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SCHEDULE 14A INFORMATION
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement[ ]Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
First Virginia Banks, Inc.
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Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- ---------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- ---------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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FIRST VIRGINIA BANKS, INC.
6400 ARLINGTON BOULEVARD
FALLS CHURCH, VIRGINIA 22042-2336
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 30, 1999
The Annual Meeting of Stockholders of First Virginia Banks, Inc. will be
held at corporate headquarters at One First Virginia Plaza, 6400 Arlington
Boulevard, Falls Church, Virginia, in the 5th Floor Auditorium at 10:00 a.m. on
Friday, April 30, 1999, for the following purposes:
(1) To elect four Class C directors for a term of three years.
(2) To ratify the appointment of KPMG LLP as independent auditors for
the year ending December 31, 1999.
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on February 22, 1999, are
entitled to notice of and to vote at the meeting or any adjournments thereof.
STOCKHOLDERS ARE URGED TO COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY AND MAIL
IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE REGARDLESS OF WHETHER
OR NOT THEY EXPECT TO ATTEND THE MEETING.
By Order of the Board of Directors,
Thomas P. Jennings
Secretary
Falls Church, Virginia
March 9, 1999
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FIRST VIRGINIA BANKS, INC.
6400 ARLINGTON BOULEVARD
FALLS CHURCH, VIRGINIA 22042-2336
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of First Virginia Banks, Inc. (hereinafter referred to as
"First Virginia") of proxies to be voted at the Annual Meeting of Stockholders
of First Virginia to be held at 10:00 a.m. on Friday, April 30, 1999, or any
adjournment thereof. The approximate mailing date of this Proxy Statement and
the accompanying proxy is March 9, 1999.
All properly executed proxies received by First Virginia prior to the
meeting will be voted at the meeting in accordance with any direction noted
thereon. Proxies on which no specification has been made will be voted For the
nominees for election as directors and For item 2. Any stockholder who has
executed and delivered a proxy may revoke it at any time before it is voted by
attending the Annual Meeting and voting in person, or by giving written notice
of revocation of the proxy to the Secretary, or by submitting to First Virginia
a signed proxy bearing a later date.
Holders of Common and Preferred Stock of First Virginia are entitled to
vote at the meeting. Each share of Common and Preferred Stock is entitled to one
vote on all matters which may come before the meeting. As of February 22, 1999,
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting, there were 50,101,079 shares of Common Stock and 51,987
shares of Preferred Stock of First Virginia issued and outstanding. No person is
known by management of First Virginia to own beneficially, directly or
indirectly, 5% or more of the outstanding stock of First Virginia.
I. ELECTION OF DIRECTORS
The Board of Directors is divided into three classes (A, B and C). The
term of office for Class C directors will expire at this Annual Meeting. Four
persons, three of whom are presently on the Board, have been nominated to serve
as Class C directors, and if elected, the four nominees will serve for a term of
three years. Mr. T. Keister Greer, a Class C director since 1976, is retiring at
the 1999 Annual Meeting since he is not eligible to stand for re-election.
With respect to the election of directors, the four nominees receiving
the greatest number of votes cast for the election of directors will be elected,
if a quorum is present at the meeting. The presence in person or by proxy of a
majority of the outstanding shares of Common and Preferred Stock entitled to
vote on the matter will constitute a quorum. Shares for which the holder has
elected to abstain or withhold the proxy's authority to vote (including broker
nonvotes) will count toward a quorum.
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Proxies received from stockholders will be voted in favor of the four
nominees unless stockholders specify otherwise on their proxies. Although the
Board of Directors does not expect that any of the persons named will be unable
to serve as a director, should any of them be unable to accept nomination or
election, it is intended that shares represented by the accompanying form of
proxy will be voted by the proxy holders for such other person or persons as may
be designated by the present Board of Directors.
Certain information concerning the nominees for election at this meeting
and the Class A and Class B directors who will continue in office after the
meeting is set forth below and on the following pages, as furnished by them.
NOMINEES FOR CLASS C DIRECTORS
(To serve until the Annual Meeting in 2002)
Common Stock
Beneficially Owned
December 31, 1998,
Name, Age and Year Principal Occupation, Business Experience in Last Five Years, and Percentage
Became a Director Other Directorships of Class(1)
- ------------------ ------------------------------------------------------------- ------------------
PAUL H. GEITHNER, JR. Retired President and Chief Administrative Officer, First Virginia, 50,333(2)
Age 68 1985-1995. Director, First Virginia Life Insurance Company.
1984 Director, Ellicott Machine Corporation, Baltimore, Maryland.
Trustee, Bridgewater College, Bridgewater, Virginia.
L. H. GINN, III President, Lighting Affiliates, Inc., a distributor of electrical 20,668(3)
Age 65 fixtures located in Richmond, Virginia, since 1975; retired U.S.
1978 Army Reserve Major General. Chairman of the Board, First Virginia
Bank-Colonial, Richmond. Director and Chairman of the Board, J.
Sargeant Reynolds Community College; Director, J. Sargeant
Reynolds Community College Educational Foundation, Richmond; Vice
President, Westminster-Canterbury Foundation, a foundation
associated with a retirement facility in Richmond; Trustee,
Episcopal Diocesan Schools and Episcopal Diocesan Homes, Richmond.
President, SHEPCABEL Corporation, a real estate management company,
and Parking Control Corporation, which owns and operates a public
parking facility, Richmond. President, St. Margaret's School
Foundation, Tappahanock, Virginia.
EDWARD M. HOLLAND Attorney-at-Law in Northern Virginia since 1966; former Senator, 76,718(4)
Age 59 Virginia General Assembly, 1972-1996. Director, First Virginia Bank,
1974 Falls Church. Trustee, Chesapeake Bay Foundation. Trustee, Vice
President and Manager, Tidewater Research Foundation, a private
charitable foundation supporting marine research and aquaculture,
Arlington, Virginia. Member of Council, Virginia Institute of Marine
Science, Gloucester Point, Virginia.
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(1) No director or executive officer owned as much as 1.0% of First Virginia
Common Stock.
(2) Includes 39,750 shares held in a revocable trust and 6,648 shares held
indirectly through his spouse's trust.
(3) Includes 413 shares held indirectly through his spouse's Individual
Retirement Account and 2,652 shares held by a trust of which Mr. Ginn is
trustee.
(4) Includes 51,718 shares held indirectly by two corporations of which Mr.
Holland is an officer, director, and owner and 15,000 shares held in two
trusts in which he is the beneficiary.
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LINDA S. Director (since 1987), President and Treasurer (since 1995), 300
VICKERS-SMITH Snell Construction Corporation, a privately held company
Age 51 headquartered in Arlington, Virginia, which owns and
operates commercial and residential properties located
in the Northern Virginia area. Director (since 1997),
Virginia Management, Inc., a real estate management
company located in Arlington. President, Fairfax Hotel,
Inc., since 1998. Trustee (since 1996), Flint Hill
School, an independent school for grades JK through 12
located in Oakton, Virginia. Member of the Deans Council,
School of Engineering, Duke University, Durham, North
Carolina, since 1997. Corporator, Northeastern University,
Boston, since 1998. Director, First Virginia Bank,
since 1998.
CLASS A DIRECTORS
(Serving until the Annual Meeting in 2000)
Common Stock
Beneficially Owned
December 31, 1998,
Name, Age and Year Principal Occupation, Business Experience in Last Five Years, and Percentage
Became a Director Other Directorships of Class
- ------------------ ------------------------------------------------------------- ------------------
BARRY J. FITZPATRICK Chairman of the Board, President and Chief Executive Officer 112,218(5)
Age 58 of First Virginia since 1995; Executive Vice President,
1995 1992-1995. Chairman of the Board, First Virginia Bank in
Falls Church, and a director and principal officer of numerous
First Virginia affiliated nonbanking companies since 1995.
