The chairman of the
committee shall report regularly to the board of directors on the results of
its meetings. The committee shall meet quarterly except that it may
additionally meet on call of its chairman as may be necessary.
Section 4. Audit Committee. The Board of Directors shall appoint an Audit
Committee that shall be comprised entirely of directors who meet the standard
of independence set forth by the New York Stock Exchange for audit committees
of listed companies. Such committee shall be comprised of a minimum of three
members and shall fix its own rules and procedures. The committee shall meet
at least quarterly. The committee shall review the following: (1) with the
independent public accountant and management, the financial statements and
the scope of the corporation's audit; (2) with the independent public
accountant and management, the adequacy of the corporation's system of
internal procedures and controls, including the resolution of material
weaknesses; (3) with the corporation's internal auditors, the activities and
performance of the internal auditors; (4) with management and the independent
accountant, compliance with laws and regulations; (5) with management, the
selection and termination of the independent public accountant and any
significant disagreements between the independent public accountant and
management; and (6) the nonaudit services of the corporation's independent
public accountant. The committee, when so delegated by a member bank, shall
perform such audit committee functions for such bank as are requested by the
bank to fulfill its requirements under Section 36 of the Federal Deposit
Insurance Act and under the regulations and guidelines adopted by the FDIC to
implement Section 36. The committee shall also review any other matters
concerning auditing and accounting as it deems necessary and appropriate.
The committee, at its discretion, may retain counsel without prior permission
of the Board or management.
Section 5. Other Committees. Other committees with limited authority may
be designated by a resolution adopted by a majority of the directors present
at a meeting at which a quorum is present.
ARTICLE V
OFFICERS
Section 1. Number. The officers of the corporation may be a chairman of
the board, a president, one or more vice chairmen (who also may serve as a
consultant and advisor to the board but not as a full-time employee of the
corporation or any of its affiliates), one or more executive vice presidents,
one or more vice presidents (any one or more of whom may be designated as
senior vice presidents), a secretary, and a treasurer. At the discretion of
the board of directors, there may be one or more assistant vice presidents,
assistant secretaries, and assistant treasurers; a general counsel and one or
more assistant general counsel and assistant counsel; a general auditor, one
or more assistant general auditors and audit managers, an electronic data
processing auditor, and a trust auditor; a communications officer; one or
more marketing officers, and such other officer titles designated by the
board from time to time. The chairman of the board, the vice chairmen, and
the president shall be chosen from members of the board of directors. The
same person may hold any two of such offices, except the office of secretary
may not be held by any person holding the office of president.
Section 2. Election, Term of Office and Qualifications. Officers of the
corporation shall be chosen annually by the board of directors at its regular
meeting immediately following the annual meeting of stockholders, and each
officer shall hold office until the next annual meeting of stockholders and
until his successor shall have been chosen and qualified or until he shall
resign or shall have been removed in the manner hereinafter provided.
Section 3. Other Officers, Agents and Employees. The board of directors
may from time to time appoint such other officers as it may deem necessary,
to hold office for such time as may be designated by it or during its
pleasure, and may also appoint, from time to time, such agents and employees
of the corporation as may be deemed proper, or may authorize any officer to
appoint and remove such agents and employees, and may from time to time
prescribe the powers and duties of such officers, agents and employees of the
corporation in the management of its property and affairs, and may authorize
any officer to prescribe the powers and duties of agents and employees.
Section 4. Vacancies. If any vacancy shall occur among the officers of the
corporation, such vacancy shall be filled by the board of directors.
Section 5. Removal of Officers. Any officer or agent of the corporation
may be removed with or without cause at any time by the board of directors or
such officer as may be provided in the bylaws. Any person or agent appointed
or employed by the corporation otherwise than by the board of directors may
be removed with or without cause at any time by any officer having authority
to appoint whenever such officer in his absolute discretion shall consider
that the best interests of the corporation will be served thereby.
