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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file number 1-6580
December 31, 1993
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 offices) (Zip Code)
Registrant's telephone number, including area code: 703/241-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
Common Stock, Par Value $1.00 New York Stock Exchange, Inc. and
Philadelphia Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
Convertible Preferred Stock, Par Value $10.00
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes __X__ No_____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes _____ No __X__
The aggregate market value of the common stock of the registrant held by
nonaffiliates as of February 25, 1994, was approximately $1,188,236,000. The
registrant's voting preferred stock is not actively traded and the market
value of such stock is not readily determinable.
On February 25, 1994, there were 32,444,307 shares of common stock
outstanding.
INDEX
Page
----
Part I
Item 1. Business 3
Competitive Factors 3
Regulation 4
Employees 4
Lines of Business 4
Statistical Disclosure By Bank Holding Companies 4
Executive Officers of the Registrant 5
Item 2. Properties 7
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 8
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 8. Financial Statements and Supplementary Data 42
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 69
Part III
Item 10. Directors and Executive Officers of the Registrant 69
Item 11. Executive Compensation 74
Item 12. Security Ownership of Certain Beneficial Owners
and Management 83
Item 13. Certain Relationships and Related Transactions 83
Part IV Page
----
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 84
Signature 86/87
Financial Statements 42/66
Exhibits:
Exhibit 3. Articles of Incorporation and Bylaws
Exhibit 11. Statement RE: Computation of per share data
Exhibit 13. First Virginia Banks, Inc. 1993 Annual
Report to Stockholders
(Not included in Electronic Filing)
Exhibit 22. Subsidiaries of Registrant
Exhibit 24. Consent of Independent Auditors
PART I
------
ITEM 1. BUSINESS
--------
First Virginia Banks, Inc. (the "Corporation") is a registered bank
holding company which was incorporated under the laws of the Commonwealth of
Virginia in October, 1949. Since its formation in 1949, the Corporation has
acquired control of 55 operating commercial banks, with three acquisitions in
the State of Maryland and three in the State of Tennessee, and has organized
seven new banks located in the State of Virginia. Forty-one of the banks have
been merged or consolidated with other banks controlled by the Corporation
and located in the same geographic area, so that, as of December 31, 1993,
the Corporation owned all of the outstanding stock of 21 commercial banks
(the "Member Banks") with combined assets of $6.916 billion. On that date,
the Member Banks operated 268 offices throughout the State of Virginia, 37
offices in Maryland and 20 offices in Tennessee. In addition to the 21
banks, the Corporation owns, directly or through subsidiaries, several bank
related member companies with offices in Virginia and six other states,
making the Corporation the fourth largest Bank Holding Company with
headquarters in the state and the sixth largest banking organization in
Virginia, based on total assets of $7.037 billion as of December 31, 1993.
Competitive Factors
- -------------------
Other banking organizations have been active in opening new banking
offices through acquisition and control of existing banks, mergers, branching
and formation of new banks and in acquiring or forming bank-related
subsidiaries in areas where the Corporation's Member Banks compete.
Accordingly, each Member Bank faces strong competition. Savings and loan
associations and credit unions actively compete for deposits. Such
institutions, as well as consumer finance companies, mortgage companies, loan
production offices of out-of-state banks, factors, insurance companies and
pension trusts are important competitors for various types of loans. The
bank-related member companies also operate in highly competitive fields.
At midyear 1993, the banking offices and deposits controlled by the
Corporation's Member Banks represented approximately 12.7% and 9.4% of the
banking offices and domestic bank deposits, respectively, in Virginia.
Regulation
- ----------
The Corporation and its subsidiaries are subject to the supervision and
examination of the Federal Reserve Board, the Federal Deposit Insurance
Corporation and the state regulators of Virginia, Maryland and Tennessee
which have jurisdiction over financial institutions and have obtained
regulatory approval for their various activities to the extent required.
Employees
- ---------
As of December 31, 1993, the Corporation and its subsidiaries employed
5,255 individuals.
Lines of Business
- -----------------
All of the Corporation's income is derived from banking or bank-related
activities. While each of the member companies is engaged in bank-related
activities, several of them conduct lines of business not expressly permitted
for banks under applicable regulations. During the last three years, the
results of their operations have not been material in relation to the
consolidated operating results of the Corporation.
Statistical Disclosure by Bank Holding Companies
- ------------------------------------------------
The following statistical information appears in this Form 10-K on the
page indicated:
Page
----
Average balance sheets and interest rates on
earning assets and interest-bearing liabilities 12/17
Average book value of investment securities 12/17
Average demand, savings and time deposits 12/17
Effect of rate-volume changes on net interest income 18/19
Type of loans 26
Page
----
Maturity ranges of time certificates of
deposit of $100,000 or more 28
Risk elements - loan portfolio 31
Summary of loan loss experience 33
Maturity ranges and average yields - investment
securities 35
Loan maturities and sensitivity to changes in
interest rates 36
Return on equity and assets, dividend payout
ratio and equity to assets ratio 9/10
Executive Officers of the Registrant
- ------------------------------------
There are no arrangements or understandings between the named executive
officers and any other person pursuant to which they were selected as an
officer.
There are no family relationships among the executive officers.
Messrs. Campbell, Cash, Geithner, Hicks, Lanzillotta, O'Donnell and
Zalokar and Ms. Tomlin have held their present positions with the Corporation
for more than five years.
ROBERT H. ZALOKAR
Chairman of the Board and Chief Executive Officer since 1985 and President
from 1978 through 1984; 38 years of service; BS, University of Kansas. Has
held numerous executive officer positions with the First Virginia
organization including President of First Virginia Bank, Falls Church, from
1973 to 1978, CEO from 1979 to 1985, and Chairman since 1979. Mr. Zalokar is
66.
PAUL H. GEITHNER, JR.
President and Chief Administrative Officer since 1985; 25 years of service;
BA, Amherst College; MBA, Wharton Graduate Division, University of
Pennsylvania. Elected Vice President 1969, responsible for member banks from
1973 to 1975; Senior Vice President 1974; Assistant to the Chairman and
President 1978. Mr. Geithner is 63.
SHIRLEY C. BEAVERS, JR.
Executive Vice President since April 1992; President and Chief Executive
Officer of First Virginia Services, Inc. since May 1986; 24 years of service;
BS and MBA, American University. Has held various officer positions with
First Virginia organizations including that of Executive Vice President and
Chief Operating Officer, First Virginia Bank, Falls Church. Mr. Beavers is
48.
BARRY J. FITZPATRICK
Executive Vice President since April 1992; 24 years of service; BBA,
University of Notre Dame; MBA, American University, and graduate of the
Stonier Graduate School of Banking. Has held several officer positions with
First Virginia organizations including Senior Vice President and Regional
Executive Officer, Eastern Region, from March 1982 to April 1992 and
President and CEO of member banks in the Roanoke Valley from 1972 to 1982.
Mr. Fitzpatrick is 54.
RAYMOND E. BRANN, JR.
Senior Vice President and Regional Executive Officer, Eastern Region, since
April 1992; 29 years of service, BS, University of Virginia; MBA, Old
Dominion University. Has held various officer positions with First Virginia
organizations including that of Senior Vice President and Regional Executive
Officer, Tennessee-Western Virginia Region from December 1986 to April 1992,
and President and CEO of several member banks, including First Virginia Bank-
Colonial and Tri-City Bank and Trust Company. Mr. Brann is 53.
HUGH L.CAMPBELL
Senior Vice President since 1978; 30 years of service; AB, Washington & Lee
University; MBA, Colgate Darden Graduate School of Business Administration,
University of Virginia; Advanced Management Program, Harvard University,
1979. Responsible for commercial lending, loan administration and financial
planning. Mr. Campbell is 56.
CHARLES R. CASH
Senior Vice President and Regional Executive Officer, Shenandoah Valley
Region, since 1982; Chairman, President and CEO of First Virginia Bank-
Shenandoah Valley since 1970; 30 years of service; graduate certificate,
American Institute of Banking. Has held several executive officer positions
with banks in the Shenandoah Valley area which have, through merger, become
First Virginia Bank-Shenandoah Valley. Mr. Cash is 64.
DOUGLAS M. CHURCH, JR.
Senior Vice President since October 1990; 20 years of service; BS, University
of Virginia, and graduate of The Stonier Graduate School of Banking. Has held
various officer positions with First Virginia organizations including
Executive Vice President of First Virginia Services, Inc. and Executive Vice
President, Retail Services, of First Virginia Bank from May 1988 until
October 1990. Mr. Church is 43.
HENRY HOWARD HICKS, JR.
Senior Vice President and Regional Executive Officer, Southwest Region, since
1982; 40 years of service; graduate certificate, American Institute of
Banking. Has held various executive officer positions with First Virginia
organizations including President and CEO of First Virginia Bank-Southwest
from 1971 to 1982. Mr. Hicks is 58.
A. PAUL LANZILLOTTA
Senior Vice President, Trust Services, since 1979; Executive Vice President,
First Virginia Bank, Falls Church, since 1978; 31 years of service; BS,
Boston College; JD and LLM, Georgetown University. Joined First Virginia Bank
as Trust Officer; appointed Vice President and Trust Officer of the
Corporation in 1967 and Senior Vice President and Trust Officer in 1976. Mr.
Lanzillotta is 62.
JUSTIN C. O'DONNELL
Senior Vice President and Regional Executive Officer, Northern Region, since
1988; President and CEO, First Virginia Bank, Falls Church, since 1985; 11
years of service; BS, Duquesne University, and graduate of The Stonier
Graduate School of Banking. Joined First Virginia Bank as Senior Vice
President and Manager of the Commercial Division in 1982. Mr. O'Donnell is
58.
CHARLES L. ROBBINS, III
Senior Vice President and Regional Executive Officer, Tennessee-Western
Virginia Region, since April 1992; President and CEO, Tri-City Bank and Trust
Company, Tennessee, since 1992; 20 years of service; BS, George Mason
University, and graduate of The Stonier Graduate School of Banking. Has held
various officer positions with First Virginia Bank, Falls Church, including
Senior Vice President and Branch Administrator from August 1987 until April
1992. Mr. Robbins is 41.
RICHARD F. BOWMAN
Vice President and Treasurer since February 1992; 18 years of service; AB,
College of William & Mary; Certified Public Accountant and Chartered Bank
Auditor. Employed as Staff Auditor; appointed Assistant General Auditor in
1978 and served as Vice President and Controller from November 1979 thru
January 1992. Mr. Bowman is 42.
THOMAS P. JENNINGS
Vice President, General Counsel and Secretary since January 1993; 15 years of
service; BA, Wake Forest University; JD, University of Virginia. Employed as
Assistant Counsel; appointed Associate Counsel in 1979, General Counsel in
1980, and Vice President and General Counsel in March 1986. Mr. Jennings is
46.
MELODYE MAYES TOMLIN
Vice President and General Auditor since 1986; 15 years of service; BS,
Radford University, and graduate of The Stonier Graduate School of Banking;
Certified Public Accountant. Employed as Staff Auditor; appointed Regional
Audit Manager in 1980 and Assistant General Auditor in 1983. Mrs. Tomlin is
37.
Ages are as of February 25, 1994.
ITEM 2. PROPERTIES
----------
The banking subsidiaries operated a total of 325 banking offices on
December 31, 1993. Of these offices, 195 were owned by the banks, two are
owned by the Corporation and leased to the banks, one was owned by an
affiliated company and leased to a bank, and 127 were leased from others. The
Corporation owns other properties, including the two Corporate headquarters
buildings which house personnel of the Corporation and its subsidiaries. On
December 31, 1993, the book value of all real estate and the unamortized cost
of improvements to leased premises totaled $113,312,000. There are no
mortgages secured by properties.
As of December 31, 1993, a total annual base rental of approximately
$11,210,000 was being paid on leased premises, of which approximately
$5,465,000 was being paid to affiliated companies. As of December 31, 1993,
total lease commitments having a remaining term in excess of one year to
persons other than affiliates were approximately $29,593,000.
The majority of the properties are modern and well furnished and provide
adequate parking.
ITEM 3. LEGAL PROCEEDINGS
-----------------
There are no legal proceedings, other than ordinary routine litigation
incidental to the business, to which the Corporation or any of its
subsidiaries is a party or of which any of their property is subject.
Management believes that the liability, if any, resulting from current
litigation will not be material to the financial statements of the
Corporation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
There was no submission of matters to a vote of security holders during
the fourth quarter of 1993.
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
-----------------------------------------------------
STOCKHOLDER MATTERS
-------------------
The common stock of the Corporation is listed for trading on the New York
Stock Exchange (Trading Symbol: FVB) and the Philadelphia Stock Exchange. The
dividends paid per share and the high and low sales price (adjusted for the
three-for-two stock split in July 1992) for common shares traded on the New
York Stock Exchange were:
Sales Price
------------------------------
Dividends
1993 1992 Per Share
-------------- -------------- ------------
High Low High Low 1993 1992
------ ------ ------ ------ ----- -----
1st Quarter...... $40.00 $36.37 $26.83 $23.33 $.260 $.233
2nd Quarter...... 39.00 32.50 30.75 25.58 .260 .233
3rd Quarter ..... 41.00 34.00 33.63 29.87 .280 .247
4th Quarter...... 40.50 31.75 37.87 30.25 .280 .250
The Corporation's preferred stock is not actively traded. The 5% cumulative
convertible preferred stock, Series A, pays a dividend of 12 1/2 cents per
share in each quarter. The 7% cumulative convertible preferred stock, Series
B and C, pays a dividend of 17 1/2 cents per share each quarter. The 8%
cumulative convertible preferred stock, Series D, pays a dividend of 20 cents
per share each quarter. As of December 31, 1993, there were 17,868 holders of
record of the Corporation's voting securities, of which 16,965 were holders
of common stock.
ITEM 6. SELECTED FINANCIAL DATA
6. SELECTED FINANCIAL DATA
-----------------------
A five-year summary of selected financial data follows:
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
(Dollar amounts in thousands, except per-share data)
Balance Sheet Data
Cash.................. $ 326,136 $ 381,384 $ 361,027 $ 291,275 $ 314,125
Overnight investments. 235,000 235,000 205,000 160,000 215,000
Investment securities:
Taxable ............. 1,940,671 1,911,301 1,554,940 1,015,684 830,479
Tax-exempt........... 235,363 253,926 257,889 271,097 238,603
Loans, net............ 4,036,391 3,793,033 3,470,561 3,390,486 3,294,770
Other assets.......... 263,322 265,903 269,843 255,605 230,987
---------- ---------- ---------- ---------- ----------
Total Assets......... $7,036,883 $6,840,547 $6,119,260 $5,384,147 $5,123,964
========== ========== ========== ========== ==========
Deposits ............. $6,136,389 $6,013,746 $5,349,971 $4,715,882 $4,426,663
Short-term borrowings. 151,859 150,681 144,816 85,667 132,197
Mortgage and other
indebtedness ........ 1,008 5,227 11,467 11,836 37,480
Other liabilities .... 56,126 63,494 72,888 73,075 73,025
Stockholders' Equity.. 691,501 607,399 540,118 497,687 454,599
---------- ---------- ---------- ---------- ----------
Total Liabilities and
Stockholders' Equity $7,036,883 $6,840,547 $6,119,260 $5,384,147 $5,123,964
========== ========== ========== ========== ==========
Operating Results
Interest income ...... $ 504,782 $ 525,270 $ 515,837 $ 501,412 $ 471,560
Interest expense ..... 164,959 204,826 260,286 264,856 243,105
---------- ---------- ---------- ---------- ----------
Net interest income..... 339,823 320,444 255,551 236,556 228,455
Provision for loan loss. 6,450 17,355 14,024 13,404 11,039
Noninterest income...... 82,540 77,087 72,283 68,376 63,060
Noninterest expenses.... 245,767 238,891 218,243 202,037 188,129
---------- ---------- ---------- ---------- ----------
Income before income tax 170,146 141,285 95,567 89,491 92,347
Provision for income tax 54,122 43,812 25,959 24,380 24,973
---------- ---------- ---------- ---------- ----------
Net income ............$ 116,024 $ 97,473 $ 69,608 $ 65,111 $ 67,374
========== ========== ========== ========== ==========
Dividends declared:
Preferred ............$ 54 $ 61 $ 71 $ 76 $ 78
Common................ 36,519 31,830 28,995 27,247 25,242
Per Share of Common Stock
Net income ............ 3.57 3.02 2.17 2.03 2.13
Dividends declared..... 1.13 .99 .91 .85 .80
Stockholders' equity... 21.29 18.85 16.80 15.51 14.37
Market price at year-end 32.75 36.63 23.67 15.17 20.00
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
Ratios
- ------
Earnings:
Return on average assets 1.68% 1.50% 1.22% 1.25% 1.39%
Return on average equity 17.81 17.03 13.44 13.59 15.55
Net interest margin..... 5.46 5.46 5.03 5.15 5.36
Risk-based capital:
Tier 1 or core capital.. 16.84 15.52 14.74 14.05 -
Tier 2 or total capital. 18.09 16.77 16.00 15.28 -
Capital strength:
Ratio of average equity
to average assets...... 9.45 8.80 9.08 9.22 8.94
Dividends declared as a
percentage of net
income (per share, not
restated for poolings
of interests).......... 31.65 32.78 41.94 41.87 37.56
Data for prior years have been restated for material acquisitions accounted for
as poolings of interests.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Net income for First Virginia Banks, Inc. increased to a record level in
1993. The record earnings continued from the excellent levels achieved in the
previous two years, and allowed First Virginia to outperform almost all of
the other 100 largest banks in the country. Many banks had difficulty in
maintaining deposit levels with interest rates declining to the lowest level
in many years, and, as a result, nonbanking organizations competed
aggressively for the consumer dollar. First Virginia, however, was able to
increase its average deposits by 6%, with particularly strong growth in
consumer transaction accounts. Similarly, despite a lackluster economy, First
Virginia capitalized on its strong position in the consumer automobile
financing market and increased its average loans by 8%. The value of First
Virginia's extensive retail-oriented branch network was a key factor in
increasing market share during 1993, with minimal increases in expense.
Net income in 1993 increased 19% to $116,024,000, as compared to the
$97,473,000 earned in the previous year. Net income per share increased $.55
to $3.57, as compared to the $3.02 earned in 1992. This remarkable
performance allowed the Corporation to achieve a return on assets of 1.68%,
which exceeded First Virginia's peer group figures by 25% and was one of the
highest of all banks in the country. While many banking institutions had
excellent results in 1993, First Virginia has performed at consistently high
levels. Over the past ten years, First Virginia has averaged a return on
assets of 1.35% where 1.00% generally has been considered the benchmark of a
high performance bank.
The Corporation achieved a return on stockholders' equity of 17.81%, as
compared to 17.03% in the previous year. This level also exceeded the
Corporation's industry peer group average of 16.00% in 1993, which is
particularly noteworthy as the Corporation has an equity level that is 17%
greater than banks of comparable size. First Virginia has consistently
achieved a higher return on stockholders' equity than its peer group. For the
past ten years, First Virginia's return on equity has averaged 15.87%, as
compared to the 13.73% average for its peer group of banks in the $5-$10
billion asset size range. During 1993, the Corporation increased its dividend
rate twice and has increased its dividend 25 times over the past twelve
years. By year-end, the annual dividend rate was $1.24 per share, up 19% over
the $1.04 rate at the end of 1992.
Average assets increased 6% during 1993 and at year-end exceeded $7
billion for the first time. This increase was slower than the 14% average
growth in 1992 and the 10% average growth in 1991, as the concern by
depositors over the safety and soundness of their financial institution
dissipated due to the considerable improvement in the asset quality, capital
and income of banks in 1993. In addition, during 1992, the Corporation had
acquired $270 million in deposits from the former CorEast Federal Savings
Bank, and acquisition activity in 1993 was not as great. The Corporation
added seven branches during 1993. Three branches with approximately $44
million in assets were added when the Corporation acquired United Southern
Bank of Morristown in Tennessee, and one branch with approximately $22
million in deposits was acquired from Home Federal Savings Bank in
Greeneville, Tennessee.
Loans grew 8% on average during 1993 to $3.958 billion which was more than
the 6% growth in 1992. Indirect automobile loan production activity increased
25% during 1993; however, commercial lending was weak and real estate loans
did not increase at as great a rate as in 1992. The decline in interest
expense was the primary contributor to the increase in income for both 1993
and 1992. Most of the decline in rates occurred throughout 1992, and interest
levels were fairly stable in 1993. However, interest costs declined 19%,
because the rates in early 1992 were higher than those in 1993. A decline in
the Corporation's provision for loan losses due to improved credit quality
was also a major factor in increasing net income and contributed $.22 per
share. An increase in the federal corporate income tax rate reduced income by
$.05 per share in 1993.
Year Ended December 31
1993 1992 1991
vs. vs. vs.
1992 1991 1990
----- ----- -----
Earnings per share - prior period............. $3.02 $2.17 $2.03
----- ----- -----
Net change during the year:
Taxable interest income..................... (.37) .24 .30
Tax-exempt interest income.................. (.04) (.05) -
Interest expense ........................... .80 1.13 .09
Provision for loan losses................... .22 (.07) (.01)
Gain on sale of mortgage servicing rights... .02 (.04) -
Other noninterest income.................... .08 .14 .07
FDIC insurance premium expense.............. (.02) (.05) (.10)
Other noninterest expense................... (.12) (.37) (.23)
Income taxes................................ (.01) (.07) .02
Increased common shares outstanding......... (.01) (.01) -
----- ----- -----
Net increase during the period............ .55 .85 .14
----- ----- -----
Earnings per share - current period........... $3.57 $3.02 $2.17
===== ===== =====
AVERAGE BALANCE SHEETS AND INTEREST RATES ON
EARNING ASSETS AND INTEREST-BEARING LIABILITIES
1993
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
(Dollars in thousands)
Interest-earning assets:
Investment securities:
U.S. Government & its agencies $1,863,228 $117,634 6.31%
State and municipal obligations(1) 240,503 19,222 7.99
Other(1) 36,906 2,571 6.97
---------- --------
Total investment securities 2,140,637 139,427 6.51
---------- --------
Loans, net of unearned income:(2)
Installment 2,669,463 254,157 9.52
Real estate 691,048 63,413 9.18
Other(1) 597,811 47,549 7.95
---------- --------
Total loans 3,958,322 365,119 9.22
---------- --------
Federal funds sold and securities
purchased under agreements to resell 270,392 8,359 3.09
---------- --------
Total earning assets and
interest income 6,369,351 512,905 8.05
---------- --------
Noninterest-earning assets:
Cash and due from banks 305,900
Premises and equipment, net 137,124
Other assets 129,245
Less allowance for loan losses (50,882)
----------
Total Assets $6,890,738
==========
(1) Income from tax-exempt securities and loans is included in interest
income on a taxable-equivalent basis. Interest income has been divided by a
factor comprised of the complement of the incremental tax rate of 35% in
1993, 34% in 1992 and 1991, increased by 5.0% in recognition of the partial
disallowance of interest costs incurred to carry the tax-exempt investments.
(2) Nonaccruing loans are included in their respective categories.
AVERAGE BALANCE SHEETS AND INTEREST RATES ON
EARNING ASSETS AND INTEREST-BEARING LIABILITIES
1993
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
(Dollars in thousands)
Interest-bearing liabilities:
Transaction accounts $1,218,697 $ 31,840 2.61%
Money-market accounts 746,703 20,090 2.69
Savings deposits 1,276,937 37,432 2.93
Certificates of deposit:
Large denomination 167,697 6,353 3.79
Other 1,627,982 65,460 4.02
---------- --------
Total interest-bearing deposits 5,038,016 161,175 3.20
Short-term borrowings 150,951 3,563 2.36
Notes and mortgages 1,374 221 16.06
---------- --------
Total interest-bearing liabilities
and interest expense 5,190,341 164,959 3.18
---------- --------
Noninterest-bearing liabilities:
Demand deposits 990,007
Other 58,929
Stockholders' equity 651,461
----------
Total liabilities and
stockholders' equity $6,890,738
==========
Net interest income and
net interest margin $347,946 5.46%
========
AVERAGE BALANCE SHEETS AND INTEREST RATES ON
EARNING ASSETS AND INTEREST-BEARING LIABILITIES
1992
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
(Dollars in thousands)
Interest-earning assets:
Investment securities:
U.S. Government & its agencies $1,815,126 $125,528 6.92%
State and municipal obligations(1) 252,240 21,615 8.57
Other(1) 43,047 3,297 7.66
---------- --------
Total investment securities 2,110,413 150,440 7.13
---------- --------
Loans, net of unearned income:(2)
Installment 2,431,099 261,774 10.77
Real estate 610,223 61,814 10.13
Other(1) 618,784 50,447 8.15
---------- --------
Total loans 3,660,106 374,035 10.22
---------- --------
Federal funds sold and securities
purchased under agreements to resell 260,606 9,516 3.65
---------- --------
Total earning assets and
interest income 6,031,125 533,991 8.85
---------- --------
Noninterest-earning assets:
Cash and due from banks 246,218
Premises and equipment, net 140,016
Other assets 133,129
Less allowance for loan losses (47,060)
----------
Total Assets $6,503,428
==========
(1) Income from tax-exempt securities and loans is included in interest
income on a taxable-equivalent basis. Interest income has been divided by a
factor comprised of the complement of the incremental tax rate of 35% in
1993, 34% in 1992 and 1991, increased by 5.0% in recognition of the partial
disallowance of interest costs incurred to carry the tax-exempt investments.
(2) Nonaccruing loans are included in their respective categories.
AVERAGE BALANCE SHEETS AND INTEREST RATES ON
EARNING ASSETS AND INTEREST-BEARING LIABILITIES
1992
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
(Dollars in thousands)
Interest-bearing liabilities:
Transaction accounts $1,059,112 $ 34,540 3.26%
Money-market accounts 788,729 26,067 3.30
Savings deposits 954,503 35,883 3.76
Certificates of deposit:
Large denomination 187,662 8,767 4.67
Other 1,856,277 94,207 5.08
---------- --------
Total interest-bearing deposits 4,846,283 199,464 4.12
Short-term borrowings 145,227 4,149 2.86
Notes and mortgages 10,833 1,213 11.20
---------- --------
Total interest-bearing liabilities
and interest expense 5,002,343 204,826 4.09
---------- --------
Noninterest-bearing liabilities:
Demand deposits 864,000
Other 64,812
Stockholders' equity 572,273
----------
Total liabilities and
stockholders' equity $6,503,428
==========
Net interest income and
net interest margin $329,165 5.46%
========
AVERAGE BALANCE SHEETS AND INTEREST RATES ON
EARNING ASSETS AND INTEREST-BEARING LIABILITIES
1991
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
(Dollars in thousands)
Interest-earning assets:
Investment securities:
U.S. Government & its agencies $1,236,261 $ 97,334 7.87%
State and municipal obligations(1) 265,679 23,136 8.71
Other(1) 52,846 4,462 8.44
---------- --------
Total investment securities 1,554,786 124,932 8.04
---------- --------
Loans, net of unearned income:(2)
Installment 2,314,535 269,373 11.64
Real estate 502,038 54,832 10.92
Other(1) 629,980 60,694 9.63
---------- --------
Total loans 3,446,553 384,899 11.17
---------- --------
Federal funds sold and securities
purchased under agreements to resell 256,574 14,880 5.80
---------- --------
Total earning assets and
interest income 5,257,913 524,711 9.98
---------- --------
Noninterest-earning assets:
Cash and due from banks 232,017
Premises and equipment, net 141,302
Other assets 114,018
Less allowance for loan losses (43,865)
----------
Total Assets $5,701,385
==========
(1) Income from tax-exempt securities and loans is included in interest
income on a taxable-equivalent basis. Interest income has been divided by a
factor comprised of the complement of the incremental tax rate of 35% in
1993, 34% in 1992, increased by 5.0% in recognition of the partial
disallowance of interest costs incurred to carry the tax-exempt investments.
(2) Nonaccruing loans are included in their respective categories.
AVERAGE BALANCE SHEETS AND INTEREST RATES ON
EARNING ASSETS AND INTEREST-BEARING LIABILITIES
1991
------------------------------
Interest
Average Income/
Balance Expense Rate
---------- --------- -------
(Dollars in thousands)
Interest-bearing liabilities:
Transaction accounts $ 845,836 $ 40,382 4.77%
Money-market accounts 632,143 32,573 5.15
Savings deposits 588,709 28,243 4.80
Certificates of deposit:
Large denomination 250,484 16,381 6.54
Other 1,908,463 135,009 7.07
---------- --------
Total interest-bearing deposits 4,225,635 252,588 5.98
Short-term borrowings 125,422 6,479 5.17
Notes and mortgages 11,466 1,219 10.63
---------- --------
Total interest-bearing liabilities
and interest expense 4,362,523 260,286 5.97
---------- --------
Noninterest-bearing liabilities:
Demand deposits 755,998
Other 65,010
Stockholders' equity 517,854
----------
Total liabilities and
stockholders' equity $5,701,385
==========
Net interest income and
net interest margin $264,425 5.03%
========
EFFECT OF RATE-VOLUME CHANGES ON NET INTEREST INCOME
1993 Compared to 1992
Increase (Decrease)
Due to Change in
------------------------------
Total
Average Average Increase
Volume Rate (Decrease)
-------- -------- --------
Interest income (In thousands)
- ---------------
Investment securities:
U.S. Government and
its agencies $ 3,327 $(11,221) $ (7,894)
State and municipal obligations* (1,006) (1,387) (2,393)
Other* (470) (256) (726)
-------- -------- --------
Total investment securities 1,851 (12,864) (11,013)
-------- -------- --------
Loans:
Installment 25,666 (33,283) (7,617)
Real estate 8,187 (6,588) 1,599
Other* (1,709) (1,189) (2,898)
-------- -------- --------
Total loans 32,144 (41,060) (8,916)
-------- -------- --------
Federal funds sold and securities
purchased under agreements
to resell 357 (1,514) (1,157)
-------- -------- --------
Total interest income 34,352 (55,438) (21,086)
-------- -------- --------
Interest expense
- ----------------
Transaction accounts 5,204 (7,904) (2,700)
Money-market accounts (1,389) (4,588) (5,977)
Savings deposits 12,122 (10,573) 1,549
Certificates of deposit:
Large denomination (933) (1,481) (2,414)
Other (11,586) (17,161) (28,747)
-------- -------- --------
Total interest-bearing deposits 3,418 (41,707) (38,289)
Short-term borrowings 164 (750) (586)
Notes and mortgages (1,059) 67 (992)
-------- -------- --------
Total interest expense 2,523 (42,390) (39,867)
-------- -------- --------
Net interest income $ 31,829 $(13,048) $ 18,781
======== ======== ========
*Fully taxable-equivalent basis
The increase or decrease due to a change in average volume has been
determined by multiplying the change in average volume by the average rate
during the preceding period, and the increase or decrease due to a change in
average rate has been determined by multiplying the current average volume by
the change in average rate.
