EXHIBIT 99
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SEURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2001.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________ to _________.
Commission file number 333-26029
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
FIRST NATIONAL BANK EMPLOYEES' SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
FIRST NATIONAL CORPORATION
950 JOHN C. CALHOUN DRIVE, S.E.
ORANGEBURG, SOUTH CAROLINA
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FIRST NATIONAL BANK
EMPLOYEES' SAVINGS PLAN
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FINANCIAL STATEMENTS
WITH SUPPLEMENTARY INFORMATION
YEARS ENDED DECEMBER 31, 2001 AND 2000
AND
INDEPENDENT AUDITORS' REPORT
FIRST NATIONAL BANK
EMPLOYEES' SAVINGS PLAN
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TABLE OF CONTENTS
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PAGE
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Independent Auditors' Report ........................................... 2
Statements of Net Assets Available for Benefits ........................ 3-4
Statements of Changes in Net Assets Available for Benefits ............. 5-6
Notes to Financial Statements .......................................... 7-11
Supplementary Information:
Schedule of Assets Held for Investment Purposes ...................... 12
1
INDEPENDENT AUDITORS' REPORT
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To the Administrative Committee of the
First National Bank Employees' Savings Plan
We have audited the accompanying statements of net assets available for benefits
of the First National Bank Employees' Savings Plan as of December 31, 2001 and
2000, and the related statements of changes in net assets available for benefits
for the years then ended. These financial statements are the responsibility of
the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the First
National Bank Employees' Savings Plan as of December 31, 2001 and 2000, and the
changes in net assets available for benefits for the years then ended, in
conformity with accounting principles generally accepted in the United States of
America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule of Assets Held
for Investment Purposes is presented for the purpose of additional analysis and
is not a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosures under the Employee Retirement Income Act of 1974. The
supplemental schedule has been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
J. W. Hunt and Company, LLP
Columbia, South Carolina
June 3, 2002
2
FIRST NATIONAL BANK
EMPLOYEES' SAVINGS PLAN
=======================
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, DECEMBER 31, 2001
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INTER- FIRST
GUARANTEED INDEXED ASSET INDEXED GROWTH NATIONAL NATIONAL
INTEREST BOND MANAGER EQUITY EQUITY EQUITY CORPORATION
ACCOUNT FUND FUND FUND FUND FUND STOCK TOTAL
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
ASSETS:
Investments, at fair value:
Mutual funds $ -- $ 74,826 $1,896,718 $2,354,644 $1,035,384 $ 117,271 $ -- $5,478,843
First National Corporation stock -- -- -- -- -- -- 1,145,706 1,145,706
Money market funds -- -- -- -- -- -- 4,832 4,832
Investments, at contract value:
New York Life Insurance Company,
Investment contract 2,255,669 -- -- -- -- -- -- 2,255,669
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total investments 2,255,669 74,826 1,896,718 2,354,644 1,035,384 117,271 1,150,538 8,885,050
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Receivables:
Employer's contribution 21,031 3,665 28,408 58,369 49,959 6,770 33,301 201,503
Participants' contributions -- -- 33 -- 33 -- 4,211 4,277
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total receivables 21,031 3,665 28,441 58,369 49,992 6,770 37,512 205,780
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net assets available
for benefits 2,276,700 78,491 1,925,159 2,413,013 1,085,376 124,041 1,188,050 9,090,830
========== ========== ========== ========== ========== ========== ========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
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3
FIRST NATIONAL BANK
EMPLOYEES' SAVINGS PLAN
=======================
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, DECEMBER 31, 2000
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INTER- FIRST
GUARANTEED ASSET INDEXED GROWTH NATIONAL NATIONAL
INTEREST MANAGER EQUITY EQUITY EQUITY CORP.