Section 6. Chairman of the Board. The chairman of the board shall be the
chief executive officer of the corporation and subject to the control of the
board of directors, shall have general direction of the business affairs and
property of the corporation and shall do and perform such other duties as may
be prescribed in these bylaws or which may be assigned to him from time to
time by the board of directors. The chairman of the board shall preside at
all meetings of the board of directors and at all meetings of the stock-
holders. He shall prescribe the duties and have general supervision over all
other officers, employees and agents of the corporation enumerated in these
bylaws or established by resolution of the board of directors or otherwise,
and shall have the power to appoint, employ, suspend or remove with or
without the advice of the board of directors any such officer, employee or
agent unless otherwise specifically provided in these bylaws, and shall fix
the salaries of all such officers, employees and agents of the corporation
and its subsidiaries within the limits established from time to time by the
board of directors. He shall have power to sign all stock certificates,
deeds, contracts and other instruments authorized by the board of directors
or its executive committee unless other direction is given therefor, and he
shall be a member of all standing committees of the board except the account-
ing and auditing committee and the management compensation and benefits
committee.
Honorary Chairman of the Board. The board of directors may appoint a former
full-time officer who has held the office of chairman of the board of the
corporation to the position of honorary chairman of the board and provide
such person with a reasonable amount of office space as long as desired by
him. If appointed, such person shall act as chairman of the senior advisory
board as such body exists from time to time.
Section 7. Vice Chairmen of the Board. The board of directors may appoint
one or more vice chairmen of the board and, if any such officers are
appointed, may assign such specific duties to any one of them as it deems
necessary and advisable. Such officers may, but need not, be full-time
salaried employees of the corporation. Any such full-time vice chairmen
shall report to the corporation's chief executive officer and shall perform
such duties as such officers may prescribe and assign from time to time.
Section 8. Succession of Duties. The bylaw duties of the chairman of the
board may be exercised and carried out by any vice chairmen when such have
been appointed by the board of directors in the absence or disability of the
chairman of the board in order of their appointment; if no vice chairmen are
so appointed, then the president shall carry out such duties in the absence
of the chairman of the board; and in the absence of the president, the
executive vice president or any vice president in the order of their election
shall carry out all such duties in the absence or disability of the chairman
of the board.
Section 9. President. The president shall be the chief administrative
officer of the corporation and as such shall perform such duties as the
chairman of the board or the board of directors may prescribe from time to
time by resolution or as may be prescribed by these bylaws. He shall
exercise all the powers and discharge all the duties of the chairman of the
board during the latter's absence or inability to act. He shall have
concurrent power with the chairman of the board to sign all deeds, contracts
and instruments authorized by the board of directors or its executive
committee unless the board otherwise directs, and he may be a member of the
standing committees of the board except the accounting and auditing committee
when appointed by the board. He shall report to the chairman of the board in
carrying out his assignments and in conducting the affairs of his office.
Section 10. Executive Vice President. The board of directors may elect one
or more executive vice presidents and any such person so elected to such
office shall perform such duties as the board of directors or the chairman of
the board may assign and prescribe from time to time.
Section 11. Vice Presidents. Each vice president shall have such powers
and perform such duties as the board of directors or the chairman may from
time to time prescribe, and shall perform such other duties as may be
prescribed in these bylaws. Each vice president shall have power to sign all
deeds, contracts and instruments authorized by the board of directors or its
executive committee unless they otherwise direct. In case of the absence or
inability to act of the president, and the executive vice presidents in the
order of their appointments, then such vice president as the board of
directors may designate for the purpose (but in the absence of such
designation then the vice presidents in order of appointment) shall have the
powers and discharge the duties of the president.
