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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, 2002
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. [ X ] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
On September 30, 2002, there were 71,691,007 shares
of common stock outstanding.
This report contains a total of 25 pages.
INDEX
Page
---------
PART I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - September 30,
2002 and 2001, and December 31, 2001 (Unaudited) 3/ 4
Condensed Consolidated Statements of Income - Three
months and Nine months ended September 30, 2002 and
2001 (Unaudited) 5/ 6
Condensed Consolidated Statements of Shareholders'
Equity - Nine months ended September 30, 2002
and 2001 (Unaudited) 7/ 8
Condensed Consolidated Statements of Cash
Flows - Nine months ended September 30, 2002
and 2001 (Unaudited) 9
Notes to Condensed Consolidated Financial
Statements (Unaudited) 10/15
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 16/24
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 25
Item 4. Controls and Procedures 25
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K 25
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
(Dollars in thousands, except per share data)
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
- -------------------------------------------------------------------------------
Sept. 30 Dec. 31 Sept. 30
2002 2001 2001
- -------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 385,036 $ 386,171 $ 280,768
Money market investments 232,705 95,808 225,496
- -------------------------------------------------------------------------------
Total cash and cash equivalents 617,741 481,979 506,264
- -------------------------------------------------------------------------------
Securities - available for sale 851,487 1,457,788 435,716
Securities - held to maturity (fair values of
$2,633,052, $1,658,992 and $2,299,952) 2,597,750 1,639,827 2,268,637
- -------------------------------------------------------------------------------
Total securities 3,449,237 3,097,615 2,704,353
- -------------------------------------------------------------------------------
Loans, net of unearned income 6,489,813 6,510,559 6,596,854
Allowance for loan losses (72,262) (71,937) (72,368)
- -------------------------------------------------------------------------------
Net loans 6,417,551 6,438,622 6,524,486
- -------------------------------------------------------------------------------
Other earning assets 31,321 26,872 20,417
Premises and equipment 148,496 153,505 154,574
Intangible assets 192,474 199,948 204,009
Accrued income and other assets 219,410 224,486 216,761
- -------------------------------------------------------------------------------
Total assets $11,076,230 $10,623,027 $10,330,864
===============================================================================
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)(Continued)
- -------------------------------------------------------------------------------
Sept. 30 Dec. 31 Sept. 30
2002 2001 2001
- -------------------------------------------------------------------------------
LIABILITIES
Deposits:
Noninterest-bearing $ 2,051,106 $ 1,831,324 $ 1,713,170
Interest-bearing:
Interest checking 1,746,813 1,711,885 1,557,634
Money market 1,417,753 1,132,998 1,044,561
Savings 1,119,017 1,048,577 1,046,113
Consumer certificates of deposit 2,234,775 2,418,890 2,466,059
Large denomination
certificates of deposit 492,011 505,962 524,180
- -------------------------------------------------------------------------------
Total deposits 9,061,475 8,649,636 8,351,717
- -------------------------------------------------------------------------------
Short-term borrowings 622,081 639,351 646,297
Long-term debt 13,498 19,526 19,534
Accrued interest and other liabilities 139,533 162,028 164,601
- -------------------------------------------------------------------------------
Total liabilities 9,836,587 9,470,541 9,182,149
- -------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred stock, $10 par value 399 421 424
Common stock, $1 par value 71,691 71,740 72,031
Capital surplus 48,102 51,046 59,858
Retained earnings 1,113,958 1,036,257 1,015,113
Accumulated other comprehensive income (loss) 5,493 (6,978) 1,289
- -------------------------------------------------------------------------------
Total shareholders' equity 1,239,643 1,152,486 1,148,715
- -------------------------------------------------------------------------------
Total liabilities and shareholders' equity $11,076,230 $10,623,027 $10,330,864
===============================================================================
See notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
- -------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
2002 2001 2002 2001
- -------------------------------------------------------------------------------
Interest income:
Loans $116,341 $129,814 $353,023 $379,645
Securities - available for sale 10,237 814 47,134 2,780
Securities - held to maturity 26,539 31,281 70,239 87,650
Money market investments 2,772 5,859 5,317 18,506
Other earning assets 428 318 1,240 926
- -------------------------------------------------------------------------------
Total interest income 156,317 168,086 476,953 489,507
- -------------------------------------------------------------------------------
Interest expense:
Deposits 31,094 50,263 105,154 150,020
Short-term borrowings 1,565 4,244 4,665 15,527
Long-term debt 194 294 602 343
- -------------------------------------------------------------------------------
Total interest expense 32,853 54,801 110,421 165,890
- -------------------------------------------------------------------------------
Net interest income 123,464 113,285 366,532 323,617
Provision for loan losses 1,194 1,708 8,070 4,709
- -------------------------------------------------------------------------------
Net interest income after provision
for loan losses 122,270 111,577 358,462 318,908
- -------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Continued)
- -------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
2002 2001 2002 2001
- -------------------------------------------------------------------------------
Net interest income after provision
for loan losses 122,270 111,577 358,462 318,908
- -------------------------------------------------------------------------------
