FIRST NATIONAL CORP /SC/, PRE 14A, 1996-03-12

FIRST NATIONAL CORP /SC/
PRE 14A, 1996-03-12
STATE COMMERCIAL BANKS

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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Sec. 14(a) of the Securities Exchange Act of 1934.
(Amendment No. )

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12

FIRST NATIONAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)and 0-11.

Title of each class of securities to which transaction applies:

-----------------------------------------------------------------

2) Aggregate number of securities to which transaction applies:

-----------------------------------------------------------------

3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:

-----------------------------------------------------------------

4) Proposed maximum aggregate value of transaction:-----------------

5) Total fee paid:--------------------------------------------------

[ ] Fee paid previously with preliminary materials

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

1) Amount Previously Paid:-----------------------------------------

2) Form, Schedule or Registration Statement No.:-------------------

3) Filing Party:---------------------------------------------------

4) Date Filed:-----------------------------------------------------

<PAGE>

FIRST NATIONAL CORPORATION
345 John C. Calhoun Drive, S.E.
Orangeburg, South Carolina 29115

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held April 23, 1996

TO THE SHAREHOLDERS:

Notice is hereby given that the Annual Meeting of the Shareholders (the
"Annual Meeting") of First National Corporation, a South Carolina corporation
(the "Company"), will be held at the Main Banking Center of First National Bank,
345 John C. Calhoun Drive, S.E., Orangeburg, South Carolina at 2:00 p.m., on
April 23, 1996, for the following purposes:

(1) To elect five directors of the Company to serve three-year terms;

(2) To adopt amendments to the Company's Articles of Incorporation;

(3) To approve the First National Corporation 1996 Incentive Stock
Option Plan;

(4) To ratify the appointment of J.W. Hunt & Company, LLP, as
independent auditors for the Company for the fiscal year ending
December 31, 1996; and

(5) To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.

Only record holders of Common Stock of the Company at the close of
business on March 8, 1996, are entitled to notice of and to vote at the Annual
Meeting or any adjournment thereof.

The Company's Proxy, Proxy Statement (providing important shareholder
information for the Annual Meeting), and its 1995 Annual Report to Shareholders
are enclosed with this Notice.

You are cordially invited and urged to attend the Annual Meeting in
person. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE
ENCLOSED, SELF- ADDRESSED, STAMPED ENVELOPE. IF YOU NEED ASSISTANCE IN
COMPLETING YOUR PROXY, PLEASE CALL THE COMPANY AT TELEPHONE NUMBER (803)
534-2175. IF YOU ATTEND THE ANNUAL MEETING AND DESIRE TO REVOKE YOUR PROXY AND
VOTE IN PERSON YOU MAY DO SO. IN ANY EVENT, A PROXY MAY BE REVOKED AT ANY TIME
BEFORE IT IS EXERCISED.

THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL
OF ALL THE PROPOSALS PRESENTED.

By Order of the Board of Directors

James C. Hunter, Jr.
Secretary
Orangeburg, South Carolina
April 2, 1996

<PAGE>

FIRST NATIONAL CORPORATION
345 John C. Calhoun Drive, S.E.
Orangeburg, South Carolina 29115

PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
to be Held April 23, 1996

-------------------------------------------------

This Proxy Statement is furnished to shareholders of First National
Corporation, a South Carolina corporation (herein, unless the context otherwise
requires, together with its subsidiaries, the "Company"), in connection with the
solicitation of proxies by the Company's Board of Directors for use at the
Annual Meeting of Shareholders to be held at the Main Banking Center of First
National Bank, 345 John C. Calhoun Drive, S.E., Orangeburg, South Carolina at
2:00 p.m., on April 23, 1996 or any adjournment thereof (the "Annual Meeting"),
for the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders.

Solicitation of proxies may be made in person or by mail, telephone or
telegraph by directors, officers and regular employees of the Company. The
Company may also request banking institutions, brokerage firms, custodians,
nominees and fiduciaries to forward solicitation materials to the beneficial
owners of Common Stock of the Company held of record by such persons, and the
Company will reimburse the reasonable forwarding expenses. The cost of
solicitation of proxies will be paid by the Company. This Proxy Statement was
first mailed to shareholders on or about April 2, 1996.

The Company has its principal executive offices at 345 John C. Calhoun
Drive, S.E., Orangeburg, South Carolina 29115. The Company's telephone number is
(803) 534-2175.

ANNUAL REPORT

The Annual Report to Shareholders covering the Company's fiscal year ended
December 31, 1995, including financial statements, is enclosed herewith. Such
Annual Report to Shareholders does not form any part of the material for the
solicitation of proxies.

REVOCATION OF PROXY

Any shareholder returning the accompanying proxy may revoke such proxy at
any time prior to its exercise (a) by giving written notice to the Company of
such revocation, (b) by voting in person at the meeting, or (c) by executing and
delivering to the Company a later dated proxy. Attendance at the Annual Meeting
will not in itself constitute revocation of a proxy. Any written notice or proxy
revoking a proxy should be sent to First National Corporation, 345 John C.
Calhoun Drive, S.E., Orangeburg, South Carolina 29115, Attention: W. Louis
Griffith. Written notice of revocation or delivery of a later dated proxy will
be effective upon receipt thereof by the Company.

QUORUM AND VOTING

The Company's only voting security is its $5.00 par value Common Stock
("Common Stock"), each share of which entitles the holder thereof to one vote on
each matter to come before the Annual Meeting. At the close of business on March
8, 1996 (the "Record Date"), the Company had issued and outstanding 2,247,636
shares of Common Stock, which were held of record by approximately 1,718
persons. Only shareholders of record at the close of business on the Record Date
are entitled to notice of and to vote on matters that come before the Annual
Meeting. Notwithstanding the Record Date specified above, the Company's stock
transfer books will not be closed and shares of the Common Stock may be
transferred subsequent to the Record Date. However, all votes must be cast in
the names of holders of record on the Record Date.

The presence in person or by proxy of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum at the Annual Meeting. If a share is
represented for any purpose at the Annual Meeting by the presence of the
registered owner or a person holding a valid proxy for the registered owner, it
is deemed to be present for the purposes of establishing a quorum. Therefore,

<PAGE>

valid proxies which are marked "Abstain" or "Withhold" or as to which no vote is
marked, including proxies submitted by brokers that are the record owners of
shares (so-called "broker non-votes"), will be included in determining the
number of votes present or represented at the Annual Meeting. If a quorum is not
present or represented at the meeting, the shareholders entitled to vote,
present in person or represented by proxy, have the power to adjourn the meeting
from time to time until a quorum is present or represented. If any such
adjournment is for a period of less than 30 days, no notice other than an
announcement at the meeting, will be given of the adjournment. If the
adjournment is for 30 days or more, notice of the adjourned meeting will be
given in accordance with the Bylaws. Directors, officers and regular employees
of the Company may solicit proxies for the reconvened meeting in person or by
mail, telephone or telegraph. At any such reconvened meeting at which a quorum
is present or represented, any business may be transacted that might have been
transacted at the meeting as originally noticed.

Adoption of the proposed amendments to the Company's Articles of
Incorporation requires the affirmative vote of two-thirds of the outstanding
shares of Common Stock. Votes that are withheld or shares that are not voted on
the amendments will have the effect of votes against the amendments.

Provided a quorum is present at the meeting, directors will be elected by
a majority of the votes cast at the Annual Meeting. Votes that are withheld or
shares that are not voted in the election of directors will have no effect on
the outcome of election of directors. Cumulative voting will not be permitted.

Approval of the proposal to adopt the 1996 Incentive Stock Option Plan
requires the affirmative vote of a majority of the total shares present and
entitled to vote at the annual meeting. Shares that are present and entitled to
vote at the meeting and that are withheld from voting, or shares that are
present and entitled to vote at the meeting and that are not voted on adoption
of the plan will have the effect of votes against the plan.

All other matters which may be considered and acted upon at the Annual
Meeting, including ratification of J. W. Hunt & Company, LLP as independent
auditors, require that the number of shares of Common Stock voted in favor of
the matter exceed the number of shares of Common Stock voted against the matter,
provided a quorum is present. Votes that are withheld or shares that are not
voted will have no effect on the outcome of such matters.

ACTIONS TO BE TAKEN BY THE PROXIES

Each proxy, unless the shareholder otherwise specifies therein, will be
voted "FOR" the election of the persons named in this Proxy Statement as the
Board of Directors' nominees for election to the Board of Directors; "FOR"
adoption of the 1996 Incentive Stock Option Plan; "FOR" adoption of the proposed
amendments to the Company's Articles of Incorporation; and "FOR" the
ratification of the appointment of J. W. Hunt & Company, LLP as accountants for
the fiscal year ending December 31, 1996. In each case where the shareholder has
appropriately specified how the proxy is to be voted, it will be voted in
accordance with his specifications. As to any other matter of business which may
be brought before the Annual Meeting, a vote may be cast pursuant to the
accompanying proxy in accordance with the best judgment of the persons voting
the same, but the Board of Directors does not know of any such other business.

STOCKHOLDER PROPOSALS

Any shareholder of the Company desiring to present a proposal for action
at the 1997 Annual Meeting of Shareholders must deliver the proposal to the
executive offices of the Company no later than December 5, 1996. Only proper
proposals that are timely received will be included in the Company's Proxy
Statement and Proxy.