Section 12. Secretary. The secretary shall keep the minutes of all
meetings of the stockholders, the board of directors and meetings of
committees of the board as they are held, in a book or books kept for that
purpose. He shall keep in safe custody the seal of the corporation and he
may affix such seal to any instrument duly executed on behalf of the
corporation. The secretary shall have charge of the certificate books and
such other books and papers as the board of directors may direct. He shall
attend to the giving and serving of all notices of the corporation, and shall
also have such other powers and perform such other duties as pertain to his
office, or as from time to time may be assigned to him by the board of
directors or the corporation's chief executive officer.
Section 13. Treasurer. The treasurer shall be the principal financial and
accounting officer of the corporation. He shall have charge of the funds,
securities, receipts and disbursements of the corporation, and shall deposit
all moneys and other valuable effects in the name and to the credit of the
corporation in such banks or other depositaries as the board of directors may
from time to time designate. He shall render to the chairman of the board,
or to the board of directors, or to the president, whenever any of them shall
require him so to do, an account of the financial condition of the
corporation and its affiliates and all of his transactions as treasurer. He
shall keep correct books of account of all its business and transactions. If
required by the board of directors, he shall give a bond in such sum and on
such conditions and with such surety as the board of directors may designate,
for the faithful performance of the duties of his office and the restoration
to the corporation, at the expiration of his term of office, or, in case of
his death, resignation or removal from office, of all books, papers,
vouchers, money or other property of whatever kind in his possession
belonging to the corporation. He shall also have such other powers and
perform such other duties as pertain to his office or as from time to time
may be assigned to him by the board of directors or the president.
Section 14. General Counsel. The general counsel, if one be appointed,
shall have charge of all litigation of the corporation, and shall keep
himself advised of the character and progress of all legal proceedings and
claims by and against the corporation or in which it is interested by reason
of its ownership and control of other corporations. He shall give to the
board of directors reports from time to time on all legal matters affecting
the corporation and, when requested, his opinion upon any question affecting
the interests of the corporation. He may, with the consent of the chief
executive officer, employ on behalf of the corporation special counsel for
the handling of any legal matter pertaining to the business of the
corporation which he deems necessary and advisable. The general counsel may,
but need not be, a full-time salaried officer of the corporation. He shall
from time to time consult with the corporation's legal advisory committee on
legal matters affecting the corporation and its affiliates.
Section 15. General Auditor. The general auditor, if one be appointed,
shall perform such internal auditing and accounting functions with regard to
the member banks and companies as the board of directors or any appropriate
committee thereof may from time to time determine, and shall have such
additional powers and duties as may be prescribed by these bylaws and as the
board of directors or any appropriate committee thereof may from time to time
determine, and shall have additional responsibilities and duties in con-
nection therewith as may be prescribed by these bylaws, applicable laws and
regulations or the board of directors or any appropriate committee thereof.
Except as stated, the general auditor and other auditing staff shall be
subject to day-to-day administrative direction of the chief executive officer
of the corporation and any such officer or employee may be dismissed by the
chief executive officer for reasons as may be applied in dismissing any other
personnel of the corporation, provided that a report of any such dismissal of
internal auditing personnel with the reasons therefor shall be made to the
board of directors or its executive committee at the next succeeding meeting
thereof. All other officers and personnel appointed or assigned to assist in
the internal audit function of the corporation, its member banks and
companies, may be assigned such day-to-day duties and responsibilities as may
be necessary by the general auditor to carry out the responsibilities of the
internal audit function. The office of general auditor may not be held by
any person holding other offices in the corporation or its affiliates except
with the specific approval of the board of directors.
Section 16. Assistant Secretary. In the absence or disability of the
secretary, the assistant secretary (or if more than one, then the assistant
secretary designated by the board of directors or the president for such
purpose) shall perform all the duties of the secretary and, when so acting,
shall have all the powers of, and be subject to all the restrictions upon,
the secretary. Each assistant secretary shall also perform such other duties
as from time to time may be assigned to him by the board of directors, the
chief executive officer or the secretary.