Noninterest income:
Service charges on deposit accounts 17,510 16,549 51,793 48,706
Electronic banking service fees 5,215 4,561 14,819 12,905
Trust and asset management fees 3,338 3,261 9,930 9,681
Insurance premiums and commissions 2,337 2,003 7,134 5,711
Other 5,679 4,840 17,281 13,658
Nonrecurring income - 13,789 - 21,538
Securities gains - 2 - 4,505
- -------------------------------------------------------------------------------
Total noninterest income 34,079 45,005 100,957 116,704
- -------------------------------------------------------------------------------
Noninterest expense:
Salaries and employee benefits 50,236 49,387 151,040 142,163
Occupancy 7,089 6,795 20,908 19,871
Equipment 8,270 8,355 24,755 24,941
Amortization of intangibles 2,195 3,799 6,652 11,163
Other 16,881 16,726 50,779 47,236
- -------------------------------------------------------------------------------
Total noninterest expense 84,671 85,062 254,134 245,374
- -------------------------------------------------------------------------------
Income before income taxes 71,678 71,520 205,285 190,238
Provision for income taxes 24,377 25,000 69,199 66,071
- -------------------------------------------------------------------------------
Net income $ 47,301 $ 46,520 $136,086 $124,167
===============================================================================
Net income per share of common stock:
Basic $ .66 $ .64 $ 1.90 $ 1.77
Diluted .66 .64 1.89 1.76
Average shares of common stock outstanding:
Basic 71,704 72,318 71,756 70,274
Diluted 72,144 72,682 72,185 70,591
See notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
- -------------------------------------------------------------------------------
Accum-
ulated
Other Total
Pre- Compre- Share-
ferred Common Capital Retained hensive holders'
Stock Stock Surplus Earnings Income Equity
- -------------------------------------------------------------------------------
Balance January 1, 2001 $ 451 $69,215 $ - $ 922,781 $ 259 $ 992,706
Comprehensive income:
Net income 124,167 124,167
Unrealized gains on
securities available for
sale 1,030 1,030
-----------
Total comprehensive income 125,197
-----------
Issuance of shares for
an acquisition 3,156 92,376 95,532
Conversion of preferred
to common stock (27) 9 18 -
Issuance of shares for
stock options 70 1,794 1,864
Common stock purchased
and retired (419)(11,870) (12,289)
Dividends declared:
Preferred stock (22) (22)
Common stock
$.7733 per share (54,273) (54,273)
Stock split adjustment (22,460) 22,460 -
- -------------------------------------------------------------------------------
Balance Sept. 30, 2001 $ 424 $72,031 $59,858 $1,015,113 $1,289 $1,148,715
===============================================================================
See notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY(Unaudited)(Continued)
- -------------------------------------------------------------------------------
Accum-
ulated
Other
Compre- Total
Pre- hensive Share-
ferred Common Capital Retained Income holders'
Stock Stock Surplus Earnings (Loss) Equity
- -------------------------------------------------------------------------------
Balance January 1, 2002 $ 421 $71,740 $51,046 $1,036,257 $(6,978) $1,152,486
Comprehensive income:
Net income 136,086 136,086
Unrealized gains on
securities available
for sale 12,471 12,471
-----------
Total comprehensive income 148,557
-----------
Conversion of preferred
to common stock (22) 7 15 -
Issuance of shares for
stock options 149 3,710 3,859
Common stock purchased
and retired (205) (6,669) (6,874)
Dividends declared:
Preferred stock (21) (21)
Common stock
$.8133 per share (58,364) (58,364)
- -------------------------------------------------------------------------------
Balance Sept. 30, 2002 $ 399 $71,691 $48,102 $1,113,958 $ 5,493 $1,239,643
===============================================================================
See notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
- -------------------------------------------------------------------------------
Nine Months Ended Sept. 30 2002 2001
- -------------------------------------------------------------------------------
Net cash provided by operating activities $137,853 $121,833
- -------------------------------------------------------------------------------
Investing activities:
Proceeds from the sale of available
for sale securities 1,009,731 189,384
Proceeds from the maturity of held to
maturity securities 2,156,433 2,883,636
Purchases of available for sale securities (386,972) (390,066)
Purchases of held to maturity securities (3,115,854)(3,120,260)
Net(increase) decrease in loans 13,002 3,089
Purchases of premises and equipment (6,852) (6,981)
Sales of premises and equipment 2,938 2,509
Net cash of acquired bank - 20,257
Net cash from bank disposition - 12,527
Other (2,120) 13,544
- -------------------------------------------------------------------------------
Net cash used for investing activities (329,694) (392,361)
- -------------------------------------------------------------------------------
Financing activities:
Net increase in deposits 411,839 227,503
Net increase (decrease) in short-term borrowings (17,270) 103,988
Principal payments on long-term debt (6,028) (4,582)
Common stock purchased and retired (6,874) (12,289)
Proceeds from issuance of common stock 3,859 1,864
Cash dividends paid (57,923) (53,101)
- -------------------------------------------------------------------------------
Net cash provided by financing activities 327,603 263,383
- -------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 135,762 (7,145)
Cash and cash equivalents at beginning of year 481,979 513,409
- -------------------------------------------------------------------------------
Cash and cash equivalents at end of period $617,741 $506,264
===============================================================================
Cash paid for:
Interest $128,610 $166,664
Income taxes 61,423 60,650
===============================================================================
See notes to condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollars in thousands, except per share data)
1. GENERAL
The foregoing unaudited condensed consolidated financial statements
include the accounts of the corporation and all of its subsidiaries. The
corporation's subsidiaries are predominantly engaged in banking activities.
