 STRASBURG, Va., July 29, 2020 GLOBE NEWSWIRE -- First National Corporation the Company or First National NASDAQ: FXNC, the bank holding company of First Bank the Bank, reported unaudited consolidated net income of 2.2 million, or 0.46 per diluted share, for the second quarter of 2020, which resulted in a return on average assets of 1.00 and a return on average equity of 11.30. This compares to net income of 2.1 million, or 0.42 per diluted share, and a return on average assets of 1.08 and a return on average equity of 11.76 for the second quarter of 2019. Provision for loan losses of 800 thousand and 200 thousand was included in net income for the three-month periods ending June 30, 2020 and 2019, respectively. For the six months ending June 30, 2020, net income totaled 3.9 million, or 0.81 per diluted share, which resulted in a return on average assets of 0.93 and a return on average equity of 10.01. This compares to net income of 4.3 million, or 0.88 per diluted share, and a return on average assets of 1.14 and a return on average equity of 12.60 for the same period of 2019. Provision for loan losses of 1.7 million and 200 thousand was included in net income for the six-month periods ending June 30, 2020 and 2019, respectively.Highlights for the second quarter of 2020: Return on assets of 1.00 and return on equity of 11.30 Provision for loan losses totaled 800 thousand compared to 200 thousand in Q2 2019 Originated 76.2 million of Payroll Protection Program loans Nonperforming assets at 0.16 of assets Loans in the Banks deferred payment program totaled 182.6 million Subordinated debt issuance of 5.0 million further strengthened holding company liquidity Tangible book value increased 14 to 16.63 per share compared to 14.60 one year agoOur team of associates continued to demonstrate an incredible commitment to their customers, their communities, and one another throughout the second quarter, said Scott Harvard, president and chief executive officer of First National. Harvard continued, Our teammates worked overtime to deliver over 76 million of payroll protection funds to small businesses and provided access to deposit accounts via the drive throughs at branches, through First Banks mobile and internet banking platforms, and with in-person meetings by appointment. On July 1st, we were pleased to re-open branch lobbies for in-person transactions to serve our customers and communities, while taking precautions to help keep our customers and employees healthy.We were pleased once again with the financial performance of the Company in the second quarter. Expenses decreased, while net interest income improved over the second quarter of 2019. We continued to earn new business customers from our commitment to serving small businesses by participating in the payroll protection program and by offering programs designed to provide financial relief to customers. We still expect significant pressure on loans to borrowers in several sectors, including the hospitality and health care industries, which have been impacted by government orders and the publics adoption of social distancing. The Companys liquidity position continues to be very strong and capital levels exceed all regulatory thresholds to be considered well-capitalized.COVID-19 PANDEMIC UPDATEOperationsDuring the second quarter, the Bank continued to follow its Pandemic Plan that strives to protect the health of its employees and customers, while continuing to deliver essential banking services. This was accomplished by limiting access to banking offices and delivering a majority of its services through branch drive throughs, ATMs, and mobile and internet banking platforms. On July 1, 2020, the Bank entered phase two of its Pandemic Plan by re-opening branch lobbies with limited hours for in-person transactions without appointments.Paycheck Protection ProgramThe Bank participated as a lender in the U.S. Small Business Administrations SBA Paycheck Protection Program PPP to support local small businesses and non-profit organizations. During the second quarter of 2020, the Bank originated 76.2 million of PPP loans, received 2.5 million of loan fees, and incurred 520 thousand of loan origination costs. The loan fees are being accreted into earnings evenly over the life of the loans, net of the loan costs, through interest and fees on loans. Approximately 99 of the PPP loan balances mature in 24 months. At June 30, 2020, PPP loan balances totaled 73.3 million and customers had not yet requested debt forgiveness from the SBA on PPP loans.Loan Payment Deferral ProgramIn response to the unknown impact of the pandemic on the economy and customers, the Bank created and implemented a loan payment deferral program for individual and business customers in the first quarter of 2020. Customers with favorable risk ratings and payment histories were given