Section 17. Assistant Treasurer. In the absence or disability of the
treasurer, the assistant treasurer (or if more than one, then the assistant
treasurer designated by the board of directors or the chief executive officer
for such purpose) shall perform all the duties of the treasurer and, when so
acting, shall have all the powers of, and be subject to all restrictions
upon, the treasurer. Each assistant treasurer shall also perform such other
duties as from time to time may be assigned to him by the board of directors,
the chief executive officer or the treasurer.
Section 18. Administrative Committees. The Chairman of the Board may
designate administrative committees to assist the Chairman in the day-to-day
operation of the corporation. Each committee shall have such authority of
the Chairman as the Chairman may delegate and shall be comprised of officers
of the corporation. Membership on such committees shall be at the request of
the Chairman of the Board, who shall appoint or remove members with or
without the advice of the board of directors, unless otherwise specifically
provided in these bylaws. The Chairman shall advise the board of directors
annually of the current committees and members thereof.
ARTICLE VI
CAPITAL STOCK
Section 1. Certificates. Certificates representing shares of the capital
stock of the corporation shall be in such form as is permitted by law and
prescribed by the board of directors or the chief executive officer and shall
be signed by the persons authorized to sign the same by the bylaws or
specific resolution of the board of directors. Certificates may, but need
not be, sealed with the seal of the corporation or a facsimile thereof. The
signature of the officers upon such certificates may be facsimiles if the
certificate is countersigned by a transfer agent or registered by registrar
other than the corporation itself or an employee of the corporation. In case
any officer who has signed or whose facsimile signature has been placed upon
a stock certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer at the date of its issue.
Section 2. Issue and Registration of Certificates: Transfer Agents and
Registrars. Transfer agents and/or registrars for the stock of the
corporation may be appointed by the board of directors and may be required to
countersign stock certificates. Certificates of stock shall be issued in
consecutive order and the certificate books shall be kept at an office of the
corporation or at the office of the transfer agent. Certificates shall be
numbered and registered in the order in which they are issued. New
certificates and, in the case of cancellation, old certificates, shall,
before they are delivered, be passed to a registrar if one is appointed by
the board of directors, and such registrar shall register the issue or
transfer of such certificates. Upon the return of the certificates by the
registrar, the new certificates shall be delivered to the person entitled
thereto.
Section 3. Transfer of Stock. The stock of the corporation shall be
transferable or assignable on the books of the corporation by the holders in
person or by attorney on surrender of the certificates for such shares duly
endorsed and, if sought to be transferred by attorney, accompanied by a
written power of attorney to have the same transferred on the books of the
corporation.
Section 4. Lost, Destroyed and Mutilated Certificates. Holders of the
stock of the corporation shall immediately notify the corporation of any
loss, destruction or mutilation of the certificate therefor, and the board of
directors may in its discretion, or any officer of the corporation appointed
by the board of directors for that purpose may in his discretion, cause one
or more new certificates for the same number of shares in the aggregate to be
issued to such stockholder upon the surrender of the mutilated certificate or
upon satisfactory proof of such loss or destruction and the deposit of a bond
in such form and amount and with such surety as the board of directors may
require.
Section 5. Record Date. For the purposes of determining stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of stockholders for any other proper purpose,
the board of directors may fix in advance a date as the record date for any
such determination of stockholders, such date in any case to be not more than
fifty days prior to the date on which the particular action requiring such
determination of stockholders is to be taken. If no record date is fixed for
the determination of stockholders entitled to notice of or to vote at a
meeting of stockholders, or stockholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on
which the resolution of the board of directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination
of stockholders. When a determination of stockholders entitled to vote at
any meeting of stockholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
ARTICLE VII
CONTRACTS, LOANS, BANK ACCOUNTS, CHECKS,
SECURITIES, ETC.: AUTHORITY OF OFFICERS
Section 1. Contracts. The board of directors may authorize any officer or
officers, agent or agents to enter any contract or to execute and deliver any
instrument on behalf of the corporation, and such order may be general or
confined to specific instances.