Trustee, Marymount University, Arlington, Virginia. Trustee,
Virginia Foundation for Independent Colleges, Richmond, Virginia.
ELSIE C. GRUVER Community and civic leader in Arlington, Virginia. 9,369(6)
Age 72
1973
W. LEE PHILLIPS, JR. Professional engineer and land surveyor since 1959; involved in 12,281(7)
Age 63 real estate management and home building in Falls Church,
1985 Virginia, and southern Maryland since 1991.
JOSIAH P. ROWE, III President and Publisher, The Free Lance-Star Publishing Co. of 2,250
Age 70 Fredericksburg, Va., since 1998; Co-Publisher and General Manager,
1991 1949-1997. Director, First Virginia Bank, Falls Church, Virginia.
Also owns 100 shares of Preferred Stock.
ALBERT F. Retired President, Government Systems Group of UNISYS Corporation 8,000
ZETTLEMOYER in McLean, Virginia, 1993-1995; retired Executive Vice President,
Age 64 UNISYS Corporation, 1993-1995.
1978
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(5) Includes options to purchase 49,313 shares of Common Stock which are
exercisable as of December 31, 1998 or sixty days thereafter.
(6) Includes 4,518 shares of Common Stock held in an Individual Retirement
Account and 1,350 shares held indirectly in her spouse's Individual
Retirement Account.
(7) Includes 4,500 shares held by a trust of which Mr. Phillips is a trustee.
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CLASS B DIRECTORS
(Serving until the Annual Meeting in 2001)
Common Stock
Beneficially Owned
December 31, 1998
Name, Age and Year Principal Occupation, Business Experience in Last Five Years, and Percentage
Became a Director Other Directorships of Class
- ------------------ ------------------------------------------------------------- -------------------
EDWARD L. Partner, Breeden, MacMillan & Green, P.L.C., a law firm in 99,549(8)
BREEDEN, III Norfolk, Virginia, since 1968. Director, First Virginia Bank
Age 63 of Tidewater, Norfolk, and First Virginia Life Insurance
1982 Company, Falls Church. Chairman of the Board and President,
The Hunter Foundation, which operates a Victorian museum
and a home for elderly men in Norfolk, Virginia (1970 to
present), and The Breeden-Adams Foundation, a private foundation
which provides financial support for cancer research (1988 to
present). Managing Partner, The Tanners Creek Company and B&H
Associates, both of which are real estate investment companies
in the Tidewater area of Virginia (1990 to present).
GILBERT R. GIORDANO Portfolio Manager, Titan Financial Advisors, L.L.C., since 1996. 290,527(9)
Age 70 Partner, Giordano & Villareale, P.A., a law firm in Upper Marlboro,
1989 Maryland, 1972-1997. Chairman of the Board, First Virginia
Bank-Maryland, Upper Marlboro.
ERIC C. KENDRICK President, Mereck Associates, Inc., a real estate management 79,551(10)
Age 52 and development firm in Arlington, Virginia, since 1989.
1986 Director and President, Murteck Construction Company, Inc.,
Upton Corporation, and Old Dominion Warehouse Corporation,
Arlington.
ROBERT M. ROSENTHAL Chief Executive Officer since 1954 and Chairman of the Board since 30,816(11)
Age 70 1990 of Geneva Enterprises, Inc., lead company of the Rosenthal
Automotive Organization, Washington, D.C. Metropolitan Area. Other
related companies on which Mr. Rosenthal also serves as Chairman
include: Maryland Imported Cars, Inc., since 1994; Imported Cars
of Maryland, Inc., since 1991; Fairfax Imports, Inc., since 1988;
Rosenthal Landover Enterprises, Inc., since 1978; Auto Supply and
Parts, Inc., since 1985; Old Dominion Insurance Company, since 1979;
New Dominion Insurance Company, since 1990; and, Geneva Air Services,
Inc., since 1987. President, Arcoa, Inc., an advertising company,
since 1970. Trustee, Capital Automotive REIT, a real estate
investment trust which invests in real property and improvements used
by motor vehicle related businesses in major urban areas across the
country, since 1998. Director, First Virginia Bank, Falls Church.
Director, Metropolitan Washington Airports Authority. Trustee, Vice
President and Treasurer, The Phillips Collection, Washington, D. C.
- ----------------------
(8) Includes 11,250 shares held indirectly by a corporation, of which Mr.
Breeden is Managing Partner, 57,262 shares held by two trusts, of which
he is a trustee, and 24,487 shares held by two foundations, of which Mr.
Breeden is Chairman of the Board and President.
(9) Includes 427 shares held in a trust for his son, 754 shares held by his
spouse and daughter, 834 shares held by his spouse and son, 13,099 shares
held by the Giordano Family Foundation, 7,050 shares held by his spouse
as custodian for his son, and 25,380 shares held by his spouse alone.
(10) Includes 15,242 shares held by his spouse and 2,593 shares held by a
corporation of which Mr. Kendrick is a director and President.
(11) Includes 26,316 shares held by the Marion and Robert Rosenthal
Foundation.
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ROBERT H. ZALOKAR Retired Chairman of the Board and Chief Executive Officer 184,451
Age 71 of First Virginia, 1984-1994. Director, First Virginia
1959 Bank, First Virginia Life Insurance Company, and First
Virginia Mortgage Company, Falls Church, Virginia.
Trustee, George Mason University Foundation.
As of December 31, 1998, directors and executive officers as a group
beneficially owned 1,366,792 shares of Common Stock, representing approximately
2.7% of those shares outstanding, of which 266,178 shares represent shares
covered by options exercisable as of December 31, 1998 (or sixty days
thereafter) and 125 shares of Preferred Stock representing less than one-half of
one percent of those shares outstanding. Messrs. Breeden, Giordano and Holland
are members of or are associated with law firms which have been in the last two
years, and are proposed in the future to be, retained by subsidiaries of First
Virginia. Messrs. Breeden, Fitzpatrick, Geithner, Ginn, Giordano, Holland,
Phillips, Rosenthal, Rowe and Zalokar have been directors of various
subsidiaries of First Virginia during the past five years as has the nominee,
Ms. Vickers-Smith. Ages of the directors are stated as of December 31, 1998.
BENEFICIAL OWNERSHIP OF NAMED EXECUTIVE OFFICERS
The following table sets forth certain information regarding the named
executives' beneficial ownership of First Virginia Common Stock as of December
31, 1998.
Shares of Common Stock of First Virginia
Beneficially Owned
Name of Officer Number * Percent of Class
---------------------------------------------------------------------
Barry J. Fitzpatrick 112,218 .2228
Shirley C. Beavers, Jr. 67,783 .1345
Raymond E. Brann, Jr. 58,113 .1153
Richard F. Bowman 43,797 .0869
Michael G. Anzilotti 24,259 .0481
* The amounts shown represent the total shares owned beneficially by such
individuals as of December 31, 1998 together with shares which are issuable upon
the exercise of all stock options that are exercisable. Specifically, the
following individuals have stock options that are exercisable as of December 31,
1998 (or sixty days thereafter), which give them the right to acquire the shares
indicated after their name upon the exercise of those options: Mr. Fitzpatrick,
49,313; Mr. Beavers, 52,578; Mr. Brann, 33,750; Mr. Bowman, 32,650; and Mr.
Anzilotti, 22,050.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
First Virginia's Board of Directors has a standing Audit Committee,
Director Nominating Committee, Management Compensation and Benefits Committee,
Public Policy Committee, and Executive Committee.
