- --------------------------------------------------------------------------------
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, 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 October 31, 1999: 792,823
- --------------------------------------------------------------------------------
<PAGE>
FIRST NATIONAL CORPORATION
INDEX
Part 1. Financial Information
<TABLE>
<S> <C>
Item 1 Financial Statements Page No.
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
September 30, 1999 September 30, 1998
<S> <C>
Interest Income
Interest and Fees on Loans $ 3,095 $ 2,783
Interest on Federal Funds Sold 1 34
Interest on Deposits in Banks 8
Interest and Dividends on Investment Securities
Available for Sale
Taxable 711 719
Non Taxable 114 89
Held to Maturity
Taxable -- 3
Non Taxable -- --
------- -------
Total Interest Income 3,921 3,636
Interest Expense
Interest on Savings Deposits and Interest
Bearing Demand Deposits 833 789
Interest on Time Deposits of $100,000 or more 174 193
Interest on All Other Time Deposits 605 677
Interest on Federal Funds Purchased 30 3
Interest on Long-term Debt 374 255
------- -------
Total Interest Expense 2,016 1,917
------- -------
Net Interest Income 1,905 1,719
------- -------
Provision for Loan Losses 135 90
------- -------
Net Interest Income After Provisions
for Loan Losses 1,770 1,629
Other Operating Income
Service Charges 170 156
Profits on Securities Available for Sale 14 0
Other Operating Income 124 142
--- ---
Total Operating Income 308 298
Other Operating Expenses
Salaries and Employee Benefits 685 616
Occupancy Expense 81 70
Equipment Expense 139 127
Other 441 420
-------- --------
Total Operating Expenses 1,346 1,233
Income Before Income taxes 732 694
Income Taxes 225 214
------- --------
Net Income $ 507 $ 480
======= ========
Per Share Data
Earnings Per Common Share, basic $ 0.64 $ 0.61
======= ========
Earnings Per Common Share, diluted $ 0.64 $ 0.61
======= ========
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>
Nine Months Ended
September 30, 1999 September 30, 1998
<S> <C>
Interest Income
Interest and Fees on Loans $ 8,800 $ 8,053
Interest on Federal Funds Sold 59 67
Interest on Deposits in Banks 14 22
Interest and Dividends on Investment Securities
Available for Sale
Taxable 2,077 1,794
Non Taxable 310 269
Held to Maturity
Taxable 30
------- -------
Total Interest Income 11,260 10,235
Interest Expense
Interest on Savings Deposits and Interest
Bearing Demand Deposits 2,334 2,306
Interest on Time Deposits of $100,000 or more 501 521
Interest on All Other Time Deposits 1,905 1,794
Interest on Federal Funds Purchased 59 24
Interest on Long-term Debt 906 624
-------- -------
Total Interest Expense 5,705 5,269
-------- -------
Net Interest Income 5,555 4,966
Provision for Loan Losses 360 228
-------- -------
Net Interest Income After Provisions
for Loan Losses 5,195 4,738
Other Operating Income
Service Charges 475 457
Profits on Securities Available for Sale 14 136
Other Operating Income 335 438
-------- --------
Total Operating Income 824 1,031
Other Operating Expenses
Salaries and Employee Benefits 1,982 1,951
Occupancy Expense 236 205
Equipment Expense 377 372
Other 1,295 1,264
-------- -----
Total Operating Expenses 3,890 3,792
Income Before Income taxes 2,129 1,977
Income Taxes 660 615
-------- ---------
Net Income $ 1,469 $ 1,362
======== ========
Per Share Data
Earnings Per Common Share, basic $ 1.86 $ 1.73
========= ========
Earnings Per Common Share, diluted $ 1.86 $ 1.73
========= ========
Cash Dividends $ 0.780 $ 0.645
========= ========
</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>
September 30, 1999 December 31, 1998
<S> <C>
ASSETS
Cash and due from banks $ 4,884 $ 5,026
Federal Funds Sold 0 2,859
Investment Securities
Available for Sale 50,895 48,244
Held to Maturity -- 19
Loans Net of Unearned Discount 146,604 129,597
Less: Allowance for Loan Losses 1,350 1,226
--------- ---------
Net Loans 145,254 128,371
Bank Premises and Equipment 4,386 4,318
Interest Receivable 1,203 1,151
Other Real Estate 343 343
Other Assets 1,691 805
--------- ---------
Total Assets $208,656 $191,136
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand Deposits
Non-Interest Bearing $ 18,983 $ 19,555
Interest Bearing 18,579 16,865
Savings Deposits 63,922 58,126
Certificates of Deposit of $100,000 and over 13,614 11,263
All Other Time Deposits 47,624 49,199