Section 2. Loans. The board of directors may authorize any officer or
officers, agent or agents to effect loans and advances at any time for the
corporation from any bank, trust company, insurance company, or other
institution, or from any person, firm, association, or corporation, and in
connection with such loans and advances to make, execute and deliver
promissory notes or other evidences of indebtedness of the corporation, and,
as security for the payment of any and all loans, advances, indebtedness and
liabilities of the corporation, to pledge, hypothecate or transfer any and
all stocks, securities and other personal property at any time held by the
corporation, and to that end to transfer, endorse, assign and deliver the
same in the name of the corporation. Such authority may be general or
confined to specific instances, except that any pledge, hypothecation or
transfer of the capital stock or assets of any subsidiary corporation shall
be authorized only by a specific resolution of the board of directors.
Section 3. Bank Accounts. All funds of the corporation, not otherwise
employed, shall be deposited from time to time to the credit of the
corporation in such banks or trust companies or other depositaries as the
board of directors may select.
Section 4. Checks, Securities, Etc. All checks, drafts or orders for the
payment of money, notes or other evidences of indebtedness issued in the name
of the corporation, all stock powers, endorsements, assignments, or other
instruments for the transfer of securities held by the corporation shall be
executed and delivered by, and all such securities shall be voted and proxies
for the voting thereof shall be executed and delivered by such officer or
officers, agent or agents to whom the board of directors shall delegate the
power, and under such conditions and restrictions as they may impose.
ARTICLE VIII
MISCELLANEOUS
Section 1. Fiscal Year. The fiscal year of the corporation shall begin on
the first day of January and end on the thirty-first day of December in each
year.
Section 2. Dividends. The board of directors may from time to time
declare, and the corporation may pay, dividends on its outstanding shares in
the manner and upon the terms and conditions provided by law and its Articles
of Incorporation.
Section 3. Corporate Seal. The board of directors shall provide a
corporate seal which shall be circular in form and shall have inscribed
thereon the name of the corporation, the state of Virginia, and year of
incorporation and the words, "Corporate Seal".
ARTICLE IX
EMERGENCIES
Section 1. Emergency Bylaws. During any emergency resulting from an attack
on the United States or any nuclear or atomic disaster, which is declared to
be such by an appropriate agency of the state or federal government, these
bylaws shall be modified (but only to the extent required by such emergency)
as follows:
a. A meeting of the board of directors may be called by any officer
or director by giving at least one hour's notice to such of the directors as
it may be feasible to reach at the time and by such means as may be feasible
at the time, including publication or radio.
b. The directors in attendance at the meeting, if not less than
three, shall constitute a quorum. To the extent required to constitute a
quorum at any meeting of the board of directors, the officers of the
corporation who are present shall be deemed, in order of rank and within the
same rank in order of seniority, directors for such meeting. For purposes of
this bylaw, officers shall rank as follows: chairman of the board, vice
chairmen, president, executive vice president, senior vice president, vice
president, secretary, treasurer, assistant vice president, assistant
secretary, and assistant treasurer. Officers holding similar titles shall
rank in the order of their appointment.
Section 2. Termination of Emergency. Except as provided in this article,
the regular bylaws of the corporation shall remain in full force and effect
during any emergency, and upon its termination, these emergency bylaws shall
cease to be operative.
ARTICLE X
AMENDMENTS
The board of directors shall have the power to alter, amend or repeal any
bylaws of the corporation and to adopt new bylaws; but any bylaws made by the
board of directors may be repealed or changed, and new bylaws made, by the
stockholders, who may prescribe that any bylaw made by them shall not be
altered, amended or repealed by the board of directors.
FIRST VIRGINIA BANKS, INC.
BYLAWS
With Amendments through December 17, 1997
FIRST VIRGINIA BANKS, INC.