PRINCIPAL SHAREHOLDERS

The following table sets forth, as of March 8, 1996, the number and
percentage of outstanding shares beneficially owned by (i) each director and
nominee for director of the Company, (ii) each person named in the Summary
Compensation Table, and (iii) all executive officers and directors of the
Company as a group. No person is known by the Company to own more than 5% of the
outstanding Common Stock.

Name, (and Address Year First Number of Shares % of Common Stock
of 5% Shareholder) Elected Director Beneficially Owned Ownership
- ------------------ ---------------- ------------------ ----------------
<S> <C> <C> <C>
E. Everett Gasque, Jr. 1993 17,438(1) *
John L. Gramling, Jr. Bank-1974 3,020(2) *
Company-1985
Robert R. Horger 1991 5,576 *
Harry M. Mims, Jr. 1988 10,965 *
Dick G. McTeer 1994 315 *
James W. Roquemore 1994 3,214(3) *
Johnny E. Ward 1991 11,265(4) *
M. Maceo Nance, Jr. 1995 1,514(5) *
Charles W. Clark 1993 23,308 1.04
Clarence F. Evans** Bank-1978 4,753 *
Company-1985
C. John Hipp, III 1994 23,554(6) 1.05
Robert H. Jennings, III Bank-1963 37,476(7) 1.70
Company-1985
Edward V. Mirmow, Jr. Bank-1983 35,751 1.60
Company-1985
Larry D. Westbury 1986 9,237(8) *
William B. Cox Bank-1979 106,764(9) 4.75
Company-1985
C. Parker Dempsey Bank-1983 3,716 *
Company-1985
J. Carlisle McAlhany Bank-1969 37,308 1.70
Company-1985
Anne H. Oswald 1991 298(10) *
James E. Sulton, Sr.** 1993 393 *
A. Dewall Waters 1987 5,747(11) *
All directors and 349,215(12) 15.50
Executive Officers as a
Group (22 persons)

</TABLE>
- -----------------------------
*Less than 1% of outstanding FNC Common Stock.
**The terms of Messrs. Evans and Sulton expire at the Annual Meeting pursuant to
the Bylaws, which provide for expiration of the term of any director at the next
annual meeting after he reaches the age of 72.

(1) Includes 1,185 shares owned by spouse.
(2) Includes 595 shares owned by spouse.
(3) Includes 392 shares in an IRA; 1,134 shares owned by spouse in an IRA; and
600 shares held by Mr. Roquemore as custodian for his three children.
(4) Includes 7,958 shares held in an IRA.
(5) Includes 1,076 shares held in joint tenancy account with spouse.
(6) Includes 377 shares in an IRA; 155 shares owned by spouse in an IRA;
14,450 shares owned by a general partnership in which Mr. Hipp owns a 1/7
interest, of which Mr. Hipp disclaims beneficial ownership of all but
2,064 shares; 1,512 shares subject to currently exercisable options; and
5,185 shares of restricted stock which Mr. Hipp presently has the right to
vote.
(7) Includes 12,822 shares owned by spouse.
(8) Includes 1,358 shares held in an IRA account; and 6,098 shares subject to
currently exercisable options. (9) Includes 49,660 shares owned by spouse, as to
which Mr. Cox disclaims beneficial ownership.
(10) Includes 12 shares held in joint tenancy account with spouse.
(11) Includes 1,484 shares held in an IRA.
(12) Includes 12,849 shares subject to currently exercisable options.

<PAGE>

ELECTION OF DIRECTORS

The Articles of Incorporation provide for a maximum of 20 directors, to be
divided into three classes each serving three-year terms. Five directors will be
elected at the Annual Meeting to serve for three-year terms or until their
successors are elected and qualified to serve. The Company's bylaws provide that
no person is eligible to be a nominee for election as a director of the Company
unless the person shall have been nominated by a record shareholder of the
Company in writing delivered to the secretary of the Company not less than 45
days prior to the meeting at which directors are to be elected. The Board of
Directors' nominees, William B. Cox, C. Parker Dempsey, J. Carlisle McAlhany,
Anne H. Oswald, and A. Dewall Waters, are presently directors of the Company and
have served continuously since first becoming directors. No other persons have
been nominated.

The terms of James E. Sulton, Sr. and Clarence F. Evans will expire at the
Annual Meeting pursuant to the Bylaws, which provide for expiration of the term
of any director at the next annual meeting after he reaches the age of 72. The
Board of Directors has chosen not to present for election at the Annual Meeting
nominees to fill these two vacancies. Therefore, by operation of state law,
Messrs. Evans and Sulton will continue to serve as directors until their
successors are elected. The Board expects to elect successors for Messrs. Evans
and Sulton subsequent to the Annual Meeting pursuant to powers granted to the
Board of Directors under the Bylaws. The persons who will be elected by the
Board of Directors have not yet been designated. Such persons are then expected
to be nominated for election by shareholders at the 1997 annual meeting of
shareholders. At the 1996 Annual Meeting, the proxies cannot be voted for a
greater number of nominees than the number set forth below.

The table below sets forth the name, address, expiration of term as a
director and business experience for the past five years for each of the
directors of the Company.

Position in FNC and
Name, Age and Address First National Bank Business Experience for the Past Five Years

Director Nominees For Terms Expiring in 1999

<S> <C> <C>
William B. Cox Director Chairman of the Board, Cox Wood Preserving Co., Inc.
Orangeburg, SC (70) - Wood preserving and processing.

C. Parker Dempsey Director Secretary, Dempsey Wood Products, Inc., (since 1990) -
Orangeburg, SC (67) Lumber Manufacturer; Executive Vice President, Stone
Forest Industries
(prior to 1990) - Forestry services.

J. Carlisle McAlhany Director Retired Merchant.
Reevesville, SC (80)

Anne H. Oswald Director Partner, Oswald and White Realty - Real estate
Walterboro, SC (48) brokerage agency.

A. Dewall Waters Director Partner, Main Waters Enterprises Partnership -
Orangeburg, SC (51) Owner/Operator, McDonald's Restaurants.

Current Directors Whose Terms Expire in 1998

<S> <C> <C>
E. Everett Gasque, Jr. Director President, E. E. Gasque & Son, Inc. - Farming Supplies
Elloree, SC (65) and Products.

John L. Gramling, Jr. Director Farmer.
Orangeburg, SC (64)

Robert R. Horger Vice Chairman Vice Chairman of the Board, First National Bank and
Orangeburg, SC (45) of the Board First National Corporation since 1994;Attorney-Horger,
Barnwell and Reid.

Harry M. Mims, Jr. Director President, J. F. Cleckley & Company - Road
Orangeburg, SC (54) construction and paving contractor.

<PAGE>

Dick G. McTeer Director Retired Motel Owner/Operator.
Bluffton, SC (69)

James W. Roquemore Director Executive Vice President, Patten Seed Company, Inc.,
Orangeburg, SC (40) Lakeland, Georgia; General Manager of Super-
Sod/Carolina - Production and marketing of turf,
grass, sod and seed. Owner and operator of golf
courses in Georgia.

Johnny E. Ward Director President, W & W Truck & Tractor Company, Inc. -
Moncks Corner, SC (54) Logging and farming equipment, sales and service.

Current Directors Whose Terms Expire in 1997

<S> <C> <C>
M. Maceo Nance, Jr. Director Retired President, South Carolina State University.
Orangeburg, SC (70)

Charles W. Clark Director President, Santee Shores, Inc. - Real Estate
Santee, SC (46) Development and Management.

C. John Hipp, III President and Chief 1994 - present, President and Chief Executive
Orangeburg, SC (44) Executive Officer Officer, First National Bank and First National
Corporation; 1991 to 1994, President, Rock Hill
National Bank and Rock Hill National Bank
Corporation; 1990 to 1991, Executive Vice President,
Rock Hill National Bank.

Robert H. Jennings, III Director Retired in 1994 as Chairman of the Board, First
Orangeburg, SC (71) National Corporation and First National Bank;
Retired President, Palmetto Baking Company - Bakery
products.

Edward V. Mirmow, Jr. Director Retired Attorney (since 1991).
Orangeburg, SC (65)

Larry D. Westbury Chairman of Chairman of the Board, First National Bank and First
Orangeburg, SC (63) the Board National Corporation since 1994; Retired in 1994 as
President and Chief Executive Officer First National
Corporation and First National Bank.

</TABLE>

Meetings of the Board of Directors and Committees.

The Boards of Directors of the Company and First National Bank are
comprised of the same persons.

During 1995, the Board of Directors of the Company held 8 regular
meetings, while the Board of Directors of First National Bank held 13 regular
meetings. Each director attended at least 75% of the aggregate of (a) the total
number of meetings of the Board of Directors of each of the Company and First
National Bank held during the period for which he or she served as a director,
and (b) the total number of meetings held by all committees of the Board of
Directors of each of the Company and First National Bank on which he or she
served.

During 1995, First National Bank Directors each received an annual
retainer of $3,000, payable at the rate of $250 per month. In addition, members
of the Executive Committee of First National Bank also received an annual
retainer of $5,200, paid at the rate of $100 per week. Members of the Audit
Committee of First National Bank were paid $50 per committee meeting attended.
Directors who are also officers of First National Bank do not receive any such
fees. No directors' fees were paid by the Company in 1995.