EFFECT OF RATE-VOLUME CHANGES ON NET INTEREST INCOME
1992 Compared to 1991
Increase (Decrease)
Due to Change in
------------------------------
Total
Average Average Increase
Volume Rate (Decrease)
-------- -------- --------
Interest income (In thousands)
- ---------------
Investment securities:
U.S. Government and
its agencies $ 45,576 $(17,382) $ 28,194
State and municipal obligations* (1,170) (351) (1,521)
Other* (827) (338) (1,165)
-------- -------- --------
Total investment securities 43,579 (18,071) 25,508
-------- -------- --------
Loans:
Installment 13,566 (21,165) (7,599)
Real estate 11,816 (4,834) 6,982
Other* (1,079) (9,168) (10,247)
-------- -------- --------
Total loans 24,303 (35,167) (10,864)
-------- -------- --------
Federal funds sold and securities
purchased under agreements
to resell 234 (5,598) (5,364)
-------- -------- --------
Total interest income 68,116 (58,836) 9,280
-------- -------- --------
Interest expense
- ----------------
Transaction accounts 10,182 (16,024) (5,842)
Money-market accounts 8,069 (14,575) (6,506)
Savings deposits 17,549 (9,909) 7,640
Certificates of deposit:
Large denomination (4,108) (3,506) (7,614)
Other (3,692) (37,110) (40,802)
-------- -------- --------
Total interest-bearing deposits 28,000 (81,124) (53,124)
Short-term borrowings 1,023 (3,353) (2,330)
Notes and mortgages (67) 61 (6)
-------- -------- --------
Total interest expense 28,956 (84,416) (55,460)
-------- -------- --------
Net interest income $ 39,160 $ 25,580 $ 64,740
======== ======== ========
*Fully taxable-equivalent basis
The increase or decrease due to a change in average volume has been
determined by multiplying the change in average volume by the average rate
during the preceding period, and the increase or decrease due to a change in
average rate has been determined by multiplying the current average volume by
the change in average rate.
STATEMENT OF INCOME
STATEMENT OF INCOME
- -------------------
NET INTEREST INCOME
The table on the previous pages details the changes in earning assets,
interest-bearing liabilities and demand deposits for the last three years,
along with the related levels of fully taxable-equivalent interest income and
expense. The variance in interest income and expense caused by differences in
average balances and rates is shown in the table on the previous pages.
Interest rates during 1993 declined slightly but were fairly stable for
most of the year and bounced around in a narrow band. Lower inflation rates
and a sluggish economy in 1993 resulted in little action by the Federal
Reserve, following vigorous actions in 1991 and 1992 in lowering the general
level of interest rates. Long-term rates fell by a greater degree than
short-term rates in 1993; however, because the Corporation maintains a
short-term maturity distribution of its loans and investments, this decline
did not have a great effect on First Virginia.
Net interest income increased 6% in 1993, mirroring the 6% increase in
average earning assets while the net interest margin remained unchanged at a
relatively high level of 5.46%, as compared to 1992. Although interest rates
were fairly stable during 1993, the decline in rates during 1992 resulted in
a faster rate of decline in interest income than in interest expense. The
Corporation is slightly liability sensitive in the short term and
consequently, as rates declined in 1992, the Corporation was able to decrease
the cost of funds on deposits at a faster pace than its decline on loans and
investments. In 1993, however, maturing loans and investments were being
repriced at a faster rate than deposits, and the net interest margin fell
steadily throughout the year after peaking in the fourth quarter of 1992. It
is anticipated that this trend will continue in the first half of 1994,
before stabilizing later in the year.
The decline in net interest income in 1993 due to rates was offset by an
increase in income due to volume and also by the mix of earning assets.
Almost all of the increase in deposits during 1993 was invested in loans
which produce a higher yield than investment securities. Loans comprised
62.1% of earning assets in 1993, up from the 60.7% recorded in 1992 but
significantly lower than the 70% level achieved in the late 1980s and early
1990s.
Deposits grew 6% on average during 1993, with the majority of that growth
concentrated in relatively low-cost demand deposits and NOW accounts, both of
which grew 15% on average. In addition, consumer savings were up 34% on
average, as consumers showed a preference to stay liquid due to the low level
of interest rates so that they could take advantage of any increases in rates
as the economy improved. The Corporation continued its policy of maintaining
a slightly higher rate on these types of core consumer deposits than did its
major competitors. The Corporation's primary source of deposits is from its
retail base of consumer accounts. Despite paying slightly higher rates for
these types of accounts, the Corporation still was able to lower its cost of
funds 91 basis points to 3.18% during 1993.
PROVISION FOR LOAN LOSSES
The provision for loan losses declined 63%, or $10.9 million during 1993
to $6.5 million after increasing 24% in 1992. The decline in the provision
during 1993 was due primarily to a lower level of net charge-offs which
dropped to a record low of .13% of loans, as compared to .35% of loans in
1992. The allowance for loan losses, as a percentage of year-end loans,
declined three basis points to 1.25% of loans due to the improvement in the
Corporation's charge-off experience and the improvement in asset quality. If
loan quality and net charge-off experience remain favorable, the Corporation
intends to reduce its allowance for loan losses further in 1994 which will
lower the provision for loan loss expense.
The decline in net charge-offs during 1993 was reflected in all categories
of loans, particularly in indirect automobile loans. The Corporation has
increased the quality of automobile loans that it has purchased from dealers
over the past several years and as a result, the charge-off rate has declined
from .50% in 1991 to .29% in 1992 and to a low of .06% in 1993. As the
economy improved during 1993 and consumers reduced their debt levels and
refinanced their mortgage loans at substantially lower interest rates, they
improved their liquidity and debt payment ability which resulted in lower
loan charge-offs. This trend was also reflected in record low levels of
charge-offs in direct installment loans and by a reduction of 31 basis points
in the charge-off rate of credit cards, to 2.80%.
The Corporation substantially avoided the problems with commercial real
estate and development loans which plagued its competitors in the early
1990s. During 1993, only $22,000 in net real estate loan losses were charged
off, and the Corporation had a net recovery in commercial loans for the year.
In the previous year, the Corporation had net charge-offs of $3.1 million in
commercial loans, primarily for residential real estate development loans.
The Corporation makes approximately 81% of its loans to consumers for small
amounts with regular, monthly repayment schedules, which therefore makes its
risk exposure to loan charge-offs less than that of many other banks.
OTHER INCOME
Noninterest income increased 7% in both 1993 and 1992, reflecting the
Corporation's efforts to increase the percentage of income received from
noninterest income sources. During 1993, the Corporation introduced a mutual
fund product and continued its promotion of brokerage services, insurance
products and other noninterest products. While noninterest income, as a
percentage of total income, is smaller than the percentage at most other
banking organizations, it meets the Corporation's objective of growing at a
faster pace than noninterest expense, which increased 3% in 1993.
Historically, the Corporation has not had the commercial or specialized
services enjoyed by comparably sized banks which provide a major source of
noninterest income generating customers.
Efficiency Ratio Chart
(The lower, the better)
National
First Southern Peer
Virginia Regionals Group
-------- --------- --------
1993 57.0% 61.4% 60.6%
1992 58.4% 61.8% 60.0%
1991 65.1% 64.7% 63.6%
1990 64.7% 64.0% 63.8%
1989 62.8% 64.3% 64.0%
Southern Regionals: Banking companies with assets over $2 billion (30 in
1993)
National Peer Group: Banking companies with assets of
between $5 and $10 billion (19 in 1993)
Source: Keefe, Bruyette & Woods
Service charges on deposit accounts increased 4% during 1993 after
increasing 2% in the previous year, and they comprise the largest segment of
noninterest income. Despite the 15% growth in transaction accounts in 1993
and the 20% growth in 1992, competitive pressures did not permit the
Corporation to increase prices during 1993, and, as a result, service charge
income did not grow as rapidly as outstanding balances. Service charges from
commercial deposit accounts increased at an 8% pace, as the Corporation
increased the processing fees on major corporate accounts.
Income from other customer services increased 9% in 1993, following two
years of double-digit growth. Interchange income from automated teller
machines continued to increase rapidly due to the Corporation's extensive
branch network and the location of its teller machines. Income from this area
increased 13% in 1993, following a 19% increase in 1992. Commissions from the
sale of customer checks increased 7% in 1993, after increasing 28% in the
prior year due to higher volumes and a change in the Corporation's contract
with its primary check provider.
Income from insurance premiums and commissions declined slightly in 1993,
resulting from lower sales of annuity products which became less attractive
due to the decline in interest rates, and from lower sales of homeowners
insurance following record mortgage origination activity in the previous
year. Sales had increased 8% in 1992, as the Corporation had acquired two
insurance agencies in the middle of 1991. Fee income from credit card
activities declined 2% in 1993, after declining 4% in 1992, which reflects
the increased competition in the credit card area from nonbank issuers and
large, nationwide issuers. The Corporation issues its credit cards primarily
in its geographic market areas at very competitive rates.
Income from trust services increased 12% in 1993, following a 9% increase
in 1992 and 11% growth in 1991. Assets under management exceeded one billion
dollars for the first time in 1993, as the Corporation increased its emphasis
on growth from this area.
The Corporation had a $711,000 gain from the sale of securities in 1993,
as compared to a small loss in 1992. The gain in 1993 was due primarily to a
gain on the sale of an equity security acquired a number of years ago. The
Corporation's policy is to retain its investment securities to maturity.
Dispositions prior to maturity normally are the result of the sale of an
acquired bank's securities which do not conform to First Virginia's
investment policies, or the sale of securities for which the underlying
credit has deteriorated.
Other noninterest income includes $1.2 million in 1993 and $1.9 million in
1991 from the sale of mortgage servicing rights. The Corporation normally
sells a package of servicing rights each year but elected not to make a sale
in 1992 in order to build the servicing portfolio for future fee income.
Excluding the sale of mortgage servicing rights in 1993, other income
increased 5% due to a 16% increase in mortgage servicing fees. In 1992, other
income increased 29% due to increases in mortgage-related fees, as higher
loan origination volume generated increased fees.
OTHER EXPENSES
Noninterest expenses increased 3% in 1993, following a 9% increase in
1992. The 1992 increase was largely attributable to a 24% increase in Federal
Deposit Insurance Corporation (FDIC) insurance assessments, as rates
increased significantly due to the failures of savings banks and the
depletion of the insurance fund. In 1993, the FDIC adopted a new fee schedule
reflecting the risk and capital levels of each institution. Due to the
Corporation's high level of capital and conservative asset structure, its
member banks qualified for the lowest assessment level possible. As a result,
the insurance rate for First Virginia did not increase in 1993, and expense
in this area increased 8%, consistent with deposit growth.
Salaries and employee benefits increased 4% in 1993, following an 11%
increase in 1992. Salaries and wages increased 4% in 1993, consistent both
with inflation and with the minimal growth in employment levels resulting
from new branches and service growth only. Profit-sharing expense increased
19% in 1993 and 38% in 1992, due to the increase in the overall profitability
of the Corporation. Incentive plans linked to the price of the Corporation's
stock declined $4.2 million in 1993, due to the decline in the Corporation's
stock price during the year. Health-care costs continued to grow at a faster
pace than inflation and employment levels, and it increased 14% in both 1993
and 1992. In 1993, the Corporation adopted the Financial Accounting Standards
Board Statement (SFAS) No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions." The adoption of this statement requires that
postretirement benefits, such as retirees' medical expenses paid by the
employer, be accounted for during the years of the retirees' active
employment. As a result of adopting this statement, the Corporation increased
its annual expense for retiree medical benefits by $1.9 million. See note 13
to the consolidated financial statements for additional information.
Occupancy expense increased 4% in both 1993 and 1992, due to an increase
in the number of branches. In addition, in 1993, a major tenant in the
Corporation's headquarters building left upon termination of its lease, and
replacement tenants have not yet occupied all of the vacated space. Equipment
expense increased 4% in 1993, as compared to a 7% increase in 1992, because
the Corporation increased its branch automation project slightly in 1993. In
December, the existing mainframe computer was replaced, almost doubling the
capacity of the old computer while reducing the operating cost substantially.
Other operating expenses declined 2% in 1993, after increasing 11% in
1992. Due to the improvement in loan quality, collection expenses declined
25% in 1993. Foreclosed property expenses were not material and totaled $.9
million each year. Charge-offs due to teller differences and miscellaneous
customer claims declined 28%. Both years had higher advertising expenses and
an increase in amortization of mortgage servicing rights due to the decline
in interest rates and the subsequent refinancing and prepayment of many
mortgages.
PROVISION FOR INCOME TAXES
Income tax expense increased 24% in 1993, to $54.1 million, due primarily
to a 20% increase in pretax income. During 1993, the federal corporate income
tax rate increased 1%, to 35%, and this change resulted in an increase of the
Corporation's effective income tax rate to 31.8%, up from the 31.0% rate in
1992. Income tax expense increased 69% in 1992, due primarily to the increase
in income in that year but also due to a 3.8% increase in the effective tax
rate from 1991 to 1992. The primary reason for the increase in the effective
tax rate in 1992, and to a lesser extent in 1993, was a decline in the
benefit received from tax-exempt municipal securities. Since 1982, various
changes in tax laws have reduced the availability and attractiveness of tax-
exempt securities for banks, and the Corporation has not been able to replace
maturing tax-exempt securities with new, comparable, tax-exempt securities.
In the fourth quarter of 1992, the Corporation adopted SFAS No. 109
"Accounting for Income Taxes." This statement changed the manner in which
deferred income taxes are recorded, from an income-statement approach to a
balance-sheet approach. In 1992, the Corporation charged an additional
$886,000 to expense upon adopting this statement. Due to the change in the
federal corporate tax rate in 1993, the Corporation credited expense of
$432,000 to adjust for certain deferred-tax benefits, as required by SFAS No.
109.
Balance Sheet
- -------------
The Corporation's objective is to invest 70%-80% of its deposits in loans,
which is the primary source of income. At the end of 1993, the ratio of loans
to deposits was 65.8%, as compared to 63.1% at the end of 1992. The
Corporation last met its loan objective in 1990 when the loan-to-deposit
ratio stood at 72.8%. Despite the relatively low level of loans to deposits,
the Corporation has been able to maintain its net interest margin at a high
level without extending the life of its investment portfolio or compromising
the quality of earning assets.
Strong loan growth in 1993 enabled the Corporation to increase the
percentage of its average earning assets invested in loans, as average loans
increased 8%. The Corporation experienced relatively strong loan growth in
1992, but the increase in deposits outpaced the growth of loans. In 1992, the
Corporation purchased $278 million in deposits from failed thrifts. And from
1990 to 1992, the Corporation's reputation for safety and soundness and the
well-publicized problems of its competitors resulted in annual, double-digit
increases in deposits that could not be invested immediately in loans. This
deposit influx slowed in 1993, as the savings and loan crisis abated and as
the capital and asset quality levels of the Corporation's competitors
improved.
The table below shows the average balances of the various categories of
earning assets as a percentage of total earning assets for the years
indicated.
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
Loans .................. 62.14% 60.69% 65.55% 71.26% 73.90%
Taxable securities...... 29.83 30.81 24.52 19.74 17.10
Tax-exempt securities... 3.78 4.18 5.05 5.18 5.18
Overnight investments... 4.25 4.32 4.88 3.82 3.82
------ ------ ------ ------ ------
100.00% 100.00% 100.00% 100.00% 100.00%
====== ====== ====== ====== ======
LOANS
The economy strengthened in 1993 and consumer confidence increased
throughout the year as concerns over employment prospects decreased somewhat.
The decline in interest rates over the last several years has induced many
consumers to refinance their homes at substantially lower rates, thus
improving their liquidity and disposable income. Automobile sales nationally
were very strong, and First Virginia's traditional strength in the indirect
automobile financing market resulted in a 25% increase in the production of
these loans. At the end of 1993, automobile loans outstanding were up 15%
from the end of 1992, and prospects for further increases in 1994 are
promising. The age of the average automobile on the road is still very high,
and with the increased monthly income freed up from mortgage refinancings,
consumers are in a good position to purchase new cars.
During 1993, the Corporation opened its first automobile loan production
office outside of its natural market areas. This office has been very
successful, and the Corporation is currently exploring additional locations.
The Corporation has combined local attention and service to its automobile
dealers with central oversight and administration of the program. Each loan
application is examined individually by a seasoned loan administrator rather
than using a depersonalized credit-scoring system. This procedure permits the
Corporation to limit its delinquencies and losses while simultaneously
examining each application for compensating credit attributes.
Home equity loans are the second largest source of loans for the
Corporation and comprise 28% of all loans. At year-end, home equity loans
were up 5% over 1992, after advancing 6% in the previous year. Activity was
down slightly, as compared to 1992, due to the high level of activity in
first mortgage loans as consumers refinanced and consolidated existing home
equity loans. Consumers utilized the cash received from these transactions
rather than borrowing additional funds. At the end of the year, however,
strong advertising promotions and a slowdown in first mortgage refinance
activity brought about much stronger activity in this area, and the
"pipeline" of loans in process was at a record level. The Corporation
typically requires a maximum loan-to-equity ratio of 70%-75% and does not
take a second mortgage behind a jumbo first mortgage, in order to reduce its
risk in foreclosure.
Residential real estate loans declined 7% during 1993, after increasing
30% in 1992. Activity was very strong in this area all year, and the
Corporation's mortgage banking subsidiary had its second most successful year
in loan originations. Due to the low level of interest rates, however, the
Corporation did not deem it appropriate to invest in long-term, fixed-rate
loans in 1993 and sold most of the loans it originated to unaffiliated
investors. The Corporation primarily retains 15-year, fixed-rate mortgage
loans for its own portfolio or longer-term loans with rates that adjust every
three to five years. Due to the intense competition with "teaser" financing
rates and their higher probability for early refinancing, the Corporation
does not normally invest in one-year, adjustable-rate mortgages.
Revolving credit loans, including credit cards, declined for the fourth
consecutive year and were down 1% at year-end, after falling 2% in 1992. The
Corporation limits its solicitation efforts primarily to its natural market
areas and despite attractive interest rates and fee schedules, as compared to
its competitors, it has experienced slight attrition.
Commercial loans increased 3% at the end of 1993, as compared to a 7% drop
at the end of 1992. The majority of the advance was due to an increase in
floor plan loans to automobile dealers to finance their inventory.
Approximately 33% of commercial loans are floor plan loans to automobile
dealers which are secured by individual automobiles, subject to periodic
inventory audits. Other commercial loan activity has been weak with little
demand following the end of the recession and expansion plans being curtailed
at many businesses. The Corporation has experienced increased competition for
attractive commercial loans, with some of its competitors offering extended
terms and low, fixed rates at levels the Corporation is not willing to
accept.
Real estate development and construction loans declined 17% to $90.8
million at the end of 1993, comprised only 2% of the total loan portfolio,
and were primarily for residential properties with strong sales. Commercial
mortgage loans increased 6% in 1993, after advancing 10% in 1992, and
consisted primarily of owner-occupied facilities. The majority of the growth
in this area came from loans to well-established country clubs and churches.
LOANS
December 31
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
(In thousands)
Consumer:
Automobile...........$1,571,418 $1,362,138 $1,243,927 $1,271,395 $1,249,131
Home equity, fixed
and variable rate 1,242,982 1,178,378 1,109,067 1,033,336 911,219
Revolving credit loans,
including credit cards 161,995 163,711 166,961 173,780 174,809
Other......... 167,942 184,879 193,175 200,767 203,247
Real estate:
Construction and
land development 90,823 109,378 109,809 133,475 107,731
Commercial mortgage. 301,315 284,579 257,944 207,195 182,483
Residential mortgage.. 493,968 529,315 405,924 382,474 384,012
Other, including
Industrial Development
Authority loans 63,082 69,898 70,204 75,959 76,002
Commercial 321,428 311,932 336,264 365,021 435,050
---------- ---------- ---------- ---------- ----------
4,087,318 3,842,373 3,919,378 3,434,403 4,723,684
Deduct unearned income,
principally on
consumer loans (327,635) (351,835) (377,897) (408,999) (388,009)
---------- ---------- ---------- ---------- ----------
Loans, net of
unearned income $4,087,318 $3,842,373 $3,515,378 $3,434,403 $3,335,675
========== ========== ========== ========== ==========
Loans and other assets which were not performing in accordance with their
original terms are discussed on several of the following pages under the
caption NONPERFORMING ASSETS.
INVESTMENT SECURITIES
The investment portfolio increased on average by 1% in 1993, after
increasing at 30% plus rates in the preceding two years. The rapid deposit
growth in 1991 and 1992, which exceeded loan growth, resulted in large
increases in the investment portfolio. With the slowdown in deposit growth in
1993 and the increase in lending, the residual amount of excess funds
invested in the securities portfolio declined.
The Corporation places primary importance on safety and liquidity in the
investment portfolio. Accordingly, the majority of the portfolio is invested
in U.S. Government securities with a maximum life of five years and an
average life of approximately two years. At the end of 1993, U.S. Government
securities comprised 88% of the securities portfolio, as compared to 86% at
the end of 1992. The Corporation generally does not invest in mortgage-backed
securities or collateralized mortgage obligations due to the unpredictability
of cash flows and maturities, and to the Corporation's emphasis on liquidity.
The percentage of securities invested in U.S. Government securities has
been increasing gradually since 1982 when changes in federal income tax laws
reduced the tax benefits derived by banks on investments in municipal
securities. The limited availability of bank-qualified municipal securities
and the reduction in yield due to the loss of tax benefits have generally
made municipal securities less attractive to the Corporation. First Virginia
has limited its investments in municipal securities primarily to publicly
issued securities of municipalities with a rating of A1 or better, or to
unrated, general-obligation securities of municipalities in its market areas
with which it is familiar.
In May 1993, the Financial Accounting Standards Board issued Statement No.
115 "Accounting for Certain Investments in Debt and Equity Securities." The
statement requires investments to be classified into one of three categories.
Securities for which an enterprise has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and are
accounted for at amortized cost. Securities which are bought and held
primarily for the purpose of sale in the near term are classified as trading
securities and are accounted for at market value, with unrealized gains and
losses included in earnings. All other securities are classified as
available-for-sale securities, are accounted for at market value with
unrealized gains and losses excluded from earnings, but are reported as a
separate component of shareholders' equity. The impact of this statement may
cause some banks to report widely fluctuating earnings and capital. The
Corporation will adopt this statement in the first quarter of 1994. Because
the Corporation's stated policy is to hold most securities until their stated
maturity and it has the ability to do so, it is expected that almost all
securities will be classified as held to maturity, and therefore, the
statement will not have a material effect. Less than $.5 million in equity
securities will be classified as available for sale and subject to market
valuation.
OVERNIGHT INVESTMENTS
Overnight investments, consisting primarily of federal funds sold and
securities repurchase agreements, generally are governed by the size of
normally anticipated deposit swings and loan demand. In addition, the amount
of customer repurchase agreements are covered by investments in overnight
securities. In 1993, average overnight investments increased 4% to $270.4
million, after increasing 2% in 1992.
DEPOSITS
Deposit growth slowed substantially in 1993, after increasing rapidly in
the preceding two years. Average outstanding deposits increased 6%, following
a 15% increase in 1992. Many banks experienced deposit stagnation or declines
in 1993, as the low level of interest rates induced many depositors to seek
higher-yielding instruments in areas outside the banking system. Competition
from the stock market and mutual funds, insurance products, and bonds placed
pressure on banks to maintain their deposits. In addition, in the
Corporation's market area, the concern for safety and soundness arising from
the thrift crisis and the problems of other banks evaporated due to the
demise of most thrifts and the improvement in asset quality and capital of
its banking competitors.
The Corporation's large and extensive branch system placed the Corporation
in good position to continue garnering low-cost consumer core deposits. In
addition, the Corporation's largest market -- the Washington-Baltimore area -
- - continues to be very attractive and generated the majority of the growth in
1993. First Virginia continued to increase market share to 9.4% of the
Virginia market in the middle of 1993. The Corporation was able to capitalize
on the changes in ownership of the former First American, Dominion and
Maryland National banks in attracting depositors.
Demand deposits increased 15% in 1993, following a 14% increase in 1992,
while NOW accounts increased 15%, following 25% growth in 1992. Demand
deposits comprise 16.4% of average deposits, while NOW accounts comprise
20.2%. Total transaction accounts constitute 36.6% of total deposits.
The decline in interest rates which occurred in 1992 has influenced
consumers to remain liquid while they wait for interest rates to increase
again. Traditional consumer savings accounts, which can be withdrawn at any
time without penalty, increased 34% in 1993 following a 62% increase in 1992
and now comprise 21.2% of deposits. At some point, consumers may transfer
these funds to higher-cost certificates of deposit when interest rates go up;
however, the Corporation is benefiting from the lower cost of these funds at
this time. Money-market accounts declined 5% in 1993 after growing 25% in
1992, as some of these customers transferred balances to higher-yielding
accounts in 1993.
Other certificates of deposit, which are primarily consumer deposits,
declined 12.3% on average after declining 2.7% in 1992. The low level of
interest rates induced consumers to lengthen their maturities in this
category, with the most popular new and reinvestment categories being two or
five-year certificates. Large-denomination certificates declined 11% in 1993,
as compared to a 25% decline in 1992. The Corporation does not actively bid
on these types of deposits or rely on them for its funding sources, and they
constitute less than 3% of total deposits. They are primarily composed of
high-savings-level consumers and bear rates identical to other certificates
of deposit. The Corporation does not purchase any brokered deposits or
solicit deposits outside of its primary market areas.
Maturity ranges for certificates of deposit with balances of $100,000 or
more on December 31, 1993 were (in thousands):
One month or less.............................................. $ 21,980
After one month through three months........................... 38,332
After three through six months ................................ 38,023
After six through twelve months ............................... 37,635
Over twelve months............................................. 29,390
--------
$165,360
========
Average Deposits Pie Chart
(Millions of Dollars)
1993 1992 1991
-------- -------- --------
Noninterest Bearing $ 990.0 $ 864.0 $ 756.0
Transaction 1,218.7 1,059.1 845.8
Savings 1,276.9 954.5 588.7
Money Market 746.7 788.7 632.1
Other Consumer CDs 1,628.0 1,856.3 1,908.5
Large-Denomination CDs 167.7 187.7 250.5
-------- -------- --------
$6,028.0 $5,710.3 $4,981.6
======== ======== ========
OTHER INTEREST-BEARING LIABILITIES
Short-term borrowings consist primarily of commercial paper issued by the
parent company and securities sold by the member banks with an agreement to
repurchase them on the following business day. These short-term obligations
are issued principally as a convenience to customers in connection with cash
management activities utilized by these customers. Average short-term
borrowings from these sources increased 4% in 1993 after advancing 16% during
1992.
During 1993, the Corporation paid off its remaining long-term indebtedness
composed of a mortgage loan on its headquarters building in Falls Church. The
only remaining long-term debt are capitalized lease obligations on branch
office facilities which are not subject to prepayment.
A shelf registration for the issuance of $50 million of senior notes was
filed with the Securities and Exchange Commission in 1989. Moody's has
indicated that the notes, when and if issued, will have a rating of A-1. The
Corporation's commercial paper is rated P-1 by Moody's and A-1 by Standard &
Poor's, and the lead bank's certificates of deposit are rated A+/A-1 by
Standard & Poor's. In 1993, Moody's initiated a rating on the lead bank's
long and short-term deposits and obligations of Aa3 and Prime-1,
respectively, the highest rating of any bank's deposits in the Corporation's
market area.
STOCKHOLDERS' EQUITY
First Virginia maintains its capital at some of the highest levels
relative to other banks in the country. The ratio of stockholders' equity to
assets was 9.83% at the end of 1993, as compared to an average of 8.38% for
similar banks in its peer group with assets between $5 - $10 billion,
according to Keefe, Bruyette & Woods. The Corporation's Tier 1 leverage ratio
was 9.68% at the end of 1993, as compared to 8.91% at the end of 1992. This
level exceeds the regulatory minimum of 3.0% by over three times and gives
the Corporation considerable available capital for growth and safety. Each of
the Corporation's individual banks maintains a capital ratio well in excess
of regulatory minimums, and all qualify as "well capitalized" banks, allowing
them the lowest FDIC premium rate and the freedom to operate without
restrictions from regulatory bodies.
Over the past five years, stockholders' equity has increased at an annual,
compounded growth rate of 10.9% and totaled $692 million at the end of 1993.
The dividend rate on the common stock was increased twice in 1993, and at the
end of 1993, the annual rate had increased 19.2% over the rate at the end of
1992. Dividends have grown at an 8.5% compound growth rate over the past five
years. In 1992, a three-for-two stock split was declared and was accounted
for in the form of a dividend. As a result, $10.7 million was transferred
from surplus to common stock; however, the total capital of the Corporation
was not affected.
First Virginia and its subsidiary banks are required to comply with
capital adequacy standards established by the Federal Reserve and the FDIC.
The Corporation exceeded the additional, regulatory risk-based capital
requirements by wide margins due in part to the high level of capital and in
part to the conservative nature of the Corporation's assets. The Tier 1 risk-
based capital ratio totaled 16.84% at the end of 1993, and the Tier 2 or
total risk-based capital ratio equaled 18.09%. The regulatory minimums are
4.0% and 8.0%, respectively.
Asset Quality
- -------------
The Corporation has a number of policies to ensure that lending and
investment activities expose the Corporation to a minimum of risk while
producing a profit consistent with the exposure to risk. These policies are
reviewed constantly by the Corporation's senior management, and each member
bank's internal loan monitoring system provides a detailed, monthly report of
production, delinquencies, and nonperforming and potential problem loans.
This careful monitoring has resulted in a consistent record of low
delinquencies and charge-offs as well as few nonperforming loans in relation
to the entire loan portfolio.
The Corporation has no foreign or highly leveraged transaction loans, and
loans are made only within the trade areas of the member banks. Loans are
generally not participated with or purchased from banks not affiliated with
the First Virginia system. In addition, participations between banks within
the First Virginia system must be participated first with the Corporation's
lead bank where another comprehensive loan review process is performed.
Approximately 82% of the Corporation's loans is made to consumers and
normally is secured by personal or real property.
First Virginia has no significant concentration of credit to any single
industry or borrower, and its loans are spread throughout its market areas.
The Corporation's legal lending limit to any one borrower is approximately
$97 million; however, it generally limits its loans to any one borrower and
related interests to $15 million. Occasionally, the Corporation may exceed
its internal limit. One of the Corporation's specialty loan areas is the
automobile finance area, and loans are made to consumers both directly in the
branches of the member banks and indirectly through automobile dealerships.
Roughly 34% of the total loan portfolio is comprised of consumer automobile
loans, but because the loan amounts are relatively small and are spread
across many individual borrowers, the risk of any major charge-offs is
minimized. The Corporation also makes loans directly to automobile dealers in
order to finance their inventories.
Over the past several years, real estate development and construction
loans have been a problem for many banks in the Corporation's market areas,
particularly in the Washington, D.C., market. The Corporation has a small
exposure in these types of loans, and at the end of 1993, total construction
and development loans amounted to only $90.8 million, or approximately 2% of
the total loan portfolio. While the Corporation has not been unaffected by
the problems affecting the real estate industry, its conservative lending
policies and orientation, primarily toward owner-occupied or residential
properties, has minimized the extent of exposure in this area.
NONPERFORMING ASSETS
Nonperforming assets declined 15% in 1993 and totaled $27.6 million at
year-end. Nonperforming assets were .68% as a percentage of total loans and
nonperforming assets, down from the .85% at the end of 1992. After peaking in
1990 at 1.07%, nonperforming assets have steadily declined to their
historical levels and are significantly below the levels of similarly sized
institutions both in the Corporation's market areas and nationwide.
Foreclosed properties declined 36% in 1993, following a 31% decline in 1992.
At the end of 1993, the Corporation had $7.1 million in foreclosed real
estate, with slightly less than one half of that total comprised of one
property in the Norfolk area and the rest composed of small, individual
properties spread throughout the Corporation's market areas. The Corporation
had no in-substance foreclosures at the end of 1993 and no foreclosed
commercial real estate in the Washington, D.C., area market.
The table on the following page shows the total of nonperforming assets at
the end of the past five years. Experience has shown that actual losses on
nonperforming assets are only a small percentage of such assets. The
Corporation expects to recover virtually all of its nonperforming assets,
many with full interest. During 1993, the Corporation collected approximately
$1.5 million in previously unaccrued interest on loans in a nonaccrual status
that were collected in full.