BYLAWS
Table of Contents
Page
ARTICLE I - MEETING OF STOCKHOLDERS. . .. . . . . . . . . . . . . . . . . .1
Section 1. Annual Meetings. . . . . . . . . . . . . . . . . . . . . . . .1
Section 2. Special Meetings . . . . . . . . . . . . . . . . . . . . . . .1
Section 3. Hour and Place of Meeting. . . . . . . . . . . . . . . . . . .1
Section 4. Notice of Meeting. . . . . . . . . . . . . . . . . . . . . . .1
Section 5. Voting List. . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 6. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Section 7. Organization . . . . . . . . . . . . . . . . . . . . . . . . .2
Section 8. Conduct of Meetings. . . . . . . . . . . . . . . . . . . . . .2
Section 9. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Section 10. Counting of Votes. . . . . . . . . . . . . . . . . . . . . . .2
Section 11. Stockholder Nominations. . . . . . . . . . . . . . . . . . . .3
Section 12. Business to be Brought Before the Annual Meeting . . . . . . .4
ARTICLE II - BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . .6
Section 1. General Powers . . . . . . . . . . . . . . . . . . . . . . . .6
Section 2. Number . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Section 3. Terms of Directors . . . . . . . . . . . . . . . . . . . . . .6
Section 4. Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . .6
Section 5. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Section 6. Senior Advisory Board . . . . . . . . . . . . . . . . . . . .6
Section 7. Stock Ownership of Directors . . . . . . . . . . . . . . . . .6
ARTICLE III - DIRECTORS' MEETINGS . . . . . . . . . . . . . . . . . . . . .7
Section 1. Regular Meetings . . . . . . . . . . . . . . . . . . . . . . .7
Section 2. Special Meetings . . . . . . . . . . . . . . . . . . . . . . .7
Section 3. Organization . . . . . . . . . . . . . . . . . . . . . . . . .7
Section 4. Quorum and Manner of Acting. . . . . . . . . . . . . . . . . .7
Section 5. Order of Business. . . . . . . . . . . . . . . . . . . . . . .7
Section 6. Action Without a Meeting . . . . . . . . . . . . . . . . . . .7
Section 7. Telephone Meetings . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE IV - COMMITTEES OF THE BOARD . . . . . . . . . . . . . . . . . . .8
Section 1. Executive Committee. . . . . . . . . . . . . . . . . . . . . .8
Section 2. Management Compensation and
Benefits Committee. . . . . . . . . . . . . . . . . . . .8
Section 3. Public Policy Committee. . . . . . . . . . . . . . . . . . . .8
Section 4. Audit Committee. . . . . . . . . . . . . . . . . . . . . . . .9
Section 5. Other Committees . . . . . . . . . . . . . . . . . . . . . . .9
ARTICLE V - OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Section 1. Number . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Section 2. Election, Term of Office, and Qualifications . . . . . . . . 10
Section 3. Other Officers, Agents, and Employees. . . . . . . . . . . . 10
Section 4. Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5. Removal of Officers. . . . . . . . . . . . . . . . . . . . . 10
Section 6. Chairman of the Board . . . . . . . . . . . . . . . . . . . 10
Honorary Chairman of the Board. . . . . . . . . . . . . . . 10
Section 7. Vice Chairmen of the Board . . . . . . . . . . . . . . . . . 11
Section 8. Succession of Duties . . . . . . . . . . . . . . . . . . . . 11
Section 9. President . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 10. Executive Vice President . . . . . . . . . . . . . . . . . . 11
Section 11. Vice Presidents . . . . . . . . . . . . . . . . . . . . . . 11
Section 12. Secretary . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 13. Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 14. General Counsel . . . . . . . . . . . . . . . . . . . . . . 12
Section 15. General Auditor . . . . . . . . . . . . . . . . . . . . . . 12
Section 16. Assistant Secretary . . . . . . . . . . . . . . . . . . . . 12
Section 17. Assistant Treasurer . . . . . . . . . . . . . . . . . . . . 13
Section 18. Administrative Committees . . . . . . . . . . . . . . . . . 13
ARTICLE VI - CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1. Certificates . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2. Issue and Registration of Certificates:
Transfer Agents and Registrars . . . . . . . . . . . . 13
Section 3. Transfer of Stock . . . . . . . . . . . . . . . . . . . . . 13
Section 4. Lost, Destroyed, or Mutilated Certificates . . . . . . . . . 13
Section 5. Record Date . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VII - CONTRACTS, LOANS, BANK ACCOUNTS, CHECKS,
SECURITIES, ETC.: AUTHORITY OF OFFICERS . . . . . . . . . 14
Section 1. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2. Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4. Checks, Securities, Etc. . . . . . . . . . . . . . . . . 14
ARTICLE VIII - MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . 15
Section 1. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2. Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3. Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IX - EMERGENCIES . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1. Emergency Bylaws . . . . . . . . . . . . . . . . . . . . . . 15
Section 2. Termination of Emergency . . . . . . . . . . . . . . . . . . 15
ARTICLE X - AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 15
EXHIBIT 12
FIRST VIRGINIA BANKS, INC.