The Audit Committee, comprised of Directors Breeden, Giordano, Gruver,
Kendrick, and Phillips, held four meetings during 1998. Functions of the
Committee include (1) reviewing with the independent auditors and management
such matters as: the financial statements and the scope of First Virginia's
audit, compliance with laws and regulations, and the adequacy of First
Virginia's system of internal procedures and controls and resolution of
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material weaknesses; (2) reviewing with First Virginia's internal auditors the
activities and performance of the internal auditors; (3) reviewing with
management the selection and termination of the independent auditors and any
significant disagreements between the independent auditors and management; and
(4) reviewing the nonaudit services of the independent auditors. Under Section
36 of the Federal Deposit Insurance Act, the Audit Committee also performs
similar functions for some of the First Virginia member banks.
The Director Nominating Committee, comprised of Directors Zalokar,
Fitzpatrick, Ginn, Giordano, Greer, and Rowe, held one meeting in 1998. The
functions of the Committee include annually recommending to the Board the names
of persons to be considered for nomination and election by First Virginia's
stockholders and, as necessary, recommending to the Board the names of persons
to be appointed to the Board between annual meetings.
The Management Compensation and Benefits Committee, comprised of
Directors Zettlemoyer, Holland, Kendrick, Phillips, and Rosenthal, held three
meetings in 1998. The Committee has the authority to establish the level of
compensation (including bonuses) and benefits of management of First Virginia.
In addition, the Committee has authority to award long-term incentive
compensation, e.g., stock options, to First Virginia's management based on such
factors as individual and corporate performance.
The Public Policy Committee, comprised of Directors Gruver, Breeden,
Fitzpatrick, Geithner, Greer, Rowe, and Zalokar, met two times during 1998. This
Committee oversees First Virginia's contributions and matching gifts programs.
The Committee also monitors the programs developed for equal employment and
compliance with the Community Reinvestment Act.
The Executive Committee, comprised of Directors Zalokar, Breeden,
Fitzpatrick, Geithner, Ginn, Holland, and Zettlemoyer, held 12 meetings in 1998.
The Committee exercises all of the powers of the Board of Directors when the
Board is not in session, except for those powers reserved for the Board under
state law and by First Virginia's Articles of Incorporation and Bylaws.
During 1998, there were 12 meetings of the Board of Directors. All
incumbent directors attended more than 75% of the aggregate total number of
meetings of the Board and committees of the Board on which they served.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires First
Virginia's directors and executive officers to file reports of ownership and
changes in ownership with the Securities and Exchange Commission and the New
York Stock Exchange. Executive officers and directors are required by SEC
regulation to furnish First Virginia with copies of all Section 16(a) forms they
file.
Based on a review of the forms that were filed and written
representations from the directors and executive officers, First Virginia
believes that during the year 1998 all filing requirements applicable to its
directors and officers were met on time, with the exception of one transaction
involving the sale of stock by Mrs. Gruver, a director, which should have been
filed on a Form 4 in November but was instead filed with the SEC on a Form 5 in
January, 1999.
EXECUTIVE COMPENSATION
The Summary Compensation Table on the next page shows the annual
compensation for the last three fiscal years for First Virginia's Chief
Executive Officer and for the four other most highly compensated executive
officers.
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SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
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(a) (b) (c) (d) (e) (f) (g)
Other
Annual Options/ All Other
Name and Compensa- SARs Compen-
Principal tion Awarded sation
Position Year Salary ($)(1) Bonus ($)(2) ($)(3) (#)(4) ($)(5)
- --------- ---- ------------- ------------ ------------- ------------ ------
Barry J. Fitzpatrick 1998 630,000 222,360 3,860 25,000 61,877
Chairman, President and 1997 600,000 346,944 3,395 30,000 66,144
Chief Executive Officer 1996 470,000 269,960 3,724 15,000 56,783
of First Virginia
Shirley C. Beavers, Jr. 1998 266,000 86,435 3,924 12,500 34,688
Executive Vice President 1997 253,500 134,265 3,708 15,000 32,812
of First Virginia and 1996 241,500 108,433 3,748 7,500 31,426
Vice Chairman and
Chief Executive Officer of
First Virginia Services, Inc.
Raymond E. Brann, Jr. 1998 214,500 84,640 5,531 12,500 64,310
Executive Vice President 1997 204,500 132,471 5,052 15,000 62,268
of First Virginia 1996 194,500 106,803 4,568 7,500 59,339
Richard F. Bowman 1998 208,000 84,894 3,724 12,500 20,935
Senior Vice President, Treasurer 1997 183,000 132,245 3,708 15,000 18,662
and Chief Financial Officer 1996 168,000 106,088 3,263 7,500 15,943
of First Virginia
Michael G. Anzilotti 1998 206,700 51,102 2,334 6,500 18,041
President and Chief Executive 1997 196,900 69,700 2,250 7,500 16,898
Officer of First Virginia Bank 1996 188,400 56,550 2,459 0 15,966
(1) The Salary column (c) includes the base salary earned by the
executive officer, which includes amounts that are deferred under the
First Virginia Banks, Inc. Employees Thrift Plan, the First Virginia
Thrift Restoration and Deferred Compensation Plan and the First Virginia
Pre-Tax Health Benefit Plan.
(2) The Bonus column (d) includes the amount earned as a bonus for
that year even if paid in the following year. It also includes amounts
earned for that year under the First Virginia Banks, Inc. Profit Sharing
Plan.
(3) The Other Annual Compensation column (e) includes the amount
of taxes paid by First Virginia for certain benefits. In Mr. Brann's
case, it also includes the interest benefit to him of a below-market-rate
residential mortgage loan made to him as an inducement to relocate to
Northern Virginia.
(4) Column (f) includes the number of stock options that were
granted in 1998. The 1996 awards were adjusted for the three-for-two
stock split in September, 1997.
(5) The All Other Compensation column (g) includes the amount paid
by the employer under the First Virginia Banks, Inc. Employees Thrift
Plan which, for each of the named officers, was $7,200. It also includes
the amounts paid by the employer under the First Virginia Thrift
Restoration and Deferred Compensation Plan. This plan provides
supplemental retirement benefits for those key officers who are
restricted from receiving further benefits under the Thrift Plan as a
result of the limitation on pretax contributions imposed by the Internal
Revenue Code. For 1998, these amounts were: for Mr. Fitzpatrick, $31,137;
Mr. Beavers, $10,820; Mr. Brann, $8,424; Mr. Bowman, $8,121; and Mr.
Anzilotti, $5,252 It also
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includes the premium amounts paid by the employer under the First Virginia Split
Dollar Life Insurance Plan. For 1998, these amounts were: for Mr. Fitzpatrick,
$21,270; Mr. Beavers, $14,372; Mr. Brann, $43,714; Mr. Bowman, $5,163; and Mr.
Anzilotti, $4,124. It also includes the "above-market" earnings on deferred
compensation earned during 1998. These amounts were: for Mr. Fitzpatrick,
$2,270; Mr. Beavers, $2,296; Mr. Brann, $4,972; Mr. Bowman, $451; and Mr.
Anzilotti, $1,465.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table shows for each of the named executive officers (1)
the number of options that were granted during 1998, (2) out of the total number
of options granted to all employees, the percentage granted to the named
executive officer, (3) the exercise price, (4) the expiration date, and (5) the
potential realizable value of the options, assuming that the market price of the
underlying securities appreciates in value from the date of grant to the end of
the option term, at annualized rates of 5% and 10%. No freestanding or tandem
SARs were granted in 1998.
