UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-23976 FIRST NATIONAL CORPORATION (Exact name of registrant as specified in its charter) Virginia 54-1232965 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 112 West King Street, Strasburg, Virginia 22657 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (540) 465-9121 NONE (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 Months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares of each of the issuer's classes of common stock, as of the latest practicable date: Class: Common stock, $5.00 par value Outstanding as of October 31, 1998: 787,936 FIRST NATIONAL CORPORATION INDEX Part 1. Financial Information Item 1 Financial Statements Page No. Consolidated Statements of Income 3 Consolidated Balance Sheets 5 Consolidated Statements of Cash Flows 6 Consolidated Statements of Changes in Stockholders' Equity 7 Notes to Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 14 Part II. Other Information Item 1 Legal Proceedings 14 Item 4. Submission of Matters to a vote of Security Holders 14 Item 6. Exhibits and Reports on Form 8-K 14 Signature 16 Part I. Financial Information Item 1. Financial Statements FIRST NATIONAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME (In Thousands of Dollars) (Except Per Share Amounts) (Unaudited) Three Months Ended September 30, 1998 September 30, 1997 Interest Income Interest and Fees on Loans $2,783 $2,425 Interest on Federal Funds Sold 34 31 Interest on Deposits in Banks 8 7 Interest and Dividends on Investment Securities Available for Sale Taxable 719 446 Non Taxable 89 89 Held to Maturity Taxable 3 34 Non Taxable 0 0 ------------ ----------- Total Interest Income 3,636 3,032 Interest Expense Interest on Savings Deposits and Interest Bearing Demand Deposits 789 694 Interest on Time Deposits of $100,000 or more 193 187 Interest on All Other Time Deposits 677 576 Interest on Federal Funds Purchased 3 2 Interest on Note Payable 255 23 --------- ---------- Total Interest Expense 1,917 1,482 -------- ------- Net Interest Income 1,719 1,550 Provision for Loan Losses 90 45 ---------- --------- Net Interest Income After Provisions for Loan Losses 1,629 1,505 Other Operating Income Service Charges 156 146 Profits on Securities Available for Sale 0 0 Other Operating Income 142 135 -------- -------- Total Operating Income 298 281 Other Operating Expenses Salaries and Employee Benefits 616 594 Occupancy Expense 70 67 Equipment Expense 127 134 Other 420 382 -------- -------- Total Operating Expenses 1,233 1,177 Income Before Income taxes 694 609 Income Taxes 214 186 --------- --------- Net Income $480 $423 ========= ======== Per Share Data Earnings Per Common Share,basic $0.61 $0.55 ========= ======== Earnings Per Common Share,diluted $0.61 $0.55 ========= ======== Cash Dividends 0.215 0.175 ========= ========= <FN> The Accompanying Notes Are An Integral Part Of These Statements </FN> FIRST NATIONAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME (In Thousands of Dollars) (Except Per Share Amounts) (Unaudited) Nine Months Ended September 30, 1998 September 30, 1997 Interest Income Interest and Fees on Loans $8,053 $6,955 Interest on Federal Funds Sold 67 66 Interest on Deposits in Banks 22 22 Interest and Dividends on Investment Securities Available for Sale Taxable 1,794 1,261 Non Taxable 269 269 Held to Maturity Taxable 30 115 Non Taxable 0 0 ------------ ----------- Total Interest Income 10,235 8,688 Interest Expense Interest on Savings Deposits and Interest Bearing Demand Deposits 2,306 1,871 Interest on Time Deposits of $100,000 or more 521 518 Interest on All Other Time Deposits 1,794 1,736 Interest on Federal Funds Purchased 24 6 Interest on Note Payable 624 69 --------- ---------- Total Interest Expense 5,269 4,200 -------- ------- Net Interest Income 4,966 4,488 Provision for Loan Losses 228 135 ---------- --------- Net Interest Income After Provisions for Loan Losses 4,738 4,353 Other Operating Income Service Charges 457 393 Profits on Securities Available for Sale 136 8 Other Operating Income 438 381 -------- -------- Total Operating Income 1,031 782 Other Operating Expenses Salaries and Employee Benefits 1,951 1,767 Occupancy Expense 