The Company's only standing committee is the Executive Committee, which is
composed of Larry D. Westbury, Chairman, William B. Cox, Clarence F. Evans,
Robert R. Horger, Robert H. Jennings, III, J. Carlisle McAlhaney, Harry M. Mims,
Jr. and C. John Hipp, III. The Board of Directors of the Company may, by
resolution adopted by a majority of its members, delegate to the Executive
Committee the power, with certain exceptions, to exercise the authority of the
Board of Directors in the management of the affairs of the Company. The
Executive Committee also acts as nominating committee for the purpose of
recommending to the Board of Directors nominees

<PAGE>

for election to the Board of Directors. The Executive Committee will consider
nominees recommended by record shareholders upon compliance with the following
procedure: The nomination must be in writing and must be delivered to the
Secretary of the Company not less than 45 days prior to the meeting of
shareholders at which directors are to be elected. The written nomination must
state the name, address and number of shares owned by the nominee, and the name
and address of the shareholder making the nomination. The Executive Committee of
the Company was established by amendment to the Company's Bylaws adopted by the
Board of Directors in February, 1996. Accordingly, the committee held no
meetings in 1995.

First National Bank's Board of Directors maintains Audit, Compensation,
Executive and Policy Committees. The functions, composition and frequency of
meetings for these bank Committees during 1995 were as follows:

Audit Committee - The Audit Committee was composed of Edward V. Mirmow,
Jr., Chairman, E. Everett Gasque, Jr., and Johnny E. Ward. The Audit Committee
held 10 meetings in 1995. The Audit Committee recommends to the Board of
Directors the appointment of the Company's independent auditors, reviews with
the independent auditors the recommendations and results of the audit
engagement, maintains direct reporting responsibility and regular communication
with the internal audit staff of the Company and First National Bank, reviews
the scope and the results of the audits of the Company's internal audit
department and other matters pertaining to the Company's accounting and
financial reporting functions, approves the services to be performed by the
independent auditors, considers the range of audit and non-audit fees, and
reviews the adequacy of the Company's and First National Bank's systems of
internal accounting controls.

Executive Committee - The Executive Committee was composed of Larry D.
Westbury, Chairman, William B. Cox, Clarence F. Evans, Robert R. Horger, Robert
H. Jennings, III, J. Carlisle McAlhany, Harry M. Mims, Jr. and C. John Hipp,
III. The Executive Committee, with certain exceptions, has the authority to act
on behalf of the Board of Directors of First National Bank in the management of
the business affairs of First National Bank. The Executive Committee has the
responsibility for planning and recommending to the Board of Directors the
succession of executive management of First National Bank. The Executive
Committee met 50 times in 1995.

Compensation Committee - The Compensation Committee is composed of William
B. Cox, Chairman, C. Parker Dempsey, A. Dewall Waters, Larry D. Westbury and C.
John Hipp, III. The Compensation Committee met 3 times in 1995. The Compensation
Committee evaluates the performance of the executive officers of the Company and
recommends to the Board of Directors, through the Executive Committee, matters
concerning compensation, salaries, and other forms of executive compensation to
officers of First National Bank.

Policy Committee - The Policy Committee is composed of Robert R. Horger,
Chairman, William B. Cox, Clarence F. Evans, C. John Hipp, III, Robert H.
Jennings, III, J. Carlisle McAlhany, Harry M. Mims, and Larry D. Westbury. The
primary purpose of the Policy Committee is to recommend new policies and review
present policies of First National Bank. The Policy Committee met 8 times in
1995.

<PAGE>

EXECUTIVE COMPENSATION

The following table summarizes for the years indicated current and
long-term compensation and stock related compensation for C. John Hipp, III, the
only executive officer of the Company and its subsidiary, First National Bank,
whose total salary and bonus for the year ended December 31, 1995 exceeded
$100,000.

================================================================================
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
----------------------------------------------------------------------------------------
Annual Long Term
Compensation Compensation
Awards
-----------------------------------
- --------------------------------------------- -------------------------------
Executive Officer Year Salary(1) Bonus(2) Number of Securities All Other
and Principal Underlying Options(3) Compensation(4)
Position
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
C. John Hipp, III, 1995 $146,018 $6,000 6,050 $1,815
President and Chief 1994(5) 97,794 6,000 5,500 -0-
Executive Officer 1993(6) N/A N/A N/A N/A
</TABLE>

- --------------------------------------------------------------------------------
(1) Perquisites and personal benefits did not exceed the lesser of $50,000 or
10% of total salary plus bonus.

(2) Figures shown represent actual cash bonuses paid during the year
indicated. First National Bank maintains an incentive compensation plan
known as the Employee Incentive Compensation Plan ("Plan"). Amounts
payable under the Plan are based on First National Corporation's
performance in terms of its Return on Equity (ROE) for any calendar year.
The First National Bank Executive Committee sets performance goals for
First National Corporation at the beginning of any calendar year. The
Board of Directors of the Company, however, has the discretion to change
during any year the performance goals, payment amounts and other
requirements of the Plan. The Plan creates an "incentive pool" determined
by multiplying a certain percentage of First National Bank income over a
stated percentage ROE for the calendar year in question. Amounts paid into
the incentive pool are distributed to participating employees based on the
individual employee's merit and salary level.

(3) Figures shown represent the number of shares of Company stock subject to
options awarded to the named executive officer during the years indicated.

(4) Includes $1,450 contributed by First National Bank through matching or
discretionary contributions to its Employee Savings Plan and allocated to
the named executive officer's accounts, and $365 of term life insurance
premiums paid by First National Bank for the benefit of the named
executive officer. The Employee Savings Plan is a "tax qualified" plan
under Section 401(a) of the Internal Revenue Code and covers all First
National Bank employees.

(5) Mr. Hipp's employment commenced in April, 1994. Accordingly, his
compensation for 1994 covered only nine months.

(6) Mr. Hipp was not employed by the Company or any of its subsidiaries in
1993.

================================================================================

Employment Agreement

In March, 1994, C. John Hipp, III, entered into an Employment Agreement
with the Company providing for his employment as President and Chief Executive
Officer of First National Bank. The term of the agreement began May 1, 1994, and
ends April 30, 1997, with provision for Mr. Hipp's continued employment at will
after April 30, 1997. The agreement provides for compensation for Mr. Hipp at
the 1994 level or a greater rate set by the Board of Directors of the Company or
by committee appointed by the Board of Directors, plus fringe benefits and
reimbursement of expenses. Under the terms of the agreement, Mr. Hipp has also
been granted options to purchase

<PAGE>

up to a total of 5,000 (before adjustments for 10% stock dividends paid on each
of November 30, 1994 and November 30, 1995) shares of the Company's common stock
under the terms and conditions of First National Corporation's Incentive Stock
Option Plan of 1992. In the event of Mr. Hipp's termination prior to April 30,
1997 without cause, Mr. Hipp will be entitled to continued compensation at the
rate then in effect until April 30, 1997. In the event that Mr. Hipp's
employment is terminated for any reason by either Mr. Hipp or the Company prior
to April 30, 1997, following a sale or merger (as defined in the agreement), Mr.
Hipp will be entitled to continued compensation at the rate then in effect until
April 30, 1997. In the event of termination of Mr. Hipp's employment because of
death or disability prior to April 30, 1997, Mr. Hipp (or his estate) will be
entitled to be paid his then current salary for a period of one year from the
date of such termination. If Mr. Hipp's employment is terminated for any reason
by either Mr. Hipp or by the Company after April 30, 1997 and prior to April 30,
2004, following a sale or merger, Mr. Hipp will be entitled to continued
compensation at the rate then in effect for a period of three years or until
April 30, 2004, whichever period is shorter. In the event of Mr. Hipp's
termination after April 30, 1997 and prior to April 30, 2004 without cause or
because of death or disability, Mr. Hipp (or his estate) will be entitled to be
paid his then current salary for a period of one year from the date of such
termination. Upon termination without cause, after a sale or merger, or after
disability, however, Mr. Hipp is under an affirmative obligation for one year
following termination to actively seek and accept comparable alternative
employment, and any compensation received by him or earnable by him with
reasonable diligence following such termination will be deducted from amounts
owed to him by the Company under the Agreement.

Restricted Stock Plan

On January 25, 1996, the Board of Directors of the Company approved the
issuance of restricted stock to C. John Hipp, III, President and Chief Executive
Officer of the Company. On March 7, 1996, the Board of Directors fixed the
number of restricted shares issuable at 5,185. The grant is conditioned upon
continued employment of Mr. Hipp as Chief Executive Officer of the Company at
each vesting date as follows: a) 25% of the shares vest free of restrictions in
1999; b) an additional 25% of the shares vest free of restrictions in 2001; and
c) the remaining 50% of the shares vest free of restrictions in 2003.
Termination of Mr. Hipp's employment as Chief Executive Officer for any reason
(except death or change in control of the Company) prior to a vesting date would
terminate any interest in non-vested shares. Prior to vesting of the shares, as
long as Mr. Hipp remains Chief Executive Officer of the Company, he will have
the right to vote such shares and to receive dividends paid with respect to such
shares. All restricted shares will fully vest in the event of change in control
of First National Bank or upon death of Mr.
Hipp while serving as Chief Executive Officer.