ACCOUNT FUND FUND FUND FUND STOCK FUND TOTAL
---------- ---------- ---------- ---------- ---------- ---------- ----------
ASSETS:
Investments, at fair value:
Mutual funds $2,091,592 $2,717,025 $1,085,627 $ 139,325 $ -- $6,033,569
First National Corporation stock -- -- -- -- -- 667,341 667,341
Money market funds -- -- -- -- -- 4,212 4,212
Investments, at contract value
New York Life Insurance Company,
Investment contract 2,053,028 -- -- -- -- -- 2,053,028
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total investments 2,053,028 2,091,592 2,717,025 1,085,627 139,325 671,553 8,758,150
---------- ---------- ---------- ---------- ---------- ---------- ----------
Receivables:
Employer's contribution 19,956 25,284 55,316 38,945 7,249 29,693 176,443
Participants' contributions 762 -- -- -- -- 4,174 4,936
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total receivables 20,718 25,284 55,316 38,945 7,249 33,867 181,379
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net assets available
for benefits 2,073,746 2,116,876 2,772,341 1,124,572 146,574 705,420 8,939,529
========== ========== ========== ========== ========== ========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
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4
FIRST NATIONAL BANK
EMPLOYEES' SAVINGS PLAN
=======================
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2001
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INTER- FIRST
GUARANTEED INDEXED ASSET INDEXED GROWTH NATIONAL NATIONAL
INTEREST BOND MANAGER EQUITY EQUITY EQUITY CORPORATION
ACCOUNT FUND FUND FUND FUND FUND STOCK TOTAL
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Additions to net assets attributed to:
Investment income:
Interest $ 123,988 $ -- $ -- $ -- $ -- $ -- $ 758 $ 124,746
Dividends -- 4,401 40,761 144,215 -- 2,802 31,494 223,673
Net appreciation in fair value
of investments -- -- -- -- -- -- 323,742 323,742
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total investment income 123,988 4,401 40,761 144,215 -- 2,802 355,994 672,161
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Contributions:
Employer's 21,031 3,665 28,408 58,369 49,959 6,770 33,301 201,503
Participants' 83,756 8,926 104,721 225,565 207,382 30,803 132,258 793,411
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total contributions 104,787 12,591 133,129 283,934 257,341 37,573 165,559 994,914
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total additions 228,775 16,992 173,890 428,149 257,341 40,375 521,553 1,667,075
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Deductions from net assets attributed to:
Benefits paid to participants 146,165 -- 133,107 188,645 57,636 7,934 44,328 577,815
Net depreciation in fair
value of investments -- 2,246 148,313 477,666 278,398 19,814 -- 926,437
Administrative expenses 8,637 -- -- -- -- -- 2,885 11,522
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total deductions 154,802 2,246 281,420 666,311 336,034 27,748 47,213 1,515,774
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) prior to
interfund transfers 73,973 14,746 (107,530) (238,162) (78,693) 12,627 474,340 151,301
Interfund transfers 128,981 63,745 (84,187) (121,166) 39,497 (35,160) 8,290 --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) 202,954 78,491 (191,717) (359,328) (39,196) (22,533) 482,630 151,301
Net assets available for benefits:
Beginning of year 2,073,746 -- 2,116,876 2,772,341 1,124,572 146,574 705,420 8,939,529
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
End of year 2,276,700 78,491 1,925,159 2,413,013 1,085,376 124,041 1,188,050 9,090,830
========== ========== ========== ========== ========== ========== ========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
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5
FIRST NATIONAL BANK
EMPLOYEES' SAVINGS PLAN
=======================
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2000
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INTER- FIRST
GUARANTEED ASSET INDEXED GROWTH NATIONAL NATIONAL
INTEREST MANAGER EQUITY EQUITY EQUITY CORPORATION
ACCOUNT FUND FUND FUND FUND STOCK TOTAL
---------- ---------- ---------- ---------- ---------- ---------- ----------
Additions to net assets attributed to:
Investment income:
Interest $ 131,085 $ -- $ -- $ -- $ -- $ 1,027 $ 132,112
Dividends -- 70,571 27,770 -- -- 23,773 122,114
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total investment income 131,085 70,571 27,770 -- -- 24,800 254,226
---------- ---------- ---------- ---------- ---------- ---------- ----------
Contributions:
Employer's 19,956 25,284 55,316 38,945 7,249 29,693 176,443
Participants' 170,448 131,077 267,504 203,112 55,167 152,886 980,194
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total contributions 190,404 156,361 322,820 242,057 62,416 182,579 1,156,637
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total additions 321,489 226,932 350,590 242,057 62,416 207,379 1,410,863
---------- ---------- ---------- ---------- ---------- ---------- ----------
Deductions from net assets attributed to:
Benefits paid to participants 268,649 120,175 153,186 99,250 2,382 43,203 686,845
Net depreciation in fair value
of investments -- 62,364 322,901 88,267 24,682 399,957 898,171
Administrative expenses 8,250 -- -- -- -- -- 8,250
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total deductions 276,899 182,539 476,087 187,517 27,064 443,160 1,593,266
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) prior to
interfund transfers 44,590 44,393 (125,497) 54,540 35,352 (235,781) (182,403)
Interfund transfers (114,192) (674,279) (491,252) 1,070,032 111,222 98,469 --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) (69,602) (629,886) (616,749) 1,124,572 146,574 (137,312) (182,403)
Net assets available for benefits:
Beginning of year 2,143,348 2,746,762 3,389,090 -- -- 842,732 9,121,932
---------- ---------- ---------- ---------- ---------- ---------- ----------
End of year 2,073,746 2,116,876 2,772,341 1,124,572 146,574 705,420 8,939,529
========== ========== ========== ========== ========== ========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
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6
FIRST NATIONAL BANK
EMPLOYEES' SAVINGS PLAN
=======================
NOTES TO FINANCIAL STATEMENTS
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NOTE A - DESCRIPTION OF PLAN:
The following description of the First National Bank (a wholly-owned subsidiary
of First National Corporation) Employees' Savings Plan ("Plan") provides only
general information. Participants should refer to the Plan agreement for a more
complete description of the Plan's provisions.