205 176 Equipment Expense 372 399 Other 1,264 1,084 -------- -------- Total Operating Expenses 3,792 3,426 Income Before Income taxes 1,977 1,709 Income Taxes 615 517 --------- --------- Net Income $1,362 $1,192 =========== ======== Per Share Data Earnings Per Common Share,basic $1.73 $1.54 ========= ======== Earnings Per Common Share,diluted $1.73 $1.54 ========= ======== Cash Dividends $0.645 $0.52 ========== ========= <FN> The Accompanying Notes Are An Integral Part Of These Statements </FN> FIRST NATIONAL CORPORATION CONSOLIDATED BALANCE SHEETS (In Thousands of Dollars) September 30, 1998 December 31, 1997 ASSETS Cash and due from banks $5,608 $3,623 Federal Funds Sold 0 0 Investment Securities Available for Sale 53,437 40,037 Held to Maturity 131 1,662 Loans Net of Unearned Discount 128,484 113,606 Less: Allowance for Loan Losses 1,209 1,112 --------- --------- Net Loans 127,275 112,494 Bank Premises and Equipment 3,787 3,934 Interest Receivable 1,109 1,148 Other Real Estate 353 919 Other Assets 1,260 772 -------- ------- Total Assets $192,960 $164,589 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits Demand Deposits Non-Interest Bearing $19,158 $16,969 Interest Bearing 16,054 15,910 Savings Deposits 56,032 52,380 Certificates of Deposit of $100,000 and over 13,227 12,243 All Other Time Deposits 49,470 42,260 ---------- ---------- Total Deposits $153,941 $139,762 -------- -------- Federal Funds Purchased 2,554 1,417 Federal Home Loan Bank Advance 17,727 6,461 Accrued Expenses 1,324 767 --------- --------- Total Liabilities $175,546 $148,407 -------- -------- Stockholders' Equity Common Stock, Par Value $5 per Share; Authorized 2,000,000 Shares 787,426 & 777,547 Shares Issued and Outstanding $3,937 $3,888 Surplus 1,376 1,187 Accumulated Other Comprehensive Income 471 335 Undivided Profits 11,630 10,772 --------- --------- Total Stockholders' Equity $17,414 $16,182 ------- ------- Total Liabilities and Stockholders' Equity $192,960 $164,589 ======== ======== <FN> The Accompanying Notes Are An Integral Part of These Statements </FN> FIRST NATIONAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of Dollars) NINE MONTHS ENDED September 30, 1998 September 30, 1997 CASH FLOWS FROM OPERATING ACTIVITIES Net Income $1,362 $1,192 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 293 351 Provision for loan losses 228 135 Change in assets and liabilities: (Increase) decrease in interest receivables 39 (103) (Increase) in other assets (488) (280) Increase in accrued expenses 557 570 ------ ------ Net Cash Provided by Operating Activities $1,991 $1,865 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of securities-available for sale $6,383 $6,708 Proceeds from maturities and principal payments on securities- available for sale 13,022 3,600 Purchases of securities-available for sale (32,676) (15,910) Proceeds from maturities and principal payments on securities- held to maturity 1,528 865 Purchases of bank premises and equipment (145) (1,003) Net (increase) in loans (15,009) (9,367) Proceeds on sale of other real estate 576 0 -------- ------------- Net Cash (Used in) Investing Activities ($26,321) ($15,107) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase in demand deposits, NOW accounts, and savings accounts 5,986 13,225 Net increase (decrease) in certificates of deposit 8,194 (905) Net increase (decrease) in long-term borrowings 11,265 (14) Net proceeds from issuance of common stock 238 29 Cash dividends paid (505) (407) Net increase in federal funds purchased 1,137 988 ----- ----------- Net Cash Provided by Financing Activities $26,315 $12,916 ------- --------- Increase (Decrease) in Cash and Cash Equivalents $1,985 $(326) CASH AND CASH EQUIVALENTS: Beginning 3,623 3,511 -------- -------- Ending $5,608 $3,185 ====== ====== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest $973 $1,074 ======= ======= Income Taxes $648 $436 ========== ===== <FN> The Accompanying Notes Are An Integral Part of These Statements </FN> FIRST NATIONAL CORPORATION CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (IN THOUSANDS OF DOLLARS) Nine Months Ended September 30, 1998 and 1997 Accumulated Other Common Capital Comprehensive Retained Comprehensive