First National Corporation in Strasburg, Va., is planning to raise up to $11.8 million in a rights offering and intends to use the proceeds to bolster its capital levels, invest in its expansion and perhaps buy back preferred shares issued under the Troubled Asset Relief Program.

The $529 million-asset company said in a Securities and Exchange Commission filing Wednesday that it will offer up to 2.96 million shares to existing shareholders at a price of $4 each. The company said that it also has a standby agreement to sell up to 425,000 shares if the offering does not sell out. First National's shares, which trade over the counter, were trading at $5.25 late Wednesday.

First National said it would use the funds for general corporate purposes, which would including improving its regulatory capital position. Though it is considered to be well capitalized, First National's capital levels have dipped in the past year as the company has set aside more funds for potential loan losses. At March 31, its leverage was 8.6%, down from 10.5% a year earlier, and its total risked-based capital-to-assets ratio was 12.74%, compared to 14.41% last year, according to the company's first-quarter earnings report.

The company received $14 million in Tarp funds in early 2009 and it said in the SEC filing that the additional capital could "provide flexibility" to redeem outstanding preferred stock.

Finally, First National said it could use a portion of the proceeds to support its growth "through acquisitions or branching, infrastructure growth or lines of business expansion."

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