UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-23976
FIRST NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-1232965
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
112 West King Street, Strasburg, Virginia 22657
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (540) 465-9121
NONE
(Former name, former address and former fiscal year,
if changed since last report.)
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 the number of shares of each of the issuer's classes of common stock,
as of the latest practicable date:
Class: Common stock, $5.00 par value
Outstanding as of October 31, 1998: 787,936
<PAGE>
FIRST NATIONAL CORPORATION
INDEX
Part 1. Financial Information
<TABLE>
<S> <C> <C> <C>
Item 1 Financial Statements Page No.
Consolidated Statements of Income 3
Consolidated Balance Sheets 5
Consolidated Statements of Cash Flows 6
Consolidated Statements of Changes in Stockholders' Equity 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
Part II. Other Information
Item 1 Legal Proceedings 14
Item 4. Submission of Matters to a vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
Signature 16
</TABLE>
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
<TABLE>
<CAPTION>
FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars)
(Except Per Share Amounts)
(Unaudited)
Three Months Ended
September 30, 1998 September 30, 1997
Interest Income
<S> <C> <C>
Interest and Fees on Loans $2,783 $2,425
Interest on Federal Funds Sold 34 31
Interest on Deposits in Banks 8 7
Interest and Dividends on Investment Securities
Available for Sale
Taxable 719 446
Non Taxable 89 89
Held to Maturity
Taxable 3 34
Non Taxable 0 0
------------ -----------
Total Interest Income 3,636 3,032
Interest Expense
Interest on Savings Deposits and Interest
Bearing Demand Deposits 789 694
Interest on Time Deposits of $100,000 or more 193 187
Interest on All Other Time Deposits 677 576
Interest on Federal Funds Purchased 3 2
Interest on Note Payable 255 23
--------- ----------
Total Interest Expense 1,917 1,482
-------- -------
Net Interest Income 1,719 1,550
Provision for Loan Losses 90 45
---------- ---------
Net Interest Income After Provisions
for Loan Losses 1,629 1,505
Other Operating Income
Service Charges 156 146
Profits on Securities Available for Sale 0 0
Other Operating Income 142 135
-------- --------
Total Operating Income 298 281
Other Operating Expenses
Salaries and Employee Benefits 616 594
Occupancy Expense 70 67
Equipment Expense 127 134
Other 420 382
-------- --------
Total Operating Expenses 1,233 1,177
Income Before Income taxes 694 609
Income Taxes 214 186
--------- ---------
Net Income $480 $423
========= ========
Per Share Data
Earnings Per Common Share,basic $0.61 $0.55
========= ========
Earnings Per Common Share,diluted $0.61 $0.55
========= ========
Cash Dividends 0.215 0.175
========= =========
<FN>
The Accompanying Notes Are An Integral Part Of These Statements
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars)
(Except Per Share Amounts)
(Unaudited)
Nine Months Ended
September 30, 1998 September 30, 1997
Interest Income
<S> <C> <C>
Interest and Fees on Loans $8,053 $6,955
Interest on Federal Funds Sold 67 66
Interest on Deposits in Banks 22 22
Interest and Dividends on Investment Securities
Available for Sale
Taxable 1,794 1,261
Non Taxable 269 269
Held to Maturity
Taxable 30 115
Non Taxable 0 0
------------ -----------
Total Interest Income 10,235 8,688
Interest Expense
Interest on Savings Deposits and Interest
Bearing Demand Deposits 2,306 1,871
Interest on Time Deposits of $100,000 or more 521 518
Interest on All Other Time Deposits 1,794 1,736
Interest on Federal Funds Purchased 24 6
Interest on Note Payable 624 69
--------- ----------
Total Interest Expense 5,269 4,200
-------- -------
Net Interest Income 4,966 4,488
Provision for Loan Losses 228 135
---------- ---------
Net Interest Income After Provisions
for Loan Losses 4,738 4,353
Other Operating Income
Service Charges 457 393
Profits on Securities Available for Sale 136 8
