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 June 30, 1999
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 July 31, 1999: 791,070
<PAGE>
FIRST NATIONAL CORPORATION
INDEX
<TABLE>
<CAPTION>
Part 1. Financial Information
Item 1. Financial Statements Page No.
<S> <C>
Consolidated Statements of Income 3,4
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 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
Part II. Other Information
Item 1 Legal Proceedings 15
Item 4. Submission of Matters to a vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
Signature 17
</TABLE>
<PAGE>
FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars)
(Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended
June 30, 1999 June 30, 1998
(Unaudited)
<S> <C>
Interest Income
Interest and Fees on Loans $2,933 $ 2,703
Interest on Federal Funds Sold 10 29
Interest on Deposits in Banks 8 8
Interest and Dividends on Investment Securities
Available for Sale
Taxable 733 576
Non Taxable 106 91
Held to Maturity
Taxable -- 8
--------- ---------
Total Interest Income 3,790 3,415
Interest Expense
Interest on Savings Deposits and Interest
Bearing Demand Deposits 776 761
Interest on Time Deposits of $100,000 or more 171 166
Interest on All Other Time Deposits 643 562
Interest on Federal Funds Purchased 29 5
Interest on Long-term Debt 274 253
--------- ---------
Total Interest Expense 1,893 1,747
--------- ---------
Net Interest Income 1,897 1,668
--------- ---------
Provision for Loan Losses 102 69
--------- ---------
Net Interest Income After Provisions
for Loan Losses 1,795 1,599
Other Operating Income
Service Charges 154 159
Profits on Securities Available for Sale -- 124
Other Operating Income 83 172
--------- ---------
Total Operating Income 237 455
Other Operating Expenses
Salaries and Employee Benefits 664 673
Occupancy Expense 79 70
Equipment Expense 112 122
Other 430 443
--------- ---------
Total Operating Expenses 1,285 1,308
Income Before Income taxes 747 746
Income Taxes 234 239
--------- ---------
Net Income $513 $ 507
========= =========
Per Share Data
Earnings Per Common Share, basic $ 0.65 $ 0.65
========= =========
Earnings Per Common Share, diluted $ 0.65 $ 0.65
========= =========
Cash Dividends 0.260 0.215
========= =========
</TABLE>
The Accompanying Notes Are An Integral Part Of These Statements
3
<PAGE>
FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars)
(Except Per Share Amounts)
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999 June 30, 1998
(Unaudited)
<S> <C>
Interest Income
Interest and Fees on Loans $ 5,705 $ 5,270
Interest on Federal Funds Sold 58 33
Interest on Deposits in Banks 14 14
Interest and Dividends on Investment Securities
Available for Sale
Taxable 1,366 1,075
Non Taxable 196 180
Held to Maturity
Taxable 27
--------- ---------
Total Interest Income 7,339 6,599
Interest Expense
Interest on Savings Deposits and Interest
Bearing Demand Deposits 1,501 1,517
Interest on Time Deposits of $100,000 or more 327 328
Interest on All Other Time Deposits 1,300 1,117
Interest on Federal Funds Purchased 29 21
Interest on Long-term Debt 532 369
--------- --------
Total Interest Expense 3,689 3,352
--------- --------
Net Interest Income 3,650 3,247
Provision for Loan Losses 225 138
--------- --------
Net Interest Income After Provisions
for Loan Losses 3,425 3,109
Other Operating Income
Service Charges 305 301
Profits on Securities Available for Sale 136
Other Operating Income 211 296
--------- --------
Total Operating Income 516 733
Other Operating Expenses
Salaries and Employee Benefits 1,297 1,335
Occupancy Expense 155 135
Equipment Expense 238 245
Other 854 844
--------- --------
Total Operating Expenses 2,544 2,559
Income Before Income taxes 1,397 1,283
Income Taxes 435 401
--------- --------
Net Income $962 $882
========= ========
Per Share Data
Earnings Per Common Share, basic $ 1.22 $ 1.12