Foreign banking activities and operations other than banking are not
significant. All material intercompany transactions and accounts have been
eliminated. The unaudited condensed 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 presented. Certain amounts previously
reported in 2001 have been reclassified for comparative purposes. These
reclassifications are immaterial and had no effect on net income or
shareholders' equity.
Certain information and disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted, pursuant to the
rules and regulations of the Securities and Exchange Commission. These
unaudited condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes
thereto included in the corporation's annual report on Form 10-K for the year
ended December 31, 2001.
2. SECURITIES
The following reflects the amortized cost of securities and the related
approximate fair values:
- -------------------------------------------------------------------------------
Sept. 30, 2002 Sept. 30, 2001
- -------------------------------------------------------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
- -------------------------------------------------------------------------------
Available for sale:
U.S. Government and its agencies $ 462,000 $ 463,566 $ 193,976 $ 194,446
Mortgage-backed securities
of U.S. Government agencies 371,611 374,988 230,046 230,146
Other 9,145 12,933 9,620 11,124
- -------------------------------------------------------------------------------
Total $ 842,756 $ 851,487 $ 433,642 $ 435,716
===============================================================================
Held to maturity:
U.S. Government and its agencies $2,036,003 $2,052,533 $1,784,864 $1,807,170
Mortgage-backed securities
of U.S. Government agencies 272,076 281,180 100,173 100,909
State and municipal obligations 287,616 297,189 381,521 389,736
Other 2,055 2,150 2,079 2,137
- -------------------------------------------------------------------------------
Total $2,597,750 $2,633,052 $2,268,637 $2,299,952
===============================================================================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
3. LOANS
Loans consisted of:
- -------------------------------------------------------------------------------
Sept. 30 2002 2001
- -------------------------------------------------------------------------------
Consumer:
Automobile $3,107,537 $3,226,964
Home equity, fixed- and variable-rate 690,188 703,831
Revolving credit loans 35,259 34,326
Other 137,728 169,321
Commercial 828,769 927,463
Construction and land development 126,028 155,560
Real estate:
Commercial mortgage 698,618 660,502
Residential mortgage 865,686 718,887
- -------------------------------------------------------------------------------
Total loans, net of unearned income $6,489,813 $6,596,854
===============================================================================
4. ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses was:
- -------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
2002 2001 2002 2001
- -------------------------------------------------------------------------------
Balance at beginning of period $73,345 $68,670 $71,937 $70,300
Increase attributable to acquisition - 5,479 - 5,479
Decrease attributable to divestiture - (1,331) - (1,331)
Provision charged to operating expense 1,194 1,708 8,070 4,709
- -------------------------------------------------------------------------------
Balance before charge-offs 74,539 74,526 80,007 79,157
Charge-offs (3,329) (3,198) (10,887) (10,462)
Recoveries 1,052 1,040 3,142 3,673
- -------------------------------------------------------------------------------
Balance at Sept. 30 $72,262 $72,368 $72,262 $72,368
===============================================================================
Percentage of annualized net
charge-offs to average loans .14% .13% .16% .14%
Percentage of allowance for loan
losses to period-end loans 1.11 1.10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
5. INTANGIBLE ASSETS
The corporation adopted Statement of Financial Accounting Standards No.
142, "Goodwill and Other Intangible Assets" (SFAS 142) on January 1, 2002. As
of the date of adoption, the corporation had unamortized goodwill of $150.183
million and unamortized identifiable intangible assets of $49.765 million, all
of which are subject to the transition provisions of SFAS 142. The corporation
did not acquire or dispose of any goodwill during the first nine months of
2002, and in accordance with SFAS 142, goodwill is no longer being amortized,
but instead is to be tested for impairment at least annually. The corporation
has evaluated its goodwill and other intangible assets and determined that
there is no impairment as of September 30, 2002. Substantially all of the
identifiable intangible assets are core deposit premiums and there was no
adjustment to the useful lives of these assets as a result of adopting SFAS
142. The carrying amount of amortizable intangible assets as of September 30,
2002, and the actual and expected amortization expense are as follows:
- -------------------------------------------------------------------------------
Gross
Carrying Accumulated Carrying
Sept. 30, 2002 Amount Amortization Amount
- -------------------------------------------------------------------------------
Core deposit premiums $ 89,808 $ 46,990 $ 42,818
Other 73 72 1
- -------------------------------------------------------------------------------
Total $ 89,881 $ 47,062 $ 42,819
===============================================================================
- -------------------------------------------------------------------------------
Gross
Carrying Accumulated Carrying
December 31, 2001 Amount Amortization Amount
- -------------------------------------------------------------------------------
Core deposit premiums $ 92,669 $ 43,222 $ 49,447
Other 1,281 963 318
- -------------------------------------------------------------------------------
Total $ 93,950 $ 44,185 $ 49,765
===============================================================================
- -------------------------------------------------------------------------------
Gross
Carrying Accumulated Carrying
Sept. 30, 2001 Amount Amortization Amount
- -------------------------------------------------------------------------------
Core deposit premiums $ 92,669 $ 40,957 $ 51,712
Other 1,281 942 339
- -------------------------------------------------------------------------------
Total $ 93,950 $ 41,899 $ 52,051
===============================================================================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
- ------------------------------------------------------------------------------
Core Deposit
Amortization Expense Goodwill Premiums Other
- -------------------------------------------------------------------------------
Actual:
Nine months ended Sept. 30, 2001 $4,774 $6,299 $90
Nine months ended Sept. 30, 2002 - 6,629 23
Expected:
Three months ended December 31, 2002 - 2,194 1
Twelve months ended December 31, 2003 - 8,731 -
Twelve months ended December 31, 2004 - 8,731 -
Twelve months ended December 31, 2005 - 7,146 -
Twelve months ended December 31, 2006 - 5,662 -
Twelve months ended December 31, 2007 - 4,704 -
===============================================================================
The following tables compare the corporation's net income and earnings per
share amounts had SFAS 142 been in effect for all periods presented.