STOCK OPTION GRANTS IN 1998
Percent of
Number of Total Potential Realizable
Securities Options Value at Assumed
Underlying Granted to Exercise Annual Rates of Stock
Options Employees or Base Price Appreciation for
Granted in Fiscal Price Expiration Option Term
Name (# Shs.)(1) Year (2) ($/Sh.) Date 5%($) 10%($)
---- ----------- ---------- -------- ---------- ----- ------
Barry J. Fitzpatrick 25,000 12.47% 44.625 12/15/2008 701,606 1,778,016
Shirley C. Beavers, Jr. 12,500 6.23% 44.625 12/15/2008 350,803 889,008
Raymond E. Brann, Jr. 12,500 6.23% 44.625 12/15/2008 350,803 889,008
Richard F. Bowman 12,500 6.23% 44.625 12/15/2008 350,803 889,008
Michael G. Anzilotti 6,500 3.24% 44.625 12/15/2008 182,416 462,283
(1) Options granted to the named executive officers in 1998 vest over a
five-year period. All of the options that were granted in 1998 include a
provision that would accelerate the vesting of the options upon a "change in
control" of First Virginia. For an explanation of the "change in control"
provision, see "Directors' Compensation, Consulting Arrangements and Plans Which
Include Change in Control Arrangements."
(2) Options to purchase 200,500 shares of First Virginia Common Stock
were granted to employees during 1998. No freestanding SARs were granted in 1998
to employees, and none of the options that were granted had any tandem SARs.
The following table on the next page shows for each of the named
executive officers the number of shares of First Virginia Common Stock acquired
upon the exercise of stock options and stock appreciation rights during 1998,
the value realized upon their exercise, the number of unexercised stock options
and SARs at the end of 1998, and the value of unexercised "in-the-money" stock
options and SARs at the end of 1998. Stock options or freestanding SARs are
considered "in-the-money" if the fair market value of the underlying securities
exceeds the exercise price of the option or SAR. Some of the stock options which
were granted to First Virginia's executive officers include a provision that
would accelerate the vesting of the options upon a "change in control" of First
Virginia. There were no unexercisable or exercisable freestanding SARs owned by
any of the named executive officers at yearend.
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AGGREGATED OPTIONS/SAR EXERCISES IN 1998 AND
YEAREND OPTIONS
Number of Value of Unexercised In-
Unexercised the-Money Options
Yearend (#) at
Shares Options at Yearend ($)
Acquired on Exercisable/ Exercisable/
Name Exercise(#) Value Realized ($) Unexercisable Unexercisable
---- ------------- ------------------ -------------- -------------
Barry J. Fitzpatrick 8,165 180,775 31,313/88,000 876,434/667,374
Shirley C. Beavers, Jr. 0 0 43,577/41,001 1,297,589/285,581
Raymond E. Brann, Jr. 0 0 27,150/38,600 835,274/225,412
Richard F. Bowman 1,000 42,111 24,400/40,250 687,185/266,687
Michael G. Anzilotti 0 0 16,800/20,750 460,549/157,937
PENSION AND THRIFT PLANS AND SUPPLEMENTAL ARRANGEMENTS
The following table shows the estimated annual benefit payable upon
retirement (life only) under the First Virginia Pension Trust Plan and under the
First Virginia Supplemental Pension Trust Plan based on specified remuneration
and years of credited service classifications, assuming a participant retired on
December 31, 1998, at age 65. Credited service in excess of thirty years is not
taken into account in determining benefits under either plan.
ANNUAL BENEFITS UNDER FIRST VIRGINIA'S PENSION TRUST PLAN AND
THE FIRST VIRGINIA SUPPLEMENTAL PENSION TRUST PLAN
Average
Annual Pay 10 Years 15 Years 20 Years 25 Years 30 Years
for Highest of of of of of
Five Years Service Service Service Service Service
- ----------- -------- -------- ------- ------- -------
$200,000 $ 30,444 $ 45,665 $ 60,887 $ 76,109 $ 91,331
$300,000 $ 46,444 $ 69,665 $ 92,887 $116,109 $139,331
$400,000 $ 62,444 $ 93,665 $124,887 $156,109 $187,331
$500,000 $ 78,444 $117,665 $156,887 $196,109 $235,331
$600,000 $ 94,444 $141,665 $188,887 $236,109 $283,331
$700,000 $110,444 $165,665 $220,887 $276,109 $331,331
Under the First Virginia Pension Trust Plan, a participant retiring at
age 65 with 30 years of credited service under the Plan will receive a maximum
annual pension benefit equal to 1.1% of average annual pay multiplied by 30
years of credited service plus 0.5% of average annual pay in excess of covered
compensation multiplied by 30 years of credited service. The calculation of
"average annual pay" is based on annual compensation for the highest five
consecutive years out of the participant's final 10 years of service. "Covered
compensation" is calculated by multiplying the annual average of Social Security
taxable wage bases in effect for the 35 years ending with the last day of the
year in which the participant attains Social Security retirement age. First
Virginia also has the First Virginia Supplemental Pension Trust Plan for certain
key employees which provides
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for the payment of supplemental pension benefits as a result of the IRS
restrictions on benefits under the First Virginia Pension Trust Plan. All of the
named executive officers (except for Mr. Fitzpatrick who would receive benefits
at retirement under a separate Supplemental Compensation Agreement) participate
in the Supplemental Pension Trust Plan.
Remuneration or earnings determining pension benefits under both the
Pension Trust Plan and the Supplemental Pension Trust Plan includes salaries and
bonuses (which are listed in the Summary Compensation Table) and any other
taxable compensation. Effective February 1, 1996, compensation resulting from
the exercise of nonqualified options, SARs, and deferred compensation are
excluded from the computation of benefits under both plans. For purposes of
determining benefits under the Pension Trust Plan, each of the named executives
had the following years of service as of December 31, 1998 (30 years is the
maximum): Mr. Fitzpatrick, 29.4 years; Mr. Beavers, 29.3 years; Mr. Brann, 30
years; Mr. Bowman, 23.5 years; and Mr. Anzilotti, 20.2 years. If a participant
retired on December 31, 1998, at age 65, the participant would receive the
pension benefits as determined by using the Summary Compensation and Pension
Tables shown above in conjunction with the formula described in the previous
paragraph.
Mr. Fitzpatrick's Supplemental Compensation Agreement ("Agreement")
provides him with supplemental retirement benefits in addition to those pension
benefits he would receive from the First Virginia Pension Trust Plan. Under the
Agreement, if he resigns, retires or leaves First Virginia for any reason, he is
entitled to receive for the rest of his life, supplemental compensation equal to
sixty percent of the average of his highest five years of annual salary and
bonus, reduced by the amount he would receive under the First Virginia Pension
Trust Plan. Highest annual salary includes salary and bonus and any profit
sharing payments received under the First Virginia Profit Sharing Plan but does
not include any other form of compensation that is not salary or bonuses, such
as compensation arising from the exercise of SARs and nonqualified options. To
avoid a possible doubling up of benefits from this Agreement and a separate
Employment Agreement (see below), payments to Mr. Fitzpatrick pursuant to his
Agreement would be delayed for three years upon a change of control. Should Mr.
Fitzpatrick die, his spouse would be entitled to one-half of his total annual
benefit for the rest of her life. Under his Agreement, once benefits begin to be
paid, Mr. Fitzpatrick is to remain available to provide consulting and advisory
services if he is physically and mentally capable of doing so. Furthermore, his
benefits are forfeitable under certain circumstances.