--------- ----------
Total Deposits $162,722 $155,008
Federal Funds Purchased 5,078 0
Other Short-term borrowings 8,000 0
Long-term debt 14,646 17,710
Accrued Expenses 1,070 817
--------- ------
Total Liabilities $191,516 $173,535
-------- --------
Stockholders' Equity
Common Stock, Par Value $5 per Share;
Authorized 2,000,000 Shares, 792,823 and 788,903
Shares Issued and Outstanding $ 3,964 $ 3,945
Surplus 1,505 1,417
Accumulated Other Comprehensive Income (Loss) (1,074) 347
Undivided Profits 12,745 11,892
--------- ---------
Total Stockholders' Equity $ 17,140 $ 17,601
------- -------
Total Liabilities and Stockholders' Equity $208,656 $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>
NINE MONTHS ENDED
September 30, 1999 September 30, 1998
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,469 $ 1,362
Adjustments to reconcile net income to net
Cash provided by operating activities:
Depreciation and amortization 330 293
Provision for loan losses 360 228
Change in assets and liabilities
(Increase)decrease in interest receivables (52) 39
(Increase) in other assets (90) (488)
Increase in accrued expenses 253 557
-------- --------
Net Cash Provided by Operating Activities $ 2,270 $ 1,991
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of securities-available for sale $ 4,115 $ 6,383
Proceeds from maturities and principal payments
on securities-available for sale 5,065 13,022
Purchases of securities-available for sale (14,048) (32,676)
Proceeds from maturities and principal payments
on securities-held to maturity 19 1,528
Purchases of bank premises and equipment (398) (145)
Net (increase) in loans (17,243) (15,009)
Increase in federal funds sold 2,859 0
Proceeds on sale of other real estate 0 576
-------- --------
Net Cash (Used in) Investing Activities $ (19,631) ($26,321)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts,
and savings accounts 6,938 5,986
Net increase (decrease) in certificates of deposit 776 8,194
Net increase (decrease) in long-term borrowings (3,064) 11,265
Net increase (decrease) in short-term borrowings 8,000 0
Net proceeds from issuance of common stock 107 238
Cash dividends paid (616) (505)
Net increase in federal funds purchased 5,078 1,137
--------- --------
Net Cash Provided by Financing Activities $ 17,219 $ 26,315
--------- ---------
Increase (Decrease) in Cash and Cash Equivalents $ (142) $ 1,985
CASH AND CASH EQUIVALENTS:
Beginning 5,026 3,623
---------- --------
Ending $ 4,884 $ 5,608
========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 5,748 $ 973
======== ========
Income Taxes $ 635 $ 648
======== ========
</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)
Nine Months Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
Accumulated
Other
Common Capital Comprehensive Retained Comprehensive
Stock Surplus Income(Loss) Earnings Income Total
<S> <C>
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 loss on securities
Available for sale 226 226
Reclassification adjustment (90) (90)
--------
Other comprehensive income, net of tax 136 136
--------
Total comprehensive income 1,449
========
Issuance of authorized common stock
dividend reinvestment plan 7 30 37
exercise of incentive stock
options 42 159 201
Cash dividends declared (505) (505)
------- ------ ------ ------ -----
Balances, September 30, 1998 $ 3,937 $ 1,376 $ 471 $11,630 $17,414
====== ====== ====== ====== ======
Balances, December 31, 1998 3,945 $ 1,417 $ 347 $11,892 $17,601
Comprehensive income:
Net Income 1,469 1,469 1,469
Other comprehensive income,
net of tax:
Unrealized loss on securities
available for sale (1,412) (1,421)
Reclassification adjustment
for gains realized in net income (9) 0
-------
Total comprehensive income, net of tax (1,421) (1,421)
--------
Total comprehensive income 48
========
Issuance of authorized common stock
Dividend reinvestment plan 11 58 69
Exercise of incentive
stock options 8 30 38
Cash dividends declared (616) (616)
------ ------ ------ ------ ------
Balances, September 30, 1999 $ 3,964 $ 1,505 $(1,074) 12,745 $17,140
====== ====== ======== ====== =======
</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 nine month periods
ended September 30, 1999 and 1998, the company's financial position at September
30, 1999 and December 31, 1998, and the cash flows for the nine month periods
ended September 30, 1999 and 1998. These adjustments are of a normal recurring
nature.