- -------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
2002 2001 2002 2001
- -------------------------------------------------------------------------------
Net income $47,301 $46,520 $136,086 $124,167
Goodwill amortization - 1,509 - 4,774
- -------------------------------------------------------------------------------
Adjusted net income $47,301 48,029 $136,086 $128,941
===============================================================================
Basic earnings per share:
Net income $ .66 $ .64 $ 1.90 $ 1.77
Goodwill amortization - .02 - .07
- -------------------------------------------------------------------------------
Adjusted net income $ .66 $ .66 $ 1.90 $ 1.84
===============================================================================
Diluted earnings per share:
Net income $ .66 $ .64 $ 1.89 $ 1.76
Goodwill amortization - .02 - .07
- -------------------------------------------------------------------------------
Adjusted net income $ .66 $ .66 $ 1.89 $ 1.83
===============================================================================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
6. 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
preferred stock were outstanding:
- -------------------------------------------------------------------------------
Sept. 30 December 31 Sept. 30
Series Dividends 2002 2001 2001
- -------------------------------------------------------------------------------
A 5% 14,863 15,551 15,735
B 7% 2,970 3,290 3,290
C 7% 5,036 5,072 5,072
D 8% 17,055 18,148 18,296
- -------------------------------------------------------------------------------
Total preferred shares 39,924 42,061 42,393
===============================================================================
The Series A, Series B and Series D shares are convertible into three and
three-eights shares of common stock, and the Series C shares are convertible
into two and seven-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 71,691,007, 71,739,797 and 72,031,049 shares were outstanding at
September 30, 2002, December 31, 2001, and September 30, 2001, respectively.
Options to purchase 1,631,915 shares of common stock were outstanding on
September 30, 2002. A total of 4,456,748 shares of common stock were reserved
at September 30, 2002: 131,342 shares for the conversion of preferred stock and
4,325,406 shares for stock options.
The corporation paid a 50% common stock dividend on August 16, 2002. All
share and per-share amounts have been adjusted accordingly.
7. FEDERAL INCOME TAX
The reconcilement of income tax computed at the federal statutory tax
rates to the provision for income taxes was as follows:
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
2002 2001 2002 2001
- -------------------------------------------------------------------------------
Amount Pct Amount Pct Amount Pct Amount Pct
- -------------------------------------------------------------------------------
Statutory rate $25,087 35.0% $25,032 35.0% $71,850 35.0% $66,583 35.0%
Nontaxable interest on
municipal obligations (1,194)(1.6) (1,356)(1.9) (3,766)(1.8) (3,691)(2.0)
State taxes, net of
Federal tax benefit 293 0.4 801 1.1 805 0.3 1,865 1.0
Nondeductible goodwill - 528 0.7 - 1,671 0.9
Other items 191 0.2 (5) - 310 0.2 (357)(0.2)
- -------------------------------------------------------------------------------
Effective rate $24,377 34.0% $25,000 34.9% $69,199 33.7% $66,071 34.7%
===============================================================================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
8. NONRECURRING INCOME
Nonrecurring noninterest income for the three months and nine months ended
September 30, 2001 includes $13.789 million for the sale of First Vantage Bank-
Tennessee. Nonrecurring noninterest income for the nine months ended September
30, 2001 also includes $7.749 million from the sale of the corporation's
interest in Star Systems, Inc., which was exchanged for shares of Concord EFS,
Inc.