Stock Surplus Income Earnings Income Total Balances , December 31, 1996 $3,872 $1,133 $31 $9,801 $14,837 Comprehensive income: Net income 1,192 1,192 1,192 Other comprehensive income net of tax: Unrealized gains on securities available for sale 283 283 Reclassification adjustment for gains realized in net income (8) (8) ---------- Other comprehensive income,net of tax 275 275 ------ Total comprehensive income 1,467 Issuance of authorized common stock dividend reinvestment plan $7 $22 29 Cash dividends declared (407) (407) ------------ ----------- ----------- -------- -------- Balances, September 30, 1997 $3,879 $1,155 $306 $10,586 $15,926 ====== ====== ==== ======= ======= Balances, December 31, 1997 3,888 $1,187 $335 $10,772 $16,182 Comprehensive income: Net Income 1,363 1,363 1,363 Other comprehensive income, net of tax: Unrealized gain on securities available for sale 272 272 Reclassification adjustment for gains realized in net income (136) (136) --------- Total comprehensive income, net of tax 136 136 ------ Total comprehensive income 1,500 Issuance of authorized common stock dividend reinvestment plan 7 30 37 exercise of incentive stock options 42 159 200 Cash dividends declared (505) (505) ------------ ---------- ----------- -------- --------- Balances, September 30, 1998 $3,937 $1,376 $471 $11,630 $17,414 ====== ====== ==== ======= ======= <FN> The Accompanying Notes Are An Integral Part of These Statements </FN> FIRST NATIONAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Interim Financial Statements The accompanying consolidated financial statements of First National Corporation and its subsidiaries have not been audited by independent accountants, except for the balance sheet at December 31, 1997. In the opinion of the company's management, the financial statements reflect all adjustments necessary to present fairly the results of operations for the nine month and three month periods ended September 30, 1998 and 1997, the company's financial position at September 30, 1998 and December 31, 1997, and the cash flows for the nine month periods ended Septemberr 30, 1998 and 1997. These adjustments are of a normal recurring nature. Note 2. Securities as of September 30, 1998 and December 31, 1997 are summarized below: (000 Omitted) September 31, 1998 December 31, 1997 ------------------ ----------------- Unrealized Unrealized Book Market Gain (Loss) Book Market Gain (Loss) Securities Available For Sale U. S. Treasury Securities $0 $0 $0 $0 $0 $0 U. S. Agency Securities 44,751 45,162 $411 31,961 32,162 $201 Obligation of State and Political Subdivisions 6,728 7,032 $304 6,478 6,785 $307 Other Securities 1,243 1,243 $0 1,090 1,090 $0 --------- --------- ------ --------- ----------- ------ Total Securities Available for Sale $52,722 $53,437 $715 $39,529 $40,037 $508 Securities Held to Maturity U. S. Treasury Securities $0 $0 $0 $0 $0 $0 U. S. Agency Securities 131 132 $1 1,662 1,662 $0 Obligation of State and Political Subdivisions 0 0 $0 0 0 $0 Other Securities 0 0 $0 0 0 $0 ---------- ---------- ------ ---------- ---------- ---- Total Securities Held to Maturity $131 $132 $1 $1,662 $1,662 $0 FIRST NATIONAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 3. The consolidated loan portfolio, stated at face amount, is composed of the following: (000 Omitted) September 30, 1998 December 31, 1997 Real estate loans: Construction and land development $5,089 $3,583 Secured by farm land 866 947 Secured by 1-4 family residential 47,247 45,133 Other real estate loans 21,418 17,126 Loans to farmers (except those secured by real estate) 591 647 Commercial and industrial loans (except those secured by real estate) 24,854 19,576 Loans to individuals for personal expenditures 28,077 26,574 All other loans 515 461 --------- ------------ Total loans $128,657 $114,047 Less unearned income reflected in loans 173 441 --------- ------------ Loans, net of unearned income $128,484 $113,606 ======== ======== <FN> The Bank had loans in a Nonaccrual category of $23,642 on December 31, 1997 and $ 453,000 on September 30, 1998. </FN> Note 4. Allowance for Loan Losses Analysis of the Allowance for Loan Losses For the Nine Months Ended (000 Omitted) September 