FIRST NATIONAL CORPORATION
Financial Statements
(Form 10-Q)
March 31, 1997
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended MARCH 31, 1997 Commission File Number 0-13663
FIRST NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
SOUTH CAROLINA 57-0799315
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
950 JOHN C. CALHOUN DRIVE, SE, ORANGEBURG, SC 29115
(Address of principal executive offices) (Zip Code)
(803) 534-2175
Registrant's telephone number, including area code
NOT APPLICABLE
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 report) and (2) has been subject
to such filing requirements for the past 90 days.
YES 'X' NO
Indicate the number of shares outstanding of each of issuer's class of
securities.
CLASS OUTSTANDING as of March 31, 1997
Common Stock, $5 par value 2,551,091
<PAGE>
FIRST NATIONAL CORPORATION
INDEX
Part I: Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheet -
March 31, 1997 and December 31, 1996
Consolidated Statement of Income -
Three Months Ended
March 31, 1997 and 1996
Consolidated Statement of Cash Flows -
Three Months Ended
March 31, 1997 and 1996
Notes to Consolidated Financial Statements
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II: Other Information
Item 1 - Legal Proceedings
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K: None
<PAGE>
PART I - FINANCIAL INFORMATION
Item l. Financial Statements
FIRST NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS 3-31-97 12-31-96
(Dollars in thousands)
Cash and due from banks $ 27,313 $ 28,824
Federal funds sold 16,450 0
Investment securities - Note 2
Securities held-to-maturity (fair value of
$59,090 in 1997 and $65,504 in 1996) 58,993 65,197
Securities available-for-sale, at fair value 109,776 95,684
Total Investment securities 168,769 160,881
Loans - Note 3 307,931 296,865
Less: Unearned income (3,494) (3,246)
Allowance for loan losses - Note 4 (5,022) (4,705)
Loans, net 299,415 288,914
Premises and equipment 10,800 10,848
Intangible assets 2,903 2,962
Other real estate - Note 6 46 63
Other assets 6,137 5,140
TOTAL ASSETS $531,833 $497,632
<PAGE>
Consolidated Balance Sheets - Continued.......
LIABILITIES & STOCKHOLDERS' EQUITY
3-31-97 12-31-96
(Dollars in thousands)
LIABILITIES:
Deposits in domestic offices:
Noninterest-bearing $ 69,196 $ 67,232
Interest-bearing - Note 7 372,155 346,921
Total deposits 441,351 414,153
Federal funds purchased & securities
sold under agreement to repurchase 38,139 32,547
Other liabilities 3,381 2,586
TOTAL LIABILITIES 482,871 449,286
Commitments & contingent liabilities - Note 8
STOCKHOLDERS' EQUITY:
Common stock - $5 par value; authorized
5,000,000 shares; issued and outstanding
2,551,091 shares in 1997, and 2,550,024
shares in 1996 - Note 9 12,756 12,750
Additional paid-in capital 22,881 22,856
Retained earnings 13,910 12,790
Unrealized gain (loss) on securities available-
for-sale, net of applicable deferred income
taxes (585) (50)
TOTAL STOCKHOLDERS' EQUITY 48,962 48,346
TOTAL LIABILITIES & STOCKHOLDER'S EQUITY $531,833 $497,632
<PAGE>
FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
3 Months Ended
03-31-97 03-31-96
(Dollars in thousands,
except per share data)
Interest income:
Interest & fees on loans $6,899 $5,916
Interest & dividends on investment sec.:
Taxable income 2,027 1,576
Non-taxable income 409 460
Dividends on stock 17 6
Interest on federal funds sold 207 196
Total Interest income 9,559 8,154
Interest expense:
Interest on deposits 3,504 3,068
Interest on federal funds purchased &
securities sold under agreements to
repurchase 465 352
Total Interest Expense 3,969 3,420
Net Interest Income 5,590 4,734
Provision for loan losses - Note 4 284 220
Net interest income after provision
for loan losses 5,306 4,514
Noninterest income:
Service charges on deposit accounts 1,005 986
Other service charges commissions, fees 490 319
Other operating income 10 8