9. EARNINGS PER SHARE
Earnings per share computations are as follows:
- -------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
2002 2001 2002 2001
- -------------------------------------------------------------------------------
Basic:
Net income $47,301 $46,520 $136,086 $124,167
Preferred stock dividends 7 8 21 22
- -------------------------------------------------------------------------------
Net income applicable to common stock $47,294 $46,512 $136,063 $124,145
- -------------------------------------------------------------------------------
Average common shares outstanding (000s) 71,704 72,318 71,756 70,274
Earnings per share of common stock $ .66 $ .64 $ 1.90 $ 1.77
===============================================================================
Diluted:
Net income $47,301 $46,520 $136,086 $124,167
Average common shares outstanding (000s) 71,704 72,318 71,756 70,274
Dilutive effect of stock options (000s) 305 224 292 174
Conversion of preferred stock (000s) 135 140 137 143
- -------------------------------------------------------------------------------
Total average common shares (000s) 72,144 72,682 72,185 70,591
- -------------------------------------------------------------------------------
Earnings per share of common stock $ .66 $ .64 $ 1.89 $ 1.76
===============================================================================
Options which were not included in the calculation of diluted earnings per
share because the options' exercise prices were greater than the average market
price were:
- -------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
2002 2001 2002 2001
- -------------------------------------------------------------------------------
Options (000s) - 272 90 345
Weighted average price $ - $ 34.87 $ 34.87 $ 33.91
- -------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
(Dollars in thousands, except per share data)
QUARTERLY RESULTS:
First Virginia Banks, Inc. third quarter earnings per share from recurring
operations increased 27% to $.66 or $47.301 million compared to $.52 or $38.095
million earned in the third quarter of 2001. The prior year's third quarter
total earnings of $.64 per share included an after-tax gain of $.12 per share
or $8.425 million from the sale of the corporation's former banking affiliate
in the Knoxville, Tennessee, market area. Excluding the gain in the 2001 third
quarter, the return on average assets increased to 1.73% compared to 1.48% in
the prior year, and the return on average shareholders' equity increased to
15.41% compared to 13.31%. Cash basis recurring income, which excludes both
the effects of intangible assets and their related amortization and the gain on
the sale of the corporation's former banking affiliate in the 2001 third
quarter, equaled $48.826 million or $.68 per share compared to $41.179 million
or $.57 per share in the prior year's third quarter. Cash basis recurring
income produced a return on average tangible assets of 1.82% in the third
quarter and a return on average tangible shareholders' equity of 18.88%. All
per-share numbers have been adjusted to reflect the August 16, 2002, three-for-
two stock split.
For the first nine months of 2002, earnings per share from recurring
operations increased 22% to $1.89 or $136.086 million compared to $1.55 or
$109.155 million earned in the comparable period of 2001. Excluding
nonrecurring gains in 2001 of $.12 per share or $8.425 million from the sale of
the corporation's former Knoxville banking affiliate and $.09 per share or
$6.588 million from the sale of the corporation's interest in an electronic
switch network company, the return on average assets increased to 1.68%
compared to 1.48% in the prior year, and the return on average shareholders'
equity increased to 15.18% compared to 13.73%. Cash basis recurring income
produced a return on average tangible assets of 1.77% for the first nine months
of 2002 and a return on average tangible shareholders' equity of 18.77%
compared to 1.64% and 17.76%, respectively, in the prior year.
A reconciliation of GAAP to cash basis recurring net income and diluted
net income per share is summarized as follows:
- -------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
2002 2001 2002 2001
- -------------------------------------------------------------------------------
Net income $ 47,301 $ 46,520 $136,086 $124,167
Less nonrecurring income (net of tax)
Gain on bank divestiture - 8,425 - 8,425
Gain on sale of investment
in Star Systems - - - 6,588
- -------------------------------------------------------------------------------
Recurring net income 47,301 38,095 136,086 109,154
Plus amortization of intangible assets 1,525 3,084 4,608 9,186
- -------------------------------------------------------------------------------
Cash basis recurring net income $ 48,826 $ 41,179 $140,694 $118,340
===============================================================================
- -------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
2002 2001 2002 2001
- -------------------------------------------------------------------------------
Diluted net income per share $ .66 $ .64 $ 1.89 $ 1.76
Less nonrecurring income (net of tax)
Gain on bank divestiture - .12 - .12
Gain on sale of investment
in Star Systems - - - .09
- -------------------------------------------------------------------------------
Recurring net income per share .66 .52 1.89 1.55
Plus amortization of intangible assets .02 .05 .06 .13
- -------------------------------------------------------------------------------
Cash basis diluted net income per share $ .68 $ .57 $ 1.95 $ 1.68
===============================================================================
Total assets and deposits also recorded new highs on September 30, 2002.
At the end of the third quarter of 2001, total assets had crossed the $10
billion mark, reaching $10.311 billion, and they passed the $11 billion level
for the first time on September 30, 2002, climbing to $11.076 billion. Total
deposits hit a new milestone of $9.061 billion, an increase of 8% compared to
$8.352 billion at September 30, 2001. Average deposits increased 7% to $8.941
billion in the third quarter of 2002 compared to $8.365 billion in the prior
year's third quarter. Average demand deposits increased 12%, interest checking
deposits advanced 11% and money market accounts rose 38% compared to the prior
year's third quarter. This significant growth in transaction account
categories was the direct result of a successful corporate-wide sales campaign.
Average outstanding consumer certificates of deposit declined 9%, impacted by
lower interest rates on new and renewed certificates.
Average loans declined 1% in the third quarter to $6.515 billion compared
to $6.592 billion in the prior year's third quarter. Average consumer
installment loans, primarily automobile loans and home equity loans, declined
2% and were impacted by a combination of zero-rate incentives offered by
automobile manufacturers and refinance activity as consumers took advantage of
the lowest rates on mortgage loans in 40 years to consolidate debt and reduce
the balances on higher rate categories of loans. Average real estate loans
increased 14% as a result of the popularity of the corporation's 15-year fixed-
rate consumer real estate loan. Average commercial loans declined 15% compared
to the prior year's third quarter, reflecting the prolonged weakness and
overcapacity in the economy.
The net interest margin increased seven basis points to 4.90% compared to
4.83% in the prior year's third quarter but was down 14 basis points compared
to the second quarter of 2002. The increase in the net interest margin in the
third quarter compared to the 2001 third quarter was the consequence of a 93
basis point decline in the yield on earning assets compared to a 128 basis
point decline in the cost of funds. During the second quarter of 2002, and to a
lesser extent in the third quarter, the corporation benefitted from the
maturity of higher-rate certificates of deposit issued in prior years that were
renewed at significantly lower interest rates. The majority of the repricing
of higher-rate certificates of deposit is now completed and with additional
expected declines in the yields on investments and loans, the corporation
anticipates the net interest margin to gradually decline over the next several
quarters. The corporation still expects to retain a net interest margin in the
top tier of banks in the country.