Other Operating Income 438 381
-------- --------
Total Operating Income 1,031 782
Other Operating Expenses
Salaries and Employee Benefits 1,951 1,767
Occupancy Expense 205 176
Equipment Expense 372 399
Other 1,264 1,084
-------- --------
Total Operating Expenses 3,792 3,426
Income Before Income taxes 1,977 1,709
Income Taxes 615 517
--------- ---------
Net Income $1,362 $1,192
=========== ========
Per Share Data
Earnings Per Common Share,basic $1.73 $1.54
========= ========
Earnings Per Common Share,diluted $1.73 $1.54
========= ========
Cash Dividends $0.645 $0.52
========== =========
<FN>
The Accompanying Notes Are An Integral Part Of These Statements
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
September 30, 1998 December 31, 1997
ASSETS
<S> <C> <C>
Cash and due from banks $5,608 $3,623
Federal Funds Sold 0 0
Investment Securities
Available for Sale 53,437 40,037
Held to Maturity 131 1,662
Loans Net of Unearned Discount 128,484 113,606
Less: Allowance for Loan Losses 1,209 1,112
--------- ---------
Net Loans 127,275 112,494
Bank Premises and Equipment 3,787 3,934
Interest Receivable 1,109 1,148
Other Real Estate 353 919
Other Assets 1,260 772
-------- -------
Total Assets $192,960 $164,589
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand Deposits
Non-Interest Bearing $19,158 $16,969
Interest Bearing 16,054 15,910
Savings Deposits 56,032 52,380
Certificates of Deposit of $100,000 and over 13,227 12,243
All Other Time Deposits 49,470 42,260
---------- ----------
Total Deposits $153,941 $139,762
-------- --------
Federal Funds Purchased 2,554 1,417
Federal Home Loan Bank Advance 17,727 6,461
Accrued Expenses 1,324 767
--------- ---------
Total Liabilities $175,546 $148,407
-------- --------
Stockholders' Equity
Common Stock, Par Value $5 per Share;
Authorized 2,000,000 Shares
787,426 & 777,547 Shares Issued and Outstanding $3,937 $3,888
Surplus 1,376 1,187
Accumulated Other Comprehensive Income 471 335
Undivided Profits 11,630 10,772
--------- ---------
Total Stockholders' Equity $17,414 $16,182
------- -------
Total Liabilities and Stockholders' Equity $192,960 $164,589
======== ========
<FN>
The Accompanying Notes Are An Integral Part of These Statements
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
NINE MONTHS ENDED
September 30, 1998 September 30, 1997
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $1,362 $1,192
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 293 351
Provision for loan losses 228 135
Change in assets and liabilities:
(Increase) decrease in interest receivables 39 (103)
(Increase) in other assets (488) (280)
Increase in accrued expenses 557 570
------ ------
Net Cash Provided by Operating Activities $1,991 $1,865
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of securities-available for sale $6,383 $6,708
Proceeds from maturities and principal payments on securities-
available for sale 13,022 3,600
Purchases of securities-available for sale (32,676) (15,910)
Proceeds from maturities and principal payments on securities-
held to maturity 1,528 865
Purchases of bank premises and equipment (145) (1,003)
Net (increase) in loans (15,009) (9,367)
Proceeds on sale of other real estate 576 0
-------- -------------
Net Cash (Used in) Investing Activities ($26,321) ($15,107)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts,
and savings accounts 5,986 13,225
Net increase (decrease) in certificates of deposit 8,194 (905)
Net increase (decrease) in long-term borrowings 11,265 (14)
Net proceeds from issuance of common stock 238 29
Cash dividends paid (505) (407)
Net increase in federal funds purchased 1,137 988
----- -----------
Net Cash Provided by Financing Activities $26,315 $12,916
------- ---------
Increase (Decrease) in Cash and Cash Equivalents $1,985 $(326)
CASH AND CASH EQUIVALENTS:
Beginning 3,623 3,511
-------- --------
Ending $5,608 $3,185
====== ======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $973 $1,074
======= =======
Income Taxes $648 $436