Total noninterest income 1,505 1,313
Noninterest expense:
Salaries & employee benefits 2,427 2,044
Occupancy expense of bank premises-net 326 274
Furniture & equipment expense - net 386 294
Amortization expense-Intangible assets 145 155
Other expense 1,214 1,112
Total noninterest expense 4,498 3,879
Income before income taxes 2,313 1,948
Applicable income taxes 708 551
Net Income $1,605 $1,397
Net income per common share - Note 10 $0.63 $0.59
Cash dividends per common share $0.19 $0.18
<PAGE>
FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
3 Months Ended 3 Months Ended
03-31-97 03-31-96
(Dollars in thousands)
Cash flows from operating activities:
Net income $ 1,605 $ 1,397
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 418 357
Provision for loan losses 284 220
Provision for deferred taxes 0 123
Increase (decrease) in reserve
for income taxes - current 707 496
(Gain) loss on sale of premises
and equipment 0 0
(Increase) decrease in interest
receivables (305) (22)
Increase (decrease) in accumulated
premium amortization and discount
accretion - net (32) (361)
Increase (decrease) in interest
payable 212 19
(Increase) decrease in miscellaneous
assets (21) 32
(Increase) decrease in prepaid
assets (339) 247
Increase (decrease) in other
liabilities (197) (43)
Total adjustments 727 1,068
Net cash provided by operating
activities 2,332 2,465
<PAGE>
Consolidated Statements of Cash Flows - Continued.......
3 Months Ended 3 Months Ended
03-31-97 03-31-96
( Dollars in thousands)
Cash flows from investing activities:
Proceeds from maturities of investment
securities held-to-maturity 7,476 25,556
Purchase of investment securities
held-to-maturity (1,238) (1,048)
Proceeds from maturities of investment
securities available-for-sale 5,967 4,316
Purchase of investment securities
available-for-sale (20,923) (27,731)
Net (increase) decrease in customer
loans (10,885) (4,646)
Additions to premises and equipment (225) (413)
Proceeds from sale of premises and
equipment 0 0
Recoveries from loans previously charged
off 100 83
(Increase) decrease in funds sold (16,450) (16,000)
Net cash used in investing
activities (36,178) (19,883)
Cash flows from financing activities:
Net increase in demand deposits, NOW
accounts, savings accounts and
certificates of deposit 27,198 11,071
Sale of common stock 30 172
Net increase (decrease) in federal funds
purchased and securities sold under
agreement to repurchase 5,592 5,458
Dividends paid (485) (404)
Net cash provided by financing
activities 32,335 16,297
Net increase (decrease) in cash and cash
equivalents (1,511) (1,121)
Cash and cash equivalents at beginning of
year $28,824 $24,144
Cash and cash equivalents at end of period $27,313 $23,023
<PAGE>
FIRST NATIONAL CORPORATION
Note 1 - Basis of Presentation:
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the three months ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the
year ended December 31, 1997. For further information, refer to
the consolidated financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year
ended December 31, 1996. All dollar amounts are stated in
thousands, except per share data.
Note 2 - Investment Securities:
The following is the amortized cost and fair value of investment
securities held-to-maturity at March 31, 1997 and December 31,
1996:
<TABLE>
<CAPTION>
03-31-97 12-31-96
Gross Gross Gross Gross
Amort Unreal Unreal Fair Amort Unreal Unreal Fair
Cost Gains Losses Value Cost Gains Losses Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U S Treasury
securities 9,686 18 (13) 9,691 13,794 50 (2) 13,842
Obligations of
U S government
agencies & corps 16,185 50 (182) 16,053 16,825 70 (167) 16,728
Obligations of state
and political
subdivisions 33,122 357 (133) 33,346 34,578 432 (76) 34,934
Total 58,993 425 (328) 59,090 65,197 552 (245) 65,504
</TABLE>
<PAGE>
Note 2 - Continued...