Nonperforming Assets
December 31
1993 1992 1991 1990 1989
------- ------- ------- ------- -------
(In thousands)
Nonaccruing loans ..... $18,387 $20,453 $17,425 $24,812 $12,576
Restructured loans..... 2,175 1,139 1,337 1,745 2,539
Properties acquired
by foreclosure........ 7,086 11,099 16,160 10,278 1,507
------- ------- ------- ------- -------
Total................ $27,648 $32,691 $34,922 $36,835 $16,622
======= ======= ======= ======= =======
Percentage of total loans and
foreclosed real estate .68% .85% .99% 1.07% .50%
Loans 90 days past due.. $ 2,752 $ 4,595 $ 8,935 $ 6,293 $ 6,958
======= ======= ======= ======= =======
Loans past due 90 days or more totaled $2.8 million at the end of 1993, a
decline of 40% as compared to 1992 which in turn had a 49% decline as
compared to 1991. This decrease represented a record low of .07% of
outstanding loans. Loans past due 30 days or more declined 21% to $17.0
million and also represented a record low of .42% of the total loan
portfolio. These ratios are considerably below industry averages and reflect
the high, overall quality of the Corporation's loan portfolio.
A loan generally is classified as nonaccrual when full collectibility of
principal or interest is in doubt; when repossession, foreclosure or
bankruptcy proceedings are initiated; or when other legal actions are taken.
In the case of installment loans, a loan is placed in nonaccrual if payments
are delinquent 120 days. The same is true for credit card loans if they are
180 days past due, and for other loans after payments are delinquent for 90
days. If collateral on a loan is sufficient to insure full collection of
principal and interest, an exception to the general policy might be made.
Loans may also be placed in a nonaccruing status at any time prior to that
indicated above if the Corporation anticipates that interest or principal
will not be collected.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level which management
believes is adequate to absorb potential losses in the loan portfolio.
Management's methodology in determining the adequacy of the allowance
considers specific credit reviews, past loan-loss experience, current
economic conditions and trends, and the growth and composition of the loan
portfolio. Every commercial loan is reviewed and rated at least annually
according to the Corporation's credit standards, and trends in the total
portfolio are examined for potential deterioration in overall quality.
At the end of 1993, the allowance represented 1.25% of total loans - down
three basis points from the level at the end of 1992 and within the long-
range band the Corporation believes to be adequate. The allowance covered net
charge-offs approximately 10 times, up considerably from the end of 1992 when
it covered net charge-offs 3.85 times. Only a small percentage of the
allowance has been allocated to specific credits, with the majority being
available for currently unidentified losses. Management believes that the
allowance is adequate to absorb any potential, unidentified losses.
Net charge-off experience improved significantly during 1993, and
nonperforming loans and delinquencies all improved to historical lows. The
Corporation constantly monitors the level of the allowance, considering its
long-term experience and short-term individual requirements. If asset quality
and loan charge-offs remain at the current historically low levels, the
Corporation intends to lower its long-term band during 1994 to the 1.15% -
1.20% range.
The allowance is charged when management determines that the prospect of
recovering the principal of a loan has diminished significantly. Subsequent
recoveries, if any, are credited to the allowance. Net charge-offs declined
60% in 1993 to $5.1 million, after maintaining itself in a band between $10
and $13 million from 1989 to 1992. All categories of loans showed significant
declines in net charge-offs, as asset quality improved. Net loan charge-offs
on credit card loans still remained at the relatively high level of 2.80%,
reflecting a trend since 1989 of higher bankruptcies and fraud in this area.
The Corporation's loss experience with credit card loans is still
significantly below the national averages. Despite the Corporation's exposure
to automobile lending, its actual loss experience has been very favorable,
and its net charge-offs declined 77% in 1993 to .06% of the portfolio. Part
of this favorable experience reflects the effort beginning in early 1991 to
increase the credit standards for indirect automobile loans and the
Corporation's policy of purchasing primarily "A" paper on new cars.
Commercial loans had a net recovery during 1993, as the Corporation
experienced no significant problems during the year.
An analysis of the activity in the allowance for loan losses for each of
the last five years is presented in the table on the following page.
Allowance for Loan Losses
December 31
1993 1992 1991 1990 1989
------- ------- ------- ------- -------
(In thousands)
Balance at beginning of year $49,340 $44,817 $43,917 $40,905 $40,165
Balances of acquired banks 259 - - 291 -
Provision charged to
operating expense........ 6,450 17,355 14,024 13,404 11,039
------- ------- ------- ------- -------
Total ................ 56,049 62,172 57,941 54,600 51,204
------- ------- ------- ------- -------
Charge-offs:
Consumer:
Credit card............. 4,516 4,852 4,756 3,189 2,474
Indirect automobile..... 2,827 5,139 7,062 5,826 6,187
Other................... 1,464 2,758 3,291 2,555 2,662
Real estate.............. 39 473 201 224 454
Commercial............... 365 3,298 1,176 2,235 1,597
------- ------- ------- ------- -------
Total ................ 9,211 16,520 16,486 14,029 13,374
------- ------- ------- ------- -------
Recoveries:
Consumer:
Credit card............. 758 632 516 438 410
Indirect automobile..... 2,102 2,024 1,807 1,698 1,417
Other................... 765 813 681 812 815
Real estate.............. 17 18 53 34 22
Commercial............... 447 201 305 364 411
------- ------- ------- ------- -------
Total ................ 4,089 3,688 3,362 3,346 3,075
------- ------- ------- ------- -------
Net charge-offs deducted.. 5,122 12,832 13,124 10,683 10,299
------- ------- ------- ------- -------
Balance at end of year ... $50,927 $49,340 $44,817 $43,917 $40,905
======= ======= ======= ======= =======
Net Loan Losses (Recoveries) to
Average Loans by Category:
Credit card.............. 2.80% 3.11% 2.96% 1.87% 1.48%
Indirect automobile...... .06 .29 .50 .40 .47
Other consumer........... .05 .16 .23 .16 .18
Real estate.............. - .07 .03 .04 .10
Commercial............... (.01) .50 .14 .28 .17
------- ------- ------- ------- -------
Total Loans............... .13% .35% .38% .31% .31%
======= ======= ======= ======= =======
Percentage of allowance for loan
losses to year-end loans. 1.25% 1.28% 1.27% 1.28% 1.23%
Nonperforming Asset Ratios Ribbon Chart
(the lower, the better)
National
First Southern Peer
Virginia Regionals Group
-------- --------- --------
1993 0.68% 1.24% 0.98%
1992 0.85% 2.62% 1.58%
1991 0.99% 2.49% 2.22%
1990 1.07% 2.56% 2.28%
1989 0.50% 1.31% 1.30%
Southern Regionals: Banking companies with assets over $2 billion (30 in
1993)
National Peer Group: Banking companies with assets of between $5 and $10
billion (19 in 1993)
Source: Keefe, Bruyette & Woods
Reserve Coverage Ratios Ribbon Chart
(the higher, the better)
National
First Southern Peer
Virginia Regionals Group
-------- --------- --------
1993 248 252 265
1992 229 161 204
1991 239 139 134
1990 165 104 117
1989 271 142 146
Southern Regionals: Banking companies with assets over $2 billion (30 in
1993)
National Peer Group: Banking companies with assets of between $5 and $10
billion (19 in 1993)
Source: Keefe, Bruyette & Woods
Net Charge-Offs Ratios Ribbon Chart
(the lower, the better)
National
First Southern Peer
Virginia Regionals Group
-------- --------- --------
1993 0.13 0.33 0.29
1992 0.35 0.78 0.66
1991 0.38 0.96 0.89
1990 0.31 0.87 0.75
1989 0.31 0.49 0.47
Southern Regionals: Banking companies with assets over $2 billion (30 in
1993)
National Peer Group: Banking companies with assets of between $5 and $10
billion (19 in 1993)
Source: Keefe, Bruyette & Woods
LIQUIDITY AND SENSITIVITY TO INTEREST RATES
- -------------------------------------------
The primary functions of asset/liability management are to assure adequate
liquidity and maintain an appropriate balance between interest-sensitive
assets and interest-sensitive liabilities. Liquidity management involves the
ability to meet the cash flow requirements of the Corporation's loan and
deposit customers. Interest-rate-sensitivity management seeks to avoid
fluctuating net interest margins and to enhance consistent growth of net
interest income through periods of changing interest rates. The Corporation
does not hedge its position with swaps, options or futures but instead
maintains a highly liquid and short-term position in all of its earning
assets and interest-bearing liabilities.
In order to meet its liquidity needs, the Corporation schedules the
maturity of its investment securities so that approximately an equal amount
will mature each month. The weighted-average life of the securities portfolio
at the end of 1993 was just over 24 months - basically unchanged from the end
of 1992 and 1991. Because the Corporation views its securities portfolio
primarily as a source of liquidity and safety, it does not necessarily react
to changes in the yield curve in an attempt to enhance its yield.
Accordingly, the average life of the portfolio does not change much as the
Corporation maintains a constant approach to its portfolio and invests
primarily in U.S. Government securities with a life no greater than five
years. Municipal securities are also generally limited to lives of no more
than five years but due to availability and other factors are occasionally
purchased in serial issues with longer lives. The maturity ranges of the
securities and the average taxable-equivalent yields as of December 31, 1993,
are as follows:
U.S. Government State and
and its Agencies Municipal Other
--------------- ------------- ------------
Amount Yield Amount Yield Amount Yield
---------- ---- -------- ---- ------- ----
(Dollars in thousands)
One year or less.............. $ 553,240 6.3% $ 79,720 7.9% $10,484 7.6%
After one year through
five years 1,351,086 5.7 146,797 7.5 18,256 5.6
After five through ten years.. 391 8.3 3,491 9.1 99 6.8
After ten years............... - - 5,355 9.2 50 10.0
No stated maturity............ - - - - 7,065 6.7
---------- -------- -------
Total ........................ $1,904,717 5.9% $235,363 7.7% $35,954 6.5%
========== ======== =======
Weighted-average maturity..... 25 months 25 months
A cash reserve consisting primarily of overnight investments is also
maintained by the parent company to meet any contingencies and to provide
additional capital, if needed, to the member banks.
The majority of the Corporation's loans are fixed-rate installment loans
to consumers, and mortgage loans whose maturities are longer than the
deposits by which they are funded. A degree of interest-rate risk is incurred
if the interest rate on deposits should rise before the loans mature.
However, the substantial liquidity provided by the monthly repayments on
these loans can be reinvested at higher rates which largely reduces the
interest-rate risk. Home equity lines of credit have adjustable rates that
are tied to the Prime Rate. Many of the loans not in the installment or
mortgage categories have maturities of less than one year or have floating
rates which may be adjusted periodically to reflect current market rates.
These loans are summarized in the following table.
Between
1 year 1 and 5 After
or less years 5 years Total
-------- -------- ------- --------
(In thousands)
Maturity ranges:
Commercial........................ $295,953 $ 92,220 $44,036 $432,209
Construction and land development. 81,424 7,303 2,096 90,823
-------- -------- ------- --------
Total ............................. $377,377 $ 99,523 $46,132 $523,032
======== ======== ======= ========
Floating-rate loans:
Commercial........................ $ 16,285 $ 7,075 $ 23,360
Construction and land development. 6,343 515 6,858
-------- ------- --------
Total ............................. $ 22,628 $ 7,590 $ 30,218
======== ======= ========
First Virginia's Asset/Liability Committee is responsible for reviewing
the Corporation's liquidity requirements and for maximizing net interest
income, consistent with capital requirements, liquidity, interest rates and
economic outlooks, competitive factors and customer needs. Liquidity
requirements are reviewed in detail for each of the Corporation's individual
banks; however, overall asset/liability management is performed on a
consolidated basis in order to achieve a consistent and coordinated approach.
One of the tools the Corporation uses to determine its interest-rate risk
is gap analysis. Gap analysis attempts to examine the volume of interest-
rate-sensitive assets minus interest-rate-sensitive liabilities. The
difference between the two is the interest sensitivity gap which indicates
how future changes in interest rates may affect net interest income.
Regardless of whether interest rates are expected to increase or fall, the
objective is to maintain a gap position that will minimize any changes in net
interest income. A negative gap exists when the Corporation has more
interest-sensitive liabilities maturing within a certain time period than
interest-sensitive assets. Under this scenario, if interest rates were to
increase, it would tend to reduce net interest income. At December 31, 1993,
the Corporation had a slightly negative interest-rate gap in the short term
(under three months) but was slightly asset sensitive in the longer term. The
table on the next page shows the Corporation's interest-sensitivity position
at December 31, 1993.
INTEREST-SENSITIVITY ANALYSIS
1 to 30-Day 1 to 90-Day 1 to 180-Day
Sensitivity Sensitivity Sensitivity
----------- ----------- -----------
(Dollars in thousands)
Earning assets:
Loans, net of unearned income.... $ 792,200 $1,044,228 $1,391,412
Investment securities............ 52,499 116,805 303,745
Federal funds purchased and
securities purchased under
agreements to resell........... 235,000 235,000 235,000
----------- ----------- -----------
Total earning assets......... 1,079,699 1,396,033 1,930,157
----------- ----------- -----------
Funding sources:
Non-interest bearing
demand deposits................ - - -
NOW accounts..................... - - -
Money-market accounts............ 724,462 724,462 724,462
Savings deposits................. - - -
Certificates of deposit.......... 235,634 493,640 859,741
Large-denomination certificates
of deposit..................... 21,980 60,312 98,335
Short-term borrowings............ 151,859 151,859 151,859
Long-term borrowings............. - - -
----------- ----------- -----------
Total funding sources........ 1,133,935 1,430,273 1,834,397
----------- ----------- -----------
Interest-sensitivity gap........... $ (54,236) $ (34,240) $ 95,760
=========== =========== ===========
Interest-sensitivity gap as a
percentage of earning assets..... (.83)% (.53)% 1.47%
Ratio of interest-sensitive assets
to interest-sensitive liabilities .95x .98x 1.05x
INTEREST-SENSITIVITY ANALYSIS (Continued)
Beyond One
1 to 365-Day Year or
Sensitivity Nonsensitive Total
----------- ----------- -----------
(Dollars in thousands)
Earning assets:
Loans, net of unearned income.... $2,087,491 $1,999,827 $4,087,318
Investment securities............ 560,678 1,615,356 2,176,034
Federal funds purchased and
securities purchased under
agreements to resell........... 235,000 - 235,000
----------- ----------- -----------
Total earning assets......... 2,883,169 3,615,183 6,498,352
----------- ----------- -----------
Funding sources:
Noninterest-bearing
demand deposits................ 1,039,933 1,039,933
NOW accounts..................... 1,294,867 1,294,867
Money-market accounts............ 724,462 - 724,462
Savings deposits................. 1,325,943 1,325,943
Certificates of deposit.......... 1,226,052 359,772 1,585,824
Large-denomination certificates
of deposit..................... 135,970 29,390 165,360
Short-term borrowings............ 151,859 - 151,859
Long-term borrowings............. 1,008 1,008
----------- ----------- -----------
Total funding sources........ 2,238,343 4,050,913 6,289,256
----------- ----------- -----------
Interest-sensitivity gap........... $ 644,826 $ (435,730) $ 209,096
=========== =========== ===========
Interest-sensitivity gap as a
percentage of earning assets..... 9.92% (6.71)% 3.22%
Ratio of interest-sensitive assets
to interest-sensitive liabilities 1.29x .89x 1.03x
First Virginia does not manage its interest-rate risk simply with static
maturity and repricing reports. It also uses a dynamic modeling process which
projects the impact of different interest rate, loan and deposit growth
scenarios over a twelve-month period. A large part of First Virginia's loans
and deposits comes from its retail base and does not automatically reprice on a
contractual basis in reaction to changes in interest-rate levels. Accordingly,
First Virginia has not experienced earnings volatility as may be indicated by
its interest-sensitive gap position. The Corporation has consistently
maintained a net interest margin in excess of 5.00%, whether rates are high or
low, and has been able to maintain adequate liquidity to provide for changes in
interest rates and in loan and deposit demands.
Quarterly Results
- -----------------
The results of operations for the first three quarters of 1993 have been
analyzed in quarterly reports to shareholders. The results of operations for
each of the quarters during the two years ended December 31, 1993, are
summarized in the table on the next two pages (in thousands, except per-share
data or as otherwise indicated). The figures for the first two quarters of 1993
have been restated to include the results of the acquisition of United Southern
Bank of Morristown during the third quarter. Prior-year results have not been
restated, because they would not have a material effect upon the Corporation's
financial statements.
Net income for the fourth quarter of 1993 increased 9% over the same quarter
in 1992. The primary reason for the increase was a 66% decline in the provision
for loan losses due to a lower rate of actual net charge-offs on loans. In
addition, the fourth quarter of 1993 included a gain of $679,000 on the sale of
some equity securities that the Corporation acquired a number of years ago.
The net interest margin declined 37 basis points to 5.28% in the fourth
quarter of 1993, as compared to the same quarter in 1992, because the
Corporation's investments and loans continued to reprice at a faster rate than
deposits. In the fourth quarter of 1992, the net interest margin peaked, after
increasing throughout the year, due to declining interest rates which affected
deposits to a greater degree than earning assets.
During the fourth quarter of 1993, the Corporation sold a package of
mortgage servicing rights and recorded a gain of $1.2 million. Over the past
several years, the Corporation has sold a package of servicing rights each year
but did not do so in 1992 due to its desire to increase future service fee
income through the retention of mortgages it originated. The fourth quarter of
1993 also included an additional write-down of $1.0 million on previously
purchased mortgage servicing rights due to an increase in the prepayment rate
of the underlying mortgages. The comparable quarter of 1992 reflected an
additional expense of $.8 million for the write-down of mortgage servicing
rights.
Nonperforming assets declined 15%, as compared to the fourth quarter of
1992, and were down 5%, as compared to the third quarter. At the end of the
fourth quarter, nonperforming assets amounted to .68% of loans as compared to
.85% at the end of 1992.
Noninterest income increased 10%, as compared to the 1992 fourth quarter,
due to the gain on the sale of servicing rights and the gain on the sale of
securities. Noninterest expenses declined slightly, as compared to the fourth
quarter of 1992, due to a decrease in employment expense primarily related to a
decline in stock-related compensation resulting from the decline in the
Corporation's stock price.
QUARTERLY RESULTS
1993
--------------------------------------
Quarter Ended
--------------------------------------
Dec. 31 Sept. 30 June 30 Mar. 31
Condensed Statements of Income -------- -------- -------- --------
(Dollar amounts in thousands, except per-share data)
Interest and fees on loans $ 89,372 $ 91,778 $ 91,424 $ 90,545
Income from securities 32,589 32,752 33,460 34,503
Other interest income 2,059 2,212 2,260 1,828
-------- -------- -------- --------
Total interest income 124,020 126,742 127,144 126,876
-------- -------- -------- --------
Interest on deposits 38,990 40,729 40,826 40,630
Interest on borrowed funds 1,062 981 850 891
-------- -------- -------- --------
Total interest expense 40,052 41,710 41,676 41,521
-------- -------- -------- --------
Net interest income 83,968 85,032 85,468 85,355
Provision for loan losses 1,416 820 2,026 2,188
Other income 22,088 20,802 20,084 19,566
Other expense 62,392 62,452 60,820 60,103
Provision for income taxes 13,259 14,039 13,414 13,410
-------- -------- -------- --------
Net income $ 28,989 $ 28,523 $ 29,292 $ 29,220
======== ======== ======== ========
Net income per share $ .89 $ .88 $ .90 $ .90
Average Quarterly Balances
Average balances (in millions):
Securities $ 2,182 $ 2,128 $ 2,111 $ 2,140
Loans 4,047 3,992 3,936 3,857
Total earning assets 6,495 6,403 6,344 6,233
Total assets 7,021 6,919 6,869 6,750
Demand deposits 1,037 1,005 988 929
Interest-bearing deposits 5,073 5,044 5,043 4,991
Total deposits 6,110 6,049 6,031 5,920
Interest-bearing liabilities 5,245 5,199 5,181 5,135
Total stockholders' equity 681 662 642 621
Key Ratios
Rates earned on assets 7.72% 8.02% 8.16% 8.33%
Rates paid on liabilities 3.03 3.18 3.23 3.28
Net interest margin 5.28 5.43 5.53 5.63
Return on average assets 1.65 1.65 1.71 1.73
Return on average equity 17.03 17.23 18.25 18.81
QUARTERLY RESULTS
1992
--------------------------------------
Quarter Ended
--------------------------------------
Dec. 31 Sept. 30 June 30 Mar. 31
Condensed Statements of Income -------- -------- -------- --------
(Dollar amounts in thousands, except per-share data)
Interest and fees on loans $ 92,287 $ 92,570 $ 93,977 $ 92,927
Income from securities 36,373 36,844 37,088 33,688
Other interest income 1,891 1,991 2,501 3,133
-------- -------- -------- --------
Total interest income 130,551 131,405 133,566 129,748
-------- -------- -------- --------
Interest on deposits 43,724 48,451 52,446 54,843
Interest on borrowed funds 1,279 1,264 1,373 1,446
-------- -------- -------- --------
Total interest expense 45,003 49,715 53,819 56,289
-------- -------- -------- --------
Net interest income 85,548 81,690 79,747 73,459
Provision for loan losses 4,192 3,505 5,704 3,954
Other income 20,096 19,301 19,328 18,362
Other expense 62,644 60,102 58,972 57,173
Provision for income taxes 12,266 11,778 10,595 9,173
-------- -------- -------- --------
Net income $ 26,542 $ 25,606 $ 23,804 $ 21,521
======== ======== ======== ========
Net income per share $ .82 $ .79 $ .74 $ .67
Quarterly Average Balances
Average balances (in millions):
Securities $ 2,188 $ 2,184 $ 2,176 $ 1,891
Loans 3,786 3,704 3,635 3,514
Total earning assets 6,213 6,126 6,072 5,710
Total assets 6,693 6,586 6,544 6,182
Demand deposits 909 880 875 791
Interest-bearing deposits 4,958 4,905 4,889 4,631
Total deposits 5,867 5,785 5,764 5,422
Interest-bearing liabilities 5,123 5,064 5,042 4,778
Total stockholders' equity 599 580 563 547
Key Ratios
Rates earned on assets 8.53% 8.70% 8.96% 9.26%
Rates paid on liabilities 3.49 3.91 4.29 4.74
Net interest margin 5.65 5.48 5.40 5.30
Return on average assets 1.59 1.56 1.46 1.39
Return on average equity 17.74 17.74 16.91 15.73
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
CONSOLIDATED BALANCE SHEETS
December 31
1993 1992
---------- ----------
(In thousands)
ASSETS
Cash and noninterest-bearing deposits in banks $ 326,136 $ 381,384
Federal funds sold and securities purchased
under agreements to resell................. 235,000 235,000
---------- ----------
Total cash and cash equivalents....... 561,136 616,384
---------- ----------
Investment securities:
U.S. Government & its agencies............. 1,904,717 1,871,284
State and municipal obligations............ 235,363 253,926
Other...................................... 35,954 40,017
---------- ----------
Total investment securities (market
value $2,228,818-1993 and
$2,225,780-1992)................... 2,176,034 2,165,227
---------- ----------
Loans......................................... 4,414,953 4,194,208
Deduct: Unearned income................... (327,635) (351,835)
---------- ----------
Loans, net of unearned income.......... 4,087,318 3,842,373
Allowance for loan losses......... (50,927) (49,340)
---------- ----------
Net loans............................. 4,036,391 3,793,033
---------- ----------
Premises and equipment........................ 137,007 136,654
Other assets.................................. 126,315 129,249
---------- ----------
Total Assets............................... $7,036,883 $6,840,547
========== ==========
CONSOLIDATED BALANCE SHEETS (Continued)
December 31
1993 1992
---------- ----------
(In thousands)
LIABILITIES
Deposits:
Noninterest-bearing........................ $1,039,933 $1,012,268
Interest-bearing:
Transaction accounts.................. 1,294,867 1,204,929
Money-market accounts................. 724,462 766,156
Savings deposits...................... 1,325,943 1,195,665
Certificates of deposit:
Large denomination................. 165,360 157,810
Other.............................. 1,585,824 1,676,918
---------- ----------
Total deposits..................... 6,136,389 6,013,746
Interest, taxes and other liabilities......... 56,126 63,494
Short-term borrowings......................... 151,859 150,681
Mortgage indebtedness......................... 1,008 5,227
---------- ----------
Total Liabilities.......................... 6,345,382 6,233,148
---------- ----------
STOCKHOLDERS' EQUITY
Preferred stock, $10 par value................ 805 825
Common stock, $1 par value.................... 32,444 32,185
Capital Surplus............................... 68,406 64,930
Retained Earnings............................. 589,846 509,459
---------- ----------
Total Stockholders' Equity................. 691,501 607,399
---------- ----------
Total Liabilities and Stockholders' Equity. $7,036,883 $6,840,547
========== ==========
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31
1993 1992 1991
-------- -------- --------
(In thousands, except per share data)
Interest income:
Interest and fees on loans.......... $363,119 $371,761 $382,456
Interest and dividends on
investment securities:
U.S. Government & its agencies... 117,634 125,528 97,334
State and municipal
obligations..................... 13,165 15,209 16,759
Other............................ 2,505 3,256 4,408
Income from federal funds sold
and securities purchased
under agreements to resell......... 8,359 9,516 14,880
-------- -------- --------
Total interest income............ 504,782 525,270 515,837
-------- -------- --------
Interest expense:
Deposits:
Transaction accounts............. 31,840 34,540 40,382
Money market accounts............ 20,090 26,067 32,573
Savings deposits................. 37,432 35,883 28,243
Certificates of deposit:
Large denomination............ 6,353 8,767 16,381
Other......................... 65,460 94,207 135,009
Short-term borrowings............... 3,563 4,149 6,479
Long-term indebtedness.............. 221 1,213 1,219
-------- -------- --------
Total interest expense........... 164,959 204,826 260,286
-------- -------- --------
Net interest income...................... 339,823 320,444 255,551
Provision for loan losses................ 6,450 17,355 14,024
-------- -------- --------
Net interest income after provision
for loan losses......................... 333,373 303,089 241,527
-------- -------- --------
CONSOLIDATED STATEMENTS OF INCOME (Continued)
Year Ended December 31
1993 1992 1991
-------- -------- --------
(In thousands, except per share data)
Net interest income after provision
for loan losses......................... 333,373 303,089 241,527
-------- -------- --------
Other income:
Service charges on deposit accounts.. 34,448 33,080 32,475
Insurance premiums and commissions... 6,555 6,591 6,107
Credit card service charges and fees. 11,070 11,278 11,696
Trust services....................... 5,001 4,467 4,113
Income from other customer services.. 16,533 15,173 12,742
Securities gains (losses) before
income tax provisions (credits)
of $246-1993, $(100)-1992,
and $(12)-1991..................... 711 (159) 8
Other................................ 8,222 6,657 5,142
-------- -------- --------
Total other income............... 82,540 77,087 72,283
-------- -------- --------
Other expenses:
Salaries and employee benefits...... 134,296 129,137 116,490
Occupancy........................... 18,207 17,499 16,841
Equipment........................... 19,634 18,864 17,554
Telephone........................... 5,508 5,511 5,305
Printing and supplies............... 5,485 5,219 5,337
Credit card processing fees......... 6,431 6,467 7,100
FDIC assessment..................... 13,412 12,453 10,046
Other............................... 42,794 43,741 39,570
-------- -------- --------
Total other expenses............. 245,767 238,891 218,243
-------- -------- --------
Income before income taxes............... 170,146 141,285 95,567
Provision for income taxes............... 54,122 43,812 25,959
-------- -------- --------
NET INCOME............................... $116,024 $ 97,473 $ 69,608
======== ======== ========
Net income per share of common stock..... $ 3.57 $ 3.02 $ 2.17
Average primary shares of
common stock outstanding......... 32,512 32,252 32,092
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
1993 1992 1991
-------- -------- --------
Preferred stock (Dollars in thousands)
- ---------------
Balance at beginning of year.............. $ 825 $ 1,027 $ 1,114
Redemption of 2,021 shares-1993, 20,241
shares-1992 and 8,635 shares-1991 upon
conversion to common stock.............. (20) (202) (87)
-------- -------- --------
Balance at end of year.................... $ 805 $ 825 $ 1,027
======== ======== ========
Common stock
- ------------
Balance at beginning of year.............. $ 32,185 $ 32,093 $ 32,009
Issuance of 196,679 shares for
an acquired bank........................ 197 - -
Issuance of 3,026 shares-1993, 29,770
shares-1992 and 12,746 shares-1991
upon conversion of preferred stock...... 3 30 13
Issuance of 48,500 shares-1993, 25,467
shares-1992 and 52,875 shares-1991
for stock options....................... 48 26 53
Issuance of 11,084 shares-1993, 36,239
shares-1992 and 18,624 shares-1991
for stock appreciation rights........... 11 36 18
-------- -------- --------
Balance at end of year.................... $ 32,444 $ 32,185 $ 32,093
======== ======== ========
Capital surplus
- ---------------
Balance at beginning of year.............. $ 64,930 $ 63,121 $ 61,229
Increase arising from:
Acquisition of a bank................... 2,117 - -
Conversion of preferred stock........... 17 172 74
Issuance of common stock for the
dividend reinvestment plan............ - 222 719
Exercise of stock options............... 937 321 696
Exercise of stock appreciation rights... 405 1,094 403
-------- -------- --------
Balance at end of year.................... $ 68,406 $ 64,930 $ 63,121
======== ======== ========
Retained earnings
- -----------------
Balance at beginning of year.............. $509,459 $443,877 $403,335
Increase attributable to an acquired bank. 1,139
Net income................................ 116,024 97,473 69,608
Dividends declared:
Preferred stock......................... (54) (61) (71)
Common stock $1.13 per share-1993, $.99
per share-1992 and $.91 per share-1991 (36,519) (31,830) (28,995)
Dividends paid by a bank prior to
its acquisition......................... (203) - -
-------- -------- --------
Balance at end of year.................... $589,846 $509,459 $443,877
======== ======== ========
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31
1993 1992 1991
-------- -------- --------
(In thousands)
Operating activities
- --------------------
Net income.................................... $116,024 $ 97,473 $ 69,608
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for depreciation and amortization 12,487 12,280 11,567
Gain on sale of fixed assets............... (208) (54) (105)
Provision for loan losses.................. 6,450 17,355 14,024
Amortization of securities premiums........ 20,936 20,099 10,178
Accretion of securities discounts.......... (775) (1,232) (1,957)
Net increase in mortgage loans held for sale (9,068) (34,263) (13,476)
Loss (gain) on sale of securities.......... (711) 159 (8)
Amortization of intangible assets.......... 3,963 3,666 2,262
Deferred income tax credits................ (1,943) (1,445) (3,394)
Decrease (increase) in prepaid expenses.... (2,708) (5,566) 3,999
Decrease (increase) in interest receivable. 6,489 (2,733) (8,579)
Decrease in interest payable............... (1,940) (14,531) (1,302)
Increase in other accrued expenses......... 2,720 9,423 437
-------- -------- --------
Net cash provided by operating activities 151,716 100,631 83,254
-------- -------- --------
Investing activities
- --------------------
Maturity of investment securities............. 626,353 475,329 448,358
Sale of investment securities................. 5,122 2,941 716
Purchase of investment securities............. (662,409) (849,695) (983,334)
Net increase in loans......................... (240,530) (305,355) (80,413)
Purchase of premises and equipment............ (12,996) (8,393) (11,275)
Sales of premises and equipment............... 362 786 594
Goodwill acquired............................. - - (1,170)
Mortgage servicing rights acquired............ (747) (748) (1,066)
Other intangible assets acquired.............. (625) (2,987) (1,322)
Other......................................... (7,409) 3,759 (5,759)
-------- -------- --------
Net cash used for investing activities... (292,879) (684,363) (634,671)
-------- -------- --------
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Year Ended December 31
1993 1992 1991
-------- -------- --------
(In thousands)
Financing activities
- --------------------
Net increase in deposits...................... 122,643 663,775 634,089
Net increase in short-term borrowings......... 1,178 5,865 59,149
Principal payments on long-term borrowings.... (4,219) (6,240) (712)
Proceeds from long-term borrowings............ - - 344
Cash dividends paid:
Common $1.08 per share-1993, $.96 per
share-1992 and $.89 per share-1991......... (34,830) (30,945) (28,517)
Preferred................................... (54) (65) (73)
Cash dividends paid by a bank prior to
its acquisition............................. (204) - -
Proceeds from issuance of common stock........ 1,401 1,699 1,889
-------- -------- --------
Net cash provided by financing activities 85,915 634,089 666,169
-------- -------- --------
Net increase (decrease) in cash and
cash equivalents..................... (55,248) 50,357 114,752
Cash and cash equivalents at
beginning of year...................... 616,384 566,027 451,275
-------- -------- --------
Cash and cash equivalents at end of year. $561,136 $616,384 $566,027
======== ======== ========
See notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Corporation and all of its subsidiaries. The Corporation's subsidiaries are
predominantly engaged in banking. Foreign banking activities and operations
other than banking are not significant. All material intercompany
transactions and accounts have been eliminated. Certain amounts for years
prior to 1993 have been reclassified for comparative purposes. All prior
years have been restated to reflect a three-for-two common stock split in
1992.