Unlike many of its competitors, First Virginia witnessed an additional
improvement in its already excellent asset quality, cementing its position as
one of the best among the 100 largest banks in the United States. At September
30, 2002, nonperforming assets had declined 26% to $14.409 million compared to
$19.385 million at September 30, 2001, and $17.278 million at June 30, 2002.
This decline resulted in a new record low of .22% in nonperforming assets as a
percentage of outstanding loans compared to .29% at the end of the prior year's
third quarter and .26% at June 30, 2002. Loans past due 90 days or more
dropped 32% to $9.005 million or .14% of loans at September 30, 2002, compared
to $13.165 million or .20% of loans at the end of the prior year's third
quarter. Net charge-offs declined to $2.277 million or .14% of average
outstanding loans compared to $2.837 million or .17% in the second quarter.
These amounts are all significantly better than the corporation's peer group of
banks and reflect the corporation's strong emphasis on making only the highest
quality loans to consumers and businesses in the communities in which it
operates. The corporation has no exposure to large nationally shared credits,
international loans or leased assets. At September 30, 2002, the allowance for
loan losses of 1.11% of outstanding loans was unchanged from the end of the
prior quarter and covered annualized net charge-offs 7.00 times. This was up
slightly compared to 1.10% at September 30, 2001. The provision for loan loss
expense declined during the third quarter to $1.194 million compared to $1.708
million in the prior year's third quarter. However, it is up 71% in the first
nine months of 2002, primarily as a result of strong loan growth in the first
half of the year.
A summary of nonperforming and delinquent loans is as follows:
- -----------------------------------------------------------------------------
Sept. 30 2002 2001
- -----------------------------------------------------------------------------
Nonaccruing loans $12,599 $15,428
Restructured loans 532 1,105
Properties acquired by foreclosure 1,278 2,852
- -----------------------------------------------------------------------------
Total nonperforming assets $14,409 $19,385
=============================================================================
Percentage of total loans and foreclosed real estate .22% .29%
Loans 90 days past due and still accruing interest $ 9,005 $13,165
Percentage of total loans .14% .20%
=============================================================================
Excluding a $13.789 million gain from the sale of the corporation's former
affiliate in Knoxville, Tennessee, in the prior year's third quarter,
noninterest income increased 9% in the third quarter of 2002. Service charges
on deposit accounts increased 6% compared to the prior year's third quarter,
driven by a 10% increase in service charge income for commercial accounts and a
45% increase in fees from internet-based banking for consumers and small- to
medium-sized businesses. The 14% increase in fee income from electronic
banking services was the result of increased sales and usage of the
corporation's debit card product. Income from the sales of insurance products
increased 17% compared to the prior year's third quarter, driven by increases
in title insurance and annuity sales. These gains were offset by an 18%
decline in the sale of credit life insurance as changes in legislation continue
to reduce the attractiveness of this product.
Noninterest expense continued to decline slightly from the first and
second quarters and was $84.671 million compared to $85.062 million in the
prior year's third quarter. There were no significant changes in individual
expense categories during the quarter compared to the first two quarters of
2002 or the third quarter of 2001. The 51.7% efficiency ratio was unchanged
compared to the second quarter, and improved compared to 55.3% in the prior
year's third quarter. During the quarter, the corporation closed its remaining
supermarket banking locations choosing to pursue other areas that show more
promise for growth and profitability.
Total shareholders' equity increased to $1.240 billion at September 30,
2002, compared to $1.149 billion at September 30, 2001. Net book value per
share increased 8% to $17.29 compared to $15.94 at the end of the prior year's
third quarter. The corporation's capital to asset ratio increased slightly to
11.19% compared to 11.12%. During the third quarter, the corporation
repurchased 139,050 shares of stock, leaving 2.254 million shares remaining in
its currently authorized share repurchase program. At September 30, 2002, there
were 71.691 million shares outstanding.
CRITICAL ACCOUNTING POLICIES:
The accounting and reporting policies of the corporation are in accordance
with accounting principles generally accepted in the United States of America
and conform with general practices in the banking industry. The preparation of
financial statements in conformity with these principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements, and the reported amounts
of revenues and expenses during the reporting period. These estimates and
assumptions are based on information available at the date of the financial
statements and could differ from actual results. The more critical of the
accounting policies involves the determination of the allowance for loan
losses.
The allowance for loan losses is maintained at a level that represents
management's best estimate of credit losses for specifically identified loans
as well as losses inherent in the remainder of the loan portfolio. The
allowance is reduced by actual credit losses and is increased by the provision
for loan losses and recoveries of previous losses. The provision for loan
losses is charged to earnings and is the periodic cost of maintaining an
appropriate allowance. Estimates for determining the proper level of the
allowance for loan losses are based on historical loss rates, changes in credit
quality, business conditions affecting key lending areas, collateral values,
loan volumes and internal credit reviews. In addition, various regulatory
agencies, as an integral part of their examination process, periodically review
the corporation's allowance for loan losses. These agencies may require the
corporation to record additions to the allowance for loan losses based on their
judgements about information available to them at the time of their
examination. While management believes that the assumptions and judgements
used in developing these estimates are accurate as of the date of the financial
statements, changes in any of the factors affecting the allowance for loan
losses could result in material changes in the corporation's financial position
and results of operations.