========== =====
<FN>
The Accompanying Notes Are An Integral Part of These Statements
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS OF DOLLARS)
Nine Months Ended September 30, 1998 and 1997
Accumulated
Other
Common Capital Comprehensive Retained Comprehensive
Stock Surplus Income Earnings Income Total
<S> <C> <C> <C> <C> <C> <C>
Balances , December 31, 1996 $3,872 $1,133 $31 $9,801 $14,837
Comprehensive income:
Net income 1,192 1,192 1,192
Other comprehensive income
net of tax:
Unrealized gains on securities
available for sale 283 283
Reclassification adjustment
for gains realized in net income (8) (8)
----------
Other comprehensive income,net of tax 275 275
------
Total comprehensive income 1,467
Issuance of authorized common stock
dividend reinvestment plan $7 $22 29
Cash dividends declared (407) (407)
------------ ----------- ----------- -------- --------
Balances, September 30, 1997 $3,879 $1,155 $306 $10,586 $15,926
====== ====== ==== ======= =======
Balances, December 31, 1997 3,888 $1,187 $335 $10,772 $16,182
Comprehensive income:
Net Income 1,363 1,363 1,363
Other comprehensive income,
net of tax:
Unrealized gain on securities
available for sale 272 272
Reclassification adjustment
for gains realized in net income (136) (136)
---------
Total comprehensive income, net of tax 136 136
------
Total comprehensive income 1,500
Issuance of authorized common stock
dividend reinvestment plan 7 30 37
exercise of incentive stock options 42 159 200
Cash dividends declared (505) (505)
------------ ---------- ----------- -------- ---------
Balances, September 30, 1998 $3,937 $1,376 $471 $11,630 $17,414
====== ====== ==== ======= =======
<FN>
The Accompanying Notes Are An Integral Part of These Statements
</FN>
</TABLE>
<PAGE>
FIRST NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Interim Financial Statements
The accompanying consolidated financial statements of First National
Corporation and its subsidiaries have not been audited by independent
accountants, except for the balance sheet at December 31, 1997. In the opinion
of the company's management, the financial statements reflect all adjustments
necessary to present fairly the results of operations for the nine month and
three month periods ended September 30, 1998 and 1997, the company's financial
position at September 30, 1998 and December 31, 1997, and the cash flows for the
nine month periods ended Septemberr 30, 1998 and 1997. These adjustments are of
a normal recurring nature.
<TABLE>
<CAPTION>
Note 2. Securities as of September 30, 1998 and December 31, 1997 are summarized below:
(000 Omitted)
September 31, 1998 December 31, 1997
------------------ -----------------
Unrealized Unrealized
Book Market Gain (Loss) Book Market Gain (Loss)
<S> <C> <C> <C> <C> <C> <C>
Securities Available For Sale
U. S. Treasury Securities $0 $0 $0 $0 $0 $0
U. S. Agency Securities 44,751 45,162 $411 31,961 32,162 $201
Obligation of State and Political
Subdivisions 6,728 7,032 $304 6,478 6,785 $307
Other Securities 1,243 1,243 $0 1,090 1,090 $0
--------- --------- ------ --------- ----------- ------
Total Securities Available for Sale $52,722 $53,437 $715 $39,529 $40,037 $508
Securities Held to Maturity
U. S. Treasury Securities $0 $0 $0 $0 $0 $0
U. S. Agency Securities 131 132 $1 1,662 1,662 $0
Obligation of State and Political
Subdivisions 0 0 $0 0 0 $0
Other Securities 0 0 $0 0 0 $0
---------- ---------- ------ ---------- ---------- ----
Total Securities Held to Maturity $131 $132 $1 $1,662 $1,662 $0
</TABLE>
<PAGE>
FIRST NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Note 3. The consolidated loan portfolio, stated at face amount, is composed of
the following:
(000 Omitted)
September 30, 1998 December 31, 1997
<S> <C> <C>
Real estate loans:
Construction and land development $5,089 $3,583
Secured by farm land 866 947
Secured by 1-4 family residential 47,247 45,133
Other real estate loans 21,418 17,126
Loans to farmers (except those secured by real estate) 591 647
Commercial and industrial loans
