- The Washington Times - Monday, January 21, 2002

Like a track star running a record-pace mile, shares of First Virginia Banks Inc. are cruising at an impressive level. Only the best track stars can keep up the pace without hitting a wall.
First Virginia shares closed Friday at $51.23 to follow a trend of strong performance, and have shown no signs of hitting that wall despite a harsh economic situation. And while there is some murmuring that shares may be overpriced, analysts are generally holding their tongues for now.
Last week, the company announced record earnings for the fifth straight year. It reported that earnings per share rose from $3.01 in 2000 to $3.48 in 2001. For the fourth quarter, Falls Church-based First Virginia announced an increase of $2.2 million in net income compared to the like quarter in 2000. Earnings per share rose from 78 cents in the fourth quarter of 2000 to 84 cents in the fourth quarter of 2001.
"[Last year] was a year of great achievement for First Virginia," says Barry Fitzpatrick, the chairman, president and chief executive officer of First Virginia. "In the face of unstable economic and worldwide political conditions, First Virginia once again recorded a new high in net income while maintaining our reputation for excellent asset quality."
Among the accomplishments of 2001 touted by the company include the acquisition and swift integration of James River Bankshares and an increased net-interest margin.
Analysts point to the interest margin growth as a particularly positive sign, given the 11 interest rate decreases handed down by the Federal Reserve in the past year. Those decreases made it difficult for many banks to pull in big revenue off loans.
"[First Virginia] has managed to offset weaknesses on the loan side with increases in fee income," says Collyn Bement Gilbert, a bank analyst with Ferris Baker Watts in Baltimore.
Indeed, revenue from fees for the First Virginia's banking services spiked in 2001. The company reports that overall revenue from fees grew 8 percent in 2001, led by a 212 percent increase in revenue from Internet banking fees. Electronic banking fee revenue including revenue from automated teller, check card and Internet transactions grew 17 percent in the fourth quarter compared to the like quarter in 2000. The company says increased usage of company debit cards has sparked the increase in fee revenue, and that co-branded credit card sales increased with other programs.
The company also says revenue from sales of insurance products rose 29 percent in the fourth quarter and 15 percent during the year.
All of the revenue from fees and services has helped offset losses associated with falling interest rates, and analysts say this is true for most community banks like First Virginia. Share values of companies in the community banking industry, including Wilmington Trust Corp., Provident Bankshares Corp. and Maryland-based F&M; Bancorp have either increased or held steady over the past year.
"The whole community banking industry [has] run up so significantly, and I'm still scratching my head as to why," Ms. Gilbert says.
Analysts say the outlook for First Virginia is good, provided they can keep revenues coming in. Without that, analysts say they may be forced to declare the company's stock overpriced. But with some sort of economic rebound expected in 2002, they generally remain a fan of the company.
"If they weathered through 2001 successfully, they've been through the woods," Ms. Gilbert says.

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