GENERAL:
The Plan is a contributory defined contribution plan covering all full-time
employees of First National Bank (the "Company") and all affiliates of the
Company who have one year of service and are age twenty-one or older. It is
subject to the provisions of the Employee Retirement Income Security Act of
1974 (ERISA).
CONTRIBUTIONS:
Each year, participants may contribute up to 18 percent of pretax annual
base compensation, as defined in the Plan. Participants may also contribute
amounts representing distributions from other qualified retirement plans.
Participants direct the investment of their contributions into various
investment options offered by the Plan. The Company contributes 50 percent
of the first 4 percent of base compensation that a participant contributes
to the Plan up to a maximum matching contribution of 2 percent of base
compensation. Employer contributions may be made from current or
accumulated net profits. Contributions are subject to certain limitations.
PARTICIPANT ACCOUNTS:
Each participant's account is credited with the participant's contribution,
the Company's matching contribution and allocations of Plan earnings. The
participant's account is charged with an allocation of administrative
expenses. Allocations are based on account balances, as defined by the
Plan. The benefit to which a participant is entitled is the benefit that
can be provided from the participant's account.
VESTING:
Participants' accounts are fully vested.
PAYMENT OF BENEFITS:
On termination of service due to death, disability, retirement, or other
reasons, a participant may receive a lump-sum amount equal to the value of
his or her account.
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FIRST NATIONAL BANK EMPLOYEES' SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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NOTE A - DESCRIPTION OF PLAN (CONTINUED):
INVESTMENT OPTIONS:
Upon enrollment in the Plan, a participant may direct employee
contributions in any of the following investment options:
GUARANTEED INTEREST ACCOUNT - Funds are invested in a guaranteed
investment contract (GIC) with an insurance company.
INDEXED BOND FUND - Funds are invested primarily in debt securities of
the Salomon Smith Barney BIG Index.
ASSET MANAGER FUND - Funds are invested primarily in domestic and
foreign common stocks, U.S. Treasuries and agencies,
investment-grade corporate bonds, mortgage pass-through securities,
asset-backed securities and money market instruments.
INDEXED EQUITY FUND - Funds are invested in common stocks replicating
the Standard and Poor's 500 Composite Index.
GROWTH EQUITY FUND - Funds are invested primarily in stocks issued by
companies with investment characteristics such as: participation in
expanding markets, increasing return on investment, increasing unit
sales volume, and higher growth in revenue and earnings per share
relative to the average of common stocks comprising indices such as
the Standard and Poor's 500 Composite Index.
INTERNATIONAL EQUITY FUND - Funds are invested primarily in non-U.S.
common stocks with an emphasis on large, well-established
companies. A value approach is used for country selection, with a
broad diversification of holdings within each country. Stocks of
both established economies and emerging market countries are
included.
FIRST NATIONAL CORPORATION STOCK FUND - The First National Corporation
Stock Fund invests only in First National Corporation common shares
and money market equivalents.
NOTE B - SUMMARY OF ACCOUNTING POLICIES:
BASIS OF ACCOUNTING:
The financial statements of the Plan are prepared using the accrual method of
accounting in accordance with accounting principles generally accepted in the
United States of America.
INVESTMENT VALUATION:
The Plan's investments are stated at fair value except for its
benefit-responsive investment contract, which is valued at contract value (Note
D). Quoted market prices are used to value investments. Shares of mutual funds
are valued at the net asset value of shares held by the Plan at year end.
8
FIRST NATIONAL BANK EMPLOYEES' SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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NOTE B - SUMMARY OF ACCOUNTING POLICIES (CONTINUED):
INVESTMENT VALUATION (CONTINUED):
The Plan provides for various investment options in any combination of stocks or
mutual funds. Investment securities are exposed to various risks, such as
interest rate, market and credit risks. Due to the level of risk associated with
certain investment securities and the level of uncertainty related to changes in
the value of investment securities, it is at least reasonably possible that
changes in the values of investment securities will change in the near term and
that such changes could materially affect participants' account balances and the
amounts reported in the statement of net assets available for benefits and the
statement of changes in net assets available for benefits.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
PAYMENT OF BENEFITS:
Benefits are recorded when paid.
ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and changes therein and
the disclosure or contingent assets and liabilities. Accordingly, actual results
could differ from those estimates.