INFORMATION PERTAINING TO STOCK OPTION PLANS

The Company's Incentive Stock Option Plan of 1992 was adopted by the Board
of Directors on March 12, 1992, and was duly approved by shareholders of the
Company on April 28, 1992. The Plan reserves 50,000 shares of Common Stock for
issuance pursuant to the exercise of options that may be granted under the Plan.
Options under the Plan are incentive stock options within the meaning of Section
422 of the Internal Revenue Code, and may be granted to key employees in full
time employment of the Company or First National Bank. The Stock Option
Committee, which is appointed by the Board of Directors of the Company, selects
the employees to receive grants under the Plan and determines the number of
shares to be covered by the options granted. Options granted under the Plan may
not be exercised in whole or in part within one year following the date of grant
of the options, and thereafter become exercisable in 25% increments over the
next four years. The exercise price of the options may not be less than fair
market value of the Common Stock on the date of grant. In the event of an
acquisition or change in control of the Company or First National Bank, any
options already granted will automatically become 100% vested. The options
expire five years following grant. No options were granted to any named
executive officer of the Company during 1995.

<PAGE>

The following table shows aggregated option exercises during 1995 and year
end 1995 option values.

==================================================================================================================================
AGGREGATED OPTION EXERCISES DURING 1995 AND YEAR END 1995 OPTION VALUES
--------------------------------------------------------------------------------------------------------
Options Exercised During Number and Value of Unexercised
1995 Options at Year End
- ----------------------------------------------------------------------------------------------------------------------------------

Executive Officer Shares Value Number of Value of Unexercised
Acquired or Realized Securities In-the-Money
Exercised Underlying Options(2)
Unexercised
Options(1)
- ----------------------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C>
C. John Hipp, III. -0- -0- Unexercised: 6,050 Unexercised: $48,884
Exercisable: 1,512 Exercisable: $12,221
Unexercisable: 4,538 Unexercisable: $36,663
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Notes:

(1) Figures shown represent the total number of shares subject to unexercised
options held by the indicated executive officer at year end 1995. The
number of shares subject to options which were exercisable and
unexercisable at year end 1995 are also shown. The number of options
granted under the plan have been adjusted to reflect a stock dividend of
10% paid on November 30, 1994, and a stock dividend of 10% paid on November
30, 1995.

(2) Dollar amounts shown represent the value of stock options held by the
indicated executive officers at year end 1995. Only those shares subject to
options which are "in the money" are reported. Shares subject to an option
are considered to be "in the money" if the fair market value at year-end
1995 of such shares of the Company's Common Stock exceeds the exercise or
base price of such shares. At year end 1995, the Company's stock price
exceeded the exercise price of all shares subject to option, thus all stock
options were considered "in the money." For those options "in the money,"
value is computed based on the difference between the fair market value of
the Company Common Stock at year end 1995 and the exercise or base price of
the shares subject to underlying option. The value of shares subject to
options exercisable and unexercisable at year end 1995 is also shown.
================================================================================

COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION

The Compensation Committee for the year ended December 31, 1995, was
composed of William B. Cox, Chairman, C. Parker Dempsey, A. Dewall Waters, Larry
D. Westbury and C. John Hipp, III. Mr. Hipp is currently President and Chief
Executive Officer of the Company and First National Bank, and Mr. Westbury is
currently Chairman of the Board of the Company and is a former President and
Chief Executive Officer of the Company and First National Bank. Although Mr.
Hipp specifically excluded himself from any Compensation Committee discussions
concerning his own compensation, he did participate in discussions concerning
the compensation of other executive officers.

BOARD REPORT ON EXECUTIVE OFFICER COMPENSATION

The Company's Compensation Committee is required to provide Company
shareholders a report discussing the basis for the Compensation Committee's
action in establishing compensation for Company and First National Bank
executive officers. The report is also required to discuss the relationship, if
any, between the Company's

<PAGE>

performance and executive officer compensation. Finally, the report must
specifically discuss the factors and criteria upon which the compensation paid
the Company's and First National Bank's Chief Executive Officer was based.

The fundamental philosophy of the Company's compensation program is to
offer competitive compensation opportunities for all First National Bank
executive officers which are based both on the individual's contribution and on
the Company's performance. The compensation paid is designed to retain and
reward executive officers who are capable of leading the Company in achieving
its business objectives in an industry characterized by complexity,
competitiveness and change. The compensation of Company and First National Bank
executive officers is reviewed and approved annually by the First National Bank
Compensation Committee, which acts as the Company's Compensation Committee.
Annual compensation for the Company's Chief Executive Officer (and other
executive officers) consists of three elements.

- - A base salary that is determined by individual contribution and
performance, and which is designed to provide a base level of compensation
comparable to that provided key executives of other financial institutions
of similar size and performance.

- - A short-term cash incentive program that is directly linked to individual
performance and indirectly linked to Company and First National Bank
performance.

- - A long-term incentive program that provides stock options to executive
officers. Stock option grants provide an incentive that focuses the
executive's attention on managing the Company from the perspective of a
stockholder with an equity stake in the business. The economic value of any
stock option granted is directly tied to the future performance of the
Company's stock and will provide value to the recipient only when the price
of the Company's stock increases over the option grant price.

For the Company's key executives, base salary is targeted to approximate
average salaries for individuals in similar positions with similar levels of
responsibilities who are employed by other banking organizations of similar size
and financial performance. During 1995, the Company increased the Chief
Executive Officer's base salary by 7.4%. The First National Bank Executive
Committee determined that the 7.4% increase in the Chief Executive Officer's
base salary was appropriate in light of two primary factors. The first factor
was a desire of the Company to provide the Chief Executive Officer with a base
salary comparable to that paid on average by other banking organizations of
similar size and financial performance. The Company periodically participates in
local, state and other salary/compensation surveys and has access to other
published salary/compensation data. The First National Bank Executive Committee
annually reviews national, regional, statewide and local peer group salary data
(to the extent available) to assist it in setting appropriate levels of the
Chief Executive Officer's and other executive officers' base salaries. A second
factor considered by the First National Bank Executive Committee in setting and
adjusting base salary was First National Bank's 1995 performance accomplishment
of a 12.25% return on equity. This performance indicator is updated annually,
where needed, to help determine the increase in the Company's key executives'
base salary and is also used to help determine the annual cash incentive, as
described below.

For the Company's key executives, the annual cash incentive during the
years 1993, 1994 and 1995 ranged from 0% to 13.0% of base salary. This means
that up to approximately 11.5% of annual compensation was variable, fluctuated
significantly from year to year, and was directly and indirectly tied to
business and individual performance. For purposes of determining the cash
incentive payable during the years 1993, 1994 and 1995, Company performance was
measured based on First National Bank Return on Equity (ROE). The First National
Bank Executive Committee sets performance goals for First National Bank and
Company at the beginning of each calendar year. In addition, the Company Board
of Directors, at its discretion, retains the flexibility to change performance
goals, bonus amounts and requirements of the Plan during the year. An "incentive
pool" is determined by multiplying a certain percentage of First National Bank
net income above a stated First National Bank ROE for the calendar year in
question. Amounts paid into the incentive pool are distributed to participating
executive officers (and other First National Bank officers) based on the
individual officer's merit and salary level.

<PAGE>

For the Company's key executives, the long-term stock option plan awards
during the years 1993, 1994 and 1995 were designed to provide economic value to
executives directly linked to increases in shareholder value. The number of
options granted were determined in the sole discretion of the Board. The
economic value of these awards will fluctuate from year to year, based on
changes in the Company's stock price. However, the average economic value
accruing each year to Company executives during the years 1993, 1994 and 1995
has ranged from approximately 0% to 17% of base salary.

This report is provided as a summary of current Board practice with regard
to annual compensation review and authorization of executive officer
compensation and with respect to specific action taken for the Chief Executive
Officer. The $1,000,000 tax deduction limitation for executive compensation,
added by the Omnibus Budget Reconciliation Act of 1993, is not relevant to this
year's report and does not affect either the Company or First National Bank's
compensation policy. Should such limitations become relevant, steps will be
taken to amend the Company's and First National Bank's Compensation Policy to
assure compliance.

William B. Cox, Chairman
C. Parker Dempsey
A. Dewall Waters
Larry D. Westbury
C. John Hipp, III

Board Compensation Committee
First National Bank

<PAGE>

OTHER BENEFIT PROGRAMS - DEFINED BENEFIT PENSION PLAN

First National Bank maintains a noncontributory, defined benefit pension
plan ("Pension Plan") covering its employees, including executive officers. The
Pension Plan is a "tax qualified" plan under Section 401(a) of the Internal
Revenue Code and must also comply with provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").

The pension table below shows estimated annual benefits payable upon
retirement to persons in the specified remuneration and years of service
categories as if retirement had occurred on December 31, 1995. The benefits
shown are computed on a single life only annuity basis.

===================================================================================================================================
ESTIMATED ANNUAL BENEFITS UNDER FIRST NATIONAL BANK'S PENSION PLAN
YEARS OF SERVICE
- -----------------------------------------------------------------------------------------------------------------------------------

FAC* 10 20 30 40
------ ---- ---- ---- ---
- -----------------------------------------------------------------------------------------------------------------------------------

* FAC: Final Average Compensation, computed as the average amount of a
participant's compensation earned over the last 60 months prior to his
or her retirement date or early termination of employment.