INVESTMENT SECURITIES
All securities are held for investment purposes. Debt securities are
carried at cost, adjusted for amortization of premiums and accretion of
discounts. Equity securities are carried at the lower of aggregate cost or
market value. Changes in market values of equity securities regarded as
temporary are charged (credited) directly to stockholders' equity. Reductions
in market values of equity securities regarded as other than temporary are
charged to income, and the carrying value of the securities is permanently
reduced by such amounts. The adjusted carrying value of the specific security
sold is used to compute gains or losses on the sale of investment securities.
LOANS
Interest on installment loans is recorded as income in amounts that will
provide an approximate level yield over the terms of the loans. Accrual of
interest on other loans is based generally on the daily amount of principal
outstanding. Interest is not accrued on loans if the collection of such
interest is doubtful.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level that is considered
adequate to provide for potential losses in the loan portfolio. Management's
evaluation of the adequacy of the allowance is based on a review of
individual loans, past loss experience, current and anticipated economic
conditions, the value of underlying collateral and other factors.
PREMISES AND EQUIPMENT
Premises and equipment are carried at cost, less accumulated depreciation
and amortization computed principally on the straight-line method over lives
not exceeding 50 and 20 years for buildings and equipment, respectively.
Gains and losses on disposition are reflected in current operations.
Maintenance and repairs are charged to operating expenses, and major
alterations and renovations are capitalized. Capital leases are carried at
the lower of the present value of their net minimum lease payments or the
fair value of the leased properties at the inception of the lease, less
accumulated amortization computed on the straight-line method over the
noncancelable terms of the leases which do not exceed 20 years.
INCOME TAXES
In 1992, the Corporation changed its method of accounting for income taxes
from the deferred method to the liability method required by Financial
Accounting Standards Board Statement No. 109 (SFAS No. 109), "Accounting for
Income Taxes" (see Note 14 "Income Taxes"). Under the liability method,
deferred-tax assets and liabilities are determined based on differences
between the financial statement carrying amounts and the tax basis of
existing assets and liabilities (i.e., temporary differences) and are
measured at the enacted rates that will be in effect when these differences
reverse. As permitted under SFAS No. 109, prior years' financial statements
have not been restated.
OTHER REAL ESTATE OWNED
Other real estate owned primarily represents properties acquired by the
Corporation's affiliates through customer loan defaults. The real estate is
stated at an amount equal to the lesser of the loan balance prior to
foreclosure, plus the costs incurred for improvements to the property, or
fair value, less the estimated selling costs of the property. At the time of
foreclosure, any excess of cost over the estimated fair value is charged to
the allowance for loan losses. After foreclosure, the estimated fair value is
reviewed periodically by management. Any further declines in fair value are
charged against current earnings or any applicable foreclosed property
valuation allowance.
2. ACQUISITIONS
On August 27, 1993, the Corporation acquired United Southern Bank of
Morristown, Tennessee, in exchange for 196,679 shares of common stock. As of
December 31, 1992, United Southern Bank had total assets of $43.2 million and
stockholders' equity of $3.4 million. Because the restatement would not have
had a material effect upon the Corporation's financial statements, the
accounts of United Southern Bank have not been retroactively reflected in
periods prior to 1993.
On June 19, 1991, Harwood-Andrews, Inc., was acquired for cash and was
merged into First Virginia Insurance Services, Inc. On August 1, 1991 assets
of Ferraro & Pinholster, Inc. were acquired by First Virginia Insurance
Services, Inc. Both acquisitions were accounted for using the purchase method
of accounting and were not material to the consolidated assets.
As of December 31, 1993, unamortized goodwill of $10,136,000 arose from
purchase acquisitions and is being amortized on a straight-line basis.
Acquisitions purchased prior to 1976 are being amortized over 40 years, and
those acquired after 1975 are being amortized over periods of 10 to 20 years.
Unamortized core deposit intangibles were $3,141,000 on December 31, 1993,
and are being amortized over periods of 5 to 10 years.
3. RESTRICTIONS ON CASH BALANCES
The Corporation's banking affiliates are required by the Federal Reserve
Board or by state banking laws to maintain certain minimum cash balances
consisting of vault cash and deposits in the Federal Reserve Bank or in other
commercial banks. Such restricted balances totaled $162,948,000 and
$149,970,000 as of December 31, 1993 and 1992, respectively.
4. INVESTMENT SECURITIES
The carrying amounts of investment securities and the related approximate
market values were (in thousands):
Carrying Unrealized Unrealized Fair
Amount Gains Losses Value
---------- ------- ------ ----------
December 31,1993:
U.S. Government and its agencies...$1,904,717 $46,992 $1,788 $1,949,921
State and municipal obligations.... 235,363 6,712 313 241,762
Other ............................. 35,954 1,201 20 37,135
---------- ------- ------ ----------
Total............................$2,176,034 $54,905 $2,121 $2,228,818
========== ======= ====== ==========
December 31,1992:
U.S. Government and its agencies...$1,871,284 $53,122 $1,797 $1,922,609
State and municipal obligations.... 253,926 7,486 151 261,261
Other ............................. 40,017 1,961 68 41,910
---------- ------- ------ ----------
Total............................$2,165,227 $62,569 $2,016 $2,225,780
========== ======= ====== ==========
Proceeds from the sale of investment securities during 1993 were
$5,122,000, resulting in gains of $712,000 and losses of $1,000. Proceeds
from the maturity of investment securities were $626,353,000, resulting in no
gains or losses.
Securities having a carrying value of $444,986,000 and $364,349,000 at
December 31, 1993 and 1992, respectively, were pledged to secure public
deposits and for other purposes required by law.
5. LOANS
Loans consisted of (in thousands): December 31
1993 1992
---------- ----------
Consumer:
Automobile installment ............................$1,571,418 $1,362,138
Home equity, fixed and variable rate............... 1,242,982 1,178,378
Revolving credit loans, including credit cards..... 161,995 163,711
Other.............................................. 167,942 184,879
Real estate:
Construction and land development.................. 90,823 109,378
Commercial mortgage................................ 301,315 284,579
Residential mortgage............................... 493,968 529,315
Other, including Industrial Development Authority.. 63,082 69,898
Commercial........................................... 321,428 311,932
---------- ----------
4,414,953 4,194,208
Less unearned income, principally on consumer loans . 327,635 351,835
---------- ----------
Loans, net of unearned income ..................... 4,087,318 3,842,373
Less allowance for loan losses....................... 50,927 49,340
---------- ----------
Net loans .........................................$4,036,391 $3,793,033
========== ==========
Loans on which interest is not being accrued or whose terms have been
modified to provide for a reduced rate of interest because of financial
difficulties of borrowers and interest income earned with respect to such
loans were (in thousands):
December 31
1993 1992
------- -------
Nonaccruing loans.....................................$18,387 $20,453
Restructured loans ................................... 2,175 1,139
------- -------
$20,562 $21,592
======= =======
Income recorded.......................................$ 107 $ 85
Income anticipated under original loan agreements ....$ 1,639 $ 1,507
There were no formal commitments of a material amount to lend additional
funds under these agreements, but additional advances may be made in the
future if it is in the interest of the Corporation to do so. Loans modified
for reasons other than a reduction in the interest rate were not material in
amount.
The Corporation's loans are widely dispersed among individuals and
industries. On December 31, 1993, there was no concentration of loans in any
single industry that exceeded 5% of total loans.
The Corporation, in the normal course of business, has made commitments to
extend loans and has written standby letters of credit which are not
recognized in the financial statements. On December 31, 1993 and 1992,
standby letters of credit totaled $19,984,000 and $20,495,000, respectively,
and the unfunded amounts of loan commitments were (in thousands):
1993 1992
---------- ----------
Fixed rate revolving credit lines ...................$ 497,728 $ 478,754
Adjustable rate loans:
Home equity lines ................................. 333,530 315,648
Commercial loans................................... 276,570 295,070
Construction and land development loans............ 49,783 42,446
Other ............................................. 132,543 79,956
---------- ----------
Total ...........................................$1,290,154 $1,211,874
========== ==========
A majority of the commercial, construction and land development
commitments, and letters of credit will expire within one year, and all loan
commitments can be terminated by the Corporation if the borrower violates any
condition of the commitment agreement.
The credit risk associated with loan commitments and letters of credit is
essentially the same as that involved with loans that are funded and
outstanding. The Corporation uses the same credit standards on a case-by-case
basis in evaluating loan commitments and letters of credit as it does when
funding loans, including the determination of the type and amount of
collateral, if required.
6. ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses was (in thousands):
Year ended December 31
1993 1992 1991
------- ------- -------
Balance January 1...............................$49,340 $44,817 $43,917
Increase attributable to an acquired bank ...... 259 - -
Provision charged to operating expense ......... 6,450 17,355 14,024
------- ------- -------
56,049 62,172 57,941
------- ------- -------
Deduct:
Loans charged off............................. 9,211 16,520 16,486
Less recoveries............................... 4,089 3,688 3,362
------- ------- -------
Net charge-offs............................... 5,122 12,832 13,124
------- ------- -------
Balance December 31.............................$50,927 $49,340 $44,817
======= ======= =======
7. PREMISES AND EQUIPMENT
Premises and equipment consisted of (in thousands):
December 31
1993 1992
-------- --------
Land .................................................$ 28,035 $ 24,666
Premises and improvements............................. 134,939 131,010
Furniture and equipment............................... 88,207 83,175
-------- --------
251,181 238,851
Accumulated depreciation and amortization............. 114,174 102,197
-------- --------
Carrying value .....................................$137,007 $136,654
======== ========
8. INDEBTEDNESS
Short-term borrowings consisted of (in thousands):
December 31
1993 1992
-------- --------
Securities sold under agreements to repurchase .......$134,637 $129,345
Commercial paper (parent company only) ............... 17,222 21,336
-------- --------
$151,859 $150,681
======== ========
Securities sold under agreements to repurchase generally mature within
three days from the transaction date. Commercial paper maturities range from
1 to 270 days. Bank lines of credit available to the Corporation amounted to
$25,000,000 at December 31, 1993 and 1992. Such lines were not being used on
either of those dates.
Mortgage indebtedness, including capital lease obligations, of the
Corporation and its subsidiaries was (in thousands):
December 31
1993 1992
------ ------
9 3/4%, payable through February 2012
(parent company only)...................$ - $4,095
Capital leases ........................................ 1,008 1,132
------ ------
$1,008 $5,227
====== ======
The capital leases are on properties which had a carrying value of
$609,000 on December 31, 1993.
The principal maturities of debt, other than short-term borrowings, in each
of the five years after December 31, 1993, will be $123,000, $133,000,
$140,000, $29,000, and $16,000, respectively.
Interest paid on deposits and indebtedness during the years 1993, 1992 and
1991 totaled $166,892,000, $219,356,000 and $261,580,000, respectively.
9. PREFERRED STOCK
There are 3,000,000 shares of preferred stock, par value of $ 10.00 per
share, authorized. The following four series of cumulative convertible pre-
ferred stock were outstanding as of December 31:
Number of Shares
Series Dividends 1993 1992
------ ------
A 5% 24,673 25,831
B 7% 10,110 10,670
C 7% 13,964 13,968
D 8% 31,712 32,011
------ ------
80,459 82,480
====== ======
The Series A and Series B shares are convertible into one and one-half
shares of common stock, and the Series C shares are convertible into one and
two-tenths shares of common stock. They may be redeemed at the option of the
Corporation for $10.00 per share.
The Series D shares are convertible into one and one-half shares of common
stock. They are redeemable at the option of the Corporation for $10.16 until
March 15, 1994, and for $.08 less per year each succeeding year to a minimum
of par value.
10. COMMON STOCK
There are 60,000,000 shares of common stock, par value $1.00 per share,
authorized, and 32,444,000 shares and 32,185,000 shares were outstanding on
December 31, 1993 and 1992, respectively.
On December 31, 1993, options to purchase 345,263 shares of common stock
and 11,625 stock appreciation rights were outstanding under employee stock
option and stock appreciation rights plans. An additional 281,500 shares are
authorized for further granting of options and rights. Options for 207,512
shares were exercisable on December 31, 1993, at a weighted-average price of
$18.96. Additional options becoming exercisable in subsequent years total
60,001 in 1994 at an average price of $28.15, 20,250 in 1995 at an average
price of $32.43, 19,250 in 1996 at an average price of $32.45, 19,250 in 1997
at an average price of $32.45, and 19,000 in 1998 at an average price of
$32.45.
Transactions involving employee stock options were as follows:
Year ended December 31
1993 1992 1991
------- ------- -------
Balance at beginning of year
(41,250 for $12.25, 62,250 for $19.75, 71,241
for $14.833 and 120,000 for $19.167 and
63,000 for $15.25 in 1991)....................304,613 389,004 357,741
Options granted:
For $23.083 per share ........................ - - 113,250
For $32.75 per share ......................... 60,000 - -
For $32.125 per share ........................ 50,000 - -
Options exercised:
For $12.25 per share ......................... (3,000) (14,250) (16,500)
For $19.75 per share .........................(10,850) (21,000) (3,750)
For $14.833 per share ........................ (9,750) (9,966) (34,875)
For $19.167 per share ........................(15,750) (16,675) (25,362)
For $15.25 per share ......................... - (22,500) -
For $23.083 per share ........................(30,000) - -
Options canceled or forfeited:
For $14.833 per share ........................ - - (1,500)
------- ------- -------
Balance at end of year ........................345,263 304,613 389,004
======= ======= =======
A stock appreciation right entitles the holder to the difference between
the value of a share of common stock on the exercise date and the value on
the date the right was granted. Payment will be made with common stock based
on its value on the exercise date. In 1984, 78,000 rights were granted for
$12.25, and in 1989, 48,750 were granted for $19.167. In 1991, 18,624 shares
were issued for 81,612 rights. In 1992, 36,239 shares were issued for 78,350
rights, and in 1993, 11,084 shares were issued for 22,800 rights. On December
31, 1993, 11,625 rights were exercisable for an average price of $18.05 per
share. Holders of 172,113 options outstanding on December 31, 1993, with an
average price of $21.15, may elect on the exercise date to receive the
benefits of a stock appreciation right rather than an option. Compensation
expense is recognized in connection with stock appreciation rights based on
the current market value of the common stock. No compensation expense is
recognized in connection with stock options, unless an election can be made
by the holder to treat the option as a stock appreciation right.
A stock option is accounted for at the difference between the market price
of the option on the measurement date or date granted and the amount the
employee is required to pay. All options are granted at full market price on
the date of the grant and, therefore, no compensation expense is recognized.
In certain cases, a holder may exercise an option as a stock appreciation
right. Stock appreciation rights are measured in the same way as an option,
except that in subsequent periods if a change in the market value of the
shares occurs, then adjustments between the current market price and
previously accrued amounts are recorded as compensation expense.
At December 31, 1993, 1,142,863 shares of common stock were reserved:
116,498 for the conversion of preferred stock and 638,388 for stock options
and stock appreciation rights and 387,977 for a bank acquisition.
The Corporation has adopted a shareholder rights plan, which under certain
circumstances will give the holders of the Corporation's common stock the
right to purchase shares of its preferred stock or other securities. The
rights will become exercisable if a person or entity should acquire 20% or
more of the Corporation's voting stock, unless it is acquired pursuant to an
offer for all outstanding shares of common stock at a price and on terms
determined by the Board of Directors to be adequate and in the best interests
of the Corporation and its stockholders.
If the rights become exercisable, the holder of each share of common
stock, except the person or entity acquiring 20% or more of the voting stock,
will have the right to purchase for $90 the number of one one-hundredths of a
share of preferred stock or equivalent security equal to $180, divided by the
then market value of one share of common stock. In the event of a merger
involving an exchange of common stock, the holder of each right, except the
acquiring person or entity, will also have the right to purchase for $90 the
number of shares of common stock of the acquiring company having a then
market value of $180.
The Corporation may redeem the rights for $.01 per right, at its option,
at any time prior to the date they become exercisable. The rights expire on
August 8, 1998.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, (SFAS No. 107)
"Disclosures about Fair Value of Financial Instruments," requires disclosure
of fair value information about financial instruments, whether or not
recognized in the balance sheet. In cases where quoted market prices are not
available, fair values are based on estimates using discounted cash flow
analysis or other valuation techniques. Those techniques involve subjective
judgment and are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. As a result, the
derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, cannot be realized in immediate
settlement of the instrument.
The following methods and assumptions were used by the Corporation in
estimating the fair value of its financial instruments:
Cash and Cash Equivalents: The carrying amounts reported in the balance sheet
for cash and short-term instruments approximate those assets' fair values.
Investment Securities: Fair values for investment securities are based on
quoted market prices.
Loans: For variable-rate loans that reprice frequently, with no significant
change in credit risk, fair values are based on carrying values. The fair
values for certain mortgage loans (e.g., one-to-four family residential) and
credit cards are based on quoted market prices of similar loans sold in con-
junction with securitization transactions and are adjusted for differences in
loan characteristics. The fair values for other loans are estimated with
discounted cash flow analysis, using interest rates currently being offered
for loans with similar terms to borrowers of similar credit quality.
Deposits: For deposits with no defined maturity, SFAS No. 107 defines the
fair value as the amount payable on demand and prohibits adjusting fair value
for any value derived from retaining those deposits for an expected future
period of time. That component, commonly referred to as a deposit base
intangible, is neither considered in the fair value amounts nor is it
recorded as an intangible asset in the balance sheet. Fair values for fixed-
rate certificates of deposit are estimated using a discounted cash flow
calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated, expected monthly maturities.
Short-Term Borrowings: The carrying amount of federal funds purchased,
borrowings under repurchase agreements, and other short-term borrowings
approximate their fair values.
Long-Term Debt: The Corporation's long-term debt consists entirely of
capitalized lease obligations which are exempt from the disclosure
requirements of SFAS No. 107.
Off-Balance Sheet Instruments: The estimated fair value of off-balance sheet
items was not material at December 31, 1993.
The estimated fair values of the Corporation's financial instruments as of
December 31, 1993 are as follows:
Carrying Fair
Amount Value
---------- ----------
Financial assets:
Cash and cash equivalents..........................$ 561,136 $ 561,136
Investment securities.............................. 2,176,034 2,228,813
Loans, net......................................... 4,087,318 4,171,083
Financial liabilities:
Deposits........................................... 6,136,389 6,144,630
Short-term borrowings.............................. 151,859 151,859
SFAS No. 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. The disclosures also do not
include certain intangible assets such as deposit base intangibles, mortgage
servicing rights and goodwill. Accordingly, the aggregate fair value amount
presented should not be interpreted as representing the underlying value of
the Corporation.
12. RETIREMENT BENEFITS
The Corporation and its subsidiaries have a noncontributory, defined-
benefit pension plan covering substantially all of their qualified employees.
The benefits are based on years of service and the employee's compensation
during the last five years of employment. The Corporation's funding policy is
to make annual contributions in amounts necessary to satisfy the Internal
Revenue Service's funding standards to the extent they are deductible against
taxable income. Contributions are intended to provide not only for benefits
attributed to service to date, but also for those expected to be earned in
the future. Contributions to the plan totaled $3,385,000, $2,587,000 and
$732,000 in 1993, 1992 and 1991, respectively. Contributions include normal
costs of the plan and amortization for periods of up to 40 years of unfunded
past service cost.
Pension expense included the following components (in thousands):
Year ended December 31
1993 1992 1991
------ ------ ------
Service cost - benefits earned during the period..$2,541 $2,239 $2,059
Interest cost on projected benefit obligation..... 4,615 4,185 3,951
Actual return on plan assets......................(3,267) (2,609) (9,014)
Net amortization and deferral ....................(2,336) (2,510) 4,652
------ ------ ------
Net periodic pension cost.......................$1,553 $1,305 $1,648
====== ====== ======
The following table sets forth the plan's funded status and amounts
recognized in the consolidated balance sheets (in thousands):
December 31
1993 1992 1991
------- ------- -------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $46,693, $38,372 and $32,877......... $51,485 $42,535 $36,653
======= ======= =======
Plan assets at fair value ........................ $67,126 $62,489 $59,136
Projected benefit obligation for service
rendered to date............................. 66,242 58,553 54,195
------- ------- -------
Plan assets in excess of projected benefit obligation 884 3,936 4,941
Unrecognized net (gain) loss from past experience
different from that assumed and effects of
change in assumptions............................. 7,988 3,343 (2,077)
Unamortized prior service cost....................... (2,611) (2,864) 255
Unrecognized net obligation at January 1, 1990
being recognized over 15 years ................... 86 100 114
------- ------- -------
Prepaid pension cost included in other assets........$ 6,347 $ 4,515 $ 3,233
======= ======= =======
The assets of the plan consist of U.S. Treasury securities-33%, other debt
obligations- 33%, stocks- 28%, and cash and equivalents- 6%. The weighted-
average discount rate and rate of increase in future compensation levels used
in determining the actuarial present value of the projected benefit
obligation were 7.25% and 4.75%, respectively. The expected long-term rate of
return on plan assets was 9%.
The Corporation and its subsidiaries have a thrift plan to which employees
with one year of service may elect to contribute up to 6% of their salary.
The Corporation contributes to the plan to the extent of 50% of the
employees' contributions, and an additional 25% contribution is made if a
specified profit objective is met. A 75% employer match was made in each of
the years 1993, 1992 and 1991 when the Corporation's contributions to the
plan totaled $3,055,000, $2,784,000 and $2,681,000, respectively. The plan is
administered under the provisions of Section 401(k) of the Internal Revenue
Code.
Certain retired individuals who were participating in any of the
Corporation's medical plans at retirement may elect to receive medical
benefits similar to those provided for active employees if they make their
elections within 30 days of retirement. Terminated employees may elect to
receive such benefits for a limited period.
13. OTHER POSTRETIREMENT BENEFIT PLANS
In addition to the Corporation's defined benefit pension plan, the
Corporation sponsors a defined benefit health care plan that provides
postretirement medical benefits to full-time employees who have worked at
least 10 years and have attained age 55 while in service with the
Corporation. The benefits are based on years of service and are contributory,
with retiree contributions adjusted annually, and contain other cost-sharing
features such as deductibles and coinsurance. Employees hired after December
31, 1993, may participate in the plan but must pay 100% of the cost. The
accounting for the plan anticipates future cost-sharing changes to the
written plan that are consistent with the Corporation's expressed intent to
increase the retiree contribution rate annually for the expected increase in
medical costs for that year. The Corporation has set a maximum amount that it
will contribute per year of approximately three times the 1993 contribution
level. The plan is not funded.
In 1993, the Corporation adopted Financial Accounting Standards Board
Statement No. 106 (SFAS No. 106), "Employers' Accounting for Postretirement
Benefits Other than Pensions." The effect of adopting the new rules increased
1993 net periodic postretirement benefit cost by $1,977,000 and decreased
1993 net income by $1,285,000. Postretirement benefit cost for 1992, which
was recorded on a cash basis, has not been restated.
The following table presents the plan's funded status, reconciled with
amounts recognized in the Corporation's statement of financial position (in
thousands).
December 31
1993
-------
Accumulated postretirement benefit obligation:
Retirees ................................................ $ 6,083
Fully eligible, active plan participants ................ 2,587
Other active plan participants .......................... 8,206
-------
16,876
Plan assets at fair value .................................. -
-------
Accumulated postretirement benefit obligation
in excess of plan assets ................................ 16,876
Unrecognized net gain or (loss) ............................ 3,299
Unrecognized transition obligation ......................... 11,600
-------
Accrued postretirement benefit cost ........................ $ 1,977
=======
Net periodic postretirement benefit cost includes the following components:
1993 1992
------ ------
Service cost ........................................ $ 691 $ 270
Interest cost ....................................... 977 -
Amortization of transition obligation over 20 years . 610 -
------ ------
Net periodic postretirement benefit cost............. $2,278 $ 270
====== ======
The weighted-average, annual assumed rate of increase in the per capita
cost of covered benefits (i.e., health care cost trend rate) is 11.3% for
1994 and is assumed to decrease gradually to 5.0% for 2003 and to remain at
that level thereafter. The health care, cost-trend rate assumption has a
significant effect on the amounts reported. For example, increasing the
assumed health care, cost-trend rates by one percentage point in each year
would increase the accumulated postretirement benefit obligation as of
December 31, 1993, by $967,000, and the aggregate of the service and interest
cost components of net periodic postretirement benefit cost for 1993 by
$81,000. The Corporation has limited its exposure to increases in health
care, cost-trend rates by setting a cap on the maximum amount it will ever
pay on any one retiree and by passing through 100% of the cost of retiree
health care to new employees hired after December 31, 1993.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% at December 31, 1993.
14. INCOME TAXES
In 1992, the Corporation adopted Financial Accounting Standards Board
Statement No. 109 (SFAS No. 109), "Accounting for Income Taxes," which
increased the 1992 provision for income taxes by $886,000. Significant
components of the Corporation's deferred-tax liabilities and assets are as
follows (in thousands):
December 31
1993 1992
------- -------
Deferred-tax liabilities:
Life insurance reserves................................$ 2,812 $ 2,487
Depreciation........................................... 6,635 6,726
Other.................................................. 4,252 4,017
------- -------
Total deferred-tax liabilities ........................ 13,699 13,230
------- -------
Deferred-tax assets:
Installment loan interest and fees..................... 2,628 2,537
Deferred compensation.................................. 4,504 4,040
Allowance for loan losses.............................. 17,769 16,691
Other.................................................. 5,262 4,483
------- -------
Total deferred tax assets.............................. 30,163 27,751
------- -------
Net deferred-tax assets .................................$16,464 $14,521
======= =======
The provision for income taxes includes amounts currently payable and
amounts deferred to or from other years as a result of differences in timing
of income or expenses for reporting and tax purposes. The income tax
provision includes the following amounts (in thousands):
Liability Deferred
Method Method
---------------- -------
1993 1992 1991
------- ------- -------
Current:
Federal income taxes ..............................$54,590 $44,120 $28,515
State income taxes................................. 1,475 1,137 838
------- ------- -------
Total current...................................... 56,065 45,257 29,353
------- ------- -------
Deferred (benefit):
Federal income taxes .............................. (1,858) (1,272) (3,349)
State income taxes................................. (85) (173) (45)
------- ------- -------
Total deferred .................................... (1,943) (1,445) (3,394)
------- ------- -------
$54,122 $43,812 $25,959
======= ======= =======
Income taxes paid during the year..................$60,207 $46,010 $28,744
======= ======= =======
The components of the provision for deferred income taxes for the year ended
December 31, 1991 are as follows (in thousands):
1991
-------
Deferred (benefit):
Provision for loan loss..............................................$ (317)
Depreciation ........................................................ (333)
Installment loan interest and fees .................................. (978)
Other, net........................................................... (1,766)
-------
Provision for deferred income taxes....................................$(3,394)
=======
The exclusion of certain categories of income and expense from taxable net
income results in an effective tax rate which is lower than the statutory
federal rate. The differences in the rates are as follows (dollars in
thousands):
Liability Method Deferred Method
------------------------------- ---------------
1993 1992 1991
--------------- --------------- ---------------
Amount Percent Amount Percent Amount Percent
------- ------- ------- ------- ------- -------
Statutory rate................$59,551 35.0% $48,037 34.0% $32,493 34.0%
Nontaxable interest on
municipal obligations....... (5,847) (3.4) (6,210) (4.4) (6,704) (7.0)
Adoption of SFAS No. 109...... 886 .6
Other items .................. 418 .2 1,099 .8 170 .2
------- ------- ------- ------- ------- -------
Effective rate................$54,122 31.8% $43,812 31.0% $25,959 27.2%
======= ======= ======= ======= ======= =======
15. EARNINGS PER SHARE
Earnings per share of common stock, after giving effect to dividends on
preferred stock of $54,000 in 1993, $61,000 in 1992 and $71,000 in 1991, are
based on 32,512,000, 32,252,000 and 32,092,000 average shares outstanding,
respectively. The dilutive effect upon earnings per share of the conversion of
the outstanding, convertible preferred stock and other items was not material
for any of the three years.
16. LEASES
The Corporation's subsidiaries have entered into lease agreements with
unaffiliated persons for premises, principally banking offices. Many of the
leases have one or more renewal options, generally for five or ten years, and
some contain a provision for increased rent during the renewal period. Leases
containing a provision for contingent payments are immaterial in number or
amount. Portions of a few premises are subleased, and the amount of rent
received is not material. There are no significant restrictions imposed on the
Corporation or its subsidiaries by the lease agreements. The subsidiaries also
lease a portion of their computer systems and other equipment. Leases on 10
banking offices have been recorded as capital leases. The effect of
capitalizing such leases on net income has not been material.
Minimum rental payments over the noncancelable term of operating and capital
leases having a remaining term in excess of one year are (in thousands):
1994..............................................$ 4,890
1995.............................................. 4,509
1996.............................................. 3,935
1997.............................................. 3,173
1998.............................................. 2,449
Thereafter........................................ 10,637
-------
Total minimum lease payments......................$29,593
=======
During 1993, 1992 and 1991, occupancy and equipment expense included the
rent paid on operating leases of $13,668,000, $13,242,000 and $12,387,000,
respectively, and was reduced by rental income of $2,024,000, $2,571,000 and
$2,555,000, respectively, applicable to leases to unaffiliated persons,
generally for a five-to-ten-year duration.
17. COMMITMENTS AND CONTINGENCIES
The Corporation, in the normal course of its business, is the subject of
legal proceedings instituted by customers and others. In the opinion of the
Corporation's management, there were no legal matters pending as of December
31, 1993, which would have a material effect on its financial statements.