(except those secured by real estate) 24,854 19,576
Loans to individuals for personal expenditures 28,077 26,574
All other loans 515 461
--------- ------------
Total loans $128,657 $114,047
Less unearned income reflected in loans 173 441
--------- ------------
Loans, net of unearned income $128,484 $113,606
======== ========
<FN>
The Bank had loans in a Nonaccrual category of $23,642 on December 31, 1997 and $ 453,000 on September 30, 1998.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Note 4. Allowance for Loan Losses
Analysis of the Allowance for Loan Losses
For the Nine Months Ended
(000 Omitted)
September 30, 1998 September 30, 1997
<S> <C> <C>
Balance at Beginning of Period $1,112 $974
Charge-Offs 142 40
Recoveries 11 8
------- -------
Net Charge-Offs 131 32
Provision for Loan Losses 228 135
-------- --------
Balance at End of Period $1,209 $1,077
======== ======
</TABLE>
<PAGE>
FIRST NATIONAL CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Net income for the three quarters of 1998 ended September 30th was $1,362
thousand compared to $1,192 thousand in 1997. This represents an increase of
14.26% which is attributable to an increase in net interest income during the
period and to gains realized on the sale of securities earlier in the year.
Total interest income, increased $1.5 million during the period, while total
interest expense increased $1.1 million resulting in an increase in net interest
income of $385 thousand. Total other operating expenses increased $366 thousand,
much faster than total operating income, net of profits on securities available
for sale, which increased $113 thousand. Management increased the provision to
the allowance for loan losses by $93 thousand as a result of growth in the loan
portfolio during the year and in anticipation of continued growth next year.
Yields, Rates and Net Interest Margin
Interest rates on loans have decreased slightly during 1998 and in
comparison with the same period last year, the yield on the loan portfolio
declined from 9.01% in 1997 to 8.85% in 1998. At the same time the cost of
interest bearing deposits increased from 4.77% in the first nine months of 1997
to 4.84% in the same period of 1998. While the yield on earning assets declined
21 basis points from 8.37% in 1997 to 8.16% in 1998, the cost of interest
bearing liabilities increased 15 basis points from 4.79% in 1997 to 4.94% in
1998. This resulted in a decrease in the bank's interest rate spread from 3.58%
in 1997 to 3.23% in 1998. Interest expense as a percentage of average earning
assets increased from 3.98% in 1997 to 4.15% in 1998. The bank's net interest
margin decreased from 4.39% in 1997 to 4.02% in 1998.
Future Operations
Management anticipates continued growth in both the loan portfolio and in
customer deposit balances as a result of continuing calling efforts by
commercial loan officers. This expectation of growth is predicated on an
assumption of continuing economic expansion during the future. At the end of
September management entered into an agreement to purchase land and a building
on North Loudoun Street in the city of Winchester as the location of another
branch office. Applications have been filed for the necessary approvals from the
bank's regulators. If the approvals are received and remodeling can be completed
on schedule, it is management's intention to open the branch prior to year end
1998.
Year 2000 Compliance
The Corporation is dependent on the utilization of data processing hardware
and software in the conduct of business. The majority of the banking business is
processed on a core banking system and related communications networks which
consist of a combination of computer hardware and various software packages
which are licensed to the Bank by third party vendors. In addition there are
several other personal computers and software packages in use throughout the
Bank. The year 2000 problem could affect any of these systems and produce an
adverse affect on the operations of the Bank.