the opportunity to defer monthly payments for 90 days. Loans participating in the program totaled 182.6 million, or 28 of the Banks loan balances at June 30, 2020. Interest income continued to accrue to the Bank during the deferral periods.Asset Quality ImpactThe pandemic is expected to have an unfavorable impact on the financial condition of the Banks loan customers, and as a result, the Bank has continued the process of identifying credit risk with the goal of mitigating the risk and minimizing future loan charge-offs. Several sectors of the loan portfolio, including hospitality, retail shopping and health care are expected to experience significant financial pressure. Those sectors comprise approximately 9, 5 and 4 of the loan portfolio, respectively, excluding PPP loans. The magnitude of the potential decline in the Banks loan quality will likely depend on the duration of the pandemic and the extent that the Banks customers experience business interruptions from the pandemic. The Bank considered the impact of the pandemic on the loan portfolio while determining an appropriate allowance for loan losses, and as a result, recorded a provision for loan losses of 800 thousand for the second quarter of 2020, compared to a 200 thousand provision for loan losses in the second quarter of 2019.Capital The stock repurchase plan remained suspended during the second quarter. The Company updated its enterprise risk assessment and capital plans during the quarter, and as a result, the Company issued 5.0 million of subordinated debt in June 2020. The purpose of the issuance was primarily to further strengthen holding company liquidity and remain a source of strength for the Bank during a severe economic downturn. The Company may also use the proceeds of the issuance for general corporate purposes, including the potential repayment of the Companys existing subordinated debt, which becomes callable in January 2021. The quarterly cash dividend to common shareholders was not reduced or eliminated during the second quarter as the Company declared and paid an 0.11 per share dividend that was unchanged from the dividend paid in the first quarter of 2020. BALANCE SHEETTotal assets of First National increased 163.7 million, or 21, to 942.1 million at June 30, 2020, compared to 778.4 million at June 30, 2019. Total securities increased 1.2 million, or 1, and loans, net of the allowance for loan losses, increased 75.3 million, or 13. Loans, net of the allowance for loan losses, would have increased 2.0 million comparing the same periods, excluding 73.3 million of PPP loans. Total liabilities increased 155.7 million, or 22, to 861.3 million at June 30, 2020, compared to 705.6 million one year ago. The increase in liabilities was primarily attributable to significant growth in deposits. Total deposits increased 149.2 million, or 22, to 839.0 million and subordinated debt increased by 5.0 million to 10.0 million at June 30, 2020. Noninterest-bearing demand deposits increased 67.4 million, or 36, savings and interest-bearing demand deposits increased 85.4 million, or 22, while time deposits decreased 3.6 million, or 3.Although proceeds from PPP loan originations during the second quarter contributed to the increase in deposits, the Bank also experienced a significant amount of deposit growth that was not related to PPP loan proceeds during the quarter. Total deposits increased 118.4 million, or 16, during the three-month period ended June 30, 2020, while PPP loans totaled 73.3 million at June 30, 2020.Subordinated debt increased to 10.0 million during the quarter from a 5.0 million issuance on June 29, 2020. The Company issued the debt at a 5.50 fixed-to-floating rate subordinated note due 2030 to an institutional investor. The Note was structured to qualify as Tier 2 capital under bank regulatory guidelines, and the proceeds from the sale of the Note may be utilized to support capital levels at the Bank in a severe economic downturn or for general corporate purposes, including the potential repayment of the Companys existing subordinated debt, which becomes callable in January 2021.Shareholders equity increased 8.0 million, or 11, to 80.8 million at June 30, 2020, compared to one year ago, from a 7.2 million increase in retained earnings and a 2.5 million increase in accumulated other comprehensive income. These increases were partially offset by 1.7 million decrease in common stock and surplus, which resulted from stock repurchases in the first quarter of 2020 under the Companys stock repurchase plan.The Companys stock repurchase plan was suspended near the end of the first quarter of 2020 due to the potential impact of the pandemic on the economy and the Banks customers and remained suspended during the second quarter. The Company paid a cash dividend to common shareholders during the second quarter of 0. 