-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RnoXjZs5k9xWs/RTeiPBPC2YefJb6VaPP+6Yt7SKe9VI1clJCRre5hrB4xRLjNCw DhM3c+06zDksDXzbIV9IPg== /in/edgar/work/0000764038-00-000012/0000764038-00-000012.txt : 20001115 0000764038-00-000012.hdr.sgml : 20001115 ACCESSION NUMBER: 0000764038-00-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST NATIONAL CORP /SC/ CENTRAL INDEX KEY: 0000764038 STANDARD INDUSTRIAL CLASSIFICATION: [6022 ] IRS NUMBER: 570799315 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12669 FILM NUMBER: 763610 BUSINESS ADDRESS: STREET 1: 950 JOHN C CALHOUN DR S.E. CITY: ORANGEBURG STATE: SC ZIP: 29115 BUSINESS PHONE: 8035342175 MAIL ADDRESS: STREET 1: P O BOX 1287 CITY: ORANGEBURG STATE: SC ZIP: 29116-1287 10-Q 1 0001.txt FORM 10-Q FIRST NATIONAL CORP FIRST NATIONAL CORPORATION Financial Statements (Form 10-Q) September 30, 2000 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 10-Q QUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended September 30, 2000 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) Registrant's telephone number, including area code (803) 534-2175 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 September 30, 2000 Common Stock, $2.50 par value 7,035,201 FIRST NATIONAL CORPORATION INDEX Part I: Financial Information Item 1 - Financial Statements Condensed Consolidated Balance Sheets - September 30, 2000 and December 31, 1999 Condensed Consolidated Statements of Changes In Shareholders' Equity - Nine Months Ended September 30, 2000 and 1999 Condensed Consolidated Statements of Income - Three and Nine Months Ended September 30, 2000 and 1999 Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2000 and 1999 Notes to Condensed 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 PART I - FINANCIAL INFORMATION Item l. FINANCIAL STATEMENTS FIRST NATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of dollars, except par value) 9/30/00 12/31/99 (Unaudited) (Note 1) ASSETS Cash and cash equivalents: Cash and due from banks $31,722 $39,479 Interest-bearing deposits with banks 427 1,848 Total cash and cash equivalents 32,149 41,327 Federal funds sold and securities purchased 1,150 - Investment securities: Held-to-maturity (fair value of $38,458 in 2000 and $46,529 in 1999) 38,916 47,268 Available-for-sale 147,924 148,304 Total investment securities 186,840 195,572 Loans 711,134 613,961 Less, unearned income (3,471) (3,420) Less, allowance for loan losses (8,623) (7,883) Loans, net 699,040 602,655 Premises and equipment, net 16,612 15,693 Other assets 19,418 17,151 TOTAL ASSETS $955,209 $872,398 LIABILITIES & SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing $114,688 $105,018 Interest-bearing transaction accounts 615,734 584,647 Total deposits 730,422 689,665 Federal funds purchased & securities sold under agreements to repurchase 88,255 76,400 Notes payable 48,900 26,750 Other liabilities 5,633 3,764 Total liabilities 873,210 796,579 Shareholders' equity: Common stock-$2.50 par value; authorized 40,000,000 shares; issued and outstanding 7,035,201 and 7,041,101 shares 17,588 17,603 Surplus 47,588 47,666 Retained earnings 18,788 13,496 Accumulated other comprehensive loss (1,965) (2,946) Total shareholders' equity 81,999 75,819 Total liabilities and shareholders' equity $955,209 $872,398 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS FIRST NATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (Unaudited) (Dollars in thousands)
Accumulated Other Common Stock Retained Comprehensive Shares Amount Surplus Earnings Income(Loss) Total BALANCE, DECEMBER 31, 1998 6,899,679 $ 17,249 $ 47,072 $ 8,743 $ 1,261 $ 74,325 Comprehensive income: Net income - - - 5,700 - 5,700 Change in net unrealized gain (loss) on securities available- for-sale, net of tax effects - - - - (3,195) (3,195) Total comprehensive income - - - - - 2,505 Cash dividends declared at $.39 per share - - - (2,274) - (2,274) Common stock issued 127,656 319 394 - - 713 Repurchase of common stock (378) (1) (8) - - (9) BALANCE, SEPTEMBER 30, 1999 7,026,957 $ 17,567 $ 47,458 $ 12,169 (1,934) $ 75,260 BALANCE, DECEMBER 31, 1999 7,041,101 $ 17,603 $ 47,666 $ 13,496 $ (2,946) $ 75,819 Comprehensive income: Net income - - - 8,108 - 8,108 Change in net unrealized gain (loss) on securities available- for-sale, net of tax effects - - - - 981 981 Total comprehensive income - - - - - 9,089 Cash dividends declared at $.40 per share - - - (2,816) - (2,816) Repurchase of common stock (5,900) (15) (78) - - (93) BALANCE, SEPTEMBER 30, 2000 7,035,201 $ 17,588 $ 47,588 $ 18,788 $ (1,965) $81,999