================================================================================

Benefits. Upon a participant's retirement at his normal retirement date
(age 65), a monthly retirement benefit will be paid in accordance with Pension
Plan provisions. The amount of such monthly retirement benefit will equal 1/12
of the sum of (i) and (ii) as follows: (i) .90% of the Pension Plan
participant's final average compensation multiplied by his years of credited
service up to a maximum of 35 years; and (ii) .65% of the Pension Plan
participant's final average compensation in excess of his covered compensation
multiplied by his years of credited service up to a maximum of 35 years. For
purposes of the above formula, a participant's final average compensation
consists of the average amount of a participant's compensation earned over the
last 60 months prior to early or normal retirement. In addition, a participant
is credited with one year of credited service under the Pension Plan for each
year in which 1,000 or more hours are worked. Benefits under the Pension Plan
are not subject to deduction for Social Security or other offset amounts.

Compensation Under the Pension Plan. For purposes of computing a
participant's final average compensation, the Pension Plan uses the following
definition of participant compensation: W-2 earnings, including bonuses,
overtime and commissions, but excluding employer contributions to employee
benefit plans, as limited by IRS Code Section 401(a)(17).

Information as to Executive Officer Participation. For purposes of
executive officer participation in the Pension Plan, the executive officer
compensation used for purposes of computing executive officer benefits under the
Pension Plan is the same as that shown in the Summary Compensation Table. As of
December 31, 1995, the named

<PAGE>

Company and First National Bank executive officer had accumulated the following
years of credited service toward retirement: C. John Hipp, III, 2 years of
credited service.

SHAREHOLDER PERFORMANCE GRAPH

The Company is required to provide its shareholders with a line graph
comparing the Company's cumulative total shareholder return with a performance
indicator of the overall stock market and either a published industry index or a
Company-determined peer comparison. The purpose of the graph is to help
shareholders determine the reasonableness of the Compensation Committee's
decisions with respect to the setting of various levels of executive officer
compensation. Shareholder return (measured through increases in stock price and
payment of dividends) is often a benchmark used in assessing corporate
performance and the reasonableness of compensation paid executive officers.

However, shareholders should recognize that corporations often use a number
of other performance benchmarks (in addition to shareholder return) to set
various levels of executive officer compensation. The Company's 1995 Annual
Report to Shareholders contains a variety of relevant performance indicators
concerning the Company. Thus, Company shareholders may wish to consider other
relevant performance indicators in assessing shareholder return and the
reasonableness of Company executive officer compensation, such as growth in
earnings per share, book value per share and cash dividends per share, along
with Return on Equity (ROE) and Return on Assets (ROA) percentages. As described
in the Board Report on Executive Officer Compensation, the Company's
Compensation Committee utilizes Bank ROE in helping to determine short-term cash
incentive program awards.

The performance graph below compares the Company's cumulative total return
over the most recent 5-year period with both the NASDAQ Composite Index
(reflecting overall stock market performance) and the NASDAQ Bank Index
(reflecting changes in banking industry stocks). Returns are shown on a total
return basis, assuming the reinvestment of dividends and a beginning stock index
price of $100 per share. The value of the Company's stock as shown in the graph
is based on information known to the Company regarding transactions in the
Company's stock. Because there is no active trading market in the Company's
stock the information is based on a limited number of transactions.

NASDAQ Composite First National Corporation NASDAQ Bank
<S> <C> <C> <C> <C>
1991 $100.00 $100.00 $100.00
1992 $115.45 $106.15 $152.03
1993 $132.48 $145.99 $196.67
1994 $128.24 $194.24 $198.85
1995 $179.43 $243.13 $287.95

</TABLE>
12

<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

First National Bank has loan and deposit relationships with some of the
directors of the Company and First National Bank and with companies with which
the directors are associated as well as with members of the immediate families
of the directors ("Affiliated Persons"). (The term "members of the immediate
families" for purposes of this paragraph includes each person's spouse, parents,
children, siblings, mothers and fathers-in-law, sons and daughters- in-law, and
brothers and sisters-in-law.) Loans to Affiliated Persons were made in the
ordinary course of business, were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons, and did not, at the time they were
made involve more than the normal risk of collectibility or present other
unfavorable features.

Director, Robert R. Horger, is a partner in the law firm of Horger,
Barnwell & Reid, which First National Bank has retained as general counsel
during the past five years. First National Bank proposes to retain the firm
during the current fiscal year.

COMPLIANCE WITH THE SECURITIES EXCHANGE ACT OF 1934

As required by Section 16(a) of the Securities Exchange Act of 1934, the
Company's directors, its executive officers and certain individuals are required
to report periodically their ownership of the Company's Common Stock and any
changes in ownership to the Securities and Exchange Commission.

John L. Gramling, a director of the Company, failed to file on a timely
basis one report relating to the purchase of a small number of shares. The
purchase should have been reported on a Form 4, due January 10, 1996, but
inadvertently was not reported until January 17, 1996.

ADOPTION OF 1996 INCENTIVE STOCK OPTION PLAN

The Board of Directors is seeking approval by the shareholders of the 1996
Incentive Stock Option Plan. The following is a summary of the 1996 Incentive
Stock Option Plan, and is qualified in its entirety by reference to the plan, a
copy of which is included herewith.

On February 8, 1996, the Board of Directors of the Company adopted the 1996
Incentive Stock Option Plan, which reserves 73,000 shares of Common Stock for
issuance pursuant to the exercise of options which may be granted pursuant to
the 1996 Incentive Stock Option Plan. The 1996 Incentive Stock Option Plan will
become effective March 14, 1996, subject to stockholder approval, and will
terminate March 14, 2001, unless terminated earlier by the Board of Directors.
Options under the 1996 Incentive Stock Option Plan will be "incentive stock
options" within the meaning of the Internal Revenue Code and may be granted to
persons who are employees of the Company or any subsidiary (including officers
and directors who are employees) at the time of grant and who are, or are
expected to be, primarily responsible for the management, growth or protection
of some part or all of the business of the Company or any subsidiary. At
December 31, 1995, the Company had 9 employees who could have been deemed to
fall within this category. The 1996 Incentive Stock Option Plan will be
administered by a Committee of not fewer than three directors of the Company
appointed by the Board of Directors. All options must have an exercise price not
less than the fair market value of the Common Stock at the date of grant, as
determined by the Committee. The Committee may set other terms for the exercise
of the options but may not grant to any person more than $100,000 of options
(based on the fair market value of the optioned shares on the date of the grant
of the option) which first become exercisable in any calendar year. The
Committee also selects the employees to receive grants under the 1996 Incentive
Stock Option Plan and determines the number of shares covered by options granted
under the 1996 Incentive Stock Option Plan. Options granted pursuant to the 1996
Incentive Stock Option Plan will not be exercisable for one year following
grant, and thereafter become exercisable in 25% increments over the next four
years. No options may be exercised after five years from the date of grant;
options may not be transferred except by will or the laws of descent and
distribution; and options may be exercised only (i) while the optionee is an
employee of the Company, (ii) within the earlier of five years from the date of
grant or three months after the date of termination of employment, (iii) within
the earlier of five years from the date of grant or two years

<PAGE>

after death, (iv) within the earlier of five years from the date of grant or one
year after disability, or (v) in case of termination for good cause (as defined
by the plan), immediately upon termination.

The number and kind of shares that are available for issuance pursuant to
the 1996 Incentive Stock Option Plan and that are subject to any options and the
option price per share shall be adjusted in the event of any merger,
consolidation, stock dividend, split-up, combination or exchange of shares or
recapitalization or change in capitalization. Upon the occurrence of certain
changes in control of the Company or its subsidiaries all options outstanding
under the 1996 Incentive Stock Option Plan will become immediately exercisable.
Furthermore, upon the proposal of an acquisition, merger, or change of control,
the Committee may, at its sole discretion, issue all remaining options
authorized under the 1996 Incentive Stock Option Plan.

Neither the Company nor the recipient of incentive stock options will have
federal income tax consequences from the issuance or exercise of the options.
Because of the discretion given to the Board of Directors in selecting the
employees to whom grants of options will be made and the number of options
granted, the benefits or amounts any individual might receive under the 1996
Stock Option Plan are not presently determinable.

The Board of Directors has adopted the 1996 Incentive Stock Option Plan
because the Board of Directors believes that stock options provide an
inexpensive way to reward and provide incentive to key employees. Since options
issued under the plan will only be valuable to the recipient if the value of the
stock rises, the future benefit to the recipient is linked to benefit to the
shareholders.

The Board of Directors believes that adoption of the 1996 Incentive Stock
Option Plan is in the best interest of the shareholders and recommends a vote
FOR approval of the 1996 Incentive Stock Option Plan.

AMENDMENTS TO THE ARTICLES OF INCORPORATION

The Board of Directors is submitting to the shareholders for their approval
the following proposed amendments to the Articles of Incorporation of the
Company:

(1) Amendment to Article Tenth. The proposed amendment would delete the
first sentence of Article Tenth of the Articles of Incorporation in order to
cause such Article to conform to South Carolina corporate law. This amendment
would eliminate the authority of the Board of Directors to remove other
directors because there is no authority for such removal under South Carolina
corporate law. As amended, Article Tenth would read as follows:

Shareholders can remove directors with or without cause only by the
affirmative vote of the holders of 80% of the Corporation's shares.
Cause shall mean fraudulent or dishonest acts or gross abuse of
authority in the discharge of duties to the Corporation and shall be
established after written notice as specific charges and the
opportunity to meet and refute such charges.