Messrs. Fitzpatrick, Beavers, Brann and Bowman have entered into
employment agreements with First Virginia which provide for their continued
employment for a three-year period following the date on which a "change of
control" takes place (the "Employment Period"). These agreements require First
Virginia (or any successor corporation) to employ the executive during the
Employment Period following a change of control in a position with authority,
duties and responsibilities at least commensurate to what the executive had
prior to a change of control, and at compensation levels (including benefits) at
least equal to what the executive was making prior to the change of control. If,
during the first year of his Employment Period, the executive is terminated
other than for "cause" or "disability" or the executive terminates his
employment for "good reason" (as those terms are defined under the employment
agreements), then First Virginia (or its successor) would pay the executive a
lump sum equal to 2.99 times the sum of his annual base salary and bonus. If,
during the second or third year of his Employment Period, the executive is
terminated other than for cause or disability or terminates his employment for
good reason, then First Virginia or its successor would pay the executive a lump
sum equal to two times the sum of his annual base salary and bonus. During a
thirty-day period after the first year, the executive could terminate his
employment for any reason and receive two times the sum of his annual base
salary and bonus. Furthermore, if any payments made under the agreements subject
the executive to taxes under Internal Revenue Code Section 4999, such payments
would be "grossed up" to put the executive in the same after-tax position as if
no excise taxes had been imposed.
Executive officers are eligible to participate in the First Virginia
Banks, Inc. Employees' Thrift Plan ("Thrift Plan"). Under the Thrift Plan,
employees of First Virginia and its subsidiaries who have completed one year of
service can contribute up to six percent of their compensation and receive
matching employer contributions equal to 50% of their employee contributions.
Employees also can contribute up to an additional six percent of their
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compensation without receiving a matching contribution. For the years when First
Virginia meets an earnings test under the Thrift Plan, employees can receive
matching contributions equal to 75% of employee contributions. The Thrift Plan
complies with Section 401(k) of the Internal Revenue Code so that employee
contributions can be made on a pretax basis. Employees can direct the investment
of their contributions and the matching employer contributions into one or more
of three funds that are administered by the Trust Department of First Virginia
Bank. Reference is made to footnote 5 of the Summary Compensation Table for the
amount of contributions made on behalf of the named executive officers under the
Thrift Plan.
First Virginia also maintains a First Virginia Thrift Restoration and
Deferred Compensation Plan which provides supplemental retirement benefits for
those key officers who are restricted from receiving further benefits under the
Thrift Plan as a result of the limitation on pretax contributions imposed by the
Internal Revenue Code. Under the First Virginia Thrift Restoration and Deferred
Compensation Plan, executive officers can continue to make pretax contributions
in excess of the IRS limits imposed on the Thrift Plan and receive matching
contributions from First Virginia identical to what they would have received if
they were in the Thrift Plan and there were no limitations on contributions.
Reference is made to Footnote 5 of the Summary Compensation Table for the amount
of the employer contributions made on behalf of the named executive officers
under the First Virginia Thrift Restoration and Deferred Compensation Plan.
DIRECTORS' COMPENSATION, CONSULTING ARRANGEMENTS
AND PLANS WHICH INCLUDE CHANGE IN CONTROL ARRANGEMENTS
For 1999, directors of First Virginia who are not salaried officers will
be paid an annual retainer of $14,000 per year and a fee of $965 for each
meeting of the Board of Directors attended. Committee chairmen will receive $875
for each committee meeting they chair and other Committee members will receive
$725 for each committee meeting they attend.
Directors are reimbursed for out-of-town expenses incurred in connection
with attendance at Board and Committee meetings. During 1998, Edwin T. Holland,
the founder and former Chairman and Chief Executive Officer of First Virginia,
and Thomas K. Malone, Jr., former Chairman and Chief Executive Officer of First
Virginia, were paid $161,316 and $131,136, respectively, under supplemental
compensation agreements, in addition to amounts they received from the First
Virginia Pension Trust Plan and, in the case of Mr. Malone, in addition to the
fees he receives for attending Board meetings. When requested, both Holland and
Malone are required to provide consulting services under their supplemental
compensation agreements. Also, during 1998, Robert H. Zalokar, former Chairman
and Chief Executive Officer of First Virginia, and Paul H. Geithner, Jr., former
President and Chief Administrative Officer of First Virginia, were paid $521,316
and $282,527, respectively, under supplemental compensation agreements, in
addition to amounts they received from the First Virginia Pension Trust Plan and
their director fees. When requested, both Zalokar and Geithner are required to
provide consulting services under their supplemental compensation agreements.
First Virginia paid Mr. Zalokar's and Mr. Malone's country club membership fees
of $2,976 and $1,653, respectively, during 1998. During 1998, Virginia H. Brown,
formerly Virginia H. Beeton, received $71,000 pursuant to her former spouse's
Supplemental Retirement Agreement with First Virginia, in addition to what she
received from the First Virginia Pension Trust Plan. Her former spouse, Ralph A.
Beeton, who is now deceased, was Chairman and Chief Executive Officer of First
Virginia.
First Virginia also has two key employee salary reduction deferred
compensation plans, one of which began in 1983 and the other in 1986, and two
directors' deferred compensation plans, which also began in 1983 and 1986
("Deferred Compensation Plans"). Under the Deferred Compensation Plans,
participants elect to defer some or all of their compensation from First
Virginia, and First Virginia agrees to pay at normal retirement age or earlier
(or to participant's beneficiary or estate on participant's death) a sum
substantially in excess of what each participant has deferred. To fund the
benefits under the Deferred Compensation Plans, First Virginia has purchased
life insurance contracts on the lives of the participants, with First Virginia
as the beneficiary. For the period ending
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December 31, 1998, none of the named executive officers of First Virginia
deferred any compensation under the Deferred Compensation Plans.
The 1983 deferred compensation plans include a provision regarding
"change in control." If there is a "change in control" of First Virginia, and a
director is terminated under the directors' plan, or in the case of the employee
plan, an employee is terminated "without cause" or the employee terminates
his/her employment for "good reason," as those terms are defined under the
employee plan, then the director or employee, as the case may be, becomes
entitled to receive his/her benefits under the 1983 Deferred Compensation Plans
at retirement, notwithstanding the fact that his/her affiliation with First
Virginia has terminated.
First Virginia has a Split Dollar Life Insurance Plan ("Split Dollar
Plan") which currently includes all executive employees of First Virginia
including those named in the Summary Compensation Table. Under the Split Dollar
Plan, an executive can purchase ordinary life insurance policies with coverage
of at least two times what is projected to be the executive's base salary at
retirement, up to a limit of $1,000,000. A portion of the premiums will be
loaned to the executives by First Virginia up to the later of ten years or the
executive's retirement date. At the end of this period, if assumptions about
mortality, dividends and other factors are realized, First Virginia will recover
all of its loans for premiums from the cash value of the policy. The policy will
then be transferred to the executive, who will pay all further premiums, if any,
under the policy. Executives who participate in the Split Dollar Plan forego any
insurance coverage over $50,000 under the First Virginia Group Life Insurance
Plan. During 1989, the Split Dollar Plan was amended so that in the event of a
"change in control," only the executive would have the right to terminate the
policy.
First Virginia's Board of Directors approved in 1992 the establishment of
a trust with Chemical Bank (now The Chase Manhattan Bank) as the trustee to
partially secure the benefits of some of First Virginia's nonqualified
compensation plans, including the Deferred Compensation Plans and the First
Virginia Thrift Restoration and Deferred Compensation Plan, in case of a change
in control. Under the trust agreement establishing the trust, if a "change in
control" takes place, the trustee would pay the benefits under the covered
compensation plans out of the trust assets that have been contributed to the
trust by First Virginia, if First Virginia or its successor refused to pay the
benefits. The trust is considered a "grantor trust" subject to the claims of
First Virginia's general creditors. For accounting purposes, the trust assets
are considered corporate assets and, therefore, no balance sheet impact to First
Virginia will result from the establishment of the trust. The trust agreement
does not include a provision which would accelerate the vesting or payment of
any of the benefits under the covered compensation plans in case of a change in
control. During 1998, First Virginia did not make a contribution to the Trust.