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS FIRST NATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands of dollars, except per share data) Three Months Ended Nine Months Ended 9/30/99 9/30/00 (Restated) 9/30/00 9/30/99 Interest income: Loans, including fees $15,857 $11,924 $44,955 $34,388 Investment securities: Taxable 2,307 2,501 6,969 8,068 Nontaxable 438 471 1,342 1,368 Federal funds sold 498 367 1,687 541 Deposits with banks 73 - 183 - Total interest income 19,173 15,263 55,136 44,365 Interest expense: Interest on deposits 6,711 4,796 18,788 14,406 Federal funds purchased & securities sold under agreements to repurchase 1,730 761 4,706 2,119 Notes payable 496 417 1,372 1,005 Total interest expense 8,937 5,974 24,866 17,530 Net interest income: Net interest income 10,236 9,289 30,270 26,835 Provision for loan losses 456 366 1,214 1,110 Net interest income after provision for loan losses 9,780 8,923 29,056 25,725 Noninterest income: Service charges on deposit accounts 1,826 1,425 5,564 4,226 Other service charges and fees 951 1,001 2,796 2,982 Gain (loss)on sale of securities available-for-sale 6 (23) (6) 222 Other income - 59 - 99 Total noninterest income 2,783 2,462 8,354 7,529 Noninterest expense: Salaries & employee benefits 4,211 4,208 13,133 12,562 Net occupancy expense 475 349 1,407 1,377 Furniture and equipment expense 944 960 2,651 2,286 Other expense 2,726 4,700 8,125 9,164 Total noninterest expense 8,356 10,217 25,316 25,389 Earnings: Income before provision for income taxes 4,207 1,168 12,094 7,865 Provision for income taxes 1,400 182 3,986 2,165 Net Income $2,807 $ 986 $8,108 $5,700 Comprehensive income $4,100 $ 690 $9,089 $2,505 Earnings per share: Basic $ 0.40 $ 0.14 $ 1.15 $ 0.82 Diluted $ 0.40 $ 0.14 $ 1.15 $ 0.81 Cash dividends per common share $ 0.14 $ 0.13 $ 0.40 $ 0.39 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS FIRST NATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands of dollars) Nine Months Ended 9/30/00 9/30/99 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 8,108 $ 5,700 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,141 1,431 Provision for loan losses 730 891 Deferred income taxes (576) (597) (Gain)loss on sale of securities available- for-sale 6 (222) Gain on sale of premises and equipment - (20) Net amortization of investment securities 10 225 Net change in: Miscellaneous other assets (2,217) (4,409) Miscellaneous other liabilities 1,869 141 Net cash provided by operating activities 9,071 3,140 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of investment securities available-for-sale 10,281 31,505 Proceeds from maturities of investment securities held-to-maturity 10,452 7,747 Proceeds from maturities of investment securities available-for-sale 17,843 43,283 Purchases of investment securities held-to-maturity (2,174) (7,510) Purchases of investment securities available-for-sale (26,129) (79,983) Net increase in customer loans (97,165) (78,051) Recoveries of loans previously charged off - 91 Purchases of premises and equipment (2,061) (4,508) Proceeds from sale of premises and equipment - 20 Net increase (decrease)in federal funds sold (1,150) 3,291 Net cash used by investing activities (90,103) (84,115) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED... Nine Months Ended 9/30/00 9/30/99 CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in demand deposits, NOW accounts, savings accounts and certificates of deposit 40,758 46,220 Net increase in federal funds purchased and securities sold under agreements to repurchase 11,855 8,792 Proceeds from issuance of debt or other borrowings 25,800 34,200 Repayment of debt or other borrowings (3,650) (6,350) Common stock issued - 645 Repurchase of common stock (93) (9) Dividends paid (2,816) (2,274) Stock options exercised - 169 Net cash provided by financing activities 71,854 81,393 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (9,178) $ 418 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 41,327 31,611 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 32,149 $ 32,029 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS FIRST NATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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. Certain prior period information has been reclassified to conform to the current period presentation. Operating results for the three and nine months ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. The condensed consolidated balance sheet at December 31, 1999, has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The information contained in the consolidated financial statements and accompanying footnotes included in the Corporation's annual report on Form 10-K for the year ended December 31, 1999 should be referenced when reading these unaudited condensed consolidated financial statements. NOTE 2 - Recent Accounting Pronouncements: In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts. The statement requires that all derivative instruments be recorded in the balance sheet as either an asset or liability measured at fair value, and that changes in the fair value of derivatives be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company formally document, designate and assess the effectiveness of transactions that receive hedge accounting. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133", which delays the original effective date of SFAS No. 133 until fiscal years beginning after June 15, 2000. The adoption of SFAS No. 133 is not expected to have a material effect on the Corporation's consolidated financial statements. NOTE 3 - Earnings Per Share: Basic earnings per share is calculated by dividing net income by the weighted-average shares of common stock outstanding during each period. Diluted earnings per share is based on the weighted-average shares of common stock outstanding during each period plus the maximum dilutive effect of common stock issuable upon exercise of stock options. The weighted average number of shares and equivalents are determined after giving retroactive effect to stock dividends and stock splits. Weighted-average shares outstanding used in calculating earnings per share for the three and nine months ended September 30, 2000 and 1999 are as follows: 3 Months Ended 9 Months Ended 9/30/00 9/30/99 9/30/00 9/30/99 Basic 7,039,621 6,988,213 7,040,604 6,988,213 Diluted 7,064,071 7,040,807 7,072,853 7,040,807 Dividends per share are calculated using the current equivalent of number of common shares outstanding at the time of the dividend based on the Corporation's shares outstanding. NOTE 4 - Commitments and Contingent Liabilities: In the normal course of business, the Corporation 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 September 30, 2000, commitments to extend credit and standby letters of credit totaled $129,903,000. The Corporation does not anticipate any material losses as a result of these transactions. NOTE 5 - Prior Period Adjustment: Certain errors, resulting in a $486,000 overstatement of the reported net income for the quarter ended September 30, 1999, in the Corporation's previously filed Form 10Q for that period, have been corrected in the current period's report. The errors had no effect on the previously reported 1999 year to date earnings or retained earnings. However, basic and diluted earnings per share for the quarter were reduced from $.22 to $.14. 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, 1999. First National Corporation (the "Corporation") is a bank holding company incorporated under the laws of South Carolina in 1985. The Corporation owns 100% of First National Bank, a national bank which opened for business in 1932, 100% of National Bank of York County, a national bank which opened for business in 1996, 100% of Florence County National Bank, a national bank which opened for business in 1998, and 90% of CreditSouth Financial Services Corporation, an upscale finance company which opened for business in 1998. The Corporation engages in no significant operations other than the ownership of its subsidiaries. Some of the major services which the Corporation provides through its banking subsidiaries include checking, NOW accounts, savings and other time deposits of various types, alternative investment products such as annuities and mutual funds, loans for businesses, agriculture, real estate, personal use, home improvement and automobiles, credit cards, letters of credit, home equity