The following is the amortized cost and fair value of securities
available-for-sale at March 31, 1997 and December 31, 1996:
<TABLE>
<CAPTION>
03-31-97 12-31-96
Gross Gross Gross Gross
Amort Unreal Unreal Fair Amort Unreal Unreal Fair
Cost Gains Losses Value Cost Gains Losses Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U S Treasury
securities 28,545 1 (235) 28,311 24,094 27 (62) 24,059
Obligations of
U S government
agencies & corps 81,564 75 (784) 80,855 71,061 224 (270) 71,015
Other securities 610 0 0 610 610 0 0 610
Total 110,719 76 (1,019) 109,776 95,765 251 (332) 95,684
</TABLE>
Investment securities with an aggregate amortized cost of $77,699
on March 31, 1997 and $65,885 on December 31, 1996, were pledged to
secure public deposits and for other purposes as required and
permitted by law.
Note 3 - Loans:
The following is a summary of loans at: 3-31-97 12-31-96
Commercial, financial & agricultural 49,354 46,392
Real Estate - construction 9,898 9,625
Real estate - mortgage 183,364 178,544
Consumer 61,821 59,058
Total loans 304,437 293,619
As of March 31, 1997 and December 31, 1996 the aggregate dollar
amount of loans to related parties; principally, directors and
executive officers, their immediate families and their business
interests, was $7,978 and $7,945 respectively. The following is an
analysis of the activity with respect to loans to related parties
for the three months ended March 31, 1997.
Balance, beginning of period 7,945
Add:
New loans 244
Deduct:
Payments 211
Other changes 0
Balance, end of period 7,978
<PAGE>
Note 4 - Allowance for Loan Losses:
Amount
03-31-97 12-31-96
Balance, beginning of period (year) 4,705 3,703
Add:
Recoveries 99 374
Provisions for loan losses charged
to income 284 1,319
Total 5,088 5,396
Deduct:
Loans charged off 66 691
Balance, end of period (year) 5,022 4,705
The allowance for loan losses is maintained at a level which, in
management's judgment is adequate to absorb credit losses inherent
in the loan portfolio. The amount of the allowance is based on
management's evaluation of the collectibility of the loan
portfolio, including the nature of the portfolio, credit
concentrations, trends in historical loss experience, specific
impaired loans, and economic conditions. Allowances for impaired
loans are generally determined based on collateral values or the
present value of estimated cash flows. The allowance is increased
by a provision for loan losses, which is charged to expense, and
reduced by charge-offs, net of recoveries.
For impairment recognized in accordance with Statement of Financial
Accounting Standards No. 114 (SFAS 114),"Accounting By Creditors
For Impairment Of A Loan", the entire change in present value of
expected cash flows is reported as bad debt expense in the same
manner in which impairment initially was recognized or as a
reduction in the amount of bad debt expense that otherwise would be
reported.
Note 5 - Adoption of Statement of Financial Accounting Standards No. 114
and No. 118:
Effective January 1, 1995, the bank adopted Statement of Financial
Accounting Standards No. 114 (SFAS 114),"Accounting By Creditors
For Impairment Of A Loan", and Statement of Financial Accounting
Standards No. 118 (SFAS 118),"Accounting By Creditors For
Impairment Of A Loan - Income Recognition And Disclosures". These
statements require creditors to account for impaired loans, except
for those loans that are accounted for at fair value or at the
lower of cost or fair value, at the present value of the expected
future cash flows discounted at the loan's effective interest rate.
<PAGE>
Note 5 - Continued...
The Company determines when loans become impaired through its
normal loan administration and review functions. Those loans
identified as substandard or doubtful as a result of the loan
review process are potentially impaired loans. A loan is impaired
when, based on current information and events, it is probable that
a creditor will be unable to collect all principal and interest
amounts due according to the contractual terms of the loan
agreement. A loan is not impaired during a period of delay in
payment if the Company expects to collect all amounts due,
including interest accrued at the contractual interest rate, for
the period of delay.
In accordance with these standards, the Company does not apply SFAS
114 and SFAS 118 to large groups of smaller balance homogeneous
loans that are collectively evaluated for impairment. These groups
include the Company's credit card, residential mortgage, overdraft
protection, home equity lines, accounts receivable financing, and
consumer installment loans.
The Company's adoption of these accounting standards did not have
a material effect on the financial condition and results of
operations of the Company.
In accordance with SFAS 114, historical information has not been
restated to reflect the application of this standard.