Note 2. Securities as of September 30, 1999 and December 31, 1998 are
summarized below:
<TABLE>
<CAPTION>
(000 Omitted)
September 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 43,138 41,733 ($1,405) 39,966 40,140 $ 174
Obligation of State and
Political Subdivisions 7,956 7,702 ($254) 6,559 6,884 $ 325
Corporate Securities 0 32 $ 32 5 32 $ 27
Other Securities 1,428 1,428 $ 0 1,188 1,188 $ 0
-------- -------- -------- -------- -------- --------
Total Securities Available
for Sale $52,522 $50,895 ($1,627) $ 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)
September 30, 1999 December 31, 1998
<S> <C>
Real estate loans:
Construction and land development $ 9,304 $ 5,415
Secured by farm land 1,216 851
Secured by 1-4 family residential 57,282 47,965
Other real estate loans 21,184 21,381
Loans to farmers (except those secured by real estate) 447 585
Commercial and industrial loans
(except those secured by real estate) 24,596 25,632
Loans to individuals for personal expenditures 31,473 27,376
All other loans 1,138 513
-------- ----------
Total loans $146,640 $129,718
Less unearned income reflected in loans 36 121
-------- ----------
Loans, net of unearned income $146,604 $129,597
======== ==========
</TABLE>
The Bank had loans in a Nonaccrual category of $42,385 on December 31, 1998
and $39,195 on September 30, 1999.
Note 4. Allowance for Loan Losses
Analysis of the Allowance for Loan Losses
<TABLE>
<CAPTION>
For the Nine Months Ended
(000 Omitted)
September 30, 1999 September 30, 1998
<S> <C>
Balance at Beginning of Period $1,226 $1,112
Charge-Offs (295) (142)
Recoveries 59 11
-------- --------
Net Charge-Offs (236) (131)
Provision for Loan Losses 360 228
-------- ---------
Balance at End of Period $1,350 $1,209
======== ======
</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.
10
<PAGE>
FIRST NATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
- --------
Net income for the first three quarters of 1999 ended September 30 was
$1,469 thousand compared to $1,362 thousand in the first three quarters of 1998.
This represents an increase of 7.86% and is attributable to an increase in net
interest income during the first nine months of 1999. Total interest income,
increased $1,025 thousand during the period, while total interest expense
increased $436 thousand resulting in an increase in net interest income of $589
thousand. Management increased the provision to the allowance for loan losses by
$132 thousand as a result of growth in the loan portfolio. Total other
noninterest expenses increased $115 thousand, principally in the salary and
benefit area. Total non-interest income decreased $190 thousand during the
period as a result of less 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 NINE MONTHS OF 1998, THE YIELD ON THE LOAN PORTFOLIO
DECLINED FROM 8.85% IN 1998 TO 8.61% IN 1999. AT THE SAME TIME THE COST OF
INTEREST BEARING DEPOSITS DECREASED FROM 4.84% IN THE FIRST NINE MONTHS OF 1998
TO 4.46% IN THE SAME PERIOD OF 1999. WHILE THE YIELD ON EARNING ASSETS DECLINED
28 BASIS POINTS FROM 8.16% IN 1998 TO 7.88% IN 1999, THE COST OF INTEREST
BEARING LIABILITIES DECREASED 31 BASIS POINTS FROM 4.94% IN 1998 TO 4.63% IN
1999. THIS RESULTED IN AN INCREASE IN THE BANK'S INTEREST RATE SPREAD FROM 3.23%
IN 1998 TO 3.25% IN 1999. INTEREST EXPENSE AS A PERCENTAGE OF AVERAGE EARNING
ASSETS DECREASED FROM 4.15% IN 1998 TO 3.93% IN 1999. THE BANK'S NET INTEREST
MARGIN DECREASED FROM 4.02% IN 1998 TO 3.94% IN 1999.