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.
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
- -------------------------------------------------------------------------
Interest
Average Income/
Three Months Ended Sept. 30, 2002 Balance Expense Rate
- -------------------------------------------------------------------------
ASSETS
Interest-earning assets:
Securities-available for sale:
U.S. Government and its agencies $ 853,195 $10,124 4.75%
Other* 14,170 156 4.41
Securities-held to maturity:
U.S. Government and its agencies 1,832,953 23,281 5.08
State, municipal and other* 299,214 4,321 5.78
----------- --------
Total securities 2,999,532 37,882 5.05
----------- --------
Loans, net of unearned income:
Installment 4,020,915 70,988 7.02
Real estate 1,538,427 29,334 7.57
Commercial and other* 955,451 16,759 6.97
----------- --------
Total loans 6,514,793 117,081 7.14
----------- --------
Money market investments 630,871 2,771 1.74
Other earning assets* 30,907 428 5.55
----------- --------
Total earning assets and income $10,176,103 158,162 6.19
=========== --------
Interest-bearing liabilities:
Interest checking $ 1,741,819 1,072 0.24
Money market 1,416,039 5,275 1.48
Savings 1,118,430 1,747 0.62
Consumer certificates of deposit 2,263,864 18,847 3.30
Large denomination
certificates of deposit 486,134 4,153 3.39
----------- --------
Total interest-bearing deposits 7,026,286 31,094 1.76
Short-term borrowings 612,649 1,564 1.01
Long-term debt 13,504 195 5.76
----------- --------
Total interest-bearing liabilities
and interest expense $ 7,652,439 32,853 1.70
=========== --------
Net interest income and net interest margin $125,309 4.90%
========
*Fully taxable-equivalent basis
Other average balances:
Demand deposits $ 1,914,675
Preferred shareholders' equity 412
Common shareholders' equity 1,227,476
Total assets 10,939,269
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
- -------------------------------------------------------------------------
Interest
Average Income/
Three Months Ended Sept. 30, 2001 Balance Expense Rate
- -------------------------------------------------------------------------
ASSETS
Interest-earning assets:
Securities-available for sale:
U.S. Government and its agencies $ 53,329 $ 696 5.19%
Other* 12,862 118 5.05
Securities-held to maturity:
U.S. Government and its agencies 1,788,506 26,839 6.00
State, municipal and other* 388,260 5,679 5.85
---------- --------
Total securities 2,242,957 33,332 5.95
---------- --------
Loans, net of unearned income:
Installment 4,120,000 81,090 7.83
Real estate 1,351,385 27,718 8.16
Commercial and Other* 1,120,153 21,788 7.70
---------- --------
Total loans 6,591,538 130,596 7.88
---------- --------
Money market investments 659,647 5,859 3.52
Other earning assets* 20,354 318 6.24
---------- --------
Total earning assets and income $9,514,496 170,105 7.12
========== --------
Interest-bearing liabilities:
Interest checking $1,573,265 1,520 0.38
Money market 1,022,662 7,145 2.77
Savings 1,047,691 2,969 1.12
Consumer certificates of deposit 2,481,928 31,597 5.05
Large denomination
certificates of deposit 532,671 7,032 5.24
---------- --------
Total interest-bearing deposits 6,658,217 50,263 3.00
Short-term borrowings 616,275 4,244 2.73
Long-term debt 20,642 294 5.69
---------- --------
Total interest-bearing liabilities
and interest expense $7,295,134 54,801 2.98
========== --------
Net interest income and net interest margin $115,304 4.83%
========
*Fully taxable-equivalent basis
Other average balances:
Demand deposits $1,706,806
Preferred shareholders' equity 427
Common shareholders' equity 1,144,363
Total assets 10,306,889
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
- -------------------------------------------------------------------------
Interest
Average Income/
Nine Months Ended Sept. 30, 2002 Balance Expense Rate
- -------------------------------------------------------------------------
Interest-earning assets:
Securities-available for sale:
U.S. Government and its agencies $ 1,221,502 $ 46,790 5.11%
Other* 12,044 474 5.25
Securities-held to maturity:
U.S. Government and its agencies 1,470,100 59,275 5.38
State, municipal and other* 328,583 14,370 5.83
----------- --------
Total Securities 3,032,229 120,909 5.32
----------- --------
Loans, net of unearned income:
Installment 4,078,560 219,363 7.19
Real estate 1,476,941 85,532 7.74
Commercial and Other* 980,882 50,361 6.86
----------- --------
Total loans 6,536,383 355,256 7.26
----------- --------
Money market investments 407,299 5,317 1.75
Other earning assets* 29,995 1,241 5.52
----------- --------
Total earning assets and income $10,005,906 482,723 6.44
=========== --------
Interest-bearing liabilities:
Interest checking $ 1,721,887 3,127 0.24
Money market 1,330,416 16,444 1.65
Savings 1,098,892 5,793 0.70
Consumer certificates of deposit 2,324,092 65,711 3.78
Large denomination
certificates of deposit 485,216 14,079 3.88
----------- --------
Total interest-bearing deposits 6,960,503 105,154 2.02
Short-term borrowings 617,827 4,665 1.01
Long-term debt 14,106 602 5.69
----------- --------
Total interest-bearing liabilities
and interest expense $ 7,592,436 110,421 1.94
=========== --------
Net interest income and net interest margin $372,302 4.97%
========
*Fully taxable-equivalent basis
Other average balances:
Demand deposits $ 1,853,140
Preferred shareholders' equity 416