30, 1998 September 30, 1997 Balance at Beginning of Period $1,112 $974 Charge-Offs 142 40 Recoveries 11 8 ------- ------- Net Charge-Offs 131 32 Provision for Loan Losses 228 135 -------- -------- Balance at End of Period $1,209 $1,077 ======== ====== FIRST NATIONAL CORPORATION Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Net income for the three quarters of 1998 ended September 30th was $1,362 thousand compared to $1,192 thousand in 1997. This represents an increase of 14.26% which is attributable to an increase in net interest income during the period and to gains realized on the sale of securities earlier in the year. Total interest income, increased $1.5 million during the period, while total interest expense increased $1.1 million resulting in an increase in net interest income of $385 thousand. Total other operating expenses increased $366 thousand, much faster than total operating income, net of profits on securities available for sale, which increased $113 thousand. Management increased the provision to the allowance for loan losses by $93 thousand as a result of growth in the loan portfolio during the year and in anticipation of continued growth next year. Yields, Rates and Net Interest Margin Interest rates on loans have decreased slightly during 1998 and in comparison with the same period last year, the yield on the loan portfolio declined from 9.01% in 1997 to 8.85% in 1998. At the same time the cost of interest bearing deposits increased from 4.77% in the first nine months of 1997 to 4.84% in the same period of 1998. While the yield on earning assets declined 21 basis points from 8.37% in 1997 to 8.16% in 1998, the cost of interest bearing liabilities increased 15 basis points from 4.79% in 1997 to 4.94% in 1998. This resulted in a decrease in the bank's interest rate spread from 3.58% in 1997 to 3.23% in 1998. Interest expense as a percentage of average earning assets increased from 3.98% in 1997 to 4.15% in 1998. The bank's net interest margin decreased from 4.39% in 1997 to 4.02% in 1998. Future Operations Management anticipates continued growth in both the loan portfolio and in customer deposit balances as a result of continuing calling efforts by commercial loan officers. This expectation of growth is predicated on an assumption of continuing economic expansion during the future. At the end of September management entered into an agreement to purchase land and a building on North Loudoun Street in the city of Winchester as the location of another branch office. Applications have been filed for the necessary approvals from the bank's regulators. If the approvals are received and remodeling can be completed on schedule, it is management's intention to open the branch prior to year end 1998. Year 2000 Compliance The Corporation is dependent on the utilization of data processing hardware and software in the conduct of business. The majority of the banking business is processed on a core banking system and related communications networks which consist of a combination of computer hardware and various software packages which are licensed to the Bank by third party vendors. In addition there are several other personal computers and software packages in use throughout the Bank. The year 2000 problem could affect any of these systems and produce an adverse affect on the operations of the Bank. FIRST NATIONAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management became aware of this potential problem in 1997 and initiated an assessment of all software and hardware to determine whether these system would function properly in the year 2000. As a result of this assessment, management has been informed by its vendor that the core banking software will be year 2000 compliant. In order to confirm compliance, testing will be conducted before the end of 1998. Testing of the core banking software was performed during the week of October 19th and a few minor problems were detected and were easily corrected. As a result of other tests, the management has determined that it will have to replace or modify certain other units of hardware or software for other systems to be year 2000 compliant. The modification of several of these systems