NOTE C - INVESTMENTS:
The following presents investments that represent 5 percent or more of the
Plan's net assets:
DECEMBER 31,
-------------------------
2001 2000
---------- ----------
Eclipse Asset Manager Fund, 153,830 and 157,381
shares, respectively $1,896,718 $2,091,592
Eclipse Indexed Equity Fund, 89,394 and 85,200
shares, respectively 2,354,644 2,717,025
Eclipse Growth Equity Fund, 46,576 and 37,423
shares, respectively 1,035,384 1,085,627
First National Corporation common stock, 59,363
and 50,845 shares, respectively 1,145,706 667,341
Investment Contract with New York Life Insurance
Company, #11433 2,255,669 2,053,028
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FIRST NATIONAL BANK EMPLOYEES' SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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NOTE C - INVESTMENTS (CONTINUED):
During 2001 and 2000, the Plan's investments (including investments bought,
sold, and held during the year) appreciated (depreciated) in value as follows:
2001 2000
---------- ----------
Mutual funds $ (926,437) $ (498,214)
Common stock 323,742 (399,957)
---------- ----------
Net depreciation in fair
value of investments (602,695) (898,171)
========== ==========
The number of employees participating in each of the Plan's investment options
at December 31, 2001 and 2000, is as follows:
2001 2000
---------- ----------
Fixed Income Fund 115 113
Indexed Bond Fund 36 --
Asset Manager Fund 183 167
Indexed Equity Fund 245 241
Growth Equity Fund 174 160
International Equity Fund 55 61
First National Corporation Stock Fund 192 179
NOTE D - INVESTMENT CONTRACT WITH INSURANCE COMPANY:
The Plan has a benefit-responsive investment contract with New York Life
Insurance Company (New York Life). New York Life, as the Plan's custodian,
maintains the assets in a pooled account. The account is credited with earnings
on the underlying investments and charged for participant withdrawals and
administrative expenses charged by New York Life. The contract is included in
the financial statements at contract value as reported to the Plan by New York
Life. Contract value represents contributions made under the contract, plus
earnings, less participant withdrawals and administrative expenses. Participants
may ordinarily direct the withdrawal or transfer of all or a portion of their
investment at contract value.
There are no reserves against contract value for credit risk of the contract
issuer or otherwise. The average yield and crediting interest rates ranged from
5.18 percent to 7.20 percent for 2001 and 5.48 percent to 7.67 percent for 2000.
The crediting interest rates are based on a formula agreed upon with the issuer
and are reviewed on an annual basis for resetting.
NOTE E - RELATED PARTY TRANSACTIONS:
Certain Plan investments are shares of First National Corporation common stock
held by the Plan sponsor's Trust Department. There were no fees paid by the Plan
to the Trust Department. Dividends received from First National Corporation were
$31,494 for the year ended December 31, 2001.
10
FIRST NATIONAL BANK EMPLOYEES' SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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NOTE F - PLAN TERMINATION:
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants would become 100 percent vested in their accounts.
NOTE G - TAX STATUS:
The Internal Revenue Service has determined and informed the Company by a letter
dated November 4, 1992, that the Plan and related trust are designed in
accordance with applicable sections of the Internal Revenue Code (IRC). Although
the Plan has been amended since receiving the determination letter, the Plan
administrator and the Plan's tax counsel believe that the Plan is designed and
is currently being operated in compliance with the applicable requirements of
the IRC.
NOTE H - PLAN OPERATING COSTS:
The Company pays certain operating costs of the Plan such as legal, audit, and
administrative fees.
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FIRST NATIONAL BANK
EMPLOYEES' SAVINGS PLAN
=======================
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 2001
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IDENTITY OF DESCRIPTION OF INVESTMENT
ISSUE, BORROWER, INCLUDING MATURITY DATE, RATE OF
LESSOR, OR SIMILAR INTEREST, COLLATERAL,PAR OR CURRENT
PARTY MATURITY VALUE VALUE
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New York Life Insurance Company Guaranteed Investment Contract #11433 $ 2,255,669
New York Life Investment Management LLC Eclipse Indexed Bond Fund, 7,126 shares 74,826
New York Life Investment Management LLC Eclipse Asset Manager Fund, 153,830 shares 1,896,718
New York Life Investment Management LLC Eclipse Indexed Equity Fund, 89,394 shares 2,354,644
New York Life Investment Management LLC Eclipse Growth Equity Fund, 46,576 shares 1,035,384
New York Life Investment Management LLC Eclipse International Equity Fund, 13,236 shares 117,271
* First National Corporation 59,363 common shares 1,145,706
Federated Automated Government Fund Money Market Fund 4,128
Federated Automated Cash Management Fund Money Market Fund 704
NOTE: Cost information is not required for participant-directed investments.
* Indicates a party in interest
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