Common shareholders' equity 1,195,026
Total assets 10,791,384
AVERAGE BALANCES AND INTEREST RATES (Unaudited)
- -------------------------------------------------------------------------
Interest
Average Income/
Nine Months Ended Sept. 30, 2001 Balance Expense Rate
- -------------------------------------------------------------------------
Interest-earning assets:
Securities-available for sale:
U.S. Government and its agencies $ 63,029 $ 2,444 5.18%
Other* 12,784 336 4.83
Securities-held to maturity:
U.S. Government and its agencies 1,677,897 75,575 6.01
State, municipal and other* 343,623 15,190 5.89
---------- --------
Total Securities 2,097,333 93,545 5.96
---------- --------
Loans, net of unearned income:
Installment 4,077,384 242,858 7.96
Real estate 1,213,553 74,169 8.17
Commercial and Other* 1,086,488 65,059 7.98
---------- --------
Total loans 6,377,425 382,086 8.01
---------- --------
Money market investments 568,201 18,506 4.35
Other earning assets* 19,208 927 6.42
---------- --------
Total earning assets and income $9,062,167 495,064 7.30
========== --------
Interest-bearing liabilities:
Interest checking $1,533,893 4,840 0.42
Money market 948,045 21,380 3.02
Savings 1,009,885 9,736 1.29
Consumer certificates of deposit 2,377,781 92,653 5.21
Large denomination
certificates of deposit 517,746 21,411 5.53
---------- --------
Total interest-bearing deposits 6,387,350 150,020 3.14
Short-term borrowings 569,080 15,527 3.65
Long-term debt 7,534 343 6.07
---------- --------
Total interest-bearing liabilities
and interest expense $6,963,964 165,890 3.18
========== --------
Net interest income and net interest margin $329,174 4.85%
========
*Fully taxable-equivalent basis
Other average balances:
Demand deposits $1,626,383
Preferred shareholders' equity 435
Common shareholders' equity 1,059,431
Total assets 9,802,329
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
As of September 30, 2002, there have been no material changes
in information regarding quantitative and qualitative
disclosures about market risk from the information presented
as of December 31, 2001 in the corporation's annual report
on Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
-----------------------
The corporation's management, including the Chief Executive Officer
and Chief Financial Officer, has evaluated the effectiveness of the
design and operation of the corporation's disclosure controls and
procedures within 90 days of the filing of this quarterly report,
and, based on their evaluation, the Chief Executive Officer and
Chief Financial Officer have concluded that these disclosure controls
and procedures are effective. There were no significant changes in
the corporation's internal controls or in other factors that could
significantly affect these controls subsequent to the date of
their evaluation.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 - K
----------------------------------
a) The following exhibits are filed as part of this report:
99-1 Certification of Periodic Report by Barry J. Fitzpatrick
99-2 Certification of Periodic Report by Richard F. Bowman
b) No reports on Form 8-K were filed during the quarter
ended September 30, 2002.
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
hereunto duly authorized.
FIRST VIRGINIA BANKS, INC.
/s/ Richard F. Bowman
October 31, 2002 --------------------------
Richard F. Bowman,
Executive Vice President,
Treasurer and
Chief Financial Officer
I, Barry J. Fitzpatrick, certify that:
1. I have reviewed this quarterly report on Form 10-Q of First Virginia
Banks, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
October 31, 2002
/s/ Barry J. Fitzpatrick
--------------------------
Barry J. Fitzpatrick
Chairman, President and
Chief Executive Officer
I, Richard F. Bowman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of First Virginia
Banks, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
October 31, 2002
/s/ Richard F. Bowman
--------------------------
Richard F. Bowman
Executive Vice President, Treasurer and
Chief Financial Officer
Exhibit 99-1
Certification of Periodic Report
I, Barry J. Fitzpatrick, Chairman, President and Chief Executive Officer of
First Virginia Banks, Inc. (the Corporation), certify, pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
1. the Quarterly Report on Form 10-Q of the Corporation for the quarterly
period ended September 30, 2002 (the Report) fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934 (15 U.S.C. 78m or 78o(d)); and
2. the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Corporation.
Dated: October 31, 2002
/s/ Barry J. Fitzpatrick
_________________________
Barry J. Fitzpatrick
Chairman, President and Chief Executive
Officer
Exhibit 99-2
Certification of Periodic Report
I, Richard F. Bowman, Executive Vice President, Treasurer and Chief Financial
Officer of First Virginia Banks, Inc. (the Corporation), certify, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
1. the Quarterly Report on Form 10-Q of the Corporation for the quarterly
period ended September 30, 2002 (the Report) fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934 (15 U.S.C. 78m or 78o(d)); and
2. the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Corporation.
Dated: October 31, 2002
/s/ Richard F. Bowman
_________________________
Richard F. Bowman
Executive Vice President,
Treasurer and Chief Financial
Officer