(2) Amendment to delete Article Fifteenth. The proposed amendment would
delete from the Articles of Incorporation Article Fifteenth in order to cause
the Articles of Incorporation to conform to South Carolina corporate law. This
Article as presently written allows the Board of Directors to fill the full
unexpired term of a director. Directors do not have this authority under
applicable South Carolina corporate law, which limits the term of a director
selected by the Board of Directors to fill a vacancy only until the next
shareholders meeting.

(3) Amendment to delete Article Seventeenth. The proposed amendment would
delete from the Articles of Incorporation Article Seventeenth in order to cause
the Articles of Incorporation to conform to South Carolina corporate law. This
Article as presently written requires 50% or more of the shareholders to call a
special meeting of shareholders. This provision is contrary to South Carolina
corporate law, which specifically provides that only 10% or more of the
shareholders are necessary to call a special meeting of shareholders.

(4) Amendment to Add New Article. It is proposed to add to the Articles of
Incorporation a new article which provides as follows:

When evaluating any proposed plan of merger, consolidation, exchange or
sale of all, or substantially all, of the assets of the Corporation,
the Board of Directors shall consider the interests

<PAGE>

of the employees of the Corporation and the community or communities in
which the Corporation and its subsidiaries, if any, do business in
addition to the interest of the Corporation's shareholders.

This provision is substantially the same as a provision that is presently
included in the Bylaws of the Corporation. The Board of Directors proposes to
add this provision to the Articles of Incorporation to avoid any confusion
concerning the effectiveness of this language. The Board believes that the
Corporation, as the owner of one or more community banks should, in the event of
a proposed plan of merger or sale, consider factors that are generally
recognized as of significant importance to community banks, including the
interests of employees of the Corporation and of the community served by the
Corporation and its subsidiaries, in addition to the interests of shareholders
of the Corporation. This proposed amendment may be deemed to present an
impediment to a change in control of the Corporation even if such change in
control were favored by a majority of shareholders because, absent such a
provision in the Articles of Incorporation, under existing common law, directors
would be required to give paramount consideration with respect to such matters
to the best interests of shareholders.

The Board of Directors recommends a vote FOR adoption of the foregoing
amendments to the Company's Articles of Incorporation.

INDEPENDENT ACCOUNTANTS

The Board of Directors, upon the recommendation of the Audit Committee, has
appointed J. W. Hunt & Company, LLP, independent certified public accountants,
as independent auditors for the Company and its subsidiaries for the current
fiscal year ending December 31, 1996, subject to ratification by the
shareholders. J. W. Hunt & Company, LLP has advised the Company that neither the
firm nor any of its partners has any direct or material interest in the Company
and its subsidiaries except as auditors and independent certified public
accountants of the Company and its subsidiaries.

A representative of J. W. Hunt & Company, LLP will be present at the 1996
Annual Meeting and will be given the opportunity to make a statement on behalf
of the firm if he so desires. A representative of J. W. Hunt & Company, LLP is
also expected to respond to appropriate questions from shareholders.

AVAILABILITY OF ANNUAL REPORT ON FORM 10-K

The Company, upon request and without charge, will provide shareholders
with copies of its Annual Report on Form 10-K for the year ended December 31,
1995 filed with the Securities and Exchange Commission. Shareholders should
direct their requests to: First National Corporation, 345 John C. Calhoun Drive,
S.E., Orangeburg, South Carolina 29115, attention: W. Louis Griffith.

OTHER BUSINESS

The Board of Directors of the Company does not know of any other business
to be presented at the Annual Meeting. If any other matters are properly brought
before the Annual Meeting, however, it is the intention of the persons named in
the accompanying proxy to vote such proxy in accordance with their best
judgment.

By Order of the Board of Directors

C. John Hipp, III
President and Chief Executive Officer
Orangeburg, South Carolina
April 2, 1996

<PAGE>

FIRST NATIONAL CORPORATION

INCENTIVE STOCK OPTION PLAN OF 1996

1. Purpose of Plan

The purpose of this Incentive Stock Option Plan ("Plan") is to aid the
First National Corporation ("Corporation") and its subsidiaries in securing
and retaining top management and key employees of outstanding ability by
making it possible to offer them an increased incentive, in the form of a
proprietary interest in the Corporation, to join or continue in the service
of the Corporation and its subsidiaries and to increase their efforts for
the welfare and success of the Corporation and its subsidiaries.

2. Definitions

As used in this Plan, the following words shall have the following
meanings:

(a) "Bank" means any bank which is a Subsidiary of the Corporation;

(b) "Board" means the Board of Directors of First National Corporation,
Orangeburg, South Carolina;

(d) "Committee" means the administrative committee appointed by the Board
under Section 3 of the Plan;

(e) "Common Stock" means the $5.00 par value common stock of First National
Corporation;

(f) "Corporation" means First National Corporation, a South Carolina
corporation with principal offices located at Orangeburg, South
Carolina;

(g) "Disability" means the Participant's inability to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death
or which has lasted or can be expected to last for a continuous period
of not less than twelve (12) months;

(h) "Incentive Stock Option" means a stock option to purchase shares of
Common Stock, which is intended to qualify as an incentive stock option
defined in Code Section 422;

(i) "Key Employee" means any person in the regular full-time common law
employment of the Corporation, the Bank, or any Subsidiary, as an
officer thereof, who in the opinion of the Committee, is or is expected
to be primarily responsible for the management, growth or protection of
some part or all of the business of the Corporation, the Bank or any
Subsidiary.

(j) "Option" means an Incentive Stock Option granted under the Plan;

(k) "Parent" means any corporation in an unbroken chain of corporations if
each of the corporations owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one
of the other corporations in such chains;

(l) "Participant" means a person to whom an Option is granted that has not
expired and ceased to be exercisable under the Plan; and

(m) "Subsidiary" means any corporation in an unbroken chain of corporations
beginning with the Corporation if each of the corporations other than
the last corporation in the unbroken chain owns fifty percent (50%) or
more of the total combined voting power of all classes of stock in one
of the other corporations in such chain.

<PAGE>

3. Administration of Plan

The Plan shall be administered by a Committee (the "Committee") of not less
than three (3) directors of the Corporation appointed by the Board. The
members of the Committee shall be disinterested persons within the meaning
of 12 C.F.R. Section 240.16b-3(c)(2)(i). None of the members of the
Committee shall be eligible to be selected for grant of an Option, or any
other option or shares under the Plan. The Committee may adopt its own
rules of procedure; and the action of a majority of the Committee, taken at
a meeting or taken without a meeting by a writing signed by such majority,
shall constitute action by the Committee. The Committee shall have the
power and authority to administer, construe and interpret the Plan, to make
rules for carrying it out and to make changes in such rules.

4. Granting of Options

The Committee may from time to time grant Options under the Plan to such
Key Employees and subject to the limitations of paragraph (a) of Section 7,
for such number of shares as the Committee may determine. Subject to the
provisions of the Plan, the Committee may impose such terms and conditions
as it deems advisable on the grant of an Option. Any of the foregoing to
the contrary notwithstanding, the following limitations shall apply to the
grant of any Incentive Stock Option:

(a) The aggregate fair market value, determined at the time an Incentive
Stock Option is granted, of the Common Stock subject to Incentive Stock
Options that are exercisable by a Participant for the first time during
any calendar year shall not exceed $100,000.

(b) Any Option granted to a Participant, who immediately before such grant
owns Common Stock possessing more than ten percent (10%) of the total
combined voting power of all classes of Common Stock of the Corporation
or common stock of any Subsidiary shall not be an Incentive Stock
Option, unless (i) at the time such Option is granted the Option price
per share is not less than one hundred ten percent (110%) of the
optioned stock's then fair market value; and (ii) the Option shall not
be exercisable after the expiration of five (5) years from the date of
the grant of the Option.

5. Terms of Options

The terms of each Option granted under the Plan shall be as determined from
time to time by the Committee and shall be set forth in an Incentive Stock
Option Agreement in a form approved by the Committee; provided, however,
the terms of such Agreement shall not exceed the following limitations:

(a) Option Price. Subject to paragraph (b) of Section 4, the Option price
per share shall not be less than one hundred percent (100%) of the fair
market value of the Common Stock at the time the Option is granted.

(b) Option Vesting. Subject to paragraph (b) of Section 4 and paragraph (b)
of Section 9, the Option shall be exercisable in accordance with the
limitations set forth below, unless an earlier expiration date shall be
stated in the Option or the Option shall cease to be exercisable
pursuant to paragraph (d) of this Section 5.