STATEMENT RE: COMPUTATION OF RATIOS
Three Months Ended Nine Months Ended
Sept.30 Sept.30
1998 1997 1998 1997
---------- ---------- ---------- ----------
Ratios - Page 10 (In thousands, except per-share data and ratios)
- ----------------
Net Loan Charge-offs (Annualized)
to Average Loans:
Net charge-offs $ 4,699 $ 4,339 $ 15,048 $ 12,607
Average loans $6,018,440 $5,954,434 $5,937,134 $5,636,436
Net Loan Charge-offs
to Average Loans 0.31% 0.29% 0.34% 0.30%
========== ========== ========== ==========
Allowance for Loan Losses
to Period-end Loans:
Allowance for Loan Losses $ 69,346 $ 68,126
Period-end Loans $6,009,999 $5,946,889
Allowance for Loan Losses
to Period-end Loans 1.15% 1.15%
========== ==========
Nonperforming Assets to
Period-end Loans:
Nonperforming Assets:
Non-accruing loans $ 12,953 $ 15,476
Restructured loans 2,245 4,561
Properties acquired by foreclosure 4,586 5,566
---------- ----------
Nonperforming Assets $ 19,784 $ 25,603
---------- ----------
Period-end Loans $6,009,999 $5,946,889
Nonperforming Assets to Period-end Loans: 0.33% 0.43%
========== ==========
Ratios - Pages 16/19
- --------------------
Net Interest Margin:
Net interest income
(Taxable equivalent) $ 110,166 $ 108,181 $ 325,998 $ 307,577
Total average
earning assets $8,553,295 $8,217,963 $8,437,957 $7,877,682
Net interest margin
ratio (Annualized) 5.14% 5.26% 5.16% 5.22%
========== ========== ========== ==========
25
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, 1998 and
1997, the related condensed consolidated statements of income for
the three-month and nine-month periods ended September 30, 1998 and
1997, and the condensed consolidated statements of cash flows and
shareholders' equity for the nine-month periods ended September 30,
1998 and 1997. 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, 1997, 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 20, 1998, 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, 1997, 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 13, 1998
26
EXHIBIT 15A
ERNST & YOUNG LLP
1225 Connecticut Avenue, N.W.
Washington, D.C. 20036
November 13, 1998
Board of Directors
First Virginia Banks, Inc.
We are aware of the incorporation by reference in Registration
Statement Number 33-30465 on Form S-8 dated June 30, 1997, 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, and Registration Statement Number 33-17358 on
Form S-8 dated September 28, 1987, of our reports dated April 8, 1998,
July 8, 1998, and October 13, 1998, 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,
1998, June 30, 1998, and September 30, 1998.
/s/ Ernst & Young LLP
_____________________
Ernst & Young LLP
27