========= ========
Earnings Per Common Share, diluted $ 1.22 $ 1.12
========= ========
Cash Dividends 0.52 0.43
========= ========
</TABLE>
The Accompanying Notes Are An Integral Part Of These Statements
4
<PAGE>
FIRST NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
ASSETS (Unaudited)
<S> <C>
Cash and due from banks $4,772 $5,026
Federal Funds Sold 0 2,859
Investment Securities
Available for Sale 57,010 48,244
Held to Maturity -- 19
Loans Net of Unearned Discount 140,961 129,597
Less: Allowance for Loan Losses 1,252 1,226
--------- ---------
Net Loans 139,709 128,371
Bank Premises and Equipment 4,358 4,318
Interest Receivable 1,284 1,151
Other Real Estate 343 343
Other Assets 1,518 805
--------- ---------
Total Assets $208,994 $191,136
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand Deposits
Non-Interest Bearing $18,990 $19,555
Interest Bearing 16,803 16,865
Savings Deposits 66,282 58,126
Certificates of Deposit of $100,000 and over 12,896 11,263
All Other Time Deposits 46,705 49,199
--------- ---------
Total Deposits $161,676 $155,008
Federal Funds Purchased 2,458 0
Other Short-term borrowings 8,000 0
Long-term debt 18,668 17,710
Accrued Expenses 1,129 817
--------- ---------
Total Liabilities $191,931 $173,535
-------- ---------
Stockholders' Equity
Common Stock, Par Value $5 per Share;
Authorized 2,000,000 Shares, 791,070 and 788,903
Shares Issued and Outstanding $3,955 $3,945
Surplus 1,467 1,417
Accumulated Other Comprehensive Income (Loss) (803) 347
Retained Earnings 12,444 11,892
--------- ---------
Total Stockholders' Equity $ 17,063 $ 17,601
--------- ---------
Total Liabilities and Stockholders' Equity $ 208,994 $191,136
========= ========
</TABLE>
The Accompanying Notes Are An Integral Part of These Statements
5
<PAGE>
FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
June 30, 1999 June 30, 1998
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES (Unaudited)
Net Income $ 962 $ 882
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 213 251
Provision for loan losses 225 138
Change in assets and liabilities
(Increase) in interest receivables (133) (4)
(Increase) in other assets (121) (475)
Increase in accrued expenses 312 460
-------- -------
Net Cash Provided by Operating Activities $ 1,458 $ 1,252
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of securities-available for sale $ -- $ 6,383
Proceeds from maturities and principal payments on securities-available for sale 2,808 8,598
Purchases of securities-available for sale (13,316) (22,385)
Proceeds from maturities and principal payments on securities-held to maturity 19 1,342
Purchases of bank premises and equipment (253) (112)
Net (increase) in loans (11,563) (9,619)
Decrease (Increase) in federal funds sold 2,859 (4,743)
Proceeds on sale of other real estate 0 576
--------- ---------
Net Cash (Used in) Investing Activities $(19,446) ($19,960)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts,
and savings accounts 7,214 2,959
Net increase (decrease) in certificates of deposit (546) 7,567
Net increase in long-term borrowings 958 11,282
Net increase in short-term borrowings 8,000 0
Net proceeds from issuance of common stock 60 201
Cash dividends paid (410) (336)
Net increase (decrease) in federal funds purchased 2,458 (1,417)
---------- ---------
Net Cash Provided by Financing Activities $ 17,734 $ 20,256
---------- ---------
Increase (Decrease) in Cash and Cash Equivalents $ (254) $ 1,548
CASH AND CASH EQUIVALENTS:
Beginning 5,026 3,623
---------- ---------
Ending $ 4,772 $ 5,171
========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 3,697 $ 3,352
=========== =========
Income Taxes $ 351 $ 346
=========== =========
</TABLE>
The Accompanying Notes Are An Integral Part of These Statements
6
<PAGE>
FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS OF DOLLARS)
Six Months Ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Other