lines of credit, safe deposit boxes, bank money orders, wire transfer services, trust services, discount brokerage services, and use of ATM facilities. The Corporation has no material concentration of deposits from any single customer or group of customers, and no significant portion of its loans is concentrated within a single industry or group of related industries. There are no material seasonal factors that would have a material adverse effect on the Corporation. The Corporation does not have foreign loans. For the third quarter of 2000, First National Corporation ("the Corporation") had consolidated net income of $2,807,000, an increase of 184.7 percent over the $986,000 earned in the third quarter of 1999. Net income in 1999's third quarter was impacted by non-recurring expenses, totaling $1,684,000 after taxes, associated with the Corporation's acquisition of FirstBancorporation Inc. and purchase of two other bank branches. Reference should be made to Note 5 of the Condensed Consolidated Financial Statements regarding a prior period adjustment made to net income for the quarter ended September 30, 1999. Diluted earnings per share amounted to $0.40 for the three months ended September 30, 2000, a 185.7 percent increase over the $0.14 per share earned in the third quarter of 1999. Net income for the first nine months of 2000 was $8,108,000, an increase of 42.2 percent over the $5,700,000 earned for the same period in 1999. Diluted earnings per share amounted to $1.15 for the nine months ended September 30, 2000, a 42.0 percent increase over the $0.81 per share earned in the first nine months of 1999. Management's Discussion Continued... NET INTEREST INCOME For the third quarter of 2000, net interest income was $10,236,000 compared to $9,289,000 for the same period in 1999. This is an increase of $947,000 or 10.2 percent. Net interest income for the first nine months of 2000 was $30,270,000 compared to $26,835,000 for the same period in 1999. This represents an increase of $3,435,000 or 12.8 percent. This increase resulted from a 23.9 percent increase in loan outstandings, net of unearned income when compared to the first nine months of 1999. The yield on a major portion of the Corporation's earning assets adjusts simultaneously, but to varying degrees of magnitude, with changes in the general level of interest rates. In the first nine months of 1999, the year to date taxable equivalent yield on earning assets was 7.50 percent. During the same period of 2000, the yield increased to 7.93 percent, or an increase of 43 basis points. The cost of the interest-bearing liabilities used to fund most of these earning assets increased 67 basis points from 3.69 percent in 1999 to 4.36 percent in 2000. Interest rates paid on interest-bearing liabilities increased more rapidly than yields on earning assets during the period. For the first nine months, net interest margins decreased from 4.42 percent in 1999 to 4.23 percent in 2000. The positive impact of interest-free funds for the same period increased from 0.60 percent in 1999 to 0.66 percent in 2000. The largest category of earning assets is loans. At the end of the third quarter 2000, loans outstanding, less unearned income, were $707,663,000 compared to $610,541,000 at December 31, 1999. This represents an increase of $97,122,000 or 15.9 percent in the nine-month period. For the third quarter ended September 30, 2000, interest and fees on loans were $15,857,000 compared to $11,924,000 for the comparable period in 1999, an increase of $3,933,000 or 33.0 percent. For the nine months ended September 30, 2000, interest and fees on loans were $44,955,000 compared with $34,388,000 for the same period in 1999. This represents an increase of $10,567,000 or 30.7 percent. For the nine months ended September 30, 2000, loans averaged $669,230,000 and decreased in yield by 29 basis points to 8.52 percent on a taxable equivalent basis, compared to $541,434,000 with a taxable equivalent yield of 8.81 percent for the full year ended December 31, 1999. Investment securities are the second largest category of earning assets. Investment securities are utilized by the Corporation 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 September 30, 2000, investment securities were $186,840,000 compared to $195,572,000 at December 31, 1999, representing a decline