PR Newswire | Feb 12, 2021 12:00PM EST

02/12 10:59 CST

Farmers Bankshares, Inc. Reports Record Earnings for 2020 WINDSOR, Va., Feb. 12, 2021

WINDSOR, Va., Feb. 12, 2021 /PRNewswire/ -- Farmers Bankshares, Inc. (OTC-PINK: FBVA) reports unaudited earnings of $1.8 million, or $0.57 per share, for the fourth quarter of 2020. These results are increased from the $921 thousand, or $0.30 per share, earned during the fourth quarter of 2019. The Company posted record earnings for the year, which amounted to $5.4 million or $1.74 per share, which is a 6.07% increase from the $5.1 million or $1.65 per share, reported for 2019.

At December 31, 2020, select financial information and key highlights include:

* Return on average assets of 1.05%, compared to 1.10% in 2019. * Return on average equity of 8.70%, compared to 9.49% in 2019. * Return on average tangible common equity (1) of 10.45%, compared to 11.82% in 2019. * Net interest margin was 3.53%, significantly reduced from 3.83% in the prior year. * Total cost of deposits decreased to 0.38% from 0.63% at December 31, 2019.

"We are pleased to report another year of record earnings in 2020. Our strategy of investing in sources of non-interest income through insurance and mortgage partnerships proved highly beneficial in 2020 and helped to offset the negative impact of falling net interest margins in traditional banking. We made significant contributions to our provision for loan losses to account for the economic uncertainty caused by the COVID-19 pandemic and still enjoyed a very profitable year. I am proud of our employees for their continuous commitment to providing high level customer service during a challenging environment. Our staff's ability and willingness to adapt to new and creative ways of conducting business and servicing our customers in a safe and efficient manner showed brightly in 2020. As a community bank, we remain nimble and flexible in responding to ever-changing customer needs, no matter the circumstances. The year 2020 held many challenges for the financial industry. Our team chose to approach it as a time for our Bank to rise to the occasion and continue to support our local community and customers, and I'm very proud of their efforts and the results," said Vernon M. Towler, President and Chief Executive Officer.

Consolidated Balance Sheet

Net loans increased $17.6 million, or 6.74%, as compared to December 31, 2019. The increase was primarily driven by loans associated with the Company's participation in the CARES Act's Paycheck Protection Program ("PPP"). While the Company had productive loan growth in some of its newer markets, two large loans to municipalities repaid during the fourth quarter which affected net loan growth during that time. The Company had approximately $17.4 million in PPP loans on the balance sheet as of December 31, 2020 and had received approximately $7.6 million in payments on 45 loans being fully forgiven through the same time period. Deposit balances have increased by $68.1 million to $454.7 million as of December 31, 2020 from $385.5 million as of December 31, 2019. Non-interest bearing deposits increased by $34.6 million and make up approximately 33.23% 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 fourth quarter, the Company used excess cash to repay a $5.0 million Federal Home Loan Bank advance prior to its maturity in order to reduce interest expense.

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

Results of Operations

Net interest income decreased 2.47%, for the year ended December 31, 2020 compared to 2019. Net interest margin through the fourth quarter decreased to 3.53%, when compared to the fourth quarter of 2019 of 3.83%. This reduction is primarily due to the impact of significantly lower market interest rates since the first quarter of 2020 and the rate associated with loans originated through the PPP program.

Non-interest income through the fourth quarter of 2020 was approximately $9.6 million and was increased by 24.35% over the same period in the prior year due primarily to increased insurance revenues from Manry Rawls Insurance and our investment in mortgage lending through our ownership interest in Tidewater Home Funding. Non-interest expense remained relatively flat in 2020 compared to same period in 2019, decreasing by less than one percent.

No provision for loan losses was added during the fourth quarter of 2020. Total provision equaled $921 thousand for the year ended December 31, 2020 compared to $0 for the same period in 2019. The Company considers local and national unemployment, housing and market trends when determining the estimated allowance. The economic factor of our allowance for loan loss calculation drove the additional provision expense during the year. Our allowance for loan losses was 2.23% of gross loans as of December 31, 2020, including loans originated through the PPP, and 2.37% of gross loans excluding loans originated through the PPP (1).

Asset Quality

Non-performing assets, which consists of nonaccrual loans and other real estate owned decreased from $1.4 million at December 31, 2019 to $844 thousand at December 31, 2020. 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 December 31, 2020, loans greater than thirty days past due totaled $466 thousand, or 0.16% of total gross loans. This compared to $927 thousand or 0.35% of total gross loans as of December 31, 2019.

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)

12/31/2020 12/31/2019

Assets (Unaudited)

Total cash & cash equivalents $ 28,557 $ 30,010

Available-for-sale securities 203,766 145,300

Non-marketable equity securities 6,279 5,265

Loans held for investment 285,009 266,741

Allowance for loan losses (6,347) (5,677)

Loans held for investment, net 278,662 261,064

Premises and equipment, net 6,277 5,796

Goodwill and other intangible assets, net 10,250 10,609

Other real estate owned 672 672

Bank-owned life insurance 11,378 11,157

Other assets 6,077 6,698

Total assets $ 551,918 $ 476,571

Liabilities & Stockholders' Equity

Deposits

Non-interest bearing deposits $ 149,637 $ 116,235

Interest-bearing deposits 303,586 269,282

Total deposits 453,223 385,517

Federal Home Loan Bank borrowings 10,000 15,000

Capital notes 8,500 6,000

Securities sold under agreements to repurchase 6,637 5,142

Total other liabilities 6,912 6,626

Total liabilities 485,272 418,285

Common stock 389 386

Capital surplus 3,357 3,000

Retained earnings 54,103 50,176

Accumulated other comprehensive income 6,341 2,622

Total Farmers Bankshares, Inc. stockholders' 64,190 56,184equity

Noncontrolling interest 2,456 2,102

Total stockholders' equity 66,646 58,286

Total liabilities and stockholders' equity $ 551,918 $ 476,571

Farmers Bankshares, Inc.

Consolidated Income Statement

($ in thousands)

For the Year Ended December 31,

2020 2019

Interest income (Unaudited)

Interest and fees on loans held for investment $ 13,510 $ 14,508

Interest on available-for-sale securities 3,978 4,306

Interest on federal funds sold 85 83

Other interest income 24 35

Total interest and dividend income 17,597 18,932

Interest expense

Interest on deposits 1,786 2,509

Interest on FHLB and other borrowings 138 361

Interest on capital notes 224 195

Interest on repurchase agreements 36 27

Interest on federal funds purchased - 37

Total interest expense 2,184 3,129

Net interest income 15,413 15,803

Provision for loan losses 921 -

Net interest income after provision for loan losses 14,492 15,803

Noninterest income

Service charges and other fee income 457 578

Income from automated teller machines and interchange 579 576

Insurance commissions 6,348 5,555

Net gain on disposition of available-for-sale securities 607 336

Income on bank owned life insurance 300 305

Other income 1,300 363

Total noninterest income 9,591 7,713

Noninterest expense

Salaries and employee benefits 10,339 10,281

Occupancy and equipment 2,136 2,198

Bank franchise and other taxes 524 383

Advertising and marketing 399 629

Data processing 1,501 1,504

Other noninterest expense 2,497 2,424

Total non-interest expense 17,396 17,419

Income before income taxes and noncontrolling interest 6,687 6,097

Income tax expense 815 739

Net income 5,872 5,358

Net income attributable to noncontrolling interest 466 262

Net income attributable to Farmers Bankshares, Inc. $ 5,406 $ 5,096

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