Note 6 - Other Real Estate:
Real estate acquired in satisfaction of a loan is reported in other
assets. Properties acquired by foreclosure or deed in lieu of
foreclosure are transferred to Other Real Estate Owned ("OREO")
and recorded at the lower of the outstanding loan balance at the
time of acquisition or the estimated market value. Market value is
determined on the basis of the properties being disposed of in the
normal course of business and not on a liquidation or distress
basis. Loan losses arising from the acquisition of such properties
are charged against the allowance for loan losses. Gains or losses
arising from the sale of OREO are reflected in current operations.
Note 7 - Interest Bearing Deposits:
Certificates of deposit in excess of $100,000 totaled $46,880 and
$38,616 at March 31, 1997 and December 31, 1996 respectively.
<PAGE>
Note 8 - Commitments and Contingent Liabilities:
In the normal course of business, the Company makes various
commitments and incurs certain contingent liabilities, which are
not reflected in the accompanying financial statements. The
commitments and contingent liabilities include guarantees,
commitments to extend credit and standby letters of credit. At
March 31, 1997, commitments to extend credit and standby letters of
credit aggregated $54,869. The Company does not anticipate any
material losses as a result of these transactions.
Note 9 - Common Stock:
As of December 31, 1996, the common stock outstanding was
2,550,024. During the first quarter, the Company granted options to
purchase an aggregate of 1,060 shares under the incentive stock
option plan. As of March 31, 1997, the common stock outstanding
was 2,551,091 shares.
Note 10 - Earnings Per Share:
Earnings per share are calculated on the weighted-average of number
of shares of common stock outstanding, giving retroactive effect to
stock dividends and stock splits. The number of weighted-average
shares outstanding at March 31, 1997, was 2,551,020 and 2,434,849
at December 31, 1996.
Dividends per share are calculated using the current equivalent of
number of common shares outstanding at the time of the dividend
based on the Company's shares outstanding.
<PAGE>
FIRST NATIONAL CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion relates to financial statements contained in
this report. For further information refer to the Management's Discussion
and Analysis of Financial Condition and Results of Operations appearing in
the Company's Annual Report on Form 10-K for the year ended December 31,
1996.
First National Corporation opened its second bank, the National Bank of
York County, on July 11, 1996 in Rock Hill, South Carolina to join its
existing bank, First National Bank, Orangeburg, South Carolina. A second
office of National Bank of York County was opened in Fort Mill, South
Carolina on September 18, 1996.
For the first quarter of 1997, First National Corporation (" the
Corporation ") had consolidated net income of $1,605,000, an increase of 14.9
percent over the $1,397,000 earned in the first quarter of 1996. Earnings
per share amounted to $0.63 for the three months ended March 31, 1997, a 6.8
percent increase over the $0.59 per share earned in the first quarter of
1996.
NET INTEREST INCOME
For the first three months of 1997, net interest income was $5,590,000
compared to $4,734,000 for the same period in 1996. This is an increase of
$856,000 or 18.1 percent. The increase resulted from a 20.6 percent increase
in loan outstandings, net of unearned income, when compared to the first
three months of 1996.
The yield on a major portion of the Company's earning assets adjusts
simultaneously with changes in the general level of interest rates. In the
first three months of 1996, the year to date taxable equivalent yield on
earning assets was 7.86 percent. During the same period in 1997, the yield
increased to 7.99 percent or an increase of 13 basis points. The cost of the
liabilities used to support these earning assets increased 2 basis points
from 3.92 percent in 1996 to 3.94 percent in 1997. Interest rates paid on
interest-bearing liabilities increased less rapidly than yields on earning
assets due primarily to lower yielding investment securities maturing and
being replaced at higher yields.
First quarter net interest margin increased from 4.54 percent in 1996 to
4.67 percent in 1997. The impact of interest-free funds for the same period
increased from .61 percent to .62 percent or an increase of 1 basis point.
<PAGE>
Management's Discussion Continued...
The largest category of earning assets is loans. At the end of the
first quarter 1997, loans outstanding, less unearned income, were
$304,437,000 compared to $293,619,000 at December 31, 1996. This represents
an increase of $10,818,000 or 3.7 percent. For the three months ended March
31, 1997 interest and fees on loans was $6,899,000 compared to $5,916,000 for
the comparable period in 1996, an increase of $983,000 or 16.6 percent.
The major volume increase in the loan portfolio was in commercial loans.