(i) The Options granted shall not be exercisable in whole or in part
prior to one (1) year after the date of grant of the Option to a
Key Employee; and

(ii) A maximum of twenty-five percent (25%) of the Options granted
shall be exercisable one (1) year following the date of grant of
the Options to a Key Employee; and

(iii)A maximum of fifty percent (50%) of the Options shall be
exercisable two (2) years following the date of grant of the
Options to a Key Employee; and

(iv) A maximum of seventy-five percent (75%) of the Options shall be
exercisable three (3) years following the date of grant of the
Options to a Key Employee; and

<PAGE>

(v) One hundred percent (100%) of the Options shall be exercisable
four (4) years following the date of grant of the Options to a Key
Employee; and

(vi) The Options granted shall expire and not be exercisable after the
expiration of five (5) years from the date of grant of the Options
to a Key Employee.

(c) Manner of Exercise of Options and Payment. Incentive Stock Options may
be exercised by a Participant by giving written notice to the Secretary
of the Corporation stating the number of shares of Common Stock with
respect to which the Incentive Stock Option is being exercised and
tendering payment therefor. At the time that an Incentive Stock Option
granted under the Plan, or any part thereof, is exercised, payment for
the Common Stock issuable thereupon shall be made in full in cash or by
certified check.

As soon as reasonably possible following such exercise, a certificate
representing shares of Common Stock purchased, registered in the name
of the Participant shall be delivered to the Participant.

(d) Termination of Employment. If a Participant's employment with the
Corporation, the Bank or a Subsidiary terminates, the following rules
shall apply:

(i) Termination. If a Participant's employment with the Corporation,
the Bank or a Subsidiary terminates other than by reason of the
Participant's death, disability or retirement after reaching age
65, the Participant's Option shall thereupon expire and cease to
be exercisable upon the expiration date of the earlier of five (5)
years from the date of grant of the Option, or three (3) months
from the date of such termination. This provision shall not apply
if the Participant, after such termination, continues to be
employed by any of the Corporation, the Bank or a Subsidiary.

(ii) Death. If the Participant's employment with the Corporation, the
Bank or a Subsidiary terminates by reason of his death, the
Participant's Option shall terminate and cease to be exercisable
upon the expiration of the earlier of five (5) years from the date
of grant of the Option, or two (2) years from the date of such
termination in the case of death. Such Option may be exercised by
the duly appointed personal representative of the deceased
Participant's estate.

(iii) Disability. If a Participant's employment with the Corporation,
the Bank or a Subsidiary terminates by reason of disability, the
Participant's Option shall terminate and cease to be exercisable
upon the expiration of the earlier of five (5) years from the date
of grant of the Option, or one (1) year from the date of such
termination in the case of disability.

(iv) Retirement. If a Participant's employment with the Corporation,
the Bank or a Subsidiary terminates by reason of retirement after
reaching age 65 (other than for disability), the Participant's
Option shall expire and cease to be exercisable upon the earlier
of five (5) years from the date of grant of the Option, or three
(3) months from date of such termination.

(v) Termination for Good Cause. Notwithstanding anything contained
herein to the contrary, if a Participant's employment with the
Corporation, the Bank or a Subsidiary is terminated for Good
Cause, as defined below and as determined by the Committee, any
Option granted to that Participant shall be immediately revoked
and terminated and the Participant, his heirs and assigns shall
have no further rights under this Plan.

For purposes of this Plan, Good Cause shall mean: (i) the
Participant's conviction of any criminal violation involving
dishonesty, fraud, or breach of trust, (ii) the Participant's
willful engagement in any misconduct in the performance of his
employment duties that materially injures the Corporation, the
Bank or any Subsidiary, (iii) the Participant's performance of any
act which, if known to the customers, clients or stockholders of
the Corporation, the Bank or any Subsidiary would materially and
adversely have an impact on the business of the Corporation, the
Bank or any Subsidiary, or (iv) the Participant's willful,
wrongful and substantial nonperformance of assigned duties
(provided that such nonperformance has continued more than ten
(10) days after the Corporation, the Bank or any Subsidiary has
given

<PAGE>

written notice of such nonperformance and of its intention to
terminate the Participant's employment because of such
nonperformance).

(vi) Noncompetition. Notwithstanding anything contained herein to the
contrary, for a period of two (2) years after the last exercise of
an option, the Participant, other than in the ordinary course of
employment with the Corporation, the Bank or any Subsidiary, shall
not: (1) within the counties where the Corporation or its
Subsidiaries have business offices or operations engage in, or
work for, or own, manage, operate, control or participate in the
ownership, management, operation or control of, or be connected
with, or have any financial interest (other than the ownership of
equity or debt securities) in, any individual, partnership, firm ,
corporation or institution engaged in any of the same or similar
activities to those now or hereafter carried on by the
Corporation, the Bank or any Subsidiary; (2) interfere with the
relationship of the Corporation, the Bank or any Subsidiary and
any of their employees, agents or representatives; or (3) directly
or indirectly divert or attempt to divert from the Corporation,
the Bank or any Subsidiary any business in which such entities
have been actively engaged during the term hereof, nor interfere
with the relationships of such entities with their dealers,
distributors, sources of supply or customers. Any breach of this
restrictive covenant by the Participant will result in the
forfeiture by the Participant, his heirs and assigns of any and
all rights under this Plan.

6. Exercise of Options

The holder of an Option who decides to exercise the Option in whole or in
part shall give notice to the Secretary of the Corporation of such exercise
in writing on a form approved by the Committee. Any exercise shall be
effective as of the date specified in the notice of exercise, but not
earlier than the date of notice of exercise and not before payment in full
of the Option price is actually received by the Secretary of the
Corporation.

7. Limitations and Conditions

(a) Shares Subject to Option. The total number of shares of Common Stock
that may be optioned as Incentive Stock Options under the Plan is
Seventy-three Thousand (73,000) shares of First National Corporation's
$5.00 par value Common Stock. The foregoing numbers of shares may be
increased or decreased by the events set forth in paragraph (a) of
Section 9.

(b) Grant of Options. The amount of shares of Common Stock that may be
optioned as Incentive Stock Options under the Plan as set forth in
Section 7(a) above shall, on an annual basis, be determined solely at
the discretion of the Committee. Notwithstanding anything to the
contrary herein, if there is a proposed acquisition, merger, change of
control or other takeover of the Corporation and/or the Bank or a
Subsidiary, the Committee, at its sole discretion, may issue any
Options authorized under this Plan but unissued prior to such time.

(c) Expiration of Option. Any shares of Common Stock that have been
optioned that cease to be subject to an Option (other than by reason of
exercise of the Option) shall again be available for option and shall
not be considered as having been theretofore optioned.

(d) Termination of Plan. No Option shall be granted under the Plan after
March 14, 2001, and the Plan shall terminate on such date. However,
Options granted before such date may extend beyond that date in
accordance with the Plan. At the time an Option is granted or amended
or the terms or conditions of an Option are changed, the Committee may
provide for limitations or conditions on the exercisability of the
Option.

(e) Non-transferability. An Option shall not be transferable by the
Participant otherwise than by will or by the laws of descent and
distribution. During the lifetime of the Participant, an Option shall
only be exercisable by the Participant.

(f) Compliance with Laws and Regulations. The Corporation shall not be
obligated to deliver any shares until there has been compliance with
such laws or regulations as the Corporation may deem applicable. The
Corporation shall use its best efforts to effect such compliance. No
fractional shares shall be delivered.

<PAGE>

In addition to the foregoing and not by way of limitation, the
Corporation may require that the person exercising the Option represent
and warrant at the time of such exercise that any shares acquired by
exercise are being acquired only for investment and without any present
intention to sell or distribute such shares, if, in the opinion of
counsel for the Corporation, such a representation is required under
the Securities Act of 1933 or any other applicable law, regulation or
rule of any governmental agency.

8. Transfers and Leaves of Absence

For purposes of the Plan: (a) a transfer of a Participant's employment
without an intervening period from the Corporation to the Bank or a
Subsidiary or vice versa, or from one Subsidiary to another or from Parent
to Subsidiary or vice versa, shall not be deemed a termination of
employment, and (b) a Key Employee who is granted in writing a leave of
absence of no more than ninety (90) days, or if more than ninety (90) days,
which guarantees his employment with the Corporation, the Bank or any
Subsidiary at the end of such leave, shall be deemed to have remained in
the employ of the Corporation, the Bank or the Subsidiary during such leave
of absence.

9. Stock Adjustments

(a) Change in Corporate Structure. In the event of any merger,
consolidation, stock dividend, split-up, combination or exchange of
shares or recapitalization or change in capitalization, the total
number of shares set forth in paragraph (a) of Section 7 shall be
proportionately and appropriately adjusted. In any such case, the
number and kind of shares that are subject to any Option (including any
Option outstanding after termination of employment) and the Option
price per share shall be proportionately and appropriately adjusted
without any change in the aggregate Option price to be paid therefor
upon the exercise of the Option. The determination by the Committee as
to the terms of any of the foregoing adjustments shall be conclusive
and binding.