18. RESTRICTIONS ON LOANS AND DIVIDENDS FROM SUBSIDIARIES
The Corporation's banking affiliates and its life insurance subsidiary are
subject to federal and/or state statutes which prohibit or restrict certain of
their activities, including the transfer of funds to the Corporation. There are
restrictions on loans from banks to their parent company, and banks and life
insurance companies are limited as to the amount of cash dividends which they
can pay. As of December 31, 1993, the Corporation's equity in the net assets of
its subsidiaries, after elimination of intercompany deposits and loans, totaled
$606,939,000. Of that amount, $511,005,000 was restricted as to the payment of
dividends. Consolidated retained earnings in the amount of $250,005,000 were
free of limitations on the payment of dividends to the Corporation's
stockholders as of December 31, 1993.
19. RELATED-PARTY TRANSACTIONS
Directors and officers of the Corporation and their affiliates were
customers of, and had other transactions with, the Corporation in the ordinary
course of business. The Corporation has made residential mortgage loans at
favorable rates to officers of the Corporation and its subsidiaries who have
been relocated for the convenience of the Corporation. Other loan transactions
with directors and officers were made on substantially the same terms as those
prevailing for comparable loans to other persons and did not involve more than
normal risk of collectibility or present other unfavorable features. As of
December 31, 1993, and 1992, loans to directors and executive officers of the
Corporation and its largest subsidiary bank, where the aggregate of such loans
exceeded $60,000, totaled $35,056,000 and $39,342,000, respectively. During
1993, $1,850,000 of new loans were made and repayments totaled $6,136,000.
These totals include loans to certain business interests and family members of
the directors and executive officers, and no losses are anticipated in
connection with any of the loans.
20. FIRST VIRGINIA BANKS, INC. (PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION (IN THOUSANDS)
BALANCE SHEETS
December 31
1993 1992
-------- --------
Assets
Cash and noninterest-bearing deposits
principally in affiliated banks.......................$ 1,474 $ 1,158
Securities purchased under agreements to resell......... 28,390 30,080
Investment in affiliates based on the Corporation's
equity in their net assets:
Member banks......................................... 541,769 491,781
Bank-related companies............................... 10,381 9,748
Investment securities, (market value $28,107-1993
and $7,215-1992)................................... 27,101 5,732
Loans (including $52,758-1993 and $47,896-1992
to affiliated companies) .......................... 53,429 49,391
Premises and equipment.................................. 40,128 40,524
Goodwill................................................ 7,884 8,540
Other assets ........................................... 30,360 26,478
-------- --------
Total Assets .........................................$740,916 $663,432
======== ========
Liabilities
Interest, taxes and other liabilities ..................$ 32,193 $ 30,602
Commercial paper ....................................... 17,222 21,336
Mortgage indebtedness .................................. - 4,095
-------- --------
Total Liabilities .................................... 49,415 56,033
-------- --------
Stockholders' Equity
Preferred stock......................................... 805 825
Common stock............................................ 32,444 32,185
Capital surplus......................................... 68,406 64,930
Retained earnings....................................... 589,846 509,459
-------- --------
Total Stockholders' Equity............................ 691,501 607,399
-------- --------
Total Liabilities and Stockholders' Equity............$740,916 $663,432
======== ========
STATEMENTS OF INCOME
Year Ended December 31
1993 1992 1991
-------- ------- -------
Income
Dividends from affiliates:
Member banks .....................................$ 68,674 $63,171 $37,784
Bank-related companies ........................... 25 335 170
Service fees from affiliates........................ 10,529 10,884 9,810
Rental income:
Affiliates ...................................... 5,185 5,891 5,921
Other ........................................... 1,782 2,252 2,307
Interest and dividends on investment securities .... 1,901 1,433 2,744
Other income:
Affiliates ....................................... 2,390 2,096 1,774
Other ............................................ 751 494 49
-------- ------- -------
Total income.................................... 91,237 86,556 60,559
-------- ------- -------
Expenses
Salaries and employee benefits...................... 12,685 16,680 12,673
Interest ........................................... 517 1,594 1,999
Other expenses:
Paid to affiliates................................ 806 1,517 1,493
Other ............................................ 9,673 9,834 10,119
-------- ------- -------
Total expenses.................................. 23,681 29,625 26,284
-------- ------- -------
Income before income taxes and equity in
undistributed income of affiliates ............ 67,556 56,931 34,275
Income tax benefits................................. 1,054 2,368 1,701
-------- ------- -------
Income before equity in
undistributed income of affiliates............. 68,610 59,299 35,976
Equity in undistributed income of affiliates ....... 47,414 38,174 33,632
-------- ------- -------
Net income..........................................$116,024 $97,473 $69,608
======== ======= =======
STATEMENTS OF CASH FLOWS
Year Ended December 31
1993 1992 1991
------- ------- -------
Net cash provided by operating activities............$69,025 $68,301 $40,638
------- ------- -------
Investing activities:
Proceeds from maturity of investment securities.... 27,343 5,920 7,969
Proceeds from the sale of investment securities.... 824
Purchase of investment securities .................(48,931) (5,198) (11,908)
Net (increase) decrease in loans................... (4,862) (37,152) 308
Purchases of premises and equipment ............... (1,891) (1,096) (1,388)
Sales of premises and equipment ................... 3 (28) 23
Investment in affiliates........................... (3,453) (6,000) (271)
Other.............................................. 2,260 (4,654) (2,441)
------- ------- -------
Net cash used for investing activities..........(28,707) (48,208) (7,708)
Financing activities:
Net increase (decrease) in short-term borrowings .. (4,114) 2,054 2,914
Principal payments on long-term borrowings......... (4,095) (5,890) (422)
Cash dividends - common............................(34,830) (30,945) (28,517)
Cash dividends - preferred ........................ (54) (65) (73)
Proceeds from issuance of common stock............. 1,401 1,698 1,890
------- ------- -------
Net cash used for financing activities .........(41,692) (33,148) (24,208)
------- ------- -------
Net increase (decrease) in cash and
cash equivalents..................... (1,374) (13,055) 8,722
Cash and cash equivalents at beginning of year . 31,238 44,293 35,571
------- ------- -------
Cash and cash equivalents at end of year........$29,864 $31,238 $44,293
======= ======= =======
Net cash provided by operating activities has been
reduced (increased) by the following
cash payments (receipts):
Interest on indebtedness...........................$ 518 $ 1,598 $ 1,998
Income taxes....................................... (954) (1,727) (420)
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
- ---------------------------------------------------
The management of First Virginia Banks, Inc. has prepared and is responsible
for the accompanying financial statements, together with the financial data and
other information presented in this annual report. Management believes that the
financial statements have been prepared in conformity with generally accepted
accounting principles appropriate under the circumstances. The financial
statements include amounts that are based on management's best estimates and
judgments.
Management maintains and depends upon an internal accounting control system
designed to provide reasonable assurance that transactions are executed in
accordance with management's authorization, that financial records are reliable
as the basis for the preparation of all financial statements, and that the
Corporation's assets are safeguarded. The design and implementation of all
systems of internal control are based on judgments required to evaluate the
costs of control in relation to the expected benefits and to determine the
appropriate balance between these costs and benefits. The Corporation maintains
a professional internal audit staff to monitor compliance with the system of
internal accounting control. Operational and special audits are conducted, and
internal audit reports are submitted to appropriate management.
The Audit Committee of the Board of Directors, comprised solely of outside
directors, meets periodically with the independent public accountants,
management and internal auditors to review accounting, auditing and financial
reporting matters. The independent public accountants and internal auditors
have free access to the Committee, without management present, to discuss the
results of their audit work and their evaluations of the adequacy of internal
controls and the quality of financial reporting.
The financial statements in this annual report have been audited by the
Corporation's independent auditors, Ernst & Young, for the purpose of
determining that the financial statements are presented fairly. Their
independent professional opinion on the Corporation's financial statements is
presented on the following page.
/S/ Robert H. Zalokar
_______________________
Robert H. Zalokar
Chairman and Chief Executive Officer
/S/ Richard F. Bowman
_______________________
Richard F. Bowman
Vice President, Treasurer and Chief Financial Officer
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
- ---------------------------------------------
To the Stockholders and Board of Directors
First Virginia Banks, Inc.
We have audited the accompanying consolidated balance sheets of First
Virginia Banks, Inc. and subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the Corporation's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of First Virginia Banks, Inc. and subsidiaries at December 31, 1993 and 1992,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles.
Washington, D.C.
January 13, 1994
/S/ Ernst & Young
___________________
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
-----------------------------------------------------------
AND FINANCIAL DISCLOSURE
------------------------
Not applicable.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The Board of Directors is divided into three classes (A, B and C). The term
of office for Class A directors will expire at the Annual Meeting to be held on
April 22, 1994. Five persons, all of whom are presently on the Board, have
been nominated to serve as Class A directors. If elected, the five nominees
will serve for a term of three years.
It is the intention of the persons named in the proxy, unless stockholders
specify otherwise by their proxies, to vote for the election of the five
nominees named below as Class A Directors. 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 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 and the Class B and
Class C 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 A Directors
E. Cabell Brand, 70, is President of Recovery and Development Systems, Inc., a
company in Salem, Virginia that engages in business and environmental
consulting and international development projects. He is a director of First
Virginia Bank-Southwest, Roanoke, Virginia and has been a director of First
Virginia since 1976. He serves on the Management Compensation and Benefits
Committee and the Director Nominating Committee and beneficially owns 5,538
shares of Common Stock. (1)
Elsie C. Gruver, 67, is a community and civic leader in Arlington, Virginia and
has been a director of First Virginia since 1973. She is Chairman of the
Public Policy Committee and a member of the Audit Committee and beneficially
owns 7,837 shares of Common Stock. (2)
W. Lee Phillips, Jr., 58, is a professional engineer and land surveyor based in
Falls Church, Virginia and has been a director of First Virginia since 1985.
He is a director of First Virginia Bank, Falls Church, Virginia. He serves on
the Audit Committee as well as the Management Compensation and Benefits
Committee and beneficially owns 8,209 shares of Common Stock. (3)
Josiah P. Rowe, III, 66, is Co-Publisher and General Manager of The Free Lance
Star Publishing Co. of Fredericksburg, Virginia and has been a director of
First Virginia since 1991. He is a director of First Virginia Bank, Falls
Church, Virginia. He serves on the Public Policy Committee and the Director
Nominating Committee and beneficially owns 1,500 shares of Common Stock and 100
shares of Preferred Stock.
Albert F. Zettlemoyer, 59, is President of the Government Systems Group of
UNISYS Corporation in McLean, Virginia and is Executive Vice President of
UNISYS and has been a director of First Virginia since 1978. He serves on the
Audit Committee and chairs the Management Compensation and Benefits Committee.
He beneficially owns 3,000 shares of Common Stock. (4)
Class B Directors
Edward L. Breeden, III, 59, is a partner in the law firm of Breeden, MacMillan
& Green in Norfolk, Virginia, and has been a director of First Virginia since
1982. He is a director of First Virginia Bank of Tidewater, Norfolk, Virginia
and of First Virginia Life Insurance Company. He serves on both the Executive
Committee and the Public Policy Committee and chairs the Audit Committee. He
beneficially owns 65,747 shares of Common Stock. (5)
Gilbert R. Giordano, 65, is a partner in the law firm of Giordano, Bush,
Villareale & Vaughan, P.A. in Upper Marlboro, Maryland and has been a director
of First Virginia since 1989. He is Chairman of the Board of First Virginia
Bank-Maryland, Upper Marlboro, Maryland. He serves on the Audit Committee and
the Director Nominating Committee and beneficially owns 203,755 shares of
Common Stock. (6)
Eric C. Kendrick, 47, is President of Mereck Associates, Inc., a real estate
management and development firm in Arlington, Virginia and has been a director
of First Virginia since 1986. He serves on the Management Compensation and
Benefits Committee and the Public Policy Committee. He beneficially owns
63,127 shares of Common Stock. (7)
Richard T. Selden, 71, is the Carter Glass Professor of Economics at the
University of Virginia in Charlottesville, Virginia and has been a director of
First Virginia since 1978. He is a director of First Virginia Bank, Falls
Church, Virginia. Dr. Selden serves on the Audit Committee and beneficially
owns 3,200 shares of Common Stock. (8)
Robert H. Zalokar, 66, is Chairman of the Board and Chief Executive Officer of
First Virginia and Chairman of the Board, First Virginia Bank, Falls Church,
Virginia. He has been a director of First Virginia since 1959. Mr. Zalokar is
also Chairman of First Virginia Life Insurance Company, First Virginia Mortgage
Company and First Virginia Services, Inc. as well as Chairman or director of
other nonbank affiliates. He serves on the Executive Committee and is an ex
officio member of the Public Policy Committee and the Director Nominating
Committee. He owns 124,055 shares of Common Stock. (9)
Class C Directors
Paul H. Geithner, Jr., 63, is President and Chief Administrative Officer of
First Virginia and has been a director of First Virginia since 1984. He is
also a director of First Virginia Bank in Falls Church, First Virginia Life
Insurance Company, First Virginia Insurance Services, Inc., First Virginia
Mortgage Company and other affiliated companies. He is a member of the Public
Policy Committee and the Executive Committee and beneficially owns 45,849
shares of Common Stock. (10)
L. H. Ginn, III, 60, is President of Lighting Affiliates, Inc., a distributor
of electrical fixtures located in Richmond, Virginia and has been a director of
First Virginia since 1978. Mr. Ginn is a retired U. S. Army Reserve Major
General. He is Chairman of the Board of First Virginia Bank-Colonial,
Richmond, Virginia. He is a member of the Executive Committee and the Director
Nominating Committee and beneficially owns 10,856 shares of Common Stock. (11)
T. Keister Greer, 72, is counsel for Greer & Melesco, attorneys in Rocky Mount,
Virginia and has been a director of First Virginia since 1976. He is Chairman
of the Board of First Virginia Bank-Franklin County, Rocky Mount, Virginia.
Mr. Greer is a member of the Public Policy Committee and the Director
Nominating Committee and beneficially owns 17,400 shares of Common Stock. (12)
Edward M. Holland, 54, is an attorney in Arlington, Virginia and a member of
the Virginia General Assembly (Senate) and has been a director of First
Virginia since 1974. He is also a director of First Virginia Bank, Falls
Church, Virginia. He serves on the Executive Committee and the Management
Compensation and Benefits Committee and beneficially owns 60,979 shares of
Common Stock. (13)
Thomas K. Malone, Jr., 74, is retired Chairman and Chief Executive Officer of
First Virginia and has been a director of First Virginia since 1957. He is a
director of First Virginia Bank in Falls Church, First Virginia Life Insurance
Company and First Virginia Mortgage Company. He is also Chairman Emeritus of
Marymount University in Arlington, Virginia. Mr. Malone is Chairman of both
the Executive Committee and the Director Nominating Committee. He also serves
on the Public Policy Committee and beneficially owns 44,632 shares of Common
Stock. (14)
(1)Includes 264 shares of Common Stock held indirectly through his spouse.
(2)Includes 1,782 shares of Common Stock held in a Keogh Plan, 900 shares held
in an Individual Retirement Account, 1,900 shares held in her spouse's Keogh
Plan, and 900 shares held in her spouse's Individual Retirement Account.
(3)Includes 3,000 shares held by a trust in which Mr. Phillips is a trustee.
(4)All of the shares are held jointly with his spouse.
(5)Includes 7,500 shares held by a corporation of which Mr. Breeden is
President, 16,325 shares held by two foundations of which Mr. Breeden is
Chairman, 16,275 shares held by two trusts in which Mr. Breeden is trustee, and
21,900 shares held by an estate in which Mr. Breeden is the executor.
(6)Includes 4,669 shares held by his spouse, 5,355 shares held by his spouse
as trustee for his son, 108 shares held by his spouse and daughter, 484 shares
held by his spouse and son, 6,000 shares held by the Giordano Family Foundation
and 387 shares held by his daughter.
(7)Includes 16,998 shares held by two trusts in which Mr. Kendrick is trustee,
1,729 shares held by a corporation in which Mr. Kendrick is a director and 750
shares held by his spouse.
(8)Includes 652 shares held in a trust in which Dr. Selden is trustee.
(9)Includes options to purchase 5,213 shares of Common Stock which are
currently exercisable.
(10)Includes 2,359 shares held indirectly through his spouse and includes
options to purchase 14,750 shares of Common Stock which are currently
exercisable. It does not include options to purchase 13,750 shares which are
not currently exercisable and 9,750 stock appreciation rights ("SARs").
(11)Includes 229 shares held indirectly through his spouse and 837 shares held
by a trust in which Mr. Ginn is trustee.
(12)Includes 5,400 shares of Common Stock held by a trust in which Mr. Greer
has a beneficial interest.
(13)Includes 34,479 shares held by a corporation in which Mr. Holland is an
officer, director, and owner.
(14)Includes 10,125 shares of Common Stock held jointly with his spouse (shared
voting and investment power).
As of February 25, 1994, executive officers and directors as a group
beneficially owned 922,049 shares of Common Stock representing approximately
2.8% of those shares outstanding, of which 170,238 shares represent shares
covered by currently exercisable options (or options exercisable within 60
days) and 200 shares of Preferred Stock representing approximately .25% of
those shares outstanding. No officer or director owned as much as 1.0% of
First Virginia Common Stock. Messrs. Breeden, Greer and Giordano 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 First Virginia and its
subsidiaries. During the past two years, Dr. Selden has been and is proposed
in the future to be, retained by First Virginia as a consultant. Messrs.
Brand, Breeden, Geithner, Ginn, Giordano, Greer, Holland, Malone, Phillips,
Rowe, Selden and Zalokar have been directors of various subsidiaries of First
Virginia during the past five years. Ages of the directors are stated as of
February 25, 1994.
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 February
25, 1994.
Shares of Common Stock of First Virginia
Beneficially Owned
Name of Officer Number * Percent of Class
Robert H. Zalokar 124,055 .3824
Paul H. Geithner, Jr. 45,849 .1413
Barry J. Fitzpatrick 40,722 .1255
Shirley C. Beavers, Jr. 31,134 .0960
Justin C. O'Donnell 25,042 .0772
* The amounts shown represent the total shares owned outright by such
individuals together with shares which are issuable upon the exercise of all
stock options which are currently exercisable. Specifically, the following
individuals have the right to acquire the shares indicated after their names,
upon the exercise of stock options: Mr. Zalokar, 5,213; Mr. Geithner, 14,750;
Mr. Fitzpatrick, 25,500; Mr. Beavers, 22,500; and Mr. O'Donnell, 15,750.
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,
Phillips, Selden, and Zettlemoyer, held five meetings during 1993. Functions
of the Committee include (1) reviewing with the independent public accountants
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 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 public accountants
and any significant disagreements between the independent public accountants
and management; and (4) reviewing the nonaudit services of the independent
public accountant. Under Section 36 of the Federal Deposit Insurance Act, the
Audit Committee also performs similar functions for the two largest First
Virginia member banks.
The Director Nominating Committee, comprised of Directors Malone, Brand,
Ginn, Giordano, Greer, Rowe, and Zalokar, held one meeting in 1993. 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 elected to the Board between annual meetings. The Committee also
considers candidates recommended by stockholders upon receipt of a letter and
resume for the proposed candidate. Such information should be sent to First
Virginia's Secretary.
The Management Compensation and Benefits Committee, comprised of Directors
Zettlemoyer, Brand, Holland, Kendrick, and Phillips, held one meeting in 1993.
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 and stock appreciation rights, to First Virginia's management
based on such factors as individual and corporate performance.
The Public Policy Committee, comprised of Directors Gruver, Breeden,
Geithner, Kendrick, Malone, Rowe, and Zalokar, met four times during 1993.
This Committee recommends to the full Board the amount of funds to be allocated
each year for charitable contributions, approves contributions upon request,
and supervises First Virginia's matching gifts program. The Committee also
monitors the programs developed for compliance with the Community Reinvestment
Act and Title VII of the Civil Rights Act of 1964.
The Executive Committee, comprised of Directors Malone, Breeden, Geithner,
Ginn, Holland, and Zalokar, held 12 meetings in 1993. 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 and those powers delegated to
other committees.
During 1993, there were 12 meetings of the Board of Directors. All 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 TRANSACTIONS
Section 16(a) of the Securities Exchange Act of 1934 requires First
Virginia's executive officers and directors 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 executive officers and directors, First Virginia believes that during
the year 1993 all filing requirements applicable to its officers and directors
were met.
ITEM 11. EXECUTIVE COMPENSATION
The following Summary Compensation Table shows the annual compensation for
First Virginia's Chief Executive Officer and for the four most highly
compensated executive officers other than First Virginia's Chief Executive
Officer for the last three fiscal years.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
(a) (b) (c) (d) (e) (f) (g)
Other All
Annual Options/ Other
Name And Compen- SARs Compen-
Principal Salary Bonus sation Awarded sation
Position Year ($) (1) ($) (2) ($) (3) (#) (4) ($) (5)
- -------- ---- ------- ------- ------- ------- -------
Robert H. Zalokar 1993 500,000 306,388 8,509 0 108,901
Chairman and Chief Executive 1992 490,000 270,714 10,608 0 93,979
Officer of First Virginia 1991 478,923 210,660 30,000
Paul H. Geithner, Jr. 1993 315,000 131,679 5,583 10,000 60,347
President of First Virginia 1992 300,000 113,050 3,987 0 52,513
1991 293,885 86,526 11,250
Barry J. Fitzpatrick 1993 189,000 90,406 69,099 10,000 25,203
Executive Vice President 1992 169,310 72,830 29,236 0 18,723
of First Virginia 1991 152,576 28,366 11,250
Shirley C. Beavers, Jr. 1993 189,000 90,406 6,045 10,000 31,385
Executive Vice President of 1992 175,769 72,830 5,160 0 26,112
First Virginia and President, 1991 171,250 33,698 11,250
First Virginia Services, Inc.
Justin C. O'Donnell 1993 202,600 45,386 5,437 2,000 33,604
Senior Vice President of 1992 192,950 43,394 4,089 0 30,549
First Virginia and President 1991 190,481 34,197 4,500
and Chief Executive Officer
of First Virginia Bank
(1)The Salary Column (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 and the First Virginia Pre-Tax
Health Benefit Plan.
(2)The Bonus Column (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 (Column (e)) includes the amount of
taxes paid by First Virginia for certain benefits. In the case of Barry J.
Fitzpatrick, it includes perquisites which amounted to $46,503 for 1993. Of
this amount, $23,432 was for a country club initiation fee and dues and $15,247
was for moving expenses. None of the other named executive officers had
perquisites and other personal benefits that exceeded the lesser of $50,000 or
10% of the total of annual salary and bonus reported for the named executive
officer in the Summary Compensation Table.
(4)Column (f) includes the number of stock options and SARs that were granted,
after adjusting for the three-for-two stock split in July, 1992. Some of the
options granted in 1991 had tandem SARs attached to them.
(5)The All Other Compensation Column (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 $6,745. It also includes the amounts paid
by the employer under the First Virginia Supplemental Benefits 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 $8,994 limitation on pretax contributions imposed by the Internal Revenue
Code for 1993. For 1993, these amounts were: for Mr. Zalokar, $40,548; Mr.
Geithner, $17,703; Mr. Fitzpatrick, $8,637; Mr. Beavers, $8,648; and Mr.
O'Donnell, $5,910. It also includes the premium amounts paid by the employer
under the First Virginia Split Dollar Life Insurance Plan. For 1993, these
amounts were: for Mr. Zalokar, $41,750; Mr. Geithner, $28,247; Mr. Fitzpatrick,
$8,642; Mr. Beavers, $14,800; and Mr. O'Donnell, $15,296. It also includes the
"above-market" earnings on deferred compensation earned during 1993. These
amounts were: for Mr. Zalokar, $19,858; Mr. Geithner, $7,652; Mr. Fitzpatrick,
$1,179; Mr. Beavers, $1,192; and Mr. O'Donnell, $5,653. Pursuant to SEC
transition rules regarding executive compensation disclosure, Columns (e) and
(g) do not include information for fiscal year 1991.
First Virginia has supplemental compensation agreements with Messrs. Zalokar
and Geithner which provide that in the event of their resignation or
retirement, they are entitled to annual compensation equal to 60% of their
average annual compensation earned by them during the five consecutive years of
their highest compensation less any benefits they receive under the First
Virginia Pension Trust Plan. "Compensation" under the Agreements includes not
only their "Salary" and "Bonus" shown in the Summary Compensation Table but any
other compensation that would be included on their IRS Form W-2. Mr.
Geithner's Agreement also provide for a 50% survivor benefit to his surviving
spouse should she survive him. Under their supplemental compensation
agreements, Messrs. Zalokar and Geithner are to provide consulting services to
First Virginia following retirement and must not engage in any activities which
compete with First Virginia.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table shows for each of the named executive officers (1) the
number of options that were granted during 1993, (2) out of the total number of
options granted to all employees, the percent granted to the named executive
officer, (3) the exercise price, (4) the expiration date and (5) the potential
realizable value of the options, assuming that the market price of the
underlying securities appreciates in value from the date of grant to the end of
the option term, at a 5% and 10% annualized rate.
Stock Option Grants In 1993
Potential
Percent Realizable
of Total Value at
Options Assumed Annual
Options Granted to Exercise Rates of Stock
Granted Employees or Base Expir- Price Appreciation
(# Shs.) in Fiscal Price ation for Option Term
(1) Year (2) ($/Sh.) Date 5%($) 10%($)
Robert H.
Zalokar ---- ---- ---- ---- ---- ----
Paul H.
Geithner,Jr. 10,000 9.09% 32.75 12/14/03 205,960 621,950
Barry J.
Fitzpatrick 10,000 9.09% 32.75 12/14/03 205,960 621,950
Shirley C.
Beavers, Jr. 10,000 9.09% 32.75 12/14/03 205,960 621,950
Justin C.
O'Donnell 2,000 1.82% 32.125 12/15/03 40,406 102,398
(1)Except in the case of Mr. Geithner (all of whose options are exercisable in
one year), options granted to the named executive officers in 1993 are
exercisable over a five year period provided certain performance goals are
achieved by First Virginia.
(2)Options to purchase 110,000 shares of First Virginia Common Stock were
granted to employees during 1993. No freestanding SARs were granted in 1993 to
employees and none of the options that were granted had any tandem SARs.
The following table 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 1993, the value realized upon
their exercise, the number of unexercised stock options and SARs at the end of
1993 and the value of unexercised in-the-money stock options and SAR rights at
the end of 1993. 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.
Aggregated Options/SAR Exercises in 1993 and
Yearend Options/SAR Values
Value
Number of Unexercised
Unexercised In-the-Money
Options/SARs Options/
Shares at Yearend SARs at
Acquired (#) Yearend ($)
Name on Value Exercisable/ Exercisable/
Exercise Realized Unexercisable Unexercisable
(#) ($)
-------- -------- ------------- -------------
Robert H. 30,000 297,501 5,213/0 70,810/0
Zalokar
Paul H. 4,939 137,000 26,500/13,750 328,250/36,250
Geithner, Jr.
Barry J. 1,500 20,750 25,500/13,750 343,750/36,250
Fitzpatrick
Shirley C. 5,154 133,438 22,500/13,750 305,625/36,250
Beavers, Jr.
Justin C.
O'Donnell 2,944 110,750 15,750/3,500 231,562/15,750
PENSION PLAN
The table on the following page shows the estimated annual benefit payable upon
retirement under the First Virginia Pension Trust Plan based on specified
remuneration and years of credited service classifications, assuming a
participant retired on December 31, 1993 at age 65. The table ends at an
average annual pay of $250,000, although because of IRS regulations,
compensation in excess of $235,840 was not taken into account in determining
benefits under the Plan in 1993. In 1994, compensation in excess of $150,000
will not be taken into account in determining benefits under the Plan.
Credited service in excess of thirty years is also not taken into account in
determining benefits under the Plan.
Annual Benefits Under First Virginia's Pension Trust Plan
Average
Annual 10 Years 15 Years 20 Years 25 Years 30 Years
Pay of of of of of
for Past Service Service Service Service Service
60 Months
- --------- ------- ------- ------- ------- -------
$150,000 22,860 34,290 45,720 57,150 68,580
175,000 26,860 40,290 53,720 67,150 80,580
200,000 30,860 46,290 61,720 77,150 92,580
225,000 34,860 52,290 69,720 87,150 104,580
250,000 38,860 58,290 77,720 97,150 115,641
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 his average annual pay multiplied by 30
years of credited service plus 0.5% of his average annual pay in excess of his
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.
This table and the Summary Compensation Table may be used to estimate
pension benefits for each of the individuals listed in the Summary Compensation
Table. Remuneration on earnings determining pension benefits under the Plan
includes salaries and bonuses (which are listed in the Summary Compensation
Table) but it also includes any other taxable compensation including
compensation resulting from the exercise of nonqualified options and SARs.
Credited service as of December 31, 1993 for each of the named executives was
as follows: Mr. Zalokar, 31 years; Mr. Geithner, 25.3 years; Mr. Fitzpatrick,
24.4 years; Mr. Beavers, 24.3 years and Mr. O'Donnell, 11.3 years.
DIRECTORS' COMPENSATION, CONSULTING ARRANGEMENTS AND PLANS WHICH INCLUDE CHANGE
IN CONTROL ARRANGEMENTS
For 1994, directors of First Virginia who are not salaried officers will be
paid an annual retainer of $13,000 per year, a fee of $850 for each meeting of
the Board of Directors attended, and a fee of $700 for each meeting of a
Committee of the Board of Directors attended. Committee chairmen will receive
$850 for each committee meeting they chair, except that the Chairman of the
Executive Committee shall receive $1,750 for each meeting. Directors are
reimbursed for out-of-town expenses incurred in connection with Board and
Committee meetings. Directors can participate in First Virginia's deferred
compensation plans which allow them to defer their retainers and fees.
During 1993, Mr. Edwin T. Holland, the founder and former Chairman and Chief
Executive Officer of First Virginia, and Mr. Thomas K. Malone, Jr., former
Chairman and Chief Executive Officer of First Virginia, were paid $139,608 and
$84,337 respectively under their supplemental compensation agreements, in
addition to the amounts they received from the First Virginia Pension Trust
Plan. Both Messrs. Holland and Malone provide consulting services under their
supplemental compensation agreements.
During 1993, Virginia H. Brown, formerly Virginia H. Beeton, received
$71,000 pursuant to her former husband's Supplemental Retirement Agreement with
First Virginia in addition to what she received from the First Virginia Pension
Trust Plan. Her former husband, Ralph A. Beeton, 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, one of which also began in 1983 and the
other in 1986, ("Deferred Compensation Plans") for key employees of First
Virginia and its subsidiaries and directors of First Virginia. 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
retirement (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 December 31, 1993, none of the
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," which is defined to include, among other things, an acquisition by
one person or group of 25% of the voting power of First Virginia's outstanding
securities. Generally, the 1983 Key Employee Salary Reduction Deferred Com-
pensation Plan requires that an employee continue his/her position with First
Virginia and/or its subsidiaries until retirement in order to receive his/her
benefits. 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
his/her benefits under the 1983 Deferred Compensation Plans at retirement,
notwithstanding the fact that his/her affiliation with First Virginia has
terminated.
In 1988, First Virginia established a Split Dollar Life Insurance Plan
("Split Dollar Plan") under which individual life insurance is available to 17
executive employees (two of whom have retired) including those named in the
Cash Compensation Table. Under the Split Dollar Plan, an executive can
purchase ordinary life insurance policies with coverage of at least two times
the executive's base annual salary, 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," which term is defined in
the same manner as the 1983 deferred compensation plans, 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 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 Supplemental Benefits 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 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, there will be no balance sheet
impact to First Virginia 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 1993, First Virginia contributed approximately
$1,464,000 to the Trust.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of First Virginia's Management Compensation and Benefits
Committee are E. Cabell Brand, Edward M. Holland, Eric C. Kendrick, W. Lee
Phillips, Jr. 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 husband's Supplemental Retirement Agreement with First
Virginia. Albert F. Zettlemoyer's daughter is an officer of First Virginia
Bank. 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 some 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.