of 4.5 percent during the nine-month period. Management's Discussion Continued... For the third quarter ended September 30, 2000, investment and money market income was $3,316,000 compared with $3,339,000 for the comparable period in 1999, a net decrease of $23,000 or 0.7 percent. For the nine month period ended September 30, 2000, investment income was $10,181,000 compared with $9,977,000 for the same period in 1999, a net increase of $204,000 or 2.0 percent. The increase was attributable to higher second quarter balances of securities purchased under agreement to resell. For the nine months ended September 30, 2000, securities averaged $186,448,000 and yielded 6.09 percent on a taxable equivalent basis, compared to $226,329,000 with a yield of approximately 5.75 percent for the full year ended December 31, 1999, resulting in a 34 basis point increase in yield. At September 30, 2000, the Corporation had net unrealized losses in the U.S. Treasury and agency portfolio denoted as held-to-maturity, of $14,000 and in the municipal portfolio of $444,000. Also at September 30, 2000, the Corporation had a net unrealized loss of approximately $3,119,000 on the $147,924,000 balance of securities denoted as available-for-sale. For the nine months ended September 30, 2000, the Corporation had a $6,000 net realized loss due to the sale of investment securities 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 or intent of the Corporation 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 nine months of 2000, interest-bearing liabilities averaged $760,258,000 and carried an average rate of 4.36 percent. This compares to an average level of $626,815,000 with a rate of 3.82 percent for the full year ended December 31, 1999, or an increase of 54 basis points. PROVISION FOR LOAN LOSSES The provision for loan losses for the three month period ended September 30, 2000 was $456,000 compared to $366,000 for the same period in 1999 which represents a 24.6 percent increase. For the nine month period ended September 30, 2000, the provision for loan losses was $1,214,000 compared to $1,110,000 for the same period in 1999 which represents a 9.4 percent increase. The allowance for loan losses was $8,623,000 or 1.22 percent of outstanding loans at September 30, 2000 compared to 1.29 percent of outstanding loans at year-end 1999. 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 is adequately funded. Other real estate owned includes certain real estate acquired as a result of foreclosure and other reasons. For the period ended September 30, 2000, other real estate owned was $918,000 compared to $227,000 at December 31, 1999. This increase resulted from the foreclosure and contractual purchase of certain real estate properties. Management's Discussion Continued... Management anticipates that the level of charge-offs for 2000 will be near the levels of 1999. The loan loss allowance is considered adequate by management. However, changes in economic conditions in the Corporation's market area could affect these levels. NONINTEREST INCOME AND EXPENSE Noninterest income for the third quarter of 2000 was $2,783,000 compared to $2,462,000 for the same period in 1999, representing an increase of $321,000 or 13.0 percent. For the first nine months of 2000, noninterest income was $8,354,000 compared to $7,529,000 for the same period in 1999, representing an increase of $825,000 or 11.0 percent. This increase is primarily attributed to deposit account service charges and other service charges, fees and commissions. Noninterest expense for the third quarter of 2000 was $8,356,000 compared to $10,217,000 for the same period in 1999, representing a decrease of $1,861,000 or 18.2 percent. For the nine months ended September 30, 2000, noninterest expense was $25,316,000 compared to $25,389,000 in 1999, a decrease of $73,000 or 0.3 percent. Salaries and employee benefits for the quarter ended September 30, 2000 increased $3,000 or 0.1 percent compared to the same period in 1999. For the first nine months of 2000, salaries and employee benefits increased $571,000 or 4.5 percent compared to the same period in 1999. Occupancy expense along with furniture and equipment expense increased $110,000 or 8.4 percent for the third quarter of 2000 compared to the same period in 1999. For the nine months ended September 30, 2000 