Common Capital Comprehensive Retained Comprehensive
Stock Surplus Income Earnings Income Total
<S> <C>
Balances, December 31, 1997 $3,888 $1,187 $335 $10,772 $16,182
Comprehensive income:
Net income 882 882 882
Other comprehensive income
net of tax:
Unrealized loss on securities
Available for sale (272) (272)
Reclassification adjustment 136 136
-------
Other comprehensive income, net of tax (136) (136)
-------
Total comprehensive income 746
=======
Issuance of authorized common stock
dividend reinvestment plan 4 15 19
exercise of incentive stock options 38 144 182
Cash dividends declared (335) (335)
------ ------- -------- ------- ------
Balances, June 30, 1998 $3,930 $1,346 $199 $11,319 $16,794
====== ====== ==== ======= =======
Balances, December 31, 1998 3,945 $1,417 $347 $11,892 $17,601
Comprehensive income:
Net Income 962 962 962
Other comprehensive income,
net of tax:
Unrealized loss on securities
available for sale (1,150) (1,150)
Reclassification adjustment
for gains realized in net income 0 0
-----
Total comprehensive income, net of tax (1,150) (1,150)
------
Total comprehensive income (188)
=======
Issuance of authorized common stock
Dividend reinvestment plan 8 39 47
Exercise of incentive stock options 2 11 13
Cash dividends declared (410) (410)
-------- ------- ---------- -------- ---------
Balances, June 30, 1999 $3,955 $1,467 $ (803) $ 12,444 $ 17,063
======== ======= ========== ======== =========
</TABLE>
The Accompanying Notes Are An Integral Part of These Statements
7
<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, 1998. In the opinion
of the company's management, the financial statements reflect all adjustments
necessary to present fairly the results of operations for the six month periods
ended June 30, 1999 and 1998 the company's financial position at June 30, 1999
and December 31, 1998, and the cash flows for the six month periods ended June
30, 1999 and 1998. These adjustments are of a normal recurring nature.
Note 2. Securities as of June 30, 1999 and December 31, 1998 are summarized
below:
<TABLE>
<CAPTION>
(000 Omitted)
June 30, 1999 December 31, 1998
------------- -----------------
Unrealized Unrealized
Cost Market Gain (Loss) Cost Market Gain (Loss)
---- ------ ----------- ---- ------ -----------
<S> <C>
Securities Available For Sale
U. S. Treasury Securities $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
U. S. Agency Securities 47,825 46,655 ($1,170) 39,966 40,140 $ 174
Obligation of State and Political
Subdivisions 8,769 8,688 $ (81) 6,559 6,884 $ 325
Corporate Securities 4 39 $ 35 5 32 $ 27
Other Securities 1,628 1,628 $ 0 1,188 1,188 $ 0
--------- --------- ------ --------- ---------- -----------
Total Securities Available for Sale $58,226 $57,010 ($1,216) $47,718 $48,244 $ 526
Securities Held to Maturity
U. S. Agency Securities 0 0 $0 19 19 $0
--------- --------- -------- --------- ----------- ----------
</TABLE>
8
<PAGE>
FIRST NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3. The consolidated loan portfolio, stated at face amount, is composed of
the following:
<TABLE>
<CAPTION>
(000 Omitted)
June 30, 1999 December 31, 1998
<S> <C>
Real estate loans:
Construction and land development $ 8,894 $ 5,415
Secured by farm land 823 851
Secured by 1-4 family residential 52,840 47,965
Other real estate loans 21,637 21,381
Loans to farmers (except those secured by real estate) 478 585
Commercial and industrial loans
(except those secured by real estate) 24,928 25,632
Loans to individuals for personal expenditures 29,011 27,376
All other loans 2,404 513
----------- ------------
Total loans $141,015 $129,718
Less unearned income reflected in loans 54 121
----------- ------------
Loans, net of unearned income $140,961 $129,597
=========== ============
</TABLE>
The Bank had loans in a Nonaccrual category of $42,385 on December 31, 1998
and $36,000 on June 30, 1999.