<PAGE>
FIRST NATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management became aware of this potential problem in 1997 and initiated an
assessment of all software and hardware to determine whether these system would
function properly in the year 2000. As a result of this assessment, management
has been informed by its vendor that the core banking software will be year 2000
compliant. In order to confirm compliance, testing will be conducted before the
end of 1998. Testing of the core banking software was performed during the week
of October 19th and a few minor problems were detected and were easily
corrected. As a result of other tests, the management has determined that it
will have to replace or modify certain other units of hardware or software for
other systems to be year 2000 compliant. The modification of several of these
systems will take the form of an upgrade to hardware and/or software at an
earlier date than would normally have been planned.
Officers of the Bank have begun communication with all large commercial
borrowers since they pose a credit risk to the Bank if their business is
disrupted due to a year 2000 compliance issue. Responses from commercial
customers will be evaluated as part of the credit review process.
Management plans to complete the majority of the year 2000 project by
December 31, 1998. The replacement of some equipment may not be completed by
year end, but the equipment will be ordered and an installation date will have
been scheduled. Total projected expenditures are not expected to exceed $200,000
and the estimated increase in depreciation expense should be less than $30,000
per year over an expected five year depreciable life.
The Corporation has set a goal to be substantially year 2000 compliant by
year end 1998 in accordance with the mandate from its regulators. Since
uncertainties remain about whether or not all third party vendors and all large
commercial borrowers will be year 2000 complaint, the financial impact of year
2000 compliance on the Corporation's assets, earnings and liquidity cannot be
fully determined at this time.
New Accounting Pronouncements
Effective January 1, 1998 the Corporation adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This statement
establishes standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in a full set of general
purpose financial statements. Financial statements for prior periods have been
restated as required.
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 132, "Employers Disclosures about Pensions
and other Post Retirement Benefits." This statement revises employers'
disclosures about pension and other postretirement benefit plans. It does not
change the measurement or recognition of those plans. This statement
standardizes the disclosure requirements for pensions and other postretirement
benefits to the extent practicable, requires additional information on changes
in the benefit obligations and fair values of plan assets that will facilitate
financial analysis, and eliminates certain disclosures. Restatement of
disclosures for earlier periods is required. This statement is effective for the
Corporation's financial statements for the year ended December 361, 1998.
In June 1998, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement requires companies to record derivatives
on the balance sheet as assets and liabilities, measured at fair
<PAGE>
FIRST NATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
value. Gains or losses resulting from changes in the values of those derivatives
would accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. This statement is not expected to have a
material impact on the Corporation's financial statements. This statement is
effective for fiscal years beginning after June 15, 1999, with earlier adoption
encouraged. The Corporation will adopt this accounting standard as required by
January 1, 2000.
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (`SOP") 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." This SOP provides
guidance on accounting for the costs of computer software developed or obtained
for internal use. This SOP requires that entities capitalize certain
internal-use software costs once certain criteria are met. This statement is not
expected to have a material impact on the Corporation's financial statements.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities," which requires the costs of start-up activities and
organization costs to be expensed as incurred. This statement is effective for
the fiscal year 1999 financial statements. This statement is not expected to
have a material impact on the Corporation's financial statements.