Future Operations
- -----------------
The Bank has been working on several major initiatives that should increase
its ability to serve our customers and attract new ones. Perhaps the most
significant new service is Internet Banking and Bill Payer which will be
available in the first quarter of 2000. We have also joined with a consortium of
approximately 67 other Virginia Community banks to share in the ownership of the
Virginia Bankers Insurance Center, LLC. This will enable FIRST BANK to begin
offering a complete line of insurance products, next year. The Bank has
purchased two potential new site locations, one in Front Royal, Virginia and the
other on Jubal Early Drive in Winchester, Virginia. Both sites offer tremendous
opportunities in the future.
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.
11
<PAGE>
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.
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
12
<PAGE>
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.
FIRST NATIONAL CORPORATION
AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES
<TABLE>
<CAPTION>
Nine Months Ended September 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 bearing $ 212,211 13,606 8.55% $ 214,608 $ 21.613 13.39%
Securities:
Taxable 46,970,008 2,076,916 5.90% 39,352,783 1,823,891 6.16%
Tax-exempt (1) 8,157,979 469,358 7.67% 6,690,798 407,686 8.10%
----------- --------- ----- ---------- --------- -----
Total Securities 55,127,987 2,546,274 6.16% 46,043,581 2,231,577 6.45%
Loans (net of earned income): (2)
Taxable 136,302,478 8,794,194 8.60% 120,933,642 8,043,733 8.85%
Tax-exempt (1) 103,557 9,415 12.12% 159,789 14,285 11.89%
------------ --------- ------ ----------- --------- -----
Total Loans 136,406,035 8,803,609 8.61% 21,093,431 8,058,018 8.85%
Fed funds sold and repurchase
agreements 1,613,168 58,848 4.86% 1,704,968 66,902 5.22%
------------ --------- ----- ----------- --------- -----
Total earning assets 193,359,401 11,422,337 7.88% 169,056,588 10,378,110 8.16%
Less: allowance for Loan Losses (1,254,933) (1,158,937)
Total nonearning assets 10,941,326 9,691,853
------------ -----------
Total Assets $203,045,794 $177,589,504
============ ============
LIABILITIES AND SHAREHOLDER EQUITY
Interest bearing deposits:
Checking $ 10,546,731 $ 114,549 1.45% $ 9,517,233 $ 152,975 2.14%
Money market savings 6,789,478 152,626 3.00% 6,438,224 159,158 3.29%
Regular savings 63,519,961 2,066,684 4.34% 53,625,474 1,993,903 4.95%
Certificates of deposit:
Less than $100,000 48,356,781 1,902,573 5.25% 44,748,893 1,794,077 5.33%
$100,000 and more 12,452,098 500,638 5.36% 12,564,104 521,354 5.52%
----------- --------- ----- ------------ ---------- -----
Total interest bearing deposits 141,665,049 4,740,070 4.46% 126,893,928 4,621,467 4.84%
Fed funds purchased 1,406,930 58,677 5.56% 551,998 23,957 5.77%
Other borrowings 21,337,971 906,455 5.66% 14,548,426 623,766 5.70%
----------- --------- ----- ------------ ---------- -----
Total interest bearing liabilities 164,409,950 5,705,202 4.63% 141,994,352 5,269,190 4.94%
Noninterest bearing liabilities
Demand deposits 19,638,677 17,573,440
Other liabilities 1,463,434 1,523,413
------------- ------------
Total liabilities 185,512,061 161,091,205
Stockholders' equity 17,533,733 16,498,299
------------- ------------
Total liabilities and
stockholders' equity $203,045,794 $177,589,504
============ =============
Net Interest income 5,717,135 5,108,920
========= =========
Interest rate spread 3.25% 3.23%
Interest expense as a percent
of average earning assets 3.93% 4.15%
Net interest margin 3.94% 4.02%
</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 September 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 November 10, 1999
----------------- ---------------------------------
Stephen C. Pettit, Comptroller
(Principal Accounting Officer and
Duly Authorized Officer)
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