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 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.
Base Salary
The Committee's policy for determining base salaries is that two primary
factors should be considered:
(1)the degree of responsibility the executive officer has, 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 "Local Peer Group" of companies consists of Central
Fidelity Banks, Inc., Crestar Financial Corporation and Signet Banking
Corporation based in Virginia, First Maryland Bancorp and Mercantile Bankshares
Corporation based in Maryland, and First Tennessee National Corporation and
First American Corporation of Tennessee. Base salaries are targeted to be
competitive with those in the "Local Peer Group." For 1993 Mr. Zalokar's base
salary was $500,000 which was approximately the mid-point of the salaries for
CEOs paid to his counterparts in the "Local Peer Group."
Short Term Incentives/Bonuses
The Committee grants bonuses to the executive officers and CEO based on the
extent to which the Corporation achieves or exceeds annual performance
objectives. The 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 is generally considered the most important single factor in
measuring the performance of a banking company and achievement of a 1% ROA is
generally considered the mark of a good performing banking company.
Bonus awards are based on the following:
(a)Up to 50% of the executive's salary may be awarded if First Virginia
achieves a return on average assets ("ROA") equivalent to 80% or more of its
target amount for the year. For the chief executive officer, First Virginia
would also have to achieve 80% of targeted amounts for return on total
stockholders' equity ("ROE"), asset quality (as determined by the ratios 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
(b)Up to 30% depending upon the degree to which First Virginia's earnings,
asset quality and capital ratios exceed the average for the other major banking
companies based in the Southeast, (the "Southeastern 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
(c)Up to 20% may be awarded at the discretion of the Committee based on an
individual executive's performance.
Listed below are the annualized ratios for First Virginia and the
Southeastern Regional Peer Group based on results for the first nine months of
1993, the latest data available to the Committee at the time the incentive
awards were considered.
First Virginia KBW Southeastern
Profit Plan Actual Regional Peer Group
Earnings
ROA 1.44% 1.70% 1.22%
ROE 15.89 18.09 15.68
Asset Quality
NPA Ratio 1.00 .72 1.72
CO Ratio .38 .13 .28
Capital Strength
Equity/Asset Ratio 8.5 9.57 7.94
Tier I Risk Based
Capital Ratio 12.5 16.18 11.18
Based on these results the Committee awarded Mr. Zalokar a bonus of $280,000.
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
First Virginia's success.
Equity compensation awards are only made if First Virginia exceeds the
weighted average of the returns reported by the major competitors in its
banking markets (Central Fidelity, Signet, Crestar, Mercantile Bancshares,
First Tennessee and First American of Tennessee). The performance ratios are
weighted as follows: ROA 35%, ROE 25%, five year cumulative total return to
shareholder ("Five Year Return") 15%, Nonperforming Asset Ratio 15% and Charge-
off Ratio 10%. The following table shows the performance ratios of First
Virginia and average for its major market area competitors of comparable size
for the first nine months of 1993, the latest data available to the Committee
at the time incentive awards were considered.
Market Area
First Virginia Major Competitors
ROA 1.70% 1.33%
ROE 18.09 16.56
Five Year Return 296.80 230.19
NPA Ratio .72 2.20
CO Ratio .13 .81
As of September 30, 1993 (the latest date information is available for the
peer group), the weighted average of these performance factors for First
Virginia was 199.5% of the peer group.
Except in the case of executive officers who are close to retirement, awards
vest and are exercisable over a five-year period in equal annual installments
beginning one year from the date of grant. However, each installment can only
be exercised if the performance goals for that year are met; otherwise, that
portion of the option lapses.
For 1993, the Committee awarded stock options to various executive officers
because First Virginia did meet the performance criteria mentioned above. Mr.
Zalokar did not receive any of the stock option awards.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
---------------------------------------------------
MANAGEMENT
----------
No person is known by management of the Corporation to own beneficially,
directly or indirectly, more than five percent of any class of the
Corporation's voting securities. The number of shares of the Corporation's
voting securities beneficially owned by each of the Corporation's directors and
by all of its directors and officers as a group is shown in Part III, item 10,
on pages 69 through 72 of this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
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. 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, 1993, 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
$10,908,000.
First Virginia Bank and First Virginia Card Services, Inc. extend VISA and
MasterCard privileges to directors, officers and employees of First Virginia
and its subsidiaries. Except as noted below, interest is charged on VISA and
MasterCard credit balances of employees and officers at a rate of 1% per month
on sales transactions. Directors and executive officers of First Virginia and
its subsidiaries are subject to generally prevailing rates.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
FINANCIAL STATEMENTS:
The following consolidated financial statements and report of independent
auditors of the Corporation and its subsidiaries are in Part I, item 8 on the
following pages:
Page
Consolidated Balance Sheets - December 31, 1993 and 1992 42/43
Consolidated Statements of Income - Three Years Ended
December 31, 1993 44/45
Consolidated Statements of Stockholders' Equity - Three Years
Ended December 31, 1993 46
Consolidated Statements of Cash Flows - Three Years Ended
December 31, 1993 47/48
Notes to Consolidated Financial Statements 49/66
Report of Independent Auditors 68
EXHIBITS:
The following exhibits are filed as a part of this report:
(3) Restated Articles of Incorporation and Bylaws.
(4) Instruments defining the rights of holders of the Corporation's
long-term debt are not filed herein because the total amount of
securities authorized thereunder does not exceed 10% of consolidated
total assets. The Corporation hereby agrees to furnish a copy of such
instruments to the Commission upon its request.
(10) Management contracts for Messrs. Ralph A. Beeton, Paul H. Geithner,
Jr., Edwin T. Holland, Thomas K. Malone, Jr., and Robert H. Zalokar
are incorporated by reference to Exhibit 10 of the 1992 Annual Report
on Form 10-K. Also incorporated from that exhibit are: (1) Key
employee salary reduction deferred compensation plans and Directors'
deferred compensation plans for 1983 and 1986 and (2) A compensatory
plan known as the Split-Dollar Life Insurance Plan. (3) There are
also four plans relating to options and rights. The 1982 Stock
Appreciation Rights Plan is incorporated by reference to Registration
Statement Number 33-6759 on Form S-8 dated Juns 25, 1986. The 1982
Incentive Stock Option Plan is incorporated by reference to Post-
effective Amendment Number 2 to Registration Statement Number 2-77151
on Form S-8 dated October 30, 1987. The 1986 Incentive Stock Option
Plan, Nongualified Stock Option Plan and Stock Appreciation Rights
Plan is incorporated by reference to Registration Statement Number
33-17358 on Form S-8 dated September 28, 1987. The 1991 Incentive
Stock Option Plan, Nonqualified Stock Option Plan and Stock
Appreciation Rights Plan is incorporated by reference to Registration
Statement Number 33-54802 on Form S-8 dated November 20, 1992.
(11) Statement RE: Computation of Per Share Earnings.
(13) First Virginia Banks, Inc. 1993 Annual Report to its Stockholders.
(Not included in the electronic filing)
(22) Subsidiaries of the Registrant.
(24) Consent of Independent Auditors.
FINANCIAL STATEMENT SCHEDULES:
Schedules to the consolidated financial statements required by Article 9 of
Regulation S-X are not required under the related instructions or are
inapplicable, and therefore have been omitted.
REPORTS ON FORM 8-K:
No reports on form 8-K were required to be filed during the last quarter of
1993.
SIGNATURES
- ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed as of
March 23, 1993 on its behalf by the undersigned, thereunto duly authorized.
FIRST VIRGINIA BANKS, INC.
/s/ Robert H. Zalokar
___________________________________
Robert H. Zalokar, Chairman and
Chief Executive Officer
/s/ Richard F. Bowman
___________________________________
Richard F. Bowman, Vice President
and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons as of March 23, 1994 on
behalf of the registrant and in the capacities indicated.
SIGNATURE TITLE
--------- -----
/s/ Robert H. Zalokar
____________________________ Chairman, Chief
Robert H. Zalokar Executive Officer
and Director
/s/ Richard F. Bowman
____________________________ Principal Financial
Richard F. Bowman and Accounting
Officer
/s/ E. Cabell Brand
____________________________ Director
E. Cabell Brand
/s/ Edward L. Breeden
____________________________ Director
Edward L. Breeden, III
____________________________ Director
Paul H. Geithner, Jr.
/s/ L. H. Ginn
____________________________ Director
L. H. Ginn, III
SIGNATURE TITLE
--------- -----
/s/ Gilbert R. Giordano
____________________________ Director
Gilbert R. Giordano
/s/ T. Keister Greer
____________________________ Director
T. Keister Greer
/s/ Elsie C. Gruver
____________________________ Director
Elsie C. Gruver
/s/ Edward M. Holland
____________________________ Director
Edward M. Holland
/s/ Eric C. Kendrick
____________________________ Director
Eric C. Kendrick
/s/ Thomas K. Malone, Jr.
____________________________ Director
Thomas K. Malone, Jr.
/s/ W. Lee Phillips, Jr.
____________________________ Director
W. Lee Phillips, Jr.
/s/ Josiah P. Rowe
____________________________ Director
Josiah P. Rowe, III
/s/ Richard T. Selden
____________________________ Director
Richard T. Selden
/s/ Albert F. Zettlemoyer
____________________________ Director
Albert F. Zettlemoyer
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 1993
ITEM 14
EXHIBITS
The Exhibits filed with this annual report are
included herein.
FIRST VIRGINIA BANKS, INC.
6400 Arlington Boulevard
Falls Church, Virginia 22042-2336
Exhibit 3
FIRST VIRGINIA BANKS, INC.
ARTICLES OF INCORPORATION
ARTICLE I.
The name of the Corporation is First Virginia Banks, Inc.
ARTICLE II.
The purpose of the Corporation is to acquire, own, manage and dispose of
the capital stock and other securities of banks and other corporations and to
render to such banks and corporations, and to others, such advice and
services as may be permitted by law. In addition, the Corporation shall have
the power to transact any business not prohibited by law or required to be
stated in these Articles of Incorporation.
ARTICLE III.
The Corporation shall have the authority to issue 60,000,000
shares of Common Stock, $1.00 par value, and 3,000,000 shares of Preferred
Stock, $10.00 par value.
A. Voting of Shares. Except as otherwise made mandatory by law, there
shall be no class voting, and each outstanding share regardless of class
(whether Common or Preferred), shall entitle the holder thereof to one vote
on each matter submitted to a vote at any meeting of stockholders.
B. Preemptive Rights. No holders of any class of stock of this Corporation
shall have any preemptive or other preferential right to purchase or
subscribe to (i) any shares of any class of stock of the Corporation, whether
now or hereafter authorized, (ii) any warrants, rights or options to purchase
any such stock, or (iii) any obligations convertible into any such stock or
into warrants, rights or options to purchase any such stock.
C. Preferred Shares Issuable in Series. Authority is expressly vested in
the Board of Directors to divide the Preferred Stock into series and, within
the following limitations, to fix and determine the relative rights and
preferences of the shares of any series so established, and to provide for
the issuance thereof. Each series shall be so designated as to distinguish
the shares thereof from the shares of all other series and classes. All
shares of the Preferred Stock shall be identical except as to the following
relative rights and preferences, as to which there may be variations between
different series:
1. The rate of dividend, the time of payment, and the dates from which
they shall be cumulative, and the extent of participation rights, if any;
2. The price at and the terms and conditions on which shares may be
redeemed;
3. The amount payable upon shares in event of involuntary liquidation;
4. The amount payable upon shares in event of voluntary liquidation;
5. Sinking fund provisions for the redemption or purchase of shares;
and
6. The terms and conditions on which shares may be converted, if the
shares of any series are issued with the privilege of conversion.
Prior to the issuance of any shares of a series of Preferred Stock, the
Board of Directors shall establish such series by adopting a resolution
setting forth the designation and number of shares of the series and the
relative rights and preferences thereof, to the extent permitted by the
provisions hereof, and the Corporation shall file in the office of the State
Corporation Commission of Virginia articles of serial designation as required
by law, and the Commission shall have issued a certificate of serial
designation.
D. Common Characteristics of All Series of Preferred Stock. Each and every
series of Preferred Stock, now existing or hereafter issued, shall have the
following common characteristics:
1. It shall rank on a parity and be of equal dignity as to dividends
and assets with all other series according to the respective dividend rates
and amounts distributable upon any voluntary or involuntary liquidation of
the Corporation fixed for each such series and without preference or priority
of any series over any other series.
2. It shall have no other dividend rights than those set forth in the
provisions pertaining to dividends for such series contained herein or in any
articles of serial designation.
3. If at any time less than all of a series then outstanding shall be
called for redemption, the shares to be redeemed shall be selected by lot in
such manner as may be determined by the Board of Directors.
4. All shares of a series redeemed or repurchased by the Corporation
shall be canceled in the manner provided by law and shall become authorized
and unissued shares undesignated as to series.
5. On or at any time before the date fixed for redemption of any
Preferred Stock which has been issued, the Corporation shall deposit in
trust, for the account of the holders of the shares to be redeemed, funds
necessary for such redemption with a bank or trust company in good standing
doing business in the State of Virginia, and having capital, surplus and
undivided profits aggregating at least $5,000,000, designated or to be
designated in such notice of redemption. Upon the making of such deposit,
then all shares with respect to the redemption shall, whether or not the
certificates therefor shall have been surrendered for cancellation, be deemed
no longer to be outstanding for any purpose, and all rights with respect to
such shares shall thereupon cease and terminate, except the right of the
holders of the certificates for such shares to receive, out of the funds so
deposited in trust, from and after the date of such deposit, the amount
payable upon the redemption thereof, and except for such right, if any, to
convert such shares in the manner prescribed for the series of which it is a
part. At the expiration of three years after the redemption date, any such
moneys then remaining on deposit with such bank or trust company shall be
paid over to the Corporation, free of trust, and thereafter the holders of
the certificates for such shares shall have no claims against such bank or
trust company, but only claims as unsecured creditors against the
Corporation, or against the Commonwealth of Virginia in the event of escheat
by law, for amounts equal to their pro rata shares of the money so paid over.
ARTICLE IV.
The Corporation may, with the approval of a majority of the
entire Board of Directors, establish, adopt, alter, amend or repeal pension
plans, pension trust, profit-sharing plans, stock-option plans, stock-
purchase plans and other incentive, bonus or deferred compensation plans, for
the officers or employees of the Corporation or its subsidiaries, including
employees who are directors of the Corporation or any subsidiary.
ARTICLE V.
A. The number of directors of the Corporation, not less than 3 and not more
than 30, shall be fixed by the Bylaws and in the absence of a Bylaw fixing
the number, shall be sixteen. Upon the adoption of this Paragraph A, of
Article V, the directors shall be divided into three classes (A, B and C), as
nearly equal in number as possible. The initial term of office for members
of Class A shall expire at the annual meeting of stockholders in 1985; the
initial term of office for members of Class B shall expire at the annual
meeting of stockholders in 1986; and the initial term of office for members
of Class C shall expire at the annual meeting of stockholders in 1987. At
each annual meeting of stockholders following such initial classification and
election, directors elected to succeed those directors whose terms expire
shall be elected for a term of office to expire at the third succeeding
annual meeting of stockholders after their election, and shall continue to
hold office until their respective successors are elected and qualified. In
the event of any increase in the number of directors fixed in the Bylaws, the
additional directors shall be so classified that all classes of directors
have as nearly equal numbers of directors as may be possible. In the event
of any decrease in the number of directors of the Corporation, all classes of
directors shall be decreased equally as nearly as may be possible.
B. Subject to the rights of the holders of any series of Preferred Stock
then outstanding, newly created directorships resulting from an increase by
not more than two in the authorized number of directors or any vacancies in
the Board of Directors resulting from death, resignation, retirement,
disqualification, removal from office or other cause shall be filled by the
affirmative vote of a majority of the directors then in office, whether or
not a quorum. Each director so chosen shall hold office until the expiration
of the term of the director, if any, whom he has been chosen to succeed, or
if none, until the expiration of the term of the class assigned to the
additional directorship to which he has been elected, or until his earlier
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, any director or the entire Board of Directors may be
removed from office at any time, but only the affirmative vote of the holders
of at least four-fifths (80%) of the stock entitled to vote generally in the
election of directors at a meeting called for that purpose.
C. The affirmative vote of the holders of not less than four-fifths (80%)
of the stock entitled to vote generally in the election of directors shall be
required to amend, or repeal this Article V or adopt any provision
inconsistent with this Article V, or to adopt a Bylaw to fix the number of
directors.
ARTICLE VI.
INDEMNIFICATION AND ELIMINATION OF LIABILITY OF
DIRECTORS, ADVISORY DIRECTORS AND OFFICERS
A. The Corporation shall indemnify a person who is or was made a party to
any proceeding, or is threatened to be made a party to any proceeding,
including a proceeding by or in the right of the Corporation, because the
person is or was a director, advisory director, or officer of the Corporation
or because, while a director, advisory director, or officer of the
Corporation, the person is or was serving any other legal entity in any
capacity at the request of the Corporation against all liabilities, fines,
penalties, and claims imposed upon or asserted against the person(including
amounts paid in settlement) and reasonable expenses incurred in the
proceeding (including counsel fees), except such liabilities and expenses as
are incurred because of the person's willful misconduct or knowing violation
of the criminal law. The right to indemnify under this paragraph shall inure
to the benefit of heirs, executors and administrators of such a person. The
Corporation may, upon majority vote of a quorum of disinterested directors,
contract in advance to indemnify and advance the expenses of any director,
advisory director, or officer.
B. Unless a determination has been made that indemnification is not
permissible, the Corporation shall make advances and reimbursements for
expenses incurred by a director, advisory director, or officer in a
proceeding upon receipt of an undertaking from the director, advisory
director, or officer to repay the same if it is ultimately determined that
the director, advisory director, or officer is not entitled to
indemnification. Such undertaking shall be an unlimited unsecured general
obligation of the director, advisory director, or officer and shall be
accepted without reference to his ability to make repayment.
C. The Corporation may, to a lesser extent or to the same extent that the
Corporation is required to provide indemnification and make advances and
reimbursements for expenses to its present or former directors, advisory
directors, and officers, provide indemnification and make advances and
reimbursements for expenses to its present or former employees and agents,
the directors, advisory directors, officers, employees and agents of its
affiliates, subsidiaries and predecessor entities, and any person serving in
any other legal entity in any capacity at the request of the Corporation, and
may contract in advance to do so. The determination that indemnification
under this paragraph is permissible, the authorization of such
indemnification and the evaluation as to the reasonableness of expenses in a
specific case shall be made as authorized from time to time by general or
specific action of the Board of Directors, which action may be taken before
or after a claim for indemnification is made, or as otherwise provided by
law.
D. In any proceeding brought by a shareholder in the right of the
Corporation or brought by or on behalf of shareholders of the Corporation, no
damages may be assessed against a director, advisory director or officer of
the Corporation arising out of a single transaction, occurrence or course of
conduct, provided that this elimination of liability shall not be applicable
if the director, advisory director or officer engaged in willful misconduct
or knowing violation of the criminal law or of any federal or state
securities law.
E. The provisions of this Article shall be applicable from and after its
adoption, even though some or all of the underlying conduct or events
relating to the proceeding with respect to which indemnity is claimed may
have occurred before such adoption. No amendment, modification or repeal of
this Article shall diminish the rights provided hereunder to any person
arising from conduct or events occurring before the adoption of such
amendment, modification or repeal.
F. The Corporation may purchase and maintain insurance to indemnify it
against the whole or any portion of the liability assumed by it in accordance
with this Article and may also procure insurance on behalf of any person who
is or was a director, advisory director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another Corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against any
liability or expenses incurred by such person in any such capacity or arising
from the person's status as such, whether or not the Corporation would have
the power to indemnify the person against such liability under the provisions
of this Article.
ARTICLE VII.
SERIAL DESIGNATIONS
The first series of Preferred Stock, consisting of 522,500 shares, is
designated as "Series A Preferred Stock." Said series, in addition to the
common characteristics described in section D of ARTICLE III, is issued
subject to the following terms and conditions:
DIVIDENDS:
The holders of the Series A Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors, yearly dividends at
the rate of 5% per annum, payable quarterly on such dates as the Board of
Directors shall determine, together with proper adjustment for any dividend
period which is less than a full quarter. Such dividends shall be paid
before any dividends are paid upon, or set apart for, the Common Stock of the
Corporation and shall be cumulative from the date of issuance so that if for
any quarterly dividend period dividends at the rate of 5% per annum shall not
have been paid upon or set apart for the Series A Preferred Stock, the
deficiency, with interest thereon at the rate of six percent (6%) per annum
on such dividends as are in arrears, shall be fully paid or set apart for
payment before any dividends shall be paid upon, or set apart for, the Common
Stock.
REDEMPTION:
The Corporation shall have no right to redeem the Series A Preferred
Stock until five years after the date on which it is issued. Thereafter, all
or any part thereof may be redeemed at any time at the option of the Board of
Directors upon not less than forty-five nor more than ninety days written
notice of the date fixed for redemption given to the holders thereof in the
manner in which notices of stockholders' meetings are required to be given by
law. The redemption price at any time during the sixth year after such
stock is issued shall be $10.50 per share. Thereafter during the seventh
and each subsequent full year after such stock is issued the redemption price
shall be reduced by 5 cents per share per year until the beginning of the
sixteenth full year after it is issued, after which time it may be redeemed
for $10 per share. In addition the redemption price shall include all unpaid
accrued dividends, with interest thereon at the rate of six percent (6%) per
annum on such dividends as are in arrears, to the date fixed for redemption.
LIQUIDATION:
1. In the event of the voluntary dissolution of the Corporation and
the distribution of its assets to its stockholders, if there is no other
series of Preferred Stock issued or outstanding, then the holders of the
Series A Preferred Stock shall be entitled to receive the then redemption
price for their shares plus all unpaid accrued dividends, with interest
thereon at the rate of six percent (6%) per annum on such dividends as are in
arrears, to the date of payment before any amount shall be paid to the
holders of the Common Stock.
2. In the event of the voluntary dissolution of the Corporation and
the distribution of its assets to its stockholders, if there are other series
of Preferred Stock issued and outstanding, then the holders of the Preferred
Stock of all series shall be preferred as to both dividends and assets over
the holders of the Common Stock. In such event the holders of the Series A
Preferred Stock shall be entitled to receive the then redemption price for
their shares plus all unpaid accrued dividends, with interest thereon at the
rate of six percent (6%) per annum on such dividends as are in arrears, to
the date of payment before any amount shall be paid to the holders of the
Common Stock. If, for any reason, there are insufficient assets to pay these
amounts to the holders of the Series A Preferred Stock and to pay the holders
of other series of preferred stock the amounts to which they are also
entitled, then the holders of the Series A Preferred Stock and of such other
preferred stock, as stated aforesaid, shall be paid ratably in proportion to
the amounts to which they are respectively entitled.
3. The provisions hereinabove set forth with regard to a voluntary
dissolution of the Corporation shall also be applicable to an involuntary
dissolution except that the holders of Preferred Stock shall only be entitled
to receive, in addition to dividends and interest, if any, the par value of
their shares in lieu of the then redemption price.
CONVERSION:
1. At the election of the holder, shares of Series A Preferred Stock
may be converted into shares of the Common Stock ($1 par value) of the
Corporation at any time at the following listed Basic Conversion Rates, or at
such Adjusted Conversion Rates as may hereafter be determined by application
of the formulae set forth in paragraph 8, subject to the following listed
terms and conditions:
a. Until and including March 31, 1977 (herein called the first
conversion period) the Basic Conversion Rate shall be 1.40 shares of Common
Stock for one share of Series A Preferred Stock;
b. Thereafter, until and including March 31, 1982 (herein called
the second conversion period) the Basic Conversion Rate shall be 1.20 shares
of Common Stock for one share of Series A Preferred Stock;
c. Thereafter for as long as any Series A Preferred Stock shall
remain outstanding (herein called the third conversion period) the Basic
Conversion Rate shall be one share of Common Stock for one share of Series A
Preferred Stock.
2. Any holder of shares of Series A Preferred Stock desiring to
convert the same shall, during regular business hours, deliver the
certificate(s) therefor, properly endorsed, to any transfer agent therefor or
to any transfer agent for the Common Stock of the Corporation, or to the
Corporation, if there be no such transfer agent, together with a notice in
writing of his election to convert the same, and shall receive, in exchange
therefor a certificate or certificates for shares of Common Stock in
accordance with the conversion rate prevailing with respect to shares of
Series A Preferred Stock upon the day of delivery of such notice accompanied
by such certificate(s) for the shares of Series A Preferred Stock to be
converted. All shares of Series A Preferred Stock surrendered for conversion
during any day shall be deemed to have been surrendered together as of the
close of business on such day in order that a single conversion rate as to
all of such shares shall be determined after giving effect to any
transactions affecting the conversion rate during or prior to such day.
3. The right of conversion shall expire as to any shares of Series A
Preferred Stock which shall be called for redemption unless, on or before the
day and hour for the expiration of the right of conversion specified in the
notice of redemption, the certificate(s) representing such shares together
with the notice hereinabove provided for shall have been delivered as
provided in the foregoing paragraph 2. In case of voluntary or involuntary
dissolution of the Corporation all conversion rights applicable to shares of
Series A Preferred Stock shall terminate at 2 P.M. Eastern Standard Time, on
the sixtieth day next following the date on which such dissolution shall
have been authorized by the stockholders of the Corporation, or otherwise
ordered, and in case of such dissolution, the Corporation shall notify the
holders of the Series A Preferred Stock in the same manner that it is
required to give notice of a redemption of such stock that the conversion
rights of the shares of Series A Preferred Stock will terminate, which notice
shall specify the date of such termination and the conversion rate then in
effect applicable to the shares of Series A Preferred Stock.
4. As to any shares of Series A Preferred Stock converted or any
shares of Common Stock issuable on conversion no dividends shall be deemed to
have accrued at the time of conversion and the holders thereof shall only
receive such dividends as they are entitled to receive as holders of record
on the dates dividends are declared.
5. The Corporation shall not be required to issue any fraction of a
share upon conversion of any share or shares of Series A Preferred Stock. If
more than one share of Series A Preferred Stock shall be surrendered for
conversion at one time by the same holder, the number of full shares of
Common Stock issuable upon conversion thereof shall be computed on the basis
of the total number of shares of Series A Preferred Stock so surrendered. If
any fractional interest in a share of Common Stock would be deliverable upon
conversion, the Corporation shall make an adjustment therefor in cash unless
its Board of Directors shall have determined to adjust fractional interests
by issuance of scrip certificates or in some other manner. Adjustment in
cash shall be made on the basis of the Current Market Value of one share of
Common Stock as that term is defined in paragraph 8C below.
6. If the holder of any shares of Series A Preferred Stock so
surrendered for conversion shall request that the stock certificate(s)
representing the Common Stock issuable upon such conversion be issued in the
name of a person or names of persons other than the holder of record thereof,
such holder shall pay all stock transfer taxes that may be payable in respect
thereof. The Corporation shall pay all original issue taxes imposed, if
any, in respect of the issuance of Common Stock upon conversion of shares of
Series A Preferred Stock in order that such shares may be issued in the name
or names of the respective holder or holders of record of the shares of
Series A Preferred Stock so surrendered for conversion.
7. No adjustment shall be made in the Basic Conversion Rates,
hereinabove specified, or in any Adjusted Conversion rate which may be in
effect at any time if the Corporation shall (i) issue or sell any shares of
its Common Stock or securities convertible into Common Stock to the public
for cash or to the public or others in consideration for the acquisition by
the Corporation or any of its subsidiaries of all or a portion of the stock
or assets of any corporation, partnership, or proprietorship, for the
business purposes of the Corporation, or (ii) issue or sell any rights to
purchase shares of its Common Stock to the then holders of its Common Stock
if, at the same time, similar rights are offered to the then holders of the
Series A Preferred Stock in such a manner that each of them receives the same
rights to purchase shares of Common Stock that he would have received if he
had converted his shares of Series A Preferred Stock into Common Stock
immediately prior to the time such rights were issued, or (iii) issue or sell
any shares of its Common Stock to the holders of the warrants outstanding on
March 24, 1967, which warrants provided for the sale and purchase of 350,000
shares of Common Stock, or (iv) issue any shares of its Common Stock to the
holders of the options outstanding on March 24, 1967, which options provided
for the sale and purchase of 46,500 shares of Common Stock, or (v) issue any
shares of its Common Stock pursuant to its Incentive Bonus Plan initially
approved by the stockholders on April 28, 1966, or (vi) issue any shares of
its Common Stock upon the exercise of rights, warrants or options, the
execution of stock purchase contracts, or the conversion of convertible
securities if, at the time such rights, warrants or options were issued, such
stock purchase contracts entered into, or such convertible securities were
issued the conversion rates then in effect were adjusted, in the manner
hereinafter described in paragraph 8 or if, at that time, no adjustments in
conversion rates were required by the provisions of paragraph 8.
8. Except as is provided in paragraph 7 above the conversion rates in
effect from time to time shall be subject to adjustments, made to the nearest
one-hundredth share of Common Stock, as follows:
A. If the Corporation shall pay any dividend or make any other distribution
in shares of Common Stock or in securities convertible into Common Stock the
conversion rate for each conversion period in effect immediately prior to
such action shall be proportionately increased so that the holders of the
Series A Preferred Stock shall be able to convert their shares of Series A
Preferred Stock into a number of shares of Common Stock equal to the same
percentage of the shares of Common Stock outstanding immediately after the
payment of such dividend or the making of such distribution into which they
could have converted their shares of Series A Preferred Stock immediately
prior to the payment of such dividend or the making of such distribution.
For purpose of determining the number of shares of Common Stock outstanding
both before and after the payment of such dividend or the making of such
distribution all rights (which term as hereinafter used in the description of
the Series A Preferred Stock shall be deemed to mean rights, warrants or
options) and contracts (which term as hereinafter used in the description of
the Series A Preferred Stock shall be deemed to mean contracts or agreements
of any kind) then outstanding for the purchase of shares of Common Stock and
all of the then outstanding securities issued by the Corporation which are
convertible into shares of Common Stock shall be deemed to have been
exercised or converted in the manner which they could have been exercised or
converted immediately prior to the paying of such dividend or the making of
such distribution or, if any of them could not have been exercised or
converted on that date in accordance with their terms, then such rights,
contracts and convertible securities shall be deemed to have been exercised
or converted in the manner which they could be exercised or converted on the
date upon which they first become exercisable or convertible.
B. If the Corporation shall split the outstanding shares of its Common
Stock into a greater number of shares or combine its outstanding shares of
Common Stock into a smaller number of shares the conversion rates for each
conversion period in effect immediately prior to such action shall be
proportionately increased, in the case of a split, or decreased, in case of a
combination, so that the holders of the Series A Preferred Stock shall be
able to convert their shares of Series A Preferred Stock into a number of
shares of Common Stock equal to the same percentage of the shares of Common
Stock outstanding immediately after the completion of such action into which
they could have converted their shares of Series A Preferred Stock
immediately prior to the taking of such action. For the purpose of
determining the number of the shares of Common Stock outstanding both before
and after the taking of such action all rights, contracts, and convertible
securities then outstanding for the purchase of shares of Common Stock shall
be deemed to have been exercised or converted in the manner which they could
have been exercised or converted immediately prior to such split or
combination or, if any of them could not have been exercised or converted on
that date in accordance with their terms, then such rights, contracts and
convertible securities shall be deemed to have been exercised or converted in
the manner which they could be exercised or converted on the date upon which
they first become exercisable or convertible.