<PAGE>
<TABLE>
<CAPTION>
FIRST NATIONAL CORPORATION
AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES
Nine Months Ended September 30,
1998 1997
Annual Annual
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate(3) Balance Expense Rate(3)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Balances at correspondent banks -
interest bearing $214,608 $21,613 13.39% $201,647 $22,364 14.79%
Securities:
Taxable 39,352,783 1,823,891 6.16% 29,377,200 1,376,029 6.25%
Tax-exempt (1) 6,690,798 407,686 8.10% 6,387,144 407,412 8.50%
----------- ---------- ----- --------------------- -----
Total Securities 46,043,581 2,231,577 6.45% 35,764,344 1,783,441 6.65%
Loans (net of earned income): (2)
Taxable 120,933,642 8,043,733 8.85% 102,834,394 6,940,537 9.00%
Tax-exempt (1) 159,789 14,285 11.89% 249,557 21,532 11.50%
------------------------ ------ ----------------------- ------
Total Loans 121,093,431 8,058,018 8.85% 103,083,951 6,962,069 9.01%
Fed funds sold and repurchase
agreements 1,704,968 66,902 5.22% 1,599,462 65,880 5.49%
----------------------- ----- ------------------------ -----
Total earning assets 169,056,588 10,378,110 8.16% 140,649,404 8,833,754 8.37%
Less: allowance for Loan Losses (1,158,937) (1,021,907)
Total nonearning assets 9,691,853 9,266,593
------------ --------------
Total Assets $177,589,504 $148,894,090
============ ============
LIABILITIES AND SHAREHOLDER EQUITY
Interest bearing deposits:
Checking $9,517,233 $152,975 2.14% $9,437,890 $157,212 2.22%
Money market savings 6,438,224 159,158 3.29% 7,699,923 194,074 3.36%
Regular savings 53,625,474 1,993,903 4.95% 41,569,730 1,520,111 4.88%
Certificates of deposit:
Less than $100,000 44,748,893 1,794,077 5.33% 43,843,628 1,735,058 5.28%
$100,000 and more 12,564,104 521,354 5.52% 12,721,202 518,389 5.43%
---------- --------- ----- ----------------------- -----
Total interest bearing deposits 126,893,928 4,621,467 4.84% 115,272,374 4,124,844 4.77%
Fed funds purchased 551,998 23,957 5.77% 138,112 5,791 5.59%
Long term borrowings 14,548,426 623,766 5.70% 1,474,769 68,894 6.23%
---------- --------- ----------------------------- -----
Total interest bearing liabilities 141,994,352 5,269,190 4.94% 116,885,255 4,199,529 4.79%
Noninterest bearing liabilities
Demand deposits 17,573,440 15,792,742
Other liabilities 1,523,413 822,897
------------- ---------------
Total liabilities 161,091,205 133,500,894
Stockholders' equity 16,498,299 15,393,195
------------- --------------
Total liabilities and stockholders' equity $177,589,504 $148,894,089
============ ============
Net Interest income 5,108,920 4,634,225
========= =========
Interest rate spread 3.23% 3.58%
Interest expense as a percent of average
earning assets 4.15% 3.98%
Net interest margin 4.02% 4.39%
<FN>
(1) Income and yields are reported on a taxable-equivalent basis assuming a federal tax rate of 34% in 1997 and 1998.
(2) Loans placed on a nonaccrual status are reflected in the balances.
(3) Annualized
</FN>
</TABLE>
<PAGE>
First National Corporation
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As of September 30, 1998 neither the Corporation nor the Bank was a
party to any legal proceedings.
Item 2. Not Applicable
Item 3. Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
third quarter of 1998.
Item 5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
2. Plan of acquisition, reorganization, arrangement, liquidation
or succession.
Not applicable
3. (I) Articles of Incorporation
(ii) Bylaws
There have been no amendments during the quarter.
4. Instruments defining the rights of security holders, including
indentures.
Not applicable
10. Material contracts
Not applicable
<PAGE>
First National Corporation
PART II. OTHER INFORMATION
11. Statement re computation of per share earnings.
Not applicable
15. Letter re unaudited interim financial information.
Not applicable
18. Letter re change in accounting principles.
Not applicable
19. Report furnished to security holders.
Not applicable
22. Published report regarding matters submitted to vote of security
holders.
Not applicable
23. Consent of experts and counsel.
Not applicable
24. Power of attorney
Not applicable
27. Financial Data Schedule
Filed electronically as a separate document.
99. Additional Exhibits
Not applicable
(b). Reports on form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
First National Corporation
(Registrant)
Date November 12 , 1998 /S/ Dana A. Froom
------------------ ----------------------
Dana A. Froom, Comptroller
(Principal Accounting Officer and
Duly Authorized Officer)
<PAGE>
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0
0
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