Note 4. Allowance for Loan Losses
Analysis of the Allowance for Loan Losses
<TABLE>
<CAPTION>
For the Six Months Ended
(000 Omitted)
June 30, 1999 June 30, 1998
<S> <C>
Balance at Beginning of Period $1,226 $1,112
Charge-Offs 249 102
Recoveries 50 9
-------- ---------
Net Charge-Offs 199 93
Provision for Loan Losses 225 138
-------- ---------
Balance at End of Period $1,252 $1,157
======== =========
</TABLE>
9
<PAGE>
FIRST NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5. New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
133, "Accounting for Derivative Instruments and Hedging Activities," which is
required to be adopted in years beginning after June 15, 1999. The Statement
permits early adoption as of the beginning of any fiscal quarter after its
issuance. The Corporation has not determined whether to adopt the new statement
early. The Statement will require the Corporation to recognize all derivatives
on the balance sheet at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. If the derivative is a hedge, depending
on the nature of the hedge, changes in the fair value of derivatives will either
be offset against the change in fair value of the hedged assets, liabilities, or
firm commitments through earnings or recognized in other comprehensive income
until the hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in earnings.
Because the Corporation does not use derivatives, management does not anticipate
that the adoption of the new Statement will have any effect on the Corporation's
earnings or financial position.
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 SOP is not expected to have
a material impact on the Company's financial statements.
<PAGE>
FIRST NATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
- --------
Net income for the first half of 1999 was $962 thousand compared to $882
thousand in the first half of 1998. This represents an increase of 9.07% which
is attributable to an increase in net interest income during the first half of
1999. Total interest income, increased $740 thousand during the period, while
total interest expense increased $337 thousand resulting in an increase in net
interest income of $403 thousand. Management increased the provision to the
allowance for loan losses by $87 thousand as a result of growth in the loan
portfolio. Total other noninterest expenses decreased $16 thousand, principally
in the salary and benefit area. Total non-interest income decreased $217
thousand during the period as a result of no security gains in 1999 and a
reclassification of some fee income.
Yields, Rates and Net Interest Margin
- -------------------------------------
INTEREST RATES ON LOANS HAVE REMAINED RELATIVELY STABLE DURING 1999 AND IN
COMPARISON WITH THE FIRST HALF OF 1998, THE YIELD ON THE LOAN PORTFOLIO DECLINED
FROM 8.88% IN 1998 TO 8.65% IN 1999. AT THE SAME TIME THE COST OF INTEREST
BEARING DEPOSITS DECREASED FROM 4.82% IN THE FIRST HALF OF 1998 TO 4.43% IN THE
SAME PERIOD OF 1999. WHILE THE YIELD ON EARNING ASSETS DECLINED 35 BASIS POINTS
FROM 8.21% IN 1998 TO 7.86% IN 1999, THE COST OF INTEREST BEARING LIABILITIES
DECREASED 32 BASIS POINTS FROM 4.90% IN 1998 TO 4.58% IN 1999 . THIS RESULTED IN
A DECREASE IN THE BANK'S INTEREST RATE SPREAD FROM 3.31% IN 1998 TO 3.28% IN
1999 . INTEREST EXPENSE AS A PERCENTAGE OF AVERAGE EARNING ASSETS DECREASED FROM
4.11% IN 1998 TO 3.90% IN 1999. THE BANK'S NET INTEREST MARGIN DECREASED FROM
4.10% IN 1998 TO 3.97% IN 1999.