For the first three month period ended March 31, 1997, commercial loans
increased $3,128,000 or 8.2 percent when compared to December 31, 1996.
This increase in the loan portfolio was brought about due to a renewed
confidence in overall economic trends as well as the opening of the National
Bank of York County and the Bluffton branch of First National Bank. The
Company has no foreign loans nor loans for highly leveraged transactions.
For the three months ended March 31, 1997, loans averaged $283,368,000
and yielded 9.02 percent on a taxable equivalent basis compared to
$261,448,000 with a taxable equivalent yield of 9.11 percent or a decrease
of 9 basis points for the year ended December 31, 1996.
Investment securities are the second largest category of earning assets.
Investment securities are utilized by the Company as a vehicle for the
employment of excess funds, to provide liquidity, to fund loan demand or
deposit liquidation, and to pledge as collateral for certain deposit and
purchased funds.
At March 31, 1997, investment securities were $168,769,000 compared to
$160,881,000 at December 31, 1996. This is an increase of $7,888,000 or 4.9
percent. This increase is the result of management's decision to utilize
excess funds in the investment function in an attempt to increase yields and
profitability.
For the three months ended March 31, 1997, investment income was
$2,453,000 compared with $2,042,000 for the comparable period in 1996, a net
increase of $411,000 or 20.1 percent. Management attributes this increase in
income to higher volume and yields on investment securities.
For the first quarter 1997, securities averaged $154,270,000 and yielded
6.29 percent on a taxable equivalent basis, compared to $149,453,000 with a
yield of 6.10 percent for the year ended December 31, 1996, resulting in a 19
basis point increase in yield.
As of March 31, 1997 the Company had unrealized gains in the U S
Treasury and agency portfolio, denoted as held-to-maturity, of $68,000 and in
the municipal portfolio $357,000. Also at March 31, 1997, the Company had an
unrealized loss of $195,000 in the U S Treasury and agency portfolio and an
$133,000 unrealized loss in the municipal portfolio.
<PAGE>
Management's Discussion Continued...
At year end 1993, the Company adopted Statement of Financial Accounting
Standards No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" for the investment portfolio, and showed a net unrealized loss at
March 31, 1997 of approximately $943,000 on the $109,776,000 of securities
denoted as available-for-sale.
Although securities classified as available-for-sale may be sold from
time to time to meet liquidity or other needs, it is not the normal activity
of the Company to trade the investment portfolio. Management has the intent
and the ability to hold securities on a long-term basis or until maturity.
During the first three months of 1997, interest-bearing liabilities
averaged $382,360,000 and carried an average rate of 3.94 percent. This
compares to an average level of $353,810,000 with an average rate of 3.90
percent at December 31, 1996 or an increase of 4 basis points. Approximately
half of these interest-bearing liabilities have fixed rates. They are
expected to be renewed at prevailing market rates as they mature.
PROVISION FOR LOAN LOSSES
The provision for loan losses for the three month period ended March 31,
1997 was $284,000 compared to $220,000 for the same period in 1996 which
represents a 29.1 percent increase. The increase in the provision for loan
losses was due primarily to continued strong loan growth. The allowance for
loan losses was $5,022,000 or 1.65 percent of outstanding loans at March 31,
1997 compared to 1.60 percent of outstanding loans at year-end 1996.
To determine the adequacy of the allowance for loan losses, management
performs an internal loan analysis which indicates the estimated loan losses.
Management feels that the allowance for loan losses in adequately funded.
Other real estate owned includes certain real estate acquired as a
result of foreclosure. For the period ended March 31, 1997, other real
estate owned was $46,000 compared to $63,000 at December 31, 1996. This
decrease resulted from the sale of several real estate properties.
Management anticipates that the level of charge-offs for 1997 will be
near or below the levels of 1996. The loan loss allowance is considered
adequate by management. However, changes in economic conditions in the
Company's market area could affect these levels.
<PAGE>
Management's Discussion Continued...
NONINTEREST INCOME AND EXPENSE
Noninterest income for the first quarter of 1997 was $1,505,000 compared
to $1,313,000 for the same period in 1996, representing an increase of
$192,000 or 14.6 percent. During the first quarter of 1997, other service
charges, commissions and fees increased $171,000 or 53.6 percent compared to
the same period in 1996. This increase can be primarily attributed to the
increase in debit card fees as well as ATM fees charged on non-bank customer
transactions.
