First National Corp., the parent company of...

First National Corp., the parent company of First National Bank, reported that net income fell by 66% to $247,000 for the first quarter ended March 31, down from $737,000 during the previous first quarter.

That drop occurred because First National Bank reported “significantly increased” earnings during the first quarter of 1987, President Mike West told shareholders during the parent company’s annual meeting in San Diego on Thursday.

Last year’s quarterly net income boost was generated by the sale of a large block of loans that the bank preferred not to hold for servicing, West said. Late last year, however, First National “began repositioning our mortgage banking group to substantially build our mortgage-servicing volume,” West said.

The bank’s loan-servicing portfolio, now at less than $100 million, is expected to eventually reach between $500 million and $750 million, spokesman Ron Phillips said Thursday.

“As we continue our investment in mortgage-loan servicing, the company as a whole will continue to improve its performance,” West said.

West told shareholders that the bank remained “slightly ahead of its 1988 plan” despite the first-quarter drop in net income.

First National’s assets rose by 5% to $380 million, up from $361 million a year ago. Loans increased by 25% to $301 million, up from $241 million. Deposits increased by 8% to $348 million, up from $323 million a year ago.

In a related development, First National Corp. Chairman Malin Burnham this week assumed the additional title of president and chief executive of the holding company. Former President and Chief Executive Robert D. Richley left First National last week to join First City Bancorp of Texas as chief operating officer.