Future Operations
- -----------------
During June of this year (1999), First Bank opened a second full service
branch in Woodstock, Virginia to enhance the banks position in this growing
market in the center of the Shenandoah Valley. A banking office was leased at
the north Woodstock Shopping Center. This is an attractive site and will soon
become home to the Shenandoah County Administrative Offices
Year 2000 Information
- ---------------------
In 1997, First Bank, a subsidiary of First National Corporation,
initiated a review and assessment of all hardware and software to confirm that
it would function properly in the Year 2000. A Year 2000 project team was formed
utilizing representatives from all areas of the Bank. Based on this assessment,
the Bank's mainframe hardware and banking software were upgraded and tested.
According to the test results, and accompanied by a letter of certification from
the Bank's software provider, our core processing system has been termed Year
2000 compliant. The Bank has replaced or modified certain pieces of hardware
and/or software so that the systems will properly function in the year 2000.
Systems for which the Bank relies on third party vendors, these vendors have
been contacted and have indicated that the hardware and/or software will be Year
2000 compliant.
11
<PAGE>
The Bank has also contacted all significant loan and deposit customers to
determine the extent to which the Bank is vulnerable to those third parties'
failure to remedy their own Year 2000 issue. The Bank believes that exposure
from customers who may not be Year 2000 compliant is minimal.
The Bank completed all five phases of it's Year 2000 project plan by June 30,
1999 and is currently considered "Year 2000 Ready". To date, the Bank has
expensed $210,199 on the assessment and replacement of issues related to the
Year 2000. Remaining expenditures, if any, are not expected to have a material
effect on the Bank's consolidated financial statements.
The Bank continues to assess its risk from other environmental factors over
which it has little direct control, such as electrical power supply, and voice
and data transmission. Based on its current assessments and remediation plans,
which are based in part on certain representations of third-party servers, the
Bank does not expect that it will experience a significant disruption of its
operations as a result of the change to the new millennium. Although the Bank
has no reason to conclude that a failure will occur, the most reasonably likely
worst case Year 2000 scenario would entail a disruption or failure of the Bank's
power suppliers' or voice and data transmission suppliers' capability to provide
data transmission services to the Main Office, where the main computer and
switchboard are located, or one of our Branch locations. If such a failure were
to occur, the Bank would implement a contingency plan. While it is impossible to
quantify the impact of such a scenario, the most reasonably likely worst-case
scenario would entail diminishment of service levels, some customer
inconvenience, and additional, as yet understood, cost associated with the
implementation of the contingency plan.
For the systems and facilities that it has determined to be most critical, the
Bank completed development of business contingency plans in March, 1999. These
plans were adopted by the Board of Directors of First Bank on April 21, 1999,
with testing of the plan an ongoing priority for the rest of 1999. These plans
will conform to recently issued guidelines from the FFIEC on business
contingency planning for Year 2000 readiness. Contingency plans will include,
among other actions, manual workarounds and identification of resource
requirements and alternative solutions for resuming critical business processes
in the event of a year 2000 related failure. While the Bank will have
contingency plans in place to address a temporary disruption in these services,
there can be no assurance that any disruption or failure will be only temporary,
that the Bank's contingency plans will function as anticipated, or that the
results of operations, financial condition, or liquidity of the Bank will not be
adversely affected in the event of a prolonged disruption or failure.
Additionally, there can be no assurance that the FFIEC or other federal
regulators will not issue new regulatory requirements that require additional
work by the Bank and, if issued, the new regulatory requirements will not
increase the cost or delay the completion of the Bank's Year 2000 project. The
costs of the project and the date on which the Bank's plans to complete the Year
2000 modifications are based on management's best estimates, which were derived
utilizing numerous assumptions of future events including the continued
availability of certain resources, third party modification plans and other
factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those plans. Specific
factors that might cause such material differences include, but are not limited
to, the availability of personnel trained in this area, the ability of third
party vendors to correct their software and hardware, the ability of significant
customers to remedy their Year 2000 issues, and similar uncertainties.