C. If the Corporation shall issue any rights or enter into any contracts
for the purchase of shares of its Common Stock, whether or not said rights or
contracts can be exercised or executed immediately, at a price (including the
consideration received for such rights or contracts) which is less than
ninety-five percent of the Current Market Value (as defined below in this
paragraph) of the Common Stock of the Corporation on the date such rights are
issued or such contracts are entered into, the conversion rates for each
conversion period in effect immediately prior to such date shall be increased
to an amount determined by multiplying such conversion rates by a fraction,
the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the date such rights are issued or such
contracts entered into plus the number of additional shares of Common Stock
offered for sale pursuant to such rights or contracts and the denominator of
which shall be the number of shares of Common Stock of the Corporation
outstanding immediately prior to such date plus the number of shares of
Common Stock of the Corporation which the aggregate subscription or purchase
price (including the consideration received for such rights or contracts) of
the total number of shares offered pursuant to said rights or contracts would
purchase at the Current Market Value of the Common Stock of the Corporation
at such date. For the purpose of determining the number of shares of Common
Stock of the Corporation outstanding immediately prior to the issue of such
rights or the making of such contracts all outstanding rights and contracts
for the purchase of shares of Common Stock and all securities issued by the
Corporation which are convertible into shares of Common Stock shall be deemed
to have been exercised or converted in the manner which they could have been
exercised or converted immediately prior to the issuing of such rights or the
making of such contracts or, if any then outstanding rights or contracts or
any then outstanding convertible securities could not have been exercised or
converted on that date in accordance with their terms, then such outstanding
rights, contracts and convertible securities shall be deemed to have been
exercised or converted in the manner which they could be exercised or
converted on the date upon which they first become exercisable or
convertible. As used in this paragraph the term Current Market Value at the
date of issue of such rights or making of such contracts shall mean the last
reported sales price per share of the Common Stock of the Corporation on the
American Stock Exchange or the New York Stock Exchange on such date, if the
shares are listed on either of said exchanges, or the mean of the low bid and
high asked price in the over-the-counter market on such day if such shares
are not listed on either of said exchanges.
D. If the Corporation shall issue any rights or enter into any contracts
for the purchase of any security convertible into shares of its Common Stock,
whether or not said rights or contracts can be exercised or executed
immediately, and, on the date such rights are issued or such contracts are
made the price per share of each share of Common Stock of the Corporation
into which such security is initially convertible (including the
consideration received for such rights or contracts) is less than ninety-
five per cent of the Current Market Value of the Common Stock of the
Corporation, as defined in paragraph C above, then the conversion rates for
each conversion period in effect immediately prior to the issue of such
rights or the making of such contracts shall be increased in the manner
hereinabove described in paragraph C in the same manner as if such rights
or contracts were rights or contracts to purchase the number of shares of
Common Stock represented by such convertible securities on the date they are
issued, if they are convertible on the date on which they are issued and, if
not, the number of shares of Common Stock represented by such convertible
securities on the date when they first become convertible.
E. If any rights or contracts to purchase any shares of Common Stock or
convertible securities of the Corporation shall be issued in connection with
the issue or sale of other securities of the Corporation, such rights or
contracts shall be deemed to have been issued or sold without consideration.
F. If the Corporation shall consolidate or merge with another corporation,
or reclassify its Common Stock (other than by way of subdivision or
contraction of outstanding shares of Common Stock) each share of Series A
Preferred Stock shall thereafter be convertible into the number of shares of
stock or other securities or property of the Corporation or of the
corporation resulting from such consolidation, merger, or reclassification,
to which the Common Stock of the Corporation, deliverable upon conversion of
shares of Series A Preferred Stock, would have been entitled, upon such
consolidation, merger or reclassification had the holder of such share of
Series A Preferred Stock exercised his right of conversion in the manner in
which it could have been exercised on the date of such consolidation, merger
or reclassification or, if it could not have been converted on that date,
then in the manner in which it could have first been exercised thereafter,
and such shares of Common Stock been issued and outstanding, and had such
holder been the holder of record of such Common Stock at the time thereof,
and lawful provision therefor shall be made as part of any such
consolidation, merger or reclassification.
G. If (i) The Corporation shall declare any dividend payable otherwise than
in cash upon its Common Stock to the holders of its Common Stock, or (ii) The
Corporation shall offer only to the holders of its Common Stock any
additional shares of stock of any class of the Corporation or any right to
subscribe thereto, or (iii) Any capital reorganization, or reclassification
of the capital stock of the Corporation, or consolidation or merger of the
Corporation with another corporation, or sale of all or substantially all of
the assets of the Corporation shall be proposed, then, in any one or more of
said events, the Corporation shall notify the holders of the Series A
Preferred Stock in the same manner that it is required to give notice of the
redemption of said stock prior to the date on which (a) the books of the
Corporation shall close, or a record be taken for such stock dividend or
subscription rights, or (b) such reclassification, reorganization,
consolidation, merger or sale, shall take place, as the case may be. Such
notice shall also state the conversion rate at the time in effect applicable
to the shares of Series A Preferred Stock.
H. The Corporation shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of shares of Series A Preferred Stock, such number of shares of
Common Stock as, from time to time, shall be sufficient to effect the
conversion of all shares of Series A Preferred Stock from time to time
outstanding. The Corporation, from time to time, shall in accordance with
the laws of the Commonwealth of Virginia, increase the authorized amount of
its Common Stock if at any time the number of shares of Common Stock
remaining unissued shall not be sufficient to permit the conversion of all
shares of Series A Preferred Stock then outstanding.
I. The exercise of the conversion privilege shall be subject to such
regulations not inconsistent with the provisions of this paragraph 8 as may
at any time or from time to time be adopted by resolution of the Board of
Directors, and any resolution so adopted may, at any time or from time to
time, be amended or repealed.
MISCELLANEOUS:
1. There shall be no sinking fund provided for the redemption of
shares of Series A Preferred Stock.
2. The Corporation may not redeem any shares of its Common Stock so
long as any dividends on its Series A Preferred Stock are in arrears.
ARTICLE VIII.
The second series of Preferred Stock, consisting of 84,000 shares, is
designated as "Second Series A Preferred Stock." Said series, in addition
to the common characteristics described in Section D of ARTICLE III, is
issued subject to the following terms and conditions (whenever the words
"Identical to ARTICLE VII" appear next to a subject heading or paragraph(s)
thereof, they shall be taken to mean (i) that the entire contents of the
particular heading or paragraph(s) thereof, as the case may be, are identical
to the corresponding provisions pertaining to "Series A Preferred Stock" set
forth in ARTICLE VII hereof, except that each reference therein to "Series A
Preferred Stock" is changed to "Second Series A Preferred Stock," and (ii)
that such corresponding provisions of ARTICLE VII, with each reference
therein to "Series A Preferred Stock" changed to "Second Series A Preferred
Stock," are incorporated herein verbatim by reference):
DIVIDENDS: All provisions are Identical to ARTICLE VII.
REDEMPTION: All provisions are Identical to ARTICLE VII.
LIQUIDATION: All provisions are Identical to ARTICLE VII.
CONVERSION: Paragraphs 1, 2, 3, 4, 5 and 6 pertaining to
CONVERSION are Identical to ARTICLE VII.
7. No adjustment shall be made in the Basic Conversion Rates,
hereinabove specified, or in any Adjusted Conversion Rate which may be in
effect at any time if the Corporation shall (i) issue or sell any shares of
its Common Stock or securities convertible into Common Stock to the public
for cash or to the public or others in consideration for the acquisition by
the Corporation or any of its subsidiaries of all or a portion of the stock
or assets of any corporation, partnership, or proprietorship, for the
business purposes of the Corporation, or (ii) issue or sell any rights to
purchase shares of its Common Stock to the then holders of its Common Stock
if, at the same time, similar rights are offered to the then holders of the
Second Series A Preferred Stock in such a manner that each of them receives
the same rights to purchase shares of Common Stock that he would have
received if he had converted his shares of Second Series A Preferred Stock
into Common Stock immediately prior to the time such rights were issued, or
(iii) issue or sell any shares of its Common Stock to the holders of the
warrants outstanding on February 16, 1968, which warrants provided for the
sale and purchase of 350,000 shares of Common Stock, or (iv) issue any
shares of its Common Stock to the holders of the options outstanding on
February 16, 1968, which options provided for the sale and purchase of
42,500 shares of Common Stock, or (v) issue any shares of its Common Stock
pursuant to its Incentive Bonus Plan initially approved by the stockholders
on April 28, 1966, or (vi) issue any shares of its Common Stock upon the
exercise of rights, warrants or options, the execution of stock purchase
contracts, or the conversion of convertible securities if, at the time such
rights, warrants or options were issued, such stock purchase contracts
entered into, or such convertible securities were issued the conversion rates
then in effect were adjusted, in the manner hereinafter described in
paragraph 8 or if, at that time, no adjustments in conversion rates were
required by the provisions of paragraph 8.
Paragraph 8 and subparagraphs A through I thereunder, inclusive,
pertaining to CONVERSION are Identical to ARTICLE VII.
MISCELLANEOUS: All provisions are Identical to ARTICLE VII.
ARTICLE IX.
The third series of Preferred Stock, consisting of 80,000 shares, is
designated as "Third Series A Preferred Stock." Said series, in addition to
the common characteristics described in section D of ARTICLE III, is issued
subject to the following terms and conditions (whenever the words "Identical
to ARTICLE VII" appear next to a subject heading or paragraph(s) thereof,
they shall be taken to mean (i) that the entire contents of the particular
heading or paragraph(s) thereof, as the case may be, are identical to the
corresponding provisions pertaining to "Series A Preferred Stock" set forth
in ARTICLE VII hereof, except that each reference therein to "Series A
Preferred Stock" is changed to "Third Series A Preferred Stock," and (ii)
that such corresponding provisions of ARTICLE VII, with each reference
therein to "Series A Preferred Stock" changed to "Third Series A Preferred
Stock," are incorporated herein verbatim by reference):
DIVIDENDS: All provisions are Identical to ARTICLE VII.
REDEMPTION: All provisions are Identical to ARTICLE VII.
LIQUIDATION: All provisions are Identical to ARTICLE VII.
CONVERSION: Paragraphs 1, 2, 3, 4, 5 and 6 pertaining to
CONVERSION are identical to ARTICLE VII.
7. No adjustment shall be made in the Basic Conversion Rates,
hereinabove specified, or in any Adjusted Conversion Rate which may be in
effect at any time if the Corporation shall (i) issue or sell any shares of
its Common Stock or securities convertible into Common Stock to the public
for cash or to the public or others in consideration for the acquisition by
the Corporation or any of its subsidiaries of all or a portion of the stock
or assets of any corporation, partnership, or proprietorship, for the
business purposes of the Corporation, or (ii) issue or sell any rights to
purchase shares of its Common Stock to the then holders of its Common Stock
if, at the same time, similar rights are offered to the then holders of the
Third Series A Preferred Stock in such a manner that each of them receives
the same rights to purchase shares of Common Stock that he would have
received if he had converted his shares of Third Series A Preferred Stock
into Common Stock immediately prior to the time such rights were issued, or
(iii) issue or sell any shares of its Common Stock to the holders of the
warrants outstanding on October 2, 1968, which warrants provided for the sale
and purchase of 350,000 shares of Common Stock, or (iv) issue any shares of
its Common Stock to the holders of the options outstanding on October 2,
1968, which options provided for the sale and purchase of 38,875 shares of
Common Stock, or (v) issue any shares of its Common Stock pursuant to its
Incentive Bonus Plan initially approved by; the stockholders on April 28,
1966, or (vi) issue any shares of its Common Stock upon the exercise of
rights, warrants or options, the execution of stock purchase contracts, or
the conversion of convertible securities if, at the time such rights,
warrants or options were issued, such stock purchase contracts entered into,
or such convertible securities were issued the conversion rates then in
effect were adjusted, in the manner hereinafter described in paragraph 8 or
if, at that time, no adjustments in conversion rates were required by the
provisions of paragraph 8.
Paragraph 8 and subparagraphs A through I thereunder, inclusive,
pertaining to CONVERSION are identical to ARTICLE VII.
MISCELLANEOUS: All provisions are Identical to ARTICLE VII.
ARTICLE X.
A. Higher Vote for Certain Business Combinations. In addition to any
affirmative vote of holders of a class or series of capital stock of the
Corporation required by law or these Articles, and except as otherwise
expressly provided in Section B of this Article X, a Business Combination
(as hereinafter defined) with or upon a proposal by a Related Person (as
hereinafter defined) shall require the affirmative vote of the holders of at
least eighty percent (80%) of the voting power of the voting stock of the
Corporation, voting together as a single class.
B. When Higher Vote Is Not Required. The provisions of Section A of this
Article X shall not be applicable to a particular Business Combination and
such Business Combination shall require only such affirmative vote as is
required by law and other provisions of the Articles or the Bylaws of the
Corporation, if all of the conditions specified in any one of the following
Paragraphs (1), (2) or (3) are met:
1. Approval by Directors. The Business Combination has been approved
by a vote of a majority of directors, which includes a majority of all the
Continuing Directors (as hereinafter defined); or
2. Combination with Subsidiary. The Business Combination is solely
between the Corporation and a subsidiary of the Corporation; or
3. Price Conditions and Procedures. All of the following conditions
have been met:
a. Such holders shall receive the aggregate amount of (i) cash
and (ii) fair market value (as of the date of the consummation of the
Business Combination) of consideration other than cash, per share of Common
or Preferred in such Business Combination by holders thereof at least equal
to the highest per share price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by the Related Person for
any shares of such class or series of stock acquired by it; provided, that if
the highest preferential amount per share of a series of Preferred Stock to
which the holders thereof would be entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the affairs of the
Corporation (regardless of whether the Business Combination to be consummated
constitutes such an event) is greater than such aggregate amount, holders of
such series of Preferred Stock shall receive an amount for each such share at
least equal to the highest preferential amount applicable to such series of
Preferred Stock.
b. The consideration to be received by holders of a particular
class or series of outstanding Common or Preferred Stock shall be in cash or
in the same form as the Related Person has previously paid for shares of such
class or series of stock. If the Related Person has paid for shares of any
class or series of stock with varying forms of consideration, the form of
consideration given for such class or series of stock in the Business
Combination shall be either cash or the form used to acquire the largest
number of shares of such class or series of stock previously acquired by it.
c. No Extraordinary Event (as hereinafter defined) occurs after
the Related Person has become a Related Person and prior to the
consummation of the Business Combination.
d. A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder
(or any subsequent provisions replacing such Act, rules or regulations) is
mailed to public stockholders of the Corporation at least 30 days prior to
the consummation of such Business Combination (whether or not such proxy or
information statement is required pursuant to such Act or subsequent
provisions).
C. Certain Definitions. For purposes of this Article X:
1. A "person" shall mean any individual, firm, corporation or other
entity, or a group of "persons" acting or agreeing to act in the manner set
forth in Rule 13d-5 under the Securities Exchange Act of 1934, as in effect
on January 1, 1984.
2. The term "Business Combination" shall mean any of the following
transactions, when entered into by the Corporation, or a subsidiary of the
Corporation, with, or upon a proposal by, a Related Person:
a. the merger or consolidation of the Corporation, or any
subsidiary of the Corporation; or
b. the sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one or a series of transactions) of any assets of the
Corporation or any subsidiary of the Corporation having an aggregate fair
market value of $5,000,000 or more; or
c. the issuance or transfer by the Corporation or any subsidiary
of the Corporation (in one or a series of transactions) of securities of the
Corporation or that subsidiary having an aggregate fair market value of
$5,000,000 or more; or
d. the adoption of a plan or proposal for the liquidation or
dissolution of the Corporation; or
e. the reclassification of securities (including a reverse stock
split), recapitalization, consolidation or any other transaction (whether or
not involving a Related Person) which has the direct or indirect effect of
increasing the voting power, whether or not then exercisable, of a Related
Person in any class or series of capital stock of the Corporation or any
subsidiary of the Corporation; or
f. any agreement, contract or other arrangement providing
directly or indirectly for any of the foregoing.
3. The term "Related Person" shall mean any person (other than the
Corporation, a subsidiary of the Corporation or any profit sharing, employee
stock ownership or other employee benefit plan of the Corporation or a
subsidiary of the Corporation or any trustee of or fiduciary with respect to
any such plan acting in such capacity) that is the direct or indirect
beneficial owner (as defined in Rule 13d-3 and Rule 13d- 5 under the
Securities Exchange Act of 1934, as in effect on January 1, 1984) of five
percent (5%) or more than five percent (5%) of the outstanding capital stock
of the Corporation entitled to vote for the election of directors, and any
Affiliate or Associate of any such person.
4. The term "Continuing Director" shall mean any member of the Board
of Directors who is not affiliated with a Related Person and who was a member
of the Board of Directors immediately prior to the time that the Related
Person became a Related Person, and any person who is not affiliated with
the Related Person and is recommended to be a Continuing Director by a
majority of Continuing Directors who are then members of the Board of
Directors.
5. "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 under the Securities Exchange Act of
1934, as in effect on January 1, 1984.
6. The term "Extraordinary Event" shall mean, as to any Business
Combination and Related Person, any of the following events that is not
approved by a majority of all Continuing Directors:
a. any failure to declare and pay at the regular date therefor
any full quarterly dividend (whether or not cumulative) on outstanding
Preferred Stock; or
b. any reduction in the annual rate of dividends paid on the
Common Stock (except as necessary to reflect any subdivision of the Common
Stock); or
c. any failure to increase the annual rate of dividends paid on
the Common Stock as necessary to reflect any reclassification (including any
reverse stock split), recapitalization, reorganization or any similar
transaction that has the effect of reducing the number of outstanding shares
of the Common Stock; or
d. the receipt by the Related Person, after such Related Person
has become a Related Person, of a direct or indirect benefit (except
proportionately as a shareholder) from any loans, advances, guarantees,
pledges or other financial assistance or any tax credits or other tax
advantages provided by the Corporation or any subsidiary of the Corporation,
whether in anticipation of or in connection with the Business Combination or
otherwise.
7. A majority of the Continuing Directors shall have the power to make
all determinations with respect to this Article X, including, without
limitation, determining the transactions that are Business Combinations, the
persons who are Related Persons, the time at which a Related Person became a
Related Person, and the fair market value of any assets, securities or other
property, and any such determinations of such Continuing Directors shall be
conclusive and binding.
D. No Effect on Fiduciary Obligations of Related Persons. Nothing
contained in this Article X shall be construed to relieve any Related Person
from any fiduciary obligation imposed by law.
E. Amendment or Repeal. The affirmative vote of the holders of not less
than eighty percent (80%) of the total voting power of the voting stock of
the Corporation, voting together as a single class, shall be required in
order to amend or repeal this Article X or adopt any provision inconsistent
with this Article X.
ARTICLE XI.
A. The power to adopt, alter, amend or repeal Bylaws shall be vested in
the Board of Directors, which may take such action by the vote of a majority
of the directors present and voting at a meeting where a quorum is present,
provided that if, as of the date such action shall occur, there is a Related
Person as defined in this Article XI of the Articles of Incorporation, such
majority shall include a majority of the Continuing Directors as defined in
this Article XI of the Articles of Incorporation; the stockholders, by the
affirmative vote of the holders of not less than four-fifths (80%) of the
voting power of all of the then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors, may
adopt new Bylaws, or alter, amend or repeal Bylaws adopted by either the
stockholders or the Board of Directors. In addition, the stockholders may
prescribe by the affirmative vote of the holders of not less than four-fifths
(80%) of the voting power of all of the then outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of
directors that any Bylaw made by them shall not be altered, amended or
repealed by the Board of Directors.
B. This Article shall not be amended, modified or repealed except by the
affirmative vote of the holders of not less than four-fifths (80%) of the
voting power of all of the then outstanding shares of capital stock of the
Corporation then entitled to vote generally in the election of directors.
C. Certain Definitions. For purposes of this Article XI:
1. A "person" shall mean any individual, firm, corporation or other
entity, or a group of "persons" acting or agreeing to get together in the
manner set forth in Rule 13d-5 under the Securities Exchange Act of 1934, as
in effect on January 1, 1984.
2. The term "Related Person" shall mean any person (other than the
Corporation, a subsidiary of the Corporation or any profit sharing, employee
stock ownership or other employee benefit plan of the Corporation or a
subsidiary of the Corporation or any trustee of or fiduciary with respect to
any such plan acting in such capacity) that is the direct or indirect
beneficial owner (as defined in Rule 13d-3 and Rule 13d-5 under the
Securities Exchange Act of 1934, as in effect on January 1, 1984) of five
percent (5%) or more than five percent (5%) of the outstanding capital stock
of the Corporation entitled to vote for the election of directors, and any
Affiliate or Associate of any such person.
3. The term "Continuing Director" shall mean any member of the Board
of Directors who is not affiliated with a Related Person and who was a
member of the Board of Directors immediately prior to the time that the
Related Person became a Related Person, and any successor to a Continuing
Director who is not affiliated with the Related Persons and is recommended to
succeed a Continuing Director by a majority of Continuing Directors who are
then members of the Board of Directors.
4. "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 under the Securities Exchange Act of
1934, as in effect on January 1, 1984.
ARTICLE XII.
A. A seventh series of Preferred Stock, par value $10.00 per share, is
created as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series E Participating Preferred Stock," and the number of
shares constituting such series shall be 300,000. Such number of shares may
be increased or decreased by resolution of the Board of Directors; provided,
that no decrease shall reduce the number of shares of Series E Participating
Preferred Stock to a number less than that of the shares then outstanding
plus the number of shares issuable upon exercise of outstanding rights,
options or warrants or upon conversion of outstanding securities issued by
the Corporation.
Section 2. Dividends and Distributions.
(A) The holders of shares of Series E Participating Preferred Stock in
preference to the holders of shares of Common Stock, par value $1.00 per
share (the "Common Stock"), of the Corporation and any other junior stock,
shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the first day of January, April, July and October in
each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series E
Participating Preferred Stock in an amount per share (rounded to the nearest
cent) equal to the greater of (a) $1.00, or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share amount of
all cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares
of Common Stock (by reclassification or otherwise), declared on the Common
Stock, since the immediately preceding Quarterly Dividend Payment Date, or,
with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series E Participating
Preferred Stock. In the event the Corporation shall at any time after August
8, 1988 (the "Rights Declaration Date") (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount to which holders of
shares of Series E Participating Preferred Stock were entitled immediately
prior to such event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series E Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in
the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the
next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per
share on the Series E Participating Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series E Participating Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series E
Participating Preferred Stock unless the date of issue of such shares is
prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of
holders of shares of Series E Participating Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date
in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series E
Participating Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated
pro rata on a share-by- share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series E Participating Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be no more than 30 days prior to the date fixed for
the payment thereof.
Section 3. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series E Participating Preferred Stock as provided in Section
2 are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series E Participating
Preferred Stock outstanding shall have been paid in full, the Corporation
shall not
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series E Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series E Participating
Preferred Stock except dividends paid ratably on the Series E Participating
Preferred Stock and all such parity stock on which dividends are payable or
in arrears in proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series E Participating
Preferred Stock provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such parity stock in exchange for
shares of any stock of the Corporation ranking junior (either as to dividends
or upon dissolution, liquidation or winding up) to the Series E Participating
Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares
of Series E Participating Preferred Stock or any shares of stock ranking on a
parity with the Series E Participating Preferred Stock except in accordance
with a purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as the
Board of Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section
3, purchase or otherwise acquire such shares at such time and in such manner.
Section 4. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders
of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series E Participating
Preferred Stock unless, prior thereto, the holders of shares of Series E
Participating Preferred Stock shall have received per 1/100 share thereof,
the greater of the issuance price thereof or the payment made per share of
Common Stock, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment
(the "Series E Liquidation Preference"). Following the payment of the full
amount of the Series E Liquidation Preference, no additional distributions
shall be made to the holders of shares of Series E Participating Preferred
Stock unless, prior thereto, the holders of shares of Common Stock shall have
received an amount per share (the "Common Adjustment") equal to the quotient
obtained by dividing (i) the Series E Liquidation Preference by (ii) 100 (as
appropriately adjusted as set forth in subparagraph C below to reflect such
events as stock splits, stock dividends and recapitalizations with respect to
the Common Stock) (such number in clause (ii), the "Adjustment Number").
Following the payment of the full amount of the Series E Liquidation
Preference and the Common Adjustment in respect to all outstanding shares of
Series E Participating Preferred Stock and Common Stock, respectively,
holders of Series E Participating Preferred Stock and holders of shares of
Common Stock shall receive their ratable and proportionate share of the
remaining assets to be distributed in the ratio of the Adjustment Number to 1
with respect to such Preferred Stock and Common Stock, on a per share basis,
respectively.
(B) In the event there are not sufficient assets available to permit
payment in full of the Series E Liquidation Preference and the liquidation
preferences of all other series of Preferred Stock, if any, which rank on a
parity with the Series E Participating Preferred Stock then such remaining
assets shall be distributed ratably to the holders of such parity shares in
proportion to their respective liquidation preferences. In the event there
are not sufficient assets available to permit payment in full of the Common
Adjustment, then such remaining assets shall be distributed ratably to the
holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such
event shall be adjusted by multiplying such Adjustment Number by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 5. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any such case
the shares of Series E Participating Preferred Stock shall at the same time
be similarly exchanged or changed in an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to 100 times the
aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the Corporation shall at
any time after the Rights Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of Series
E Participating Preferred Stock shall be adjusted by multiplying such amount
by a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that are outstanding immediately prior to
such event.
Section 6. Redemption. The shares of Series E Participating Preferred
Stock shall not be redeemable.
Section 7. Ranking. The Series E Participating Preferred Stock shall
rank on a parity with all other series of the Corporation's Preferred Stock
as to the payment of dividends and the distribution of assets.
Section 8. Amendment. The Articles of Incorporation of the Corporation
shall not be further amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series E
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding
shares of Series E Participating Preferred Stock voting separately as a
class.
Section 9. Fractional Shares. Series E Participating Preferred Stock
may be issued in fractions of a share which shall entitle the holder in
proportion to such holders' fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of
all other rights of holders of Series E Participating Preferred Stock.
ARTICLE XIII.
Except as otherwise provided under Article V, Article X and Article XI,
these Articles of Incorporation may be amended by the affirmative vote of a
majority of all votes entitled to be cast by each voting group of the
Corporation entitled to vote on the amendment at a meeting at which a quorum
of each voting group exists.
Exhibit 3
BYLAWS
OF
FIRST VIRGINIA BANKS, INC.
ARTICLE I
MEETING OF STOCKHOLDERS
Section 1. Annual Meetings. The annual meeting of the stockholders for
the election of directors and for the transaction of such other business as
may properly come before the meeting shall be held on such date each year
that shall be established by the board of directors; however, if no such
date is established, then the annual meeting shall be on the fourth Wednesday
in April each year, if not a legal holiday, and if so, then on the next
succeeding business day.
Section 2. Special Meetings. Except as provided in Article II, Section
4 of these bylaws, special meetings of the stockholders shall be called by
the president or secretary only at the written request of a majority of the
directors, provided that, if as of the date of the request for such special
meeting there is a Related Person as defined in Article X of the Articles of
Incorporation, such majority shall include a majority of the Continuing
Directors, as defined in Article X of the Articles of Incorporation or by the
holders of four-fifths (80%) of the voting power of all of the then
outstanding shares of capital stock of the corporation entitled to vote
generally in the election of directors. The request shall state the purpose
or purposes for which the meeting is to be called. The notice of every
special meeting of stockholders shall state the purpose for which it is
called.
Section 3. Hour and Place of Meeting. All meetings of the stockholders
may be held at such hour and place within or without the State of Virginia as
may be provided in the notice of meeting.
Section 4. Notice of Meetings. Written notice of the annual and of any
special meeting of the stockholders shall be given not less than ten days nor
more than sixty days before the meeting (except as a different time is
specified by law), by or at the direction of the board of directors or the
person calling the meeting, to each holder of record of shares of the
corporation entitled to vote at the meeting, in person or by mail sent to the
address recorded on the stock transfer books of the corporation on the date
mailed, unless otherwise required by law. If any stockholder shall fail or
decline to furnish mailing address, then such notice need not be sent to him
unless required by law. All such notices should state the day, hour, place
and purpose(s) of the meeting, and the matters to be considered.
Section 5. Voting List. A complete list of the stockholders entitled
to vote at any meeting or any adjournment thereof, with the address of and
number of shares held by each on the record date, shall, for a period of ten
days prior to such meeting, be kept on file at the registered office or
principal place of business of the corporation or at the office of the
transfer agent or registrar and shall be subject to inspection by any
stockholder at any time during usual business hours except as such right of
inspection may be subject to limitations prescribed by law. Such list shall
also be produced and kept open at the time and place of the meeting and shall
be open to inspection by any stockholder during the whole time of the
meeting. Whenever the production or exhibition of any voting list, or of the
stock transfer books of the corporation, shall be required by law, the
production of a copy thereof certified correct by the transfer agent shall be
deemed to be substantial compliance with such requirement.
Section 6. Quorum. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
stockholders. Once a quorum has been duly convened, the quorum shall not be
deemed broken by the departure of any stockholder or holder of a proxy. In
the absence of a quorum, the stockholders present in person or by proxy, by
majority vote and without notice other than by announcement at the meeting,
may adjourn the meeting from time to time until a quorum shall be present.
At any such adjourned meeting at which a quorum shall be present, any
business may be transacted which could have been transacted at the meeting as
originally called.
Section 7. Organization. At all meetings of the stockholders, the
chairman of the board, or in his absence the vice chairmen, in the order of
their appointment, or in their absence the president, or in the absence of
all of them a person chosen by a majority of the stockholders represented in
person or by proxy and entitled to vote at the meeting shall preside as
chairman of the meeting. The secretary of the corporation, or in his absence
or if he be appointed chairman of the meeting, an assistant secretary shall
act as secretary at all meetings of the stockholders; but if neither the
secretary nor any assistant secretary be present and able to act as such, the
chairman may appoint any person to act as secretary of the meeting.
Section 8. Conduct of Meetings. Parliamentary rules as formulated by
Cushman, Robert's or Sturgis' Manual shall govern the conduct of all
meetings of the stockholders upon verbal announcement thereof by the
chairman, except that where such rules conflict with the provisions of these
bylaws, the statutes of Virginia, or the Articles of Incorporation, the
provisions of the said bylaws, statutes or Articles shall prevail. The
chairman of all meetings of the stockholders may announce from time to time
such rules and guidelines for the conduct of business as he may determine in
his discretion.
Section 9. Voting. Except as otherwise provided by law or by Articles
of Serial Designation with respect to any class or classes of preferred stock
outstanding, each stockholder shall be entitled to one vote for each share of
stock held by him and registered in his name on the books of the corporation
on the date fixed by the resolution of the board of directors as the record
date for the determination of the stockholders entitled to notice of and to
vote at such meeting as more fully set forth elsewhere in these bylaws. Such
vote may be given in person or by proxy appointed by an instrument in writing
executed by a stockholder or his duly authorized attorney, and delivered to
the secretary of the meeting. No proxy shall be valid after eleven months
from its date, unless otherwise provided therein. If a quorum is present,
the affirmative vote of a majority of the shares represented at the meeting
and entitled to vote on the subject matter shall be the act of the stock-
holders, except when a larger vote or a vote by class is required by the
Articles of Incorporation, any other provision of these bylaws or the laws of
the state of Virginia and except that in elections of directors those
receiving the greatest number of votes shall be deemed elected even though
not receiving a majority.