will take the form of an upgrade to hardware and/or software at an earlier date than would normally have been planned. Officers of the Bank have begun communication with all large commercial borrowers since they pose a credit risk to the Bank if their business is disrupted due to a year 2000 compliance issue. Responses from commercial customers will be evaluated as part of the credit review process. Management plans to complete the majority of the year 2000 project by December 31, 1998. The replacement of some equipment may not be completed by year end, but the equipment will be ordered and an installation date will have been scheduled. Total projected expenditures are not expected to exceed $200,000 and the estimated increase in depreciation expense should be less than $30,000 per year over an expected five year depreciable life. The Corporation has set a goal to be substantially year 2000 compliant by year end 1998 in accordance with the mandate from its regulators. Since uncertainties remain about whether or not all third party vendors and all large commercial borrowers will be year 2000 complaint, the financial impact of year 2000 compliance on the Corporation's assets, earnings and liquidity cannot be fully determined at this time. New Accounting Pronouncements Effective January 1, 1998 the Corporation adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This statement establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general purpose financial statements. Financial statements for prior periods have been restated as required. In February 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 132, "Employers Disclosures about Pensions and other Post Retirement Benefits." This statement revises employers' disclosures about pension and other postretirement benefit plans. It does not change the measurement or recognition of those plans. This statement standardizes the disclosure requirements for pensions and other postretirement benefits to the extent practicable, requires additional information on changes in the benefit obligations and fair values of plan assets that will facilitate financial analysis, and eliminates certain disclosures. Restatement of disclosures for earlier periods is required. This statement is effective for the Corporation's financial statements for the year ended December 361, 1998. In June 1998, The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement requires companies to record derivatives on the balance sheet as assets and liabilities, measured at fair FIRST NATIONAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS value. Gains or losses resulting from changes in the values of those derivatives would accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. This statement is not expected to have a material impact on the Corporation's financial statements. This statement is effective for fiscal years beginning after June 15, 1999, with earlier adoption encouraged. The Corporation will adopt this accounting standard as required by January 1, 2000. In March 1998, the American Institute of Certified Public Accountants (AICPA) issued Statement of Position (`SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." This SOP provides guidance on accounting for the costs of computer software developed or obtained for internal use. This SOP requires that entities capitalize certain internal-use software costs once certain criteria are met. This statement is not expected to have a material impact on the Corporation's financial statements. In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-Up Activities," which requires the costs of start-up activities and organization costs to be expensed as incurred. This statement is effective for the fiscal year 1999 financial statements. This statement is not expected to have a material impact on the Corporation's financial statements. FIRST NATIONAL CORPORATION AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES Nine Months Ended September 30, 1998 1997 Annual Annual Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate(3) Balance Expense Rate(3) ASSETS Balances at correspondent banks - interest bearing $214,608 $21,613 13.39% $201,647 $22,364 14.79% Securities: Taxable 39,352,783 1,823,891 6.16% 29,377,200 1,376,029 6.25% Tax-exempt (1) 6,690,798 407,686 8.10% 6,387,144 407,412 8.50% ----------- ---------- ----- --------------------- ----- Total Securities 46,043,581 2,231,577 6.45% 35,764,344 1,783,441 6.65% Loans (net of earned income): (2) Taxable 120,933,642 8,043,733 8.85% 102,834,394 6,940,537 9.00% Tax-exempt (1) 159,789 14,285 11.89% 249,557 21,532 11.50% ------------------------ ------ ----------------------- ------ Total Loans 121,093,431 8,058,018 8.85% 103,083,951 6,962,069 9.01% Fed funds sold and repurchase agreements 1,704,968 66,902 5.22% 1,599,462 65,880 5.49% ----------------------- ----- ------------------------ ----- Total earning assets 169,056,588 10,378,110 8.16% 140,649,404 8,833,754 8.37% Less: allowance for Loan Losses (1,158,937) (1,021,907) Total nonearning assets 9,691,853 9,266,593 ------------ -------------- Total Assets $177,589,504 $148,894,090 ============ ============ LIABILITIES AND SHAREHOLDER EQUITY Interest bearing deposits: Checking $9,517,233 $152,975 2.14% $9,437,890 $157,212 2.22% Money market savings 6,438,224 159,158 3.29% 7,699,923 194,074 3.36% Regular savings 53,625,474 1,993,903 4.95% 41,569,730 1,520,111 4.88% Certificates of deposit: Less than $100,000 44,748,893 1,794,077 5.33% 43,843,628 1,735,058 5.28% $100,000 and more 12,564,104 521,354 5.52% 12,721,202 518,389 5.43% ---------- --------- ----- ----------------------- ----- Total interest bearing deposits 126,893,928 4,621,467 4.84% 115,272,374 4,124,844 4.77% Fed funds purchased 551,998 23,957 5.77% 138,112 5,791 5.59% Long term borrowings 14,548,426 623,766 5.70% 1,474,769 68,894 6.23% ---------- --------- ----------------------------- ----- Total interest bearing liabilities 141,994,352 5,269,190 4.94% 116,885,255 4,199,529 4.79% Noninterest bearing liabilities Demand deposits 17,573,440 15,792,742 Other liabilities 1,523,413 822,897 ------------- --------------- Total liabilities 161,091,205 133,500,894 Stockholders' equity 16,498,299 15,393,195 ------------- -------------- Total liabilities and stockholders' equity $177,589,504 $148,894,089 ============ ============ Net Interest income 5,108,920 4,634,225 ========= ========= Interest rate spread 3.23% 3.58% Interest expense as a percent of average earning assets 4.15% 3.98% Net interest margin 4.02% 4.39% <FN> (1) Income and yields are reported on a taxable-equivalent basis assuming a federal tax rate of 34% in 1997 and 1998. (2) Loans placed on a nonaccrual status are reflected in the balances. (3) Annualized </FN> First National Corporation Item 3. Quantitative and Qualitative Disclosures About Market Risk Not Applicable PART II. OTHER INFORMATION Item 1. Legal Proceedings As of September 30, 1998 neither the Corporation nor the Bank was a party to any legal proceedings. Item 2. Not Applicable Item 3. Not Applicable Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the third quarter of 1998. Item 5. Not Applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 2. Plan of acquisition, reorganization, arrangement, liquidation or succession. Not applicable 3. (I) Articles of Incorporation (ii) Bylaws There have been no amendments during the quarter. 4. Instruments defining the rights of security holders, including indentures. Not applicable 10. Material contracts Not applicable First National Corporation PART II. OTHER INFORMATION 11. Statement re computation of per share earnings. Not applicable 15. Letter re unaudited interim financial information. Not applicable 18. Letter re change in accounting principles. Not applicable 19. Report furnished to security holders. Not applicable 22. Published report regarding matters submitted to vote of security holders. Not applicable 23. Consent of experts and counsel. Not applicable 24. Power of attorney Not applicable 27. Financial Data Schedule Filed electronically as a separate document. 99. Additional Exhibits Not applicable (b). Reports on form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. First National Corporation (Registrant) Date November 12 , 1998 /S/ Dana A. Froom ------------------ ---------------------- Dana A. Froom, Comptroller (Principal Accounting Officer and Duly Authorized Officer)