Noninterest expense for the first quarter of 1997 was $4,498,000
compared to $3,879,000, an increase of $619,000 or 16.0 percent. Salaries
and employee benefits for the three month period ended March 31, 1997,
increased $383,000 or 18.7 percent compared to the same period in 1996.
These increases can be largely attributed to the opening of the National Bank
of York County and the Bluffton branch of First National Bank during the
third quarter of 1996. Occupancy expense along with furniture and equipment
expense increased $144,000 or 25.4 percent for the three month period ended
March 31, 1997 when compared to the same period in 1996.
NET INCOME
Net income was up 14.9 percent for the first three months of 1997 when
compared to the same period in 1996. The $856,000 or 18.1 percent increase
in net interest income and the $192,000 or 14.6 percent increase in
noninterest income for the first quarter ended March 31, 1997 were the
primary factors in the growth in net income.
CAPITAL RESOURCES AND LIQUIDITY
To date the capital needs of the Company have been met through the
retention of earnings less cash dividends. At the end of the first quarter
1997, stockholder's equity was $48,962,000 compared to $48,346,000 at
December 31, 1996.
The Corporation and subsidiaries are subject to certain risk-based
capital guidelines. These ratios measure the relationship of capital to a
combination of balance sheet and off balance sheet risks. The values of both
balance sheet and off balance sheet items will be adjusted to reflect credit
risk. Under the guidelines of the Board of Governors of the Federal Reserve
System, which are substantially similar to the Office of the Comptroller of
the Currency guidelines, as of December 31, 1995 Tier 1 capital must be at
least 4 percent of risk-weighted assets, while total capital must be 8
percent of risk-weighted assets. The Tier 1 capital ratio at March 31, 1997
was 15.3 percent compared to 15.8 percent at December 31, 1996. The total
capital ratio was 16.6 percent at March 31, 1997 compared to 17.1 percent at
December 31, 1996.
<PAGE>
Management's Discussion Continued...
In conjunction with the risk-based capital ratio, applicable regulatory
agencies have also prescribed a leverage capital ratio in evaluating capital
strength and adequacy. The minimum leverage ratio required for banks is
between 3 percent and 5 percent, depending on the institution's composite
rating as determined by its regulators. At March 31, 1997, First National
Corporation's leverage ratio was 9.1 percent, compared to 9.5 percent at
December 31, 1996. First National Corporation's ratio exceeds the minimum
standards by substantial margins.
Liquidity is the ability of the Company to meet its cash flow
requirements which arise primarily from withdrawal of deposits, extension of
credit and payment of operating expenses. Asset liquidity is maintained by
the maturity structure of loans, investment securities and other short-term
investments. Management has policies and procedures governing the length of
time to maturity on loans and investments. Normally changes in the earning
asset mix are of a longer term nature and are not utilized for day-to-day
Corporation liquidity needs.
The Company's liabilities provide liquidity on a day-to-day basis.
Daily liquidity needs are met from deposit levels or from the Company's use
of federal funds purchased and securities sold under agreement to repurchase.
Additional liquidity can be secured from lines of credit extended to the
Company from its correspondent banks. Management feels that its liquidity
position is adequate.
<PAGE>
PART II - OTHER INFORMATION
Item l. Legal Proceedings:
Neither First National Corporation nor its subsidiaries
are part to nor is any of their property the subject of any
material or other pending legal proceedings, other than ordinary
routine proceedings incidental to their business.
Item 2. Changes in Securities:
Not Applicable
Item 3. Defaults Upon Senior Securities:
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders:
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K: None
<PAGE>
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
Date: May 13, 1997 C. John Hipp, III
President and Chief Executive Officer
Date: May 13, 1997 W. Louis Griffith
Principal Accounting Officer and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
27 Financial Data Schedule Attached
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Financial Condition at March 31, 1997 (Unaudited) and
the Consolidated Statement of Income (Unaudited) for the three months ended
March 31, 1997 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 27,313
<INT-BEARING-DEPOSITS> 0
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0
0
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</TABLE>