(b) Change in Control. If after the effective date hereof (and after the
requisite stockholder approval of the Plan under Section 17), either
(i), (ii) or (iii) below shall occur, any Participant holding an Option
shall immediately have the right to exercise the Option for all shares
optioned thereunder and not previously purchased, irrespective of any
provision under the Option agreement which would otherwise prohibit
such exercise at such time:

(i) the acquisition ("Acquisition"), directly or indirectly, by
any "person" (as such term is defined for purposes of Sections
13(d) and 14(d) of the Securities and Exchange Act of 1934
("Exchange Act"), other than by the Corporation, a
tax-qualified retirement plan under the Code, or any person so
defined who on the effective date hereof is a director of the
Bank or the Corporation or whose shares of stock therein are
treated as "beneficially owned" (as such term is defined for
purposes of Rule 13d-3 of the Exchange Act) by any such
director ("Acquiror"), of the beneficial ownership (as such
term is defined for purposes of Section 13(d)(1) of the
Exchange Act) of shares of the Corporation which, when added
to any other shares beneficially owned by the Acquiror, shall
have twenty percent (20%) or more of the combined voting power
of the Corporation's then outstanding securities; or

(ii)the occurrence of any merger, consolidation or reorganization
to which the Corporation is a party and pursuant to which the
Corporation (or an entity controlled thereby) is not a
surviving entity, or the sale of all or substantially all of
the assets of the Corporation, Bank or a Subsidiary; or

(iii)the occurrence of a change in control of the Corporation, as
defined by 12 U.S.C. Section 1817(j).

10. Amendments and Termination

(a) Amendment. The Board shall have the power to amend the Plan, including
the power to change the amount of aggregate fair market value of the
shares for which any Key Employee may be granted Incentive Stock

<PAGE>

Options under Section 4 to the extent provided in Code Section 422. It
shall not, however, except as otherwise provided in the Plan, increase
the maximum number of shares authorized for the Plan, nor change the
class of eligible employees to other than Key Employees, nor reduce the
basis upon which the minimum Option price is determined, nor extend the
period within which Options under the Plan may be granted, nor provide
for an Option that is exercisable during a period of more than five (5)
years from the date it is granted. It shall have no power (without the
consent of the person or persons at the time entitled to exercise the
Option) to change the terms and conditions of any Option in a manner
that would adversely affect the rights of such persons except to the
extent, if any, provided in the Option.

(b) Termination. The Board may suspend or terminate the Plan at any time.
No such suspension or termination shall affect Options then in effect.

11. No Employment Right

The grant of an Option hereunder shall not constitute an agreement or
understanding, expressed or implied, on the part of the Corporation or the
Bank, any Parent or any Subsidiary, to employ the Participant for any
specified period and shall not confer upon any employee the right to
continue in the employment of the Corporation or the Bank, any Parent or
any Subsidiary, nor affect any right which the Corporation or the Bank, a
Parent or Subsidiary may have to terminate the employment of such
Participant.

12. Fair Market Value

Whenever the fair market value of Common Stock is to be determined under
the Plan as of a given date, such fair market value shall be determined as
follows:

(a) If the Common Stock is traded on the over-the-counter market, the
average of the mean between the bid and the asked price for the Common
Stock at the close of trading for the ten consecutive trading days
immediately preceding such given date;

(b) If the Common Stock is listed on a national securities exchange, the
average of the closing prices of the Common Stock on the composite tape
for the ten consecutive trading days immediately preceding such given
date; and

(c) If the Common Stock is neither traded on the over-the-counter market
nor listed on a national securities exchange, such value as the Board,
in its sole discretion and in good faith, shall determine. In making
its determination, the Board may rely on all relevant information,
including but not limited to, the following: (i) a recent appraisal by
a qualified expert as to the value of the Common Stock, (ii)
documentation of sales of Common Stock similar in block size and
recently sold in an arm's length transaction, (iii) recent offers to
purchase or sell Common Stock, (iv) the history of the Corporation, the
Bank and its Subsidiaries, (v) the nature of the Corporation and Bank's
business, the economic outlook in general and the outlook of the
specific industry within which the Corporation, the Bank and its
Subsidiaries operate, (vi) the book value of the Common Stock and the
Corporation's general financial condition, (vii) the historical
earnings of the Corporation, (viii) the Corporation's dividend paying
capacity, and (ix) the fair market value of comparable corporation
stock, if any, whose stock is actively traded. In making its
assessment, the Board shall determine all relevant information,
including the above factors, and shall apply sound reasoning in
determining the relative weight to be given to any factor used in
arriving at its good faith valuation.

13. Notices

Every direction, revocation or notice authorized or required by the Plan
shall be deemed delivered to the Corporation (i) on the date it is
personally delivered to the Secretary of the Corporation at its principal
executive officers or (ii) three business days after it is sent by
registered or certified mail, postage prepaid, addressed to the Secretary
of the Corporation at such offices, and shall be delivered to a Participant
(i) on the day it is personally delivered to him or her or (ii) three
business days after it is sent by registered or certified mail, postage
prepaid, addressed to him or her at the last address shown for him or her
on the records of the Corporation, Bank or any Subsidiary.

<PAGE>

14. Applicable Law

All questions pertaining to the validity, interpretation and administration
of the Plan and Options granted hereunder shall be determined in conformity
with the laws of the state of South Carolina, to the extent not
inconsistent with Section 422 of the Code and regulations thereunder.

15. No Obligation to Exercise Options

The granting of an Incentive Stock Option shall impose no obligation upon a
Participant to exercise such Incentive Stock Option.

16. Withholding Taxes

Upon the exercise of any Incentive Stock Option, the Corporation shall have
the right to require the Participant to remit to the Corporation an amount
sufficient to satisfy all federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for
shares of Common Stock.

Upon the disposition of any Common Stock acquired by the exercise of an
Incentive Stock Option, the Corporation shall have the right to require the
Participant to remit to the Corporation an amount sufficient to satisfy all
federal, state and local withholding tax requirements as a condition to the
registration of the transfer of such common stock on its books.

17. Effective Date

The Plan is adopted on and shall be effective as of March 14, 1996, subject
to its approval as of such date by action of the stockholders of the
Corporation within twelve (12) months of such effective date, and subject
to any modification that may be made herein, prior to such stockholder
approval, that may be deemed required or appropriate by the Board to meet
legal requirements. All Options which have been or may be granted under the
Plan prior to stockholder approval, shall be conditioned upon, and shall
not be exercisable until after such stockholder approval.

18. Rule 16b-3 Status

The Plan is intended to comply with all applicable conditions of Rule 16b-3
(and any amendment or successor thereto) promulgated pursuant to the
Exchange Act. All transactions under the Plan involving persons subject to
Section 16 of the Exchange Act are subject to such conditions of Rule 16b-3
(and any amendment or successor thereto), regardless of whether the
conditions are expressly set forth in the Plan. Any provision of the Plan
that is contrary to a condition of Rule 16b-3 (or any amendment or
successor thereto) shall not apply to any such persons.

<PAGE>

APPENDIX - FORM OF PROXY

PROXY

FIRST NATIONAL CORPORATION

PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS - TUESDAY, APRIL 23, 1996

C. John Hipp, III and W. Louis Griffith, or either of them, with full power
of substitution, are hereby appointed as agent(s) of the undersigned to vote as
proxies all of the shares of Common Stock of First National Corporation held of
record by the undersigned on the Record Date at the Annual Meeting of
Shareholders to be held on April 23, 1996, and at any adjournment thereof, as
follows:

1. ELECTION OF FOR all nominees listed WITHHOLD AUTHORITY
DIRECTORS. below (except any I have to vote for all
written below) [ ] nominees listed
below [ ]

[ ] WITHHOLD AUTHORITY on the following nominees only

William B. Cox, C. Parker Dempsey, J. Carlisle McAlhany, Anne H. Oswald, A.
Dewall Waters

INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL(S) WRITE THE
NOMINEE'S(S') NAME(S) ON THE LINE BELOW.

2. PROPOSAL TO ADOPT THE 1996 INCENTIVE STOCK OPTION PLAN.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION BY DELETING THE
FIRST SENTENCE OF ARTICLE NINTH AND DELETING ALL OF ARTICLE FIFTEENTH AND
ARTICLE SEVENTEENTH.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

4. PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION BY ADDING THE FOLLOWING
PROVISION:

WHEN EVALUATING ANY PROPOSED PLAN OF MERGER, CONSOLIDATION, EXCHANGE OR
SALE OF ALL OR SUBSTANTIALLY ALL, OF THE ASSETS OF THE CORPORATION, THE
BOARD OF DIRECTORS SHALL CONSIDER THE INTERESTS OF THE EMPLOYEES OF THE
CORPORATION AND THE COMMUNITY OR COMMUNITIES IN WHICH THE CORPORATION
AND ITS SUBSIDIARIES IF ANY DO BUSINESS IN ADDITION TO THE INTEREST OF
THE CORPORATION'S SHAREHOLDERS.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

PROPOSAL TO RATIFY APPOINTMENT OF J. W. HUNT & COMPANY, LLP, CERTIFIED
PUBLIC ACCOUNTANTS, AS THE COMPANY'S INDEPENDENT AUDITORS FOR 1996.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

<PAGE>

6. And, in the discretion of said agents, upon such other business as may
properly come before the meeting, and matters incidental to the conduct of
the meeting. (Management at present knows of no other business to be
brought before the meeting.)

THE PROXIES WILL BE VOTED AS INSTRUCTED. IF NO CHOICE IS INDICATED WITH RESPECT
TO A MATTER WHERE A CHOICE IS PROVIDED, THIS PROXY WILL BE VOTED "FOR" SUCH
MATTER.

Please sign exactly as name appears below. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title. If more than one
trustee, all should sign. All joint owners must sign.

Dated: , 1996 ___________________________
--------------------------------

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