Farmers Bankshares, Inc. Reports First Quarter and Year-to-Date Earnings

WINDSOR, Va., April 23, 2021 /PRNewswire/ — Farmers Bankshares, Inc. (OTC-PINK: FBVA) reports unaudited earnings of $1.9 million, or $0.63…

WINDSOR, Va., April 23, 2021 /PRNewswire/ — Farmers Bankshares, Inc. (OTC-PINK: FBVA) reports unaudited earnings of $1.9 million, or $0.63 per share, for the first quarter of 2021.  These results increased approximately 86.35% from the $1.1 million, or $0.34 per share, earned during the first quarter of 2020. 

At March 31, 2021, select financial information and key highlights include:

  • Return on average assets of 1.38%, compared to 0.88% in 2020.
  • Return on average equity of 12.14%, compared to 7.40% in 2020.
  • Return on average tangible common equity (1) of 14.41%, compared to 9.09% in 2020.
  • Net interest margin was 3.22%, reduced from 3.52% in the prior year.
  • Total cost of deposits decreased to 0.35% from 0.55% at March 31, 2020.

Consolidated Balance Sheet

Net loans decreased $9.7 million, or 3.51%, as compared to December 31, 2020.  The decrease was primarily driven by many small businesses using excess cash from continued stimulus programs to pay down their credit lines. The Company had approximately $16.6 million in the CARES Act’s Paycheck Protection Program («PPP») loans on the balance sheet as of March 31, 2021 and continues to participate in the second round of PPP. We originated approximately $11.8 million in second round PPP loans and received $12.6 million in forgiveness payments on first round PPP loans during the first quarter of 2021.    Deposit balances have increased by $35.1 million to $488.4 million as of March 31, 2021 from $453.2 million as of December 31, 2020.  Non-interest bearing deposits increased by $17.1 million and make up approximately 34.44% of total deposits.  The influx of customer stimulus payments, PPP loan funds and seasonal municipality deposits all contributed to this increase in deposits.  During the first quarter, management terminated a $10 million interest rate swap that was entered into in March 2020, which resulted in a gain of $428 thousand.  The Company’s balance sheet has experienced a high amount of liquidity due to COVID-19 related stimulus programs and therefore the need for wholesale funding had greatly diminished since the swap’s inception.  The termination will also aid in reducing debt service expenses. 

Capital ratios at the bank level remain well within the well-capitalized guidelines of the regulatory framework.  

«We have worked diligently to put excess cash to work in order to improve margin during the quarter; however, the continued influx of deposits resulting from various government stimulus programs related to COVID-19, together with sustained low interest rates, continues to make this very challenging.  When long term interest rates increased mid-first quarter it made sense to terminate the interest rate swap.  Excluding the gain from that transaction, we still posted a solid first quarter with non-interest income sources continuing to contribute significantly to net income. Subsequent to quarter end we closed on the sale of other real estate owned that had been on our balance sheet for several years.  The sale resulted in a pre-tax net gain of approximately $3.1 million that will be recorded and reflected in the second quarter 2021 financial results.  While we will enjoy the benefits of these two extraordinary items in 2021, it will not diminish our focus on protecting net interest margin, analyzing new non-interest income sources and remaining prudent in managing non-interest expenses for the long term,» stated Vernon M. Towler, President and Chief Executive Officer. 

Results of Operations

Net interest income increased 5.6% in the first quarter of 2021 compared to the first quarter of 2020, while margin continues to be compressed as noted above.  The increase is net interest income is primarily due to the impact of significantly lower market interest rates on deposits since the prior year, while the inflation of our balance sheet due to PPP loans and downward pressure on loan rates has caused the reduction in net interest margin.     

Non-interest income in the first quarter of 2021 was approximately $2.8 million and was increased by 32.97% over the same period in the prior year due primarily to the gain from unwinding the interest rate swap discussed above and $263 thousand in securities gains.   Non-interest expense was slightly reduced in the first quarter of 2021 compared to same period in 2020, decreasing by 2.66%, as management continues to focus on efficiency and reasonable expense control.      

No provision for loan losses was added during the first quarter of 2021. The Company considers local and national unemployment, housing and market trends when determining the estimated allowance.    Our allowance for loan losses was 2.32% of gross loans as of March 31, 2021, including loans originated through the PPP, and 2.47% of gross loans excluding loans originated through the PPP (1). 

In April 2021, the Company closed on the sale of other real estate owned that it held for an extended period of time.  The gross sales proceeds totaled $3.6 million and the property had a cost basis of $525 thousand, resulting in a net, pre-tax gain of $3.1 million that will be recorded in the second quarter of 2021.  

Asset Quality

Non-performing assets, which consists of nonaccrual loans and other real estate owned decreased from $844 thousand at December 31, 2020 to $833 thousand at March 31, 2021.  There were no additions to nonaccrual loans during the quarter. 

Loans are considered past due if the required principal and interest income have not been received as of the date such payments were due. As of March 31, 2021, loans greater than thirty days past due totaled $268 thousand, or 0.10% of total gross loans.  This compared to $467 thousand or 0.13% of total gross loans as of December 31, 2020. 

Of the $37.6 million in loans that were on a COVID-19 payment deferral plan during 2020, all have returned to normal payment schedules.

(1)

Non-GAAP financial measure.  Return on average tangible common equity excludes goodwill and intangibles. 

Headquartered in Windsor, Virginia, Farmers Bankshares, Inc. is the holding company for Farmers Bank, Windsor, Virginia.  Farmers Bank was founded in 1919, and is a community bank which operates eight branches and services areas throughout Tidewater Virginia.  Additional information is available at the company’s website, www.farmersbankva.com.