Section 10. Counting of Votes. The chairman shall appoint three
tellers to count the vote respecting the election of directors and any other
questions put to vote, whether such vote is by written ballot or by a show
of hands or by viva voce', and at least two out of three tellers shall
certify in writing the results of any such voting. Written ballots shall not
be required unless first decided upon by the chairman on matters to be
brought before the stockholders and a teller may but need not be, a
stockholder of the corporation.
ARTICLE II
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the corporation
shall be managed by the board of directors subject to any requirement of
stockholder action.
Section 2. Number. The number of directors shall be fifteen (15).
Section 3. Terms of Directors. A person up for election shall be
elected to serve a term of three years and shall not be eligible to stand for
election or re-election if on the date of the stockholders' meeting at which
he is to be elected or re-elected, he has then reached the age of 72 years,
except that if any such person shall have been duly appointed as chairman of
the corporation or of a member bank at any time prior to the date that he
reaches the age of 72 years, he shall be eligible to continue to stand for
election as a director thereafter; provided, however, that he shall not in
any case be eligible to stand for such election beyond the date that he
reaches the age of 75.
Further, except as provided above, when a director shall reach the age
of 72 during such term, he shall resign from the board of directors effective
on the day preceding the next succeeding annual meeting of the stockholders
at which such director's term expires. If any such director shall become ill
and unable to perform his duties as a director, he shall resign from the
board of directors effective on the day of the next succeeding meeting of the
board of directors or the date set forth in the notice of resignation,
whichever is earlier.
Section 4. Vacancies. Any vacancy on the board of directors for any
cause, except a vacancy created by an increase by more than two in the
number of directors, may be filled for the unexpired portion of the term by
a majority vote of all of the remaining directors, though less than a quorum,
given at a regular meeting or at a special meeting called for that purpose.
In case the entire board shall die or resign, any stockholder may call a spe-
cial meeting of the stockholders upon notice as hereinbefore provided for
meetings of the stockholders, at which special meeting the directors for the
unexpired portion of the term may be elected.
Section 5. Fees. Directors, as such, shall not receive any stated
salary for their services, but, by resolution of the board of directors, a
fixed sum and expenses of attendance, if any, may be allowed for attendance
at each regular or special meeting of the board or any meeting of any
committee. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor.
Section 6. Senior Advisory Board. There shall be a senior advisory
board which shall consist of such directors of the corporation as shall
resign from the board of directors hereafter at or after reaching the age of
72 or as shall resign because of poor health and who request to transfer to
it. The members of such board shall serve at the pleasure of the
corporation's board of directors and shall be subject to reappointment from
year to year by said board of directors, but not more than three years from
the date first elected to such senior advisory board. Members of the senior
advisory board shall receive notice of and be entitled to attend all meetings
of the corporation's regular board of directors and shall receive the same
fees and expenses as are paid to members of the board of directors, but will
not be entitled to vote at such meetings.
Section 7. Stock Ownership of Directors. Every director shall be the
owner in his sole name and have in his personal possession or control stock
of the corporation having a par value of not less than One Thousand Dollars
($1,000). Such stock must be unpledged and unencumbered at the time such
director becomes a director and during the whole of his term as such. Any
director violating the provisions of this section shall immediately vacate
his office.
ARTICLE III
DIRECTORS' MEETINGS
Section 1. Regular Meetings. Regular meetings of the board of
directors shall be held without other notice than this bylaw immediately
after, and at the same place as, the annual meeting of stockholders.
Additional regular meetings shall be held at least monthly. The board of
directors may provide by resolution the time and place, either within or
without this state, for the holding of additional regular meetings without
other notice than such resolution.
Section 2. Special Meetings. Special meetings of the board of
directors shall be held whenever called by the chairman of the board, by the
president, or by any two of the directors. Notice of each such meeting shall
be mailed to each director, addressed to his residence or usual place of
business, at least three days before the day on which the meeting is to be
held, or shall be sent to such place by telegraph or mailgram, or be
delivered personally or by telephone, not later than the day before the day
on which the meeting is to be held. Neither the business to be transacted
at, nor the purpose of, any special meeting need be specified in the notice
or waiver of notice of such meeting.
Section 3. Organization. At all meetings of the board of directors,
the chairman, or in his absence the vice chairmen in the order of their
appointment, or in their absence, the president (or in his absence the
executive vice president if a member of the board), or, in the absence of all
of them, any director selected by the board of directors shall act as chair-
man; and the secretary of the corporation, or, in his absence or if he be
elected chairman of the meeting, an assistant secretary, shall act as
secretary; but if neither the secretary nor any assistant secretary be
present and able to act as such, the chairman may appoint any person present
to act as secretary of the meeting.
Section 4. Quorum and Manner of Acting. Unless otherwise provided by
law or the Articles of Incorporation, a majority of the number of directors
fixed by the bylaws at the time of any regular or special meeting shall
constitute a quorum for the transaction of business at such meeting, and the
act of a majority of the directors present at any such meeting at which a
quorum is present shall be the act of the board of directors. In the absence
of a quorum, a majority of those present may adjourn the meeting from time to
time until a quorum be had. Notice of any such adjourned meeting need not be
given.
Section 5. Order of Business. At all meetings of the board of
directors business may be transacted in such order as from time to time the
board may determine.
Section 6. Action Without a Meeting. Any action which is required to
be taken at a meeting of the directors or of a director's committee may be
taken without a meeting if a consent in writing, setting forth the action so
to be taken, shall be signed either before or after such action by all of
the directors or by all of the members of the committee, as the case may be,
and such consent is filed in the minute book of the proceedings of the board
or committee. Such consent shall have the same force and effect as a
unanimous vote.
Section 7. Telephone Meetings. Members of the board of directors or
any committee designated thereby may participate in a meeting of such board
or committee by means of conference telephone or similar communications
equipment whereby all persons participating in the meeting can hear each
other, and a written record can be made of the action taken at the meeting.
ARTICLE IV
COMMITTEES OF THE BOARD
Section 1. Executive Committee. The board of directors, by a
resolution adopted by a majority of the number of directors, may designate
three or more directors, to include the chairman, the vice chairmen, if one
or more be appointed, and the president, to constitute an executive
committee. Members of the executive committee shall serve until removed,
until their successors are designated or until the executive committee is
dissolved by the board of directors. All vacancies which may occur in the
executive committee shall be filled by the board of directors. The executive
committee, when the board of directors is not in session, may exercise all
of the powers of the board of directors except to approve an amendment to the
Articles of Incorporation, these bylaws, a plan of merger or consolidation, a
plan of exchange under which the corporation would be acquired, the sale,
lease or exchange, or the mortgage or pledge for a consideration other than
money, of all, or substantially all, the property and assets of the
corporation otherwise than in the usual and regular course of its business,
the voluntary dissolution of the corporation, or revocation of voluntary
dissolution proceedings, and may authorize the seal of the corporation to be
affixed as required. The executive committee may make its own rules for the
holding and conduct of its meetings (except that at least two members of the
committee shall be necessary to constitute a quorum), the notice thereof
required and the keeping of its records, and shall report all of its actions
to the board of directors.
Section 2. Management Compensation and Benefits Committee. The board
of directors shall, by resolution, appoint a Management Compensation and
Benefits Committee that shall be comprised entirely of "outside directors" as
that term is defined under proposed Item 402(j)(2) of Regulation S-K of the
Securities and Exchange Commission; that is, "directors who do not have
employment or consulting arrangements with the corporation or its affiliates
and who are not employed by an entity that has an employee of the corporation
serving as a member of a committee which establishes that entity's
compensation policy." (If, in the final SEC rules, Item 402(j)(2) of the
SEC's Regulation S-K includes a different definition of "outside directors"
than that described above, then these Bylaws will follow the definition as
stated in the final rules, as amended from time to time.) Such committee
shall fix its own rules and procedures and shall meet at least once each
year. The committee shall have the authority to establish the level of
compensation (including bonuses) and benefits of management of the
corporation. Such committee shall also have all of the authority vested
under any stock option or other equity-based compensation plan of the
corporation including but not limited to the authority to grant stock
options, stock appreciation rights, restricted or phantom stock, etc. to the
corporation's management.
Section 3. Public Policy Committee. The board of directors shall, by
resolution, appoint not less than three nor more than six of its members to
constitute a public policy committee. The board shall likewise designate the
chairman of the committee. In addition, the chairman of the board shall be
an ex-officio member of the public policy committee and shall be entitled to
vote on all matters coming before the committee.
The committee shall recommend to the board of directors the total amount
of funds to be allocated each calendar year for charitable contributions to
be made by the corporation. The committee shall have authority to approve
contributions by the corporation within the dollar limits set by the approved
annual budget and may delegate some or all of its authority for final
approval to the chief executive officer provided that all contributions
approved by the chief executive officer are subsequently reported to the
committee for review. The committee shall exercise general supervision over
the corporation's matching gifts program and shall have authority to add
and/or delete those colleges and universities eligible for inclusion in the
program. The committee shall monitor on an ongoing basis the programs
developed for compliance with the Community Reinvestment Act as well as Title
VII of the Civil Rights Act of 1964 (Equal Employment Opportunity) and as a
result may make recommendations to the chief executive officer in respect
thereto. The committee shall perform such other duties and functions as
shall be assigned to said committee from time to time by the board of
directors. The chairman of the committee shall report regularly to the board
of directors on the results of its meetings. The committee shall meet
quarterly except that it may additionally meet on call of its chairman as may
be necessary.
Section 4. Audit Committee. The Board of Directors shall appoint an
Audit Committee that shall be comprised entirely of directors who meet the
standard of independence set forth by the New York Stock Exchange for audit
committees of listed companies. Such committee shall be comprised of a
minimum of three members and shall fix its own rules and procedures. The
committee shall meet at least quarterly. The committee shall review the
following: (1) with the independent public accountant and management, the
financial statements and the scope of the corporation's audit; (2) with the
independent public accountant and management, the adequacy of the
corporation's system of internal procedures and controls, including the
resolution of material weaknesses; (3) with the corporation's internal
auditors, the activities and performance of the internal auditors; (4) with
management and the independent accountant, compliance with laws and
regulations; (5) with management, the selection and termination of the
independent public accountant and any significant disagreements between the
independent public accountant and management; and (6) the nonaudit services
of the corporation's independent public accountant. The committee, when so
delegated by a member bank, shall perform such audit committee functions for
such bank as are requested by the bank to fulfill its requirements under
Section 36 of the Federal Deposit Insurance Act and under the regulations and
guidelines adopted by the FDIC to implement Section 36. The committee shall
also review any other matters concerning auditing and accounting as it deems
necessary and appropriate. The committee, at its discretion, may retain
counsel without prior permission of the Board or management.
Section 5. Other Committees. Other committees with limited authority
may be designated by a resolution adopted by a majority of the directors
present at a meeting at which a quorum is present.
ARTICLE V
OFFICERS
Section 1. Number. The officers of the corporation may be a chairman
of the board, a president, one or more vice chairmen (who also may serve as a
consultant and advisor to the board but not as a full-time employee of the
corporation or any of its affiliates), one or more executive vice presidents,
one or more vice presidents (any one or more of whom may be designated as
senior vice presidents), a secretary, and a treasurer. At the discretion of
the board of directors, there may be one or more assistant vice presidents,
assistant secretaries, and assistant treasurers; a general counsel and one or
more assistant general counsel and assistant counsel; a general auditor, one
or more assistant general auditors and audit managers, an electronic data
processing auditor, and a trust auditor; a communications officer; one or
more marketing officers, and such other officer titles designated by the
board from time to time. The chairman of the board, the vice chairmen, and
the president shall be chosen from members of the board of directors. The
same person may hold any two of such offices, except the office of secretary
may not be held by any person holding the office of president.
Section 2. Election, Term of Office and Qualifications. Officers of
the corporation shall be chosen annually by the board of directors at its
regular meeting immediately following the annual meeting of stockholders, and
each officer shall hold office until the next annual meeting of stockholders
and until his successor shall have been chosen and qualified or until he
shall resign or shall have been removed in the manner hereinafter provided.
Section 3. Other Officers, Agents and Employees. The board of
directors may from time to time appoint such other officers as it may deem
necessary, to hold office for such time as may be designated by it or during
its pleasure, and may also appoint, from time to time, such agents and
employees of the corporation as may be deemed proper, or may authorize any
officer to appoint and remove such agents and employees, and may from time
to time prescribe the powers and duties of such officers, agents and
employees of the corporation in the management of its property and affairs,
and may authorize any officer to prescribe the powers and duties of agents
and employees.
Section 4. Vacancies. If any vacancy shall occur among the officers of
the corporation, such vacancy shall be filled by the board of directors.
Section 5. Removal of Officers. Any officer or agent of the
corporation may be removed with or without cause at any time by the board of
directors or such officer as may be provided in the bylaws. Any person or
agent appointed or employed by the corporation otherwise than by the board of
directors may be removed with or without cause at any time by any officer
having authority to appoint whenever such officer in his absolute discretion
shall consider that the best interests of the corporation will be served
thereby.
Section 6. Chairman of the Board. The chairman of the board shall be
the chief executive officer of the corporation and subject to the control of
the board of directors, shall have general direction of the business affairs
and property of the corporation and shall do and perform such other duties as
may be prescribed in these bylaws or which may be assigned to him from time
to time by the board of directors. The chairman of the board shall preside
at all meetings of the board of directors and at all meetings of the stock-
holders. He shall prescribe the duties and have general supervision over all
other officers, employees and agents of the corporation enumerated in these
bylaws or established by resolution of the board of directors or otherwise,
and shall have the power to appoint, employ, suspend or remove with or
without the advice of the board of directors any such officer, employee or
agent unless otherwise specifically provided in these bylaws, and shall fix
the salaries of all such officers, employees and agents of the corporation
and its subsidiaries within the limits established from time to time by the
board of directors. He shall have power to sign all stock certificates,
deeds, contracts and other instruments authorized by the board of directors
or its executive committee unless other direction is given therefor, and he
shall be a member of all standing committees of the board except the account-
ing and auditing committee and the management compensation and benefits
committee.
Honorary Chairman of the Board. The board of directors may appoint a
former full-time officer who has held the office of chairman of the board of
the corporation to the position of honorary chairman of the board and provide
such person with a reasonable amount of office space as long as desired by
him. If appointed, such person shall act as chairman of the senior advisory
board as such body exists from time to time.
Section 7. Vice Chairmen of the Board. The board of directors may
appoint one or more vice chairmen of the board and, if any such officers are
appointed, may assign such specific duties to any one of them as it deems
necessary and advisable. Such officers may, but need not, be full-time
salaried employees of the corporation. Any such full-time vice chairmen
shall report to the corporation's chief executive officer and shall perform
such duties as such officers may prescribe and assign from time to time.
Section 8. Succession of Duties. The bylaw duties of the chairman of
the board may be exercised and carried out by any vice chairmen when such
have been appointed by the board of directors in the absence or disability of
the chairman of the board in order of their appointment; if no vice chairmen
are so appointed, then the president shall carry out such duties in the
absence of the chairman of the board; and in the absence of the president,
the executive vice president or any vice president in the order of their
election shall carry out all such duties in the absence or disability of the
chairman of the board.
Section 9. President. The president shall be the chief administrative
officer of the corporation and as such shall perform such duties as the
chairman of the board or the board of directors may prescribe from time to
time by resolution or as may be prescribed by these bylaws. He shall
exercise all the powers and discharge all the duties of the chairman of the
board during the latter's absence or inability to act. He shall have
concurrent power with the chairman of the board to sign all deeds, contracts
and instruments authorized by the board of directors or its executive
committee unless the board otherwise directs, and he may be a member of the
standing committees of the board except the accounting and auditing committee
when appointed by the board. He shall report to the chairman of the board in
carrying out his assignments and in conducting the affairs of his office.
Section 10. Executive Vice President. The board of directors may elect
one or more executive vice presidents and any such person so elected to such
office shall perform such duties as the board of directors or the chairman of
the board may assign and prescribe from time to time.
Section 11. Vice Presidents. Each vice president shall have such
powers and perform such duties as the board of directors or the chairman may
from time to time prescribe, and shall perform such other duties as may be
prescribed in these bylaws. Each vice president shall have power to sign all
deeds, contracts and instruments authorized by the board of directors or its
executive committee unless they otherwise direct. In case of the absence or
inability to act of the president, and the executive vice presidents in the
order of their appointments, then such vice president as the board of
directors may designate for the purpose (but in the absence of such
designation then the vice presidents in order of appointment) shall have the
powers and discharge the duties of the president.
Section 12. Secretary. The secretary shall keep the minutes of all
meetings of the stockholders, the board of directors and meetings of
committees of the board as they are held, in a book or books kept for that
purpose. He shall keep in safe custody the seal of the corporation and he
may affix such seal to any instrument duly executed on behalf of the
corporation. The secretary shall have charge of the certificate books and
such other books and papers as the board of directors may direct. He shall
attend to the giving and serving of all notices of the corporation, and shall
also have such other powers and perform such other duties as pertain to his
office, or as from time to time may be assigned to him by the board of
directors or the corporation's chief executive officer.
Section 13. Treasurer. The treasurer shall be the principal financial
and accounting officer of the corporation. He shall have charge of the
funds, securities, receipts and disbursements of the corporation, and shall
deposit all moneys and other valuable effects in the name and to the credit
of the corporation in such banks or other depositaries as the board of
directors may from time to time designate. He shall render to the chairman
of the board, or to the board of directors, or to the president, whenever
any of them shall require him so to do, an account of the financial condition
of the corporation and its affiliates and all of his transactions as
treasurer. He shall keep correct books of account of all its business and
transactions. If required by the board of directors, he shall give a bond in
such sum and on such conditions and with such surety as the board of
directors may designate, for the faithful performance of the duties of his
office and the restoration to the corporation, at the expiration of his term
of office, or, in case of his death, resignation or removal from office, of
all books, papers, vouchers, money or other property of whatever kind in his
possession belonging to the corporation. He shall also have such other
powers and perform such other duties as pertain to his office or as from time
to time may be assigned to him by the board of directors or the president.
Section 14. General Counsel. The general counsel, if one be appointed,
shall have charge of all litigation of the corporation, and shall keep
himself advised of the character and progress of all legal proceedings and
claims by and against the corporation or in which it is interested by reason
of its ownership and control of other corporations. He shall give to the
board of directors reports from time to time on all legal matters affecting
the corporation and, when requested, his opinion upon any question affecting
the interests of the corporation. He may, with the consent of the chief
executive officer, employ on behalf of the corporation special counsel for
the handling of any legal matter pertaining to the business of the
corporation which he deems necessary and advisable. The general counsel may,
but need not be, a full-time salaried officer of the corporation. He shall
from time to time consult with the corporation's legal advisory committee on
legal matters affecting the corporation and its affiliates.
Section 15. General Auditor. The general auditor, if one be appointed,
shall perform such internal auditing and accounting functions with regard to
the member banks and companies as the board of directors or any appropriate
committee thereof may from time to time determine, and shall have such
additional powers and duties as may be prescribed by these bylaws and as the
board of directors or any appropriate committee thereof may from time to time
determine, and shall have additional responsibilities and duties in con-
nection therewith as may be prescribed by these bylaws, applicable laws and
regulations or the board of directors or any appropriate committee thereof.
Except as stated, the general auditor and other auditing staff shall be
subject to day-to-day administrative direction of the chief executive officer
of the corporation and any such officer or employee may be dismissed by the
chief executive officer for reasons as may be applied in dismissing any other
personnel of the corporation, provided that a report of any such dismissal of
internal auditing personnel with the reasons therefor shall be made to the
board of directors or its executive committee at the next succeeding meeting
thereof. All other officers and personnel appointed or assigned to assist in
the internal audit function of the corporation, its member banks and
companies, may be assigned such day-to-day duties and responsibilities as may
be necessary by the general auditor to carry out the responsibilities of the
internal audit function. The office of general auditor may not be held by
any person holding other offices in the corporation or its affiliates except
with the specific approval of the board of directors.
Section 16. Assistant Secretary. In the absence or disability of the
secretary, the assistant secretary (or if more than one, then the assistant
secretary designated by the board of directors or the president for such
purpose) shall perform all the duties of the secretary and, when so acting,
shall have all the powers of, and be subject to all the restrictions upon,
the secretary. Each assistant secretary shall also perform such other duties
as from time to time may be assigned to him by the board of directors, the
chief executive officer or the secretary.
Section 17. Assistant Treasurer. In the absence or disability of the
treasurer, the assistant treasurer (or if more than one, then the assistant
treasurer designated by the board of directors or the chief executive officer
for such purpose) shall perform all the duties of the treasurer and, when so
acting, shall have all the powers of, and be subject to all restrictions
upon, the treasurer. Each assistant treasurer shall also perform such other
duties as from time to time may be assigned to him by the board of directors,
the chief executive officer or the treasurer.
ARTICLE VI
CAPITAL STOCK
Section 1. Certificates. Certificates representing shares of the
capital stock of the corporation shall be in such form as is permitted by
law and prescribed by the board of directors or the chief executive officer
and shall be signed by the persons authorized to sign the same by the bylaws
or specific resolution of the board of directors. Certificates may, but need
not be, sealed with the seal of the corporation or a facsimile thereof. The
signature of the officers upon such certificates may be facsimiles if the
certificate is countersigned by a transfer agent or registered by registrar
other than the corporation itself or an employee of the corporation.
In case any officer who has signed or whose facsimile signature has been
placed upon a stock certificate shall have ceased to be such officer before
such certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer at the date of its issue.
Section 2. Issue and Registration of Certificates: Transfer Agents and
Registrars. Transfer agents and/or registrars for the stock of the
corporation may be appointed by the board of directors and may be required to
countersign stock certificates. Certificates of stock shall be issued in
consecutive order and the certificate books shall be kept at an office of the
corporation or at the office of the transfer agent. Certificates shall be
numbered and registered in the order in which they are issued. New
certificates and, in the case of cancellation, old certificates, shall,
before they are delivered, be passed to a registrar if one is appointed by
the board of directors, and such registrar shall register the issue or
transfer of such certificates. Upon the return of the certificates by the
registrar, the new certificates shall be delivered to the person entitled
thereto.
Section 3. Transfer of Stock. The stock of the corporation shall be
transferable or assignable on the books of the corporation by the holders in
person or by attorney on surrender of the certificates for such shares duly
endorsed and, if sought to be transferred by attorney, accompanied by a
written power of attorney to have the same transferred on the books of the
corporation.
Section 4. Lost, Destroyed and Mutilated Certificates. Holders of the
stock of the corporation shall immediately notify the corporation of any
loss, destruction or mutilation of the certificate therefor, and the board of
directors may in its discretion, or any officer of the corporation appointed
by the board of directors for that purpose may in his discretion, cause one
or more new certificates for the same number of shares in the aggregate to be
issued to such stockholder upon the surrender of the mutilated certificate or
upon satisfactory proof of such loss or destruction and the deposit of a
bond in such form and amount and with such surety as the board of
directors may require.
Section 5. Record Date. For the purposes of determining stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of stockholders for any other proper purpose,
the board of directors may fix in advance a date as the record date for any
such determination of stockholders, such date in any case to be not more
than fifty days prior to the date on which the particular action requiring
such determination of stockholders is to be taken. If no record date is
fixed for the determination of stockholders entitled to notice of or to vote
at a meeting of stockholders, or stockholders entitled to receive payment of
a dividend, the date on which notice of the meeting is mailed or the date on
which the resolution of the board of directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination
of stockholders. When a determination of stockholders entitled to vote at
any meeting of stockholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
ARTICLE VII
CONTRACTS, LOANS, BANK ACCOUNTS, CHECKS,
SECURITIES, ETC.: AUTHORITY OF OFFICERS
Section 1. Contracts. The board of directors may authorize any officer
or officers, agent or agents to enter any contract or to execute and deliver
any instrument on behalf of the Corporation, and such order may be general or
confined to specific instances.
Section 2. Loans. The board of directors may authorize any officer or
officers, agent or agents to effect loans and advances at any time for the
corporation from any bank, trust company, insurance company, or other
institution, or from any person, firm, association, or corporation, and in
connection with such loans and advances to make, execute and deliver
promissory notes or other evidences of indebtedness of the corporation, and,
as security for the payment of any and all loans, advances, indebtedness and
liabilities of the corporation, to pledge, hypothecate or transfer any and
all stocks, securities and other personal property at any time held by the
corporation, and to that end to transfer, endorse, assign and deliver the
same in the name of the corporation. Such authority may be general or
confined to specific instances, except that any pledge, hypothecation or
transfer of the capital stock or assets of any subsidiary corporation shall
be authorized only by a specific resolution of the board of directors.
Section 3. Bank Accounts. All funds of the corporation, not otherwise
employed, shall be deposited from time to time to the credit of the
corporation in such banks or trust companies or other depositaries as the
board of directors may select.
Section 4. Checks, Securities, Etc. All checks, drafts or orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, all stock powers, endorsements, assignments, or
other instruments for the transfer of securities held by the corporation
shall be executed and delivered by, and all such securities shall be voted
and proxies for the voting thereof shall be executed and delivered by such
officer or officers, agent or agents to whom the board of directors shall
delegate the power, and under such conditions and restrictions as they may
impose.
ARTICLE VIII
MISCELLANEOUS
Section 1. Fiscal Year. The fiscal year of the corporation shall begin
on the first day of January and end on the thirty-first day of December in
each year.
Section 2. Dividends. The board of directors may from time to time
declare, and the corporation may pay, dividends on its outstanding shares in
the manner and upon the terms and conditions provided by law and its Articles
of Incorporation.
Section 3. Corporate Seal. The board of directors shall provide a
corporate seal which shall be circular in form and shall have inscribed
thereon the name of the corporation, the state of Virginia, and year of
incorporation and the words, "Corporate Seal".
ARTICLE IX
EMERGENCIES
Section 1. Emergency Bylaws. During any emergency resulting from an
attack on the United States or any nuclear or atomic disaster, which is
declared to be such by an appropriate agency of the state or federal
government, these bylaws shall be modified (but only to the extent required
by such emergency) as follows:
a. A meeting of the board of directors may be called by any
officer or director by giving at least one hour's notice to such of the
directors as it may be feasible to reach at the time and by such means as may
be feasible at the time, including publication or radio.
b. The directors in attendance at the meeting, if not less than
three, shall constitute a quorum. To the extent required to constitute a
quorum at any meeting of the board of directors, the officers of the
corporation who are present shall be deemed, in order of rank and within the
same rank in order of seniority, directors for such meeting. For purposes of
this bylaw, officers shall rank as follows: chairman of the board, vice
chairmen, president, executive vice president, senior vice president, vice
president, secretary, treasurer, assistant vice president, assistant
secretary, and assistant treasurer. Officers holding similar titles shall
rank in the order of their appointment.
Section 2. Termination of Emergency. Except as provided in this
article, the regular bylaws of the corporation shall remain in full force and
effect during any emergency, and upon its termination, these emergency
bylaws shall cease to be operative.
ARTICLE X
AMENDMENTS
The board of directors shall have the power to alter, amend or repeal
any bylaws of the corporation and to adopt new bylaws; but any bylaws made by
the board of directors may be repealed or changed, and new bylaws made, by
the stockholders, who may prescribe that any bylaw made by them shall not be
altered, amended or repealed by the board of directors.
EXHIBIT 11
FIRST VIRGINIA BANKS, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Year Ended December 31
1993 1992 1991
-------- ------- -------
(In thousands, except per share data)
PRIMARY:
Average common shares outstanding 32,408 32,144 32,036
Dilutive effect of stock options 104 108 56
-------- ------- -------
Total average common shares 32,512 32,252 32,092
======== ======= =======
Net income $116,024 $97,473 $69,608
Provision for preferred dividends (53) (61) (71)
-------- ------- -------
Net income applicable to common
stock $115,971 $97,412 $69,537
======== ======= =======
Net income per share of common
stock $3.57 $3.02 $2.17
======== ======= =======
FULLY DILUTED:
Average common shares outstanding 32,408 32,144 32,036
Dilutive effect of stock options 107 113 64
Conversion of preferred stock 117 133 154
-------- ------- -------
Total average common shares 32,632 32,390 32,254
======== ======= =======
Net income $116,024 $97,473 $69,608
======== ======= =======
Net income per share of common
stock $3.56 $3.01 $2.16
======== ======= =======
Years prior to 1992 have been restated to reflect the three-for-two common
stock split in July of 1992.
EXHIBIT 22
SUBSIDIARIES OF THE REGISTRANT
December 31, 1993
State of
Incorporation
-------------
First Virginia Banks, Inc. Virginia
Banking Subsidiaries:
Northern Region:
First Virginia Bank Virginia
First General Mortgage Company Virginia
First Virginia Mortgage Company Virginia
First Virginia Commercial Corporation Virginia
First Virginia Card Services, Inc. Virginia
First Virginia Credit Services, Inc. Virginia
First Virginia Bank-Central Maryland Maryland
C.B. Properties, Inc. Maryland
C.B. Properties II, Inc. Maryland
First Virginia Bank-Maryland Maryland
Eastern Region:
First Virginia Bank of Tidewater Virginia
First Virginia Bank-Colonial Virginia
First Virginia Bank-Commonwealth Virginia
First Virginia Bank-Central Virginia
First Virginia Bank-South Hill Virginia
Southwest Region:
First Virginia Bank-Southwest Virginia
First Virginia Bank-Franklin County Virginia
First Virginia Bank-Southside Virginia
First Virginia Bank-Highlands Virginia
First Virginia Bank-Piedmont Virginia
First Virginia Bank-Clinch Valley Virginia
Shenandoah Valley Region:
First Virginia Bank-Shenandoah Valley Virginia
First Virginia Bank of Augusta Virginia
First Virginia Bank-Planters Virginia
Tennessee-Western Virginia Region:
First Virginia Bank-Mountain Empire Virginia
Tri-City Bank and Trust Company Tennessee
Bank of Madisonville Tennessee
United Southern Bank Tennessee
Nonbanking Subsidiaries
First Virginia Insurance Services, Inc. Virginia
First Virginia Services, Inc. Virginia
First Virginia Life Insurance Company Virginia
Springdale Advertising Agency, Inc. Virginia
Northern Operations Center, Inc. Virginia
Southwest Operations Center, Inc. Virginia
Eastern Operations Center, Inc. Virginia
First Virginia Software, Inc. Virginia
United Land Corporation Maryland
Springdale Temporary Services, Inc. Virginia
All of the organizations listed above are 100% owned by First Virginia Banks,
Inc. or one of its subsidiary banks.
EXHIBIT 24
Consent of Independent Auditors
Board of Directors
First Virginia Banks, Inc.
We consent to the incorporation by reference into Registration Statement
Number 33-52507 on Form S-4 dated March 4, 1994, Post-effective Amendment
No. 1 to Registration Statement Number 33-38024 on Form S-8 dated January 10,
1994, Registration Statement Number 33-51587 on Form S-3 dated December 20,
1993, Registration Statement Number 33-54802 on Form S-8 dated November 20,
1992, Registration Statement Number 33-31890 on form S-3 dated November 1,
1989, Post-effective Amendment Number 3 to Registration Statement Number
2-67507 on Form S-3 dated January 7, 1988, Post-effective Amendment Number 2
to Registration Statement Number 2-77151 on Form S-8 dated October 30, 1987,
Registration Statement Number 33-17358 on Form S-8 dated September 28, 1987,
Registration Statement Number 33-15360 on Form S-3 dated June 26, 1987, of
our report dated January 13, 1994, with respect to the consolidated financial
statements of First Virginia Banks, Inc. included in this Annual Report on
Form 10-K for the year ended December 31, 1993.
Washington, D.C.
March 23, 1994