Robert H. Zalokar is smiling, and for good reason.

First Virginia Banks Inc., of which he is chairman and chief executive officer, has turned in yet another stellar performance.

Income in the first six months rose 29% to $58.3 million. The returns on assets and equity improved to 1.72% and 18.55% from 1.42% and 16.33% in the comparable period last year.

It is a triumph of super community banking, as Falls Church-based First Virginia manages a growing empire of 20 banks with 319 offices and $7 billion of assets in Virginia, Maryland, and Tennessee.

Not only are its fundamentals excellent, but First Virginia has excelled in the business of indirect automobile lending. Few bankers have done well in this business, which relies on car dealerships as the lending channel. First Virginia has been doing it since the early 1950s.

"We've trained our dealers well," Mr. Zalokar says when asked about the secrets of his success. "We will not take junk, and they know it.

"We are committed to. competing effectively with car manufacturers' captive finance companies and with anyone else who will enter a market, but we will not sacrifice quality," Mr. Zalokar adds.

The people who buy auto dealers' paper "have an average 17 years with our company. The manager of the unit was a car dealer for several years. He knows both sides of the business very well."

Entering Rival's Turf

First Virginia does business with more than 100 dealers, providing individual financing as well as floor planning.

The rates are competitive with those of General Motors Acceptance Corp., Ford Motor Credit Corp., and NationsBank Corp. -- three leading forces in the business.

Going after the much bigger NationsBank, First Virginia is opening a car-lending subsidiary in North Carolina.

If NationsBank can be up here, "then we can go down there," says Mr. Zalokar.

First Virginia has developed a loyal dealer network because "we're here to stay," he says. The emphasis is on the relationship.

"Even when times get tight, we will not touch indirect buying," the bank CEO says. "We will curb other loans."

Aside from "knowing the automobile business as well as the dealers do," Mr. Zalokar boasts of a solid audit process, collateral monitoring system for floor-plan loans, and a rigorous collection program.

One rule of thumb: If a borrower misses the first payment, the car is taken.

Indirect auto lending is the icing on the cake for a company that "knows who we are, and we are not ashamed of it," says Mr. Zalokar.

Spreading the Risks

"We are a small loan company. We like the retail business and find it diversifies our risk effectively."

Net loan chargeoffs are consistently low -- they fell to an annualized 0.15% in the second quarter from 0.41% a year earlier.

The performance demonstrates once again the effectiveness of strategic focus and clear product orientation typical of a strong super community organization.

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