The common stock of Farmers Bankshares, Inc. trades on the OTC Pink Marketplace under the symbol FBVA.  Any stockbroker can assist with purchase of the company’s stock, as well as with sales of holdings.

 

Farmers Bankshares, Inc. 

Consolidated Balance Sheets

($ in thousands)








3/31/2021


12/31/2020

Assets


(Unaudited)



Total cash & cash equivalents 


$      29,953


$      28,557

Available-for-sale securities


242,697


203,766

Non-marketable equity securities


5,266


6,279

Loans held for investment


268,888


285,009

Allowance for loan losses


(6,230)


(6,347)

Loans held for investment, net


262,658


278,662

Premises and equipment, net


6,190


6,277

Goodwill and other intangible assets, net


10,160


10,250

Other real estate owned 


672


672

Bank-owned life insurance 


11,452


11,378

Other assets


7,587


6,077

Total assets


$   576,635


$    551,918






Liabilities & Stockholders’ Equity





Deposits





Non-interest bearing deposits


$   168,195


$    149,637

Interest-bearing deposits


320,170


303,586

Total deposits


488,365


453,223

Federal Home Loan Bank borrowings



10,000

Capital notes


8,500


8,500

Securities sold under agreements to repurchase


8,586


6,637

Total other liabilities


6,803


6,912

Total liabilities


512,254


485,272






Common stock 


391


389

Capital surplus


3,541


3,357

Retained earnings


55,665


54,103

Accumulated other comprehensive income 


2,204


6,341

Total Farmers Bankshares, Inc. stockholders’ equity


61,801


64,190

Noncontrolling interest 


2,580


2,456

Total stockholders’ equity


64,381


66,646

Total liabilities and stockholders’ equity


$   576,635


$    551,918

 

Farmers Bankshares, Inc. 

Consolidated Income Statement

($ in thousands)

For the Three Months Ended March 31, 






2021


2020

Interest income 

(Unaudited)

Interest and fees on loans held for investment

$          3,287


$         3,377

Interest on available-for-sale securities

1,091


991

Interest on federal funds sold

6


76

Other interest income 

8


4

Total interest and dividend income 

4,392


4,448





Interest expense




Interest on deposits

331


594

Interest on FHLB and other borrowings

27


60

Interest on capital notes

66


49

Interest on repurchase agreements 

12


9

Total interest expense

436


712

Net interest income 

3,956


3,736

Provision for loan losses


125

Net interest income after provision for loan losses

3,956


3,611





Noninterest income




Service charges and other fee income 

112


135

Income from automated teller machines and interchange

160


128

Insurance commissions

1,591


1,658

Net gain on disposition of available-for-sale securities

273


93

Net gain on interest rate swap 

423


Income on bank owned life insurance

74


76

Other income 

195


37

Total noninterest income

2,828


2,127





Noninterest expense




Salaries and employee benefits

2,564


2,562

Occupancy and equipment 

515


516

Bank franchise and other taxes 

185


184

Advertising and marketing

105


121

Data processing 

364


398

Other noninterest expense 

580


649

Total non-interest expense

4,313


4,430

Income before income taxes and noncontrolling interest

2,471


1,308

Income tax expense

383


156

Net income 

2,088


1,152

Net income attributable to noncontrolling interest

124


98

Net income attributable to Farmers Bankshares, Inc. 

$          1,964


$         1,054

 

Financial Highlights 








March 31, 

December 31, 

September 30, 

June 30, 

March 31,

At or For the Three Months Ended,

2021

2020

2020

2020

2020







Per Share and Shares Outstanding (1)






Basic net income  

$               0.63

$               0.57

$               0.41

$               0.42

$               0.34

Book value at end of period

$             19.77

$             20.65

$             19.92

$             18.94

$             19.16

Tangible book value at end of period 

$             16.52

$             17.35

$             16.60

$             15.59

$             15.78

Basic weighted average shares outstanding 

3,116,938

3,104,776

3,104,004

3,102,617

3,098,332

Dividends per share 

$               0.13

$               0.12

$               0.12

$               0.12

$               0.12

Shares outstanding at period end

3,125,678

3,108,462

3,106,809

3,106,809

3,106,415







Selected Performance Ratios 






Return on average assets

1.38%

1.05%

0.96%

0.96%

0.88%

Return on average stockholders’ equity

12.14%

8.70%

7.90%

7.94%

7.40%

Return on average tangible stockholders’ equity

14.41%

10.45%

9.54%

9.64%

9.09%

Net interest margin, tax equivalent (2)

3.22%

3.53%

3.37%

3.47%

3.52%

Cost of deposits

0.35%

0.38%

0.39%

0.45%

0.55%

Non-interest income as a percentage of total revenue (3)

41.69%

44.17%

37.23%

34.89%

36.28%

Efficiency ratio (4)

63.58%

69.09%

69.63%

70.52%

74.64%







Balance Sheet Ratios






Loans to deposits

53.78%

61.29%

65.03%

67.11%

70.77%

Tangible common equity to tangible assets

10.91%

11.92%

11.74%

11.47%

12.46%

Nonperforming loans to period-end loans

0.10%

0.13%

0.10%

0.07%

0.13%

Allowance for loan losses to period-end loans

2.32%

2.23%

2.20%

2.11%

2.01%

Net charge-offs to average loans outstanding

0.04%

0.09%

0.09%

0.11%

0.18%

____________________

(1)

Computed based on the weighted average number of shares outstanding during each period.

(2)

Net interest margin is net interest income divided by average interest earning assets.

(3)

Total revenue consists of net interest income and non-interest income

(4)

Efficiency ratio is non-interest expense divided by the sum of net interest income and non-interest income.

 

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SOURCE Farmers Bankshares, Inc.