The 1983 deferred compensation plans, the Split Dollar Plan, the
above-described trust agreement with The Chase Manhattan Bank, Mr. Fitzpatrick's
Supplemental Compensation Agreement, certain stock option agreements, and the
above-described employment agreements all include change in control provisions.
Under this definition, a change in control means: (a) an acquisition by any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (i) the then outstanding shares
of First Virginia Common Stock or (ii) the combined voting power of the then
outstanding voting securities of First Virginia entitled to vote generally in
the election of directors (the "Outstanding First Virginia Voting Securities");
provided, however, that any acquisition directly from or by First Virginia or
any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by First Virginia or an affiliated company or any acquisition by a
company pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of (c) below would be excluded; or (b) individuals who, as of the date
when the change in control provisions were adopted, constitute the Board (the
"Incumbent Board") of First Virginia, cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual becoming a
director whose election, or nomination for election by First Virginia's
shareholders, was approved by vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such individual was
a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of directors
or other actual or
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threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board; or (c) consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of First
Virginia (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the outstanding First
Virginia Common Stock and Outstanding First Virginia Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns
First Virginia or all or substantially all of First Virginia's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination
of the outstanding First Virginia Common Stock and the outstanding First
Virginia Voting Securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of First Virginia or such corporation resulting from
such Business Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or the
action of the Board, providing for such Business Combination; or (d) approval by
the shareholders of First Virginia of a complete liquidation or dissolution of
First Virginia.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of First Virginia's Management Compensation and
Benefits Committee are Edward M. Holland, Eric C. Kendrick, W. Lee Phillips,
Jr., Robert M. Rosenthal and Albert F. Zettlemoyer. Edward M. Holland is the son
of Edwin T. Holland, the founder and former Chairman and Chief Executive Officer
of First Virginia. As noted above, Edwin T. Holland receives a fee from First
Virginia pursuant to a Supplemental Compensation Agreement. Also, as noted
above, Edward M. Holland's sister, Virginia H. Brown, receives a benefit
pursuant to her former spouse's Supplemental Retirement Agreement with First
Virginia. Albert F. Zettlemoyer's daughter is an officer of First Virginia
Insurance Services, Inc., a subsidiary of First Virginia. None of the members of
the Management Compensation and Benefits Committee served as members of the
compensation committees of another entity. No executive officer of First
Virginia served as a director of another entity that had an executive officer
serving on First Virginia's compensation committee. No executive officer of
First Virginia served as a member of the compensation committee of another
entity which had an executive officer who served as a director of First
Virginia.
MANAGEMENT COMPENSATION AND BENEFITS COMMITTEE
REPORT CONCERNING FIRST VIRGINIA'S
EXECUTIVE COMPENSATION POLICY
The Management Compensation and Benefits Committee (the "Committee") of
the Board of Directors establishes the policy for the compensation of the
executive officers of First Virginia. It is also responsible for administering
most of First Virginia's executive compensation programs. The Committee is
composed entirely of outside directors who are not eligible, with the exception
of the directors' deferred compensation plans, to participate in the plans over
which it has authority.
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The overall goal of First Virginia's compensation policy is to motivate,
reward, and retain its key executive officers. The Committee believes this
should be accomplished through an appropriate combination of competitive base
salaries and, at times, both short-term and long-term incentives.
The primary components of First Virginia's executive compensation program
are base salaries, bonuses, (e.g., short-term compensation), and equity
compensation (e.g., long-term compensation). Executive officers also participate
in other broad-based employee compensation and benefit programs. In its
determination of executive compensation, the Committee noted the potential
effect of the one million dollar deduction limitation under Section 162(m) of
the Internal Revenue Code but declined to alter its policy in determining
executive compensation to meet the requirements for deductibility under Section
162(m) because the amount of compensation affected, if any, was not material.
BASE SALARY
The Compensation Committee's policy for determining base salaries is
based on two primary factors:
(1) the degree of responsibility the executive officer has, his
experience, and the number of years he has been in office and
(2) the compensation levels of corresponding positions at other
banking companies of comparable size that compete with and serve the
same markets as First Virginia. This "Market Area Peer Group" of
companies consists of Crestar Financial Corporation based in
Virginia, Riggs National Corporation based in Virginia and
Washington, D.C., First Maryland Bancorp and Mercantile Bankshares
Corporation based in Maryland, First Tennessee National Corporation
and First American Corporation of Tennessee based in Tennessee, and
Centura Banks, Inc. based in North Carolina. Base salaries are
targeted to be the median salaries of corresponding positions in the
"Market Area Peer Group". For 1998, Mr. Fitzpatrick's base salary
was $630,000, which was equal to the median for salaries paid to his
counterparts in the "Market Area Peer Group".
SHORT-TERM INCENTIVES/BONUSES
The Committee grants bonuses to the executive officers and CEO based on
the extent to which First Virginia achieves or exceeds annual performance
objectives. The Compensation Committee may award bonuses to the CEO and to the
executive officers if First Virginia achieves a return on total average assets
(ROA) of at least 1% (the same basis for determining payments of profit sharing
to all employees). ROA generally is considered by the Committee to be the most
important single factor in measuring the performance of a banking company, and
achievement of a 1% ROA generally is considered by the Committee to be the
minimum for a good performing banking company.
Bonus awards are based on the following:
(a) The Committee establishes target amounts each year for return on
average assets ("ROA"), return on total stockholders' equity
("ROE"), asset quality and capital strength consistent with First
Virginia's Profit Plan target amounts. Up to 50% of an executive's
salary may be awarded if the corporation achieves an ROA
equivalent to 80% or more of ROA target amount for the year. For
the chief executive officer, First Virginia would also have to
achieve 80% of targeted amounts for ROE, asset quality as
determined by the ratio of nonperforming assets to total loans
(NPA ratio) and net loan charge-offs (CO ratio) and capital
strength based on the average equity-to-asset ratio (Equity/Asset
ratio) and the Tier I risk-based capital ratio; and/or
(b) Up to 30% of an executive's salary may be awarded based on the
degree to which First Virginia's earnings, asset quality, and
capital ratios exceed the average for the other major banking
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companies based in the Southeast, the "Southern Regional Peer
Group," as compiled by Keefe, Bruyette and Woods, the New York
securities firm which specializes exclusively in the banking and
thrift industry; and/or
(c) Up to 20% of an executive's salary may be awarded at the
discretion of the Committee based on an individual executive's
performance.
Within the above parameters, prior to the beginning of each year, the
Committee establishes for the CEO a target bonus which is based on a projected
return on assets for First Virginia. At the end of the year, the Committee
considers a preliminary bonus after taking into account the target bonus, First
Virginia's actual return on assets for the year, and a formula which is based on
a set relationship between the actual versus the projected return on assets.
The Committee then exercises its judgment in light of the foregoing
parameters and other considerations, including the Committee's view of
individual performance and potential and the recommendations of the CEO for the
executive officers (other than himself), to reach a bonus decision for each
executive officer and for the CEO. The Committee does not use a formula to
determine a final bonus decision. Among other things, Mr. Fitzpatrick's bonus
reflected First Virginia's success in achieving a 1.39% return on assets (for
the first nine months) and the other above-described results. Consistent with
the Committee's avoidance of a strict formula approach, no specific weighing
among the above 50%, 30% and 20% factors was specified. The Committee believes
that the use of the above approach provides a flexible yet effective method of
motivating First Virginia's management.
Listed below are the annualized ratios for First Virginia and the
Southern Regional Peer Group based on results for the first nine months of 1998,
the latest data available to the Committee at the time the incentive awards were
considered.