occupancy together with furniture and equipment expense increased $395,000 or 10.8 percent compared to the same period in 1999. These increases can be largely attributed to an increase in building and furniture and equipment depreciation expense, maintenance and repairs on buildings as well as an increase in equipment rental/lease expense. Other expenses were $1,974,000 or 42.0 percent lower in the third quarter of 2000 compared to the same period in 1999. For the nine months ended September 30, 2000, other expenses decreased $1,039,000 or 11.3 percent compared to the same period in 1999. Other expenses for the nine months ended September 30, 1999 included nonrecurring charges of approximately $2,381,000 related to costs associated with the Corporation's merger with Firstbancorporation, Inc. The net increase in other expenses in 2000 of $1,342,000, when compared to these expenses in 1999 excluding the nonrecurring merger-related charges, is distributed among the following expense categories: advertising, insurance and surety bond, office and printing supplies, postage, and telephone and line charges. NET INCOME Net income was up 184.7 percent for the third quarter of 2000 when compared to the same period in 1999. For the nine months ended September 30, 2000, net income was up 42.2 percent compared to the same period in 1999. The $3,435,000 or 12.8 percent increase in net interest income and the $825,000 or 11.0 percent increase in noninterest income for the nine months ended September 30, 2000 as compared to the same period in 1999 along with prior year nonrecurring merger costs discussed above were the primary factors in the growth in net income. Management's Discussion Continued... CAPITAL RESOURCES AND LIQUIDITY To date, the capital needs of the Corporation have been met through the retention of earnings less cash dividends. At the end of the third quarter of 2000, stockholder's equity was $81,999,000 compared to $75,819,000 at December 31, 1999. The Corporation and its banking 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 September 30, 2000 was 12.38 percent compared to 12.70 percent at December 31, 1999. The total capital ratio was 13.63 percent at September 30, 2000 compared to 13.95 percent at December 31, 1999. 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 September 30, 2000, First National Corporation's leverage ratio was 8.14 percent, compared to 8.64 percent at December 31, 1999. First National Corporation's ratios exceed the minimum standards by substantial margins. Liquidity is the ability of the Corporation 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 Corporation's liabilities provide liquidity on a day-to-day basis. Daily liquidity needs are met from deposit levels or from the Corporation'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 Corporation from its correspondent banks and other sources such as the Federal Home Loan Bank. Management feels that its liquidity position is adequate. PART II - OTHER INFORMATION Item l. Legal Proceedings: Neither First National Corporation nor its subsidiaries are a party 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 of Form 8-K (A) Exhibit 27 - Financial Data Schedule (B) Reports on Form 8-K: None Pursuant to the requirements of the Securities and 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: November 14, 2000 C. JOHN HIPP, III PRESIDENT & CHIEF EXECUTIVE OFFICER Date: November 14, 2000 RICHARD C. MATHIS EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER EXHIBIT INDEX EXHIBIT NO. DESCRIPTION OF EXHIBIT 27 Financial Data Schedule Attached EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
9 This schedule contains summary financial information extracted from the Condensed Consolidated Statement of Financial Condition at September 30, 2000 (Unaudited) and the Condensed Statement of Income (Unaudited) for the nine months ended September 30, 2000 and is qualified in its entirety by reference to such financial statements. 1000 3-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 31,722 427 1,150 0 147,924 38,916 38,458 707,663 8,623 955,209 730,422 124,155 5,633 13,000 0 0 17,588 64,411 955,209 44,955 8,311 1,870 55,136 18,788 24,866 30,270 1,214 (6) 25,316 12,094 8,108 0 0 8,108 1.15 1.15 7.93 1,468 1,466 0 7,557 7,886 644 167 8,623 8,623 0 0
-----END PRIVACY-ENHANCED MESSAGE-----