12
<PAGE>
FIRST NATIONAL CORPORATION
AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1999 1998
Annual Annual
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate(3) Balance Expense Rate(3)
------- ------- ------- ------- ------- -------
<S> <C>
ASSETS
Balances at correspondent banks - interest bearin $228,875 $13,606 11.89% $250,953 $ 14.389 11.47%
Securities:
Taxable 46,912,657 1,366,295 5.82% 35,899,705 1,101,374 6.14%
Tax-exempt (1) 7,773,406 297,186 7.65% 6,672,513 273,406 8.19%
----------- ------- ----- ----------- ------- -----
Total Securities 54,686,063 1,663,481 6.08% 42,572,218 1,374,780 6.46%
Loans (net of earned income): (2)
Taxable 131,867,032 5,701,009 8.65% 118,533,786 5,263,129 8.88%
Tax-exempt (1) 108,915 6,565 12.06% 170,025 10,056 11.83%
----------- -------- -------- ----------- --------- ------
Total Loans 131,975,947 5,707,574 8.65% 118,703,811 5,273,185 8.88%
Fed funds sold and repurchase
agreements 2,383,282 57,696 4.84% 1,485,104 33,290 4.48%
----------- -------- -------- ----------- --------- ------
Total earning assets 189,274,167 7,442,358 7.86% 163,012,086 6,695,644 8.21%
Less: allowance for Loan Losses (1,166,522) (1,147,180)
Total nonearning assets 11,096,330 10,025,499
----------- -----------
Total Assets $199,203,975 $171,890,405
=========== ===========
LIABILITIES AND SHAREHOLDER EQUITY
Interest bearing deposits:
Checking $10,614,790 $82,462 1.55% $9,440,025 $101,537 2.15%
Money market savings 6,747,374 102,078 3.03% 6,368,754 105,331 3.31%
Regular savings 62,442,046 1,319,100 4.23% 52,897,577 1,310,015 4.95%
Certificates of deposit:
Less than $100,000 49,094,102 1,297,277 5.28% 42,311,144 1,116,787 5.28%
$100,000 and more 12,194,385 327,340 5.37% 11,976,882 328,151 5.48%
---------- ------- ------ ----------- ---------- ------
Total interest bearing deposits 141,092,697 3,128,257 4.43% 122,994,381 2,961,821 4.82%
Fed funds purchased 1,137,796 28,887 5.08% 725,041 21,376 5.90%
Other borrowings 18,787,191 532,316 5.67% 12,953,804 368,536 5.69%
---------- ------- ------ ----------- ---------- ------
Total interest bearing liabilities 161,017,684 3,689,460 4.58% 136,673,225 3,351,733 4.90%
Noninterest bearing liabilities
Demand deposits 19,044,116 17,140,021
Other liabilities 1,484,835 1,492,534
------------- -----------
Total liabilities 181,546,635 155,305,780
Stockholders' equity 17,657,340 16,584,625
------------- -----------
Total liabilities and stockholders' equity $199,203,975 $171,890,405
============ ============
Net Interest income 3,752,898 3,343,911
======== =========
Interest rate spread 3.28% 3.31%
Interest expense as a percent of average
earning assets 3.90% 4.11%
Net interest margin 3.97% 4.10%
</TABLE>
(1) Income and yields are reported on a taxable-equivalent basis assuming a
federal tax rate of 34% in 1998 and 1999.
(2) Loans placed on a nonaccrual status are reflected in the balances.
(3) Annualized
14
<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 June 30, 1999 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
First National Corporation's annual meeting of shareholders was held on
Tuesday, April 6, 1999 in Warren County, Virginia. Information relating to the
solicitation of proxies required by this item is incorporated by reference from
the Corporation's proxy statement dated February 19, 1999 for the Corporation's
Annual Meeting of Shareholders held April 6, 1999, filed with the Commission on
March 16, 1999.
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
15
<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
16
<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 August 10, 1999
--------------------------- ------------------------------
Stephen C. Pettit, Comptroller
(Principal Accounting Officer and
Duly Authorized Officer)
17
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