First Virginia
Profit Plan
or Target KBW Southern
Amount Actual Regional Peer Group
------ ------ -------------------
Earnings (Higher is better)
ROA 1.53% 1.39% 1.30%
ROE 13.80% 12.45% 15.21%
Asset Quality (Lower is better)
NPA .40% .33% .46%
CO .32% .34% .28%
Capital (Higher is better)
Equity/Asset Ratio 9.5% 10.60% 8.37%
Tier I Risk Based 10.0% 12.21% 11.06%
Capital
First Virginia's actual results were greater than 80% of the profit plan
or target amount in every category and exceeded the Regional Peer Group in every
category except ROE and net charge-offs. For that reason, the Committee awarded
Mr. Fitzpatrick a bonus of $200,000.
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LONG-TERM COMPENSATION/STOCK OPTIONS
The Committee believes that the granting of stock options is the most
appropriate form of long-term compensation for executives and that such awards
of equity encourage the executive to achieve a significant ownership stake in
the success of First Virginia.
At the end of 1998, the Committee granted options covering a total of
200,500 shares of First Virginia Common Stock at $44.625 per share to the CEO
and to certain officers. Each option that was awarded by the Committee vests
over a five-year period in equal annual installments.
The size of each option award was not based on a formula and did not
necessarily correlate to the degree by which First Virginia's results exceeded
those of its Market Area Peer Group or the amount of each executive's current
stock-based holdings. Instead, the size of each award was based on a number of
factors, some of which were subjective, including the performances of the CEO
and each executive officer and the degree of responsibility each executive
officer has with First Virginia. Mr. Fitzpatrick received options covering
25,000 shares. The size of his grant was primarily based on the performance of
First Virginia as described above.
Edward M. Holland
Eric C. Kendrick
W. Lee Phillips
Robert M. Rosenthal
Albert F. Zettlemoyer
PERFORMANCE GRAPH
The following performance graph compares the yearly percentage change in
First Virginia's cumulative total shareholder return on its Common Stock with
(1) the cumulative total return of a broad market index that includes companies
whose equity securities are traded on the same exchange or are of comparable
market capitalization and (2) the cumulative total return of a published
industry or line-of-business index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
First Virginia Banks, Inc., S&P MidCap 400 and
KBW 50 Index (with dividends reinvested)
First Virginia S&P 400
Banks, Inc. Mid Cap KBW 50
-------------- ------- ------
1993 100 100 100
1994 101.21 96.44 94.90
1995 136.77 126.21 151.99
1996 162.19 150.42 215.00
1997 269.19 198.86 314.32
1998 250.80 236.73 340.34
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First Virginia believes the most appropriate equity market indices to be
used to measure the price performance of First Virginia's Common Stock are the
"S&P MidCap 400" and the "KBW 50." First Virginia is included as a component of
the S&P MidCap 400.
The Standard & Poor's MidCap 400 is comprised of 400 securities with
market value between approximately $200 million and $4 billion. First Virginia
considers it more representative of companies its size (yearend 1998 market
capitalization of approximately $2.354 billion) than the S&P 500 index which is
heavily dominated by large capitalization stocks (the 50 largest stocks account
for 50% of the total value of the S&P 500). Also, financial stocks represent
approximately 15% of the S&P MidCap 400 index.
The KBW 50 is an index comprised of 50 banking companies, including all
the money center banks and most large regional banks. It was developed by Keefe,
Bruyette & Woods, a New York securities firm which specializes in the banking
and thrift industry. The KBW 50 is considered more representative of price
performance of the major banking companies in the United States. As is the case
with the S&P MidCap 400 index, the KBW 50 is a market capitalization weighted
index and assumes quarterly reinvestment of dividends.
As indicated in the Management Compensation and Benefits Committee Report
above, return on average assets (ROA) is an important factor for determining
First Virginia's performance and for determining short-term and long-term
compensation for First Virginia's executive officers. The following chart
compares First Virginia's ROA during the period 1994-1998 with the KBW Southern
Regional Peer Group and with a local peer group consisting of Riggs National
Corporation, F&M National Corporation, Mercantile Bankshares Corporation, First
Tennessee National Corporation, First American Corporation of Tennessee and
Centura Banks, Inc. As noted in the Management Compensation and Benefits
Committee Report, the Compensation Committee compared First Virginia's ROA with
both these groups as part of their evaluation of executive compensation.
COMPARISON OF RETURN ON AVERAGE ASSETS
First Virginia Banks, Inc., Southern Regional
and Local Peer Groups
Southern
First Virginia Regional Local
Banks, Inc. Peer Group Peer Group
-------------- ---------- ----------
1994 1.58 1.24 1.25
1995 1.41 1.23 1.47
1996 1.43 1.27 1.40
1997 1.44 1.30 1.35
1998 1.40 1.22 1.34
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TRANSACTIONS WITH MANAGEMENT
During the past year, certain of the directors and officers of First
Virginia and their associates had loans outstanding from First Virginia's
banking subsidiaries. Each of these loans was made in the ordinary course of the
lending bank's business. In some cases, where officers of First Virginia or its
subsidiaries had to be relocated, residential mortgage loans were made by First
Virginia at favorable interest rates. During 1995, First Virginia made a below
market rate residential mortgage loan in the amount of $400,000 at 7-5/8% to
Raymond E. Brann, Jr., Executive Vice President of First Virginia, as an
inducement for him to relocate to Northern Virginia. The interest benefit to him
of that loan is included in the Summary Compensation Table. However, none of the
other named executive officers had any other below market rate loans from First
Virginia and none of them had any loans from any of First Virginia's banking
subsidiaries at favorable interest rates. All other loans have been made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and did
not involve more than the normal risk of collectibility or present other
unfavorable features. As of December 31, 1998, the aggregate amount of loans
outstanding to all directors and executive officers of First Virginia and
associates and members of their immediate families was approximately
$27,206,000.
II. APPOINTMENT OF INDEPENDENT AUDITORS
On February 24, 1999, First Virginia's Audit Committee approved, and
First Virginia's Board of Directors ratified, the appointment of the accounting
firm KPMG LLP as independent accountants for the year ending December 31, 1999
to replace Ernst & Young LLP ("E & Y"), who were dismissed as the independent
accountants effective with such appointment.
The reports of E & Y on First Virginia's consolidated financial
statements for the years ending December 31, 1998 and 1997 did not contain an
adverse opinion or a disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles. In connection with the
audits of First Virginia's consolidated financial statements for the two years
ended December 31, 1998 and through February 24, 1999, there have been no
disagreements between First Virginia and E & Y on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope and
procedures which, if not resolved to the satisfaction of E & Y, would have
caused them to make reference thereto in their report on the financial
statements for such years. In addition, there were no reportable events (as
defined in SEC Regulation S-K, Item 304(a)(1)(v)) during the two years ending
December 31, 1998 and through February 24, 1999.
At the meeting, a vote will be taken on a proposal to ratify the
appointment by the Board of Directors of KPMG LLP as independent auditors for
the year ending December 31, 1999. Ratification will require the affirmative
vote of the holders of a majority of shares of Common and Preferred Stock
present or represented by properly executed and delivered proxies at the meeting
provided a quorum is present and a majority of the outstanding shares of Common
and Preferred Stock vote on the matter. Abstentions and broker nonvotes will be
included in determining the number of votes present or represented at the
meeting with respect to determining the quorum vote for ratification. Broker
nonvotes will not be included among those that vote on the matter.
Representatives of KPMG LLP, but not E & Y, are expected to be present at the
Annual Meeting and will be available to respond to appropriate questions and to
make a statement if they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31,
1999.
18
22
STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the next Annual
Meeting in 2000 and included in First Virginia's Proxy Statement in 2000 must be
received by First Virginia no later than November 10, 1999. Upon receipt of any
such proposal, First Virginia will determine whether or not to include such
proposal in the Proxy Statement and proxy in accordance with regulations
governing the solicitation of proxies.
Under First Virginia's Bylaws, in order for a stockholder to nominate a
candidate for director, written notice of the nomination must be given to First
Virginia in advance of the meeting. Ordinarily, such notice must be given not
less than 90 nor more than 120 days before the meeting. However, if First
Virginia gives less than 70 days notice or prior public disclosure of the
meeting, then the stockholder must give such notice within 10 days after notice
of the meeting is mailed or other public disclosure of the meeting is made. The
notice must include, among other things, (1) the name and record address of, and
the class and amount of voting securities of First Virginia owned by, the
stockholder proponent, (ii) the name, age, address and occupation of, and the
class and amount of voting securities of First Virginia owned by, the nominee,
and (iii) all information that would be required under Securities and Exchange
Commission rules in a proxy statement soliciting proxies for such nominee.
In order for a stockholder to bring other business before an annual
meeting of stockholders, written notice must be given to First Virginia within
the same time limits described above for the nomination of a candidate for
director. The notice must include, among other things, (i) the name and record
address of, and the class and amount of voting securities of First Virginia
owned by, the stockholder proponent and any other stockholder known to be
supporting such proposal, (ii) a brief description of the proposed business, the
reasons for conducting such business at the annual meeting, and (iii) any
financial or other interest of the stockholder in such proposal. 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. In each case, the notice must be given to the Secretary of First
Virginia at its principal executive offices, 6400 Arlington Boulevard, Falls
Church, Virginia 22042-2336.
The foregoing summary of certain provisions of First Virginia's Bylaws is
not intended to be complete and is qualified in its entirety by reference to the
Bylaws of First Virginia, copies of which will be furnished without charge to
any stockholder upon written request to the Secretary.
OTHER MATTERS
Management does not know of any other business to be presented to the
meeting except for matters incident to the conduct of the meeting. The persons
named in the accompanying proxy will vote in accordance with the specifications
on the proxy form and will vote in accordance with their best judgment on any
other matters which properly come before the meeting.
The cost of soliciting proxies will be borne by First Virginia. In
addition to solicitation by mail, proxies may be solicited in person, by
telephone or telegraph, or by directors, officers and employees of First
Virginia. In addition, First Virginia has engaged Morrow & Co., Inc. to aid in
the distribution of proxy materials and to solicit proxies from brokers,
nominees, and security-holding companies for a fee of $5,000 plus out-of-pocket
expenses. First Virginia does not expect to pay any other compensation for the
solicitation of proxies, but will pay brokers, nominees, fiduciaries, and other
custodians their reasonable expenses for sending proxy material to principals
and obtaining their instructions.
A copy of First Virginia's Annual Report for 1998, including financial
statements, is being mailed with this Proxy Statement to all stockholders of
record. The Annual Report is not to be regarded as proxy soliciting material.
19
23
FIRST VIRGINIA WILL PROVIDE WITHOUT CHARGE, UPON THE WRITTEN REQUEST OF
ANY STOCKHOLDER ENTITLED TO VOTE AT THE ANNUAL MEETING, A COPY OF ITS ANNUAL
REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998, ON FORM 10-K, WHICH REPORT
WILL BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OR BEFORE MARCH 31,
1999. STOCKHOLDERS OF RECORD ON FEBRUARY 22, 1999, AND BENEFICIAL OWNERS OF SUCH
SECURITIES SHOULD SUBMIT REQUESTS FOR SUCH REPORT TO THOMAS P. JENNINGS,
SECRETARY, 6400 ARLINGTON BOULEVARD, FALLS CHURCH, VIRGINIA 22042-2336.
20
24
REVOCABLE PROXY
FIRST VIRGINIA BANKS, INC.
X PLEASE MARK VOTES
AS IN THIS EXAMPLE
Proxy for Annual Meeting of Stockholders
Friday, April 30, 1999
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Elsie C. Gruver, John B. Melvin and W. Lee
Phillips, Jr., and each of them, proxies with full power to vote all of the
stock of FIRST VIRGINIA BANKS, INC., which the undersigned has the power to vote
at the Annual Meeting of Stockholders to be held Friday, April 30, 1999, at 6400
Arlington Boulevard, Falls Church, Virginia, in the Fifth Floor Auditorium at
10:00 a.m., local time, and any adjournment thereof, in accordance with
instructions noted below, and at their discretion, upon any other business not
now known which properly may come before the said meeting, all as more fully set
forth in the accompanying proxy statement, receipt of which is acknowledged.
With- For All
1. ELECTION OF DIRECTORS For hold Except
( ) ( ) ( )
C Class C (for a term of 3 years):
O Paul H. Geithner, Jr.
M L. H. Ginn, III
M Edward M. Holland
O Lynda S. Vickers-Smith
N
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
- -------------------------------------------------------------------------
For Against Abstain
2. PROPOSAL TO RATIFY ( ) ( ) ( )
THE APPOINTMENT OF
KPMG LLP as
independent auditors
for the year 1999.
Please be sure to sign and date
this Proxy in the box below. Date
Stockholder sign above. Co-holder (if any) sign above.
- -------------------------------------------------------------------------
Detach above card, sign, date and mail in postage paid envelope provided.
25
FIRST VIRGINIA BANKS, INC.
If no choice is indicated above, this proxy shall be deemed to grant
authority to vote FOR the election of director nominees and to vote FOR the
proposals. The stockholder's signature should be exactly as the name appears
above. When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, or guardian, please give full title
as such. If a corporation, please sign in full corporate name by the President
or other authorized officer. If a partnership, please sign in partnership name
by authorized person.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL
YOUR PROXY CARD TODAY
26
REVOCABLE PROXY
FIRST VIRGINIA BANKS, INC.
X PLEASE MARK VOTES
AS IN THIS EXAMPLE
Proxy for Annual Meeting of Stockholders
Friday, April 30, 1999
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Elsie C. Gruver, John B. Melvin and W. Lee
Phillips, Jr., and each of them, proxies with full power to vote all of the
stock of FIRST VIRGINIA BANKS, INC., which the undersigned has the power to vote
at the Annual Meeting of Stockholders to be held Friday, April 30, 1999, at 6400
Arlington Boulevard, Falls Church, Virginia, in the Fifth Floor Auditorium at
10:00 a.m., local time, and any adjournment thereof, in accordance with
instructions noted below, and at their discretion, upon any other business not
now known which properly may come before the said meeting, all as more fully set
forth in the accompanying proxy statement, receipt of which is acknowledged.
With- For All
1. ELECTION OF DIRECTORS For hold Except
( ) ( ) ( )
P Class C (for a term of 3 years):
R Paul H. Geithner, Jr.
E L. H. Ginn, III
F Edward M. Holland
E Lynda S. Vickers-Smith
R
R
E
D
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
- -------------------------------------------------------------------------
For Against Abstain
2. PROPOSAL TO RATIFY ( ) ( ) ( )
THE APPOINTMENT
OF KPMG LLP as
independent auditors
for the year 1999.
Please be sure to sign and date
this Proxy in the box below. Date
Stockholder sign above. Co-holder (if any) sign above.
- -------------------------------------------------------------------------
Detach above card, sign, date and mail in postage paid envelope provided.
27
FIRST VIRGINIA BANKS, INC.
If no choice is indicated above, this proxy shall be deemed to grant
authority to vote FOR the election of director nominees and to vote FOR the
proposals. The stockholder's signature should be exactly as the name appears
above. When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, or guardian, please give full title
as such. If a corporation, please sign in full corporate name by the President
or other authorized officer. If a partnership, please sign in partnership name
by authorized person.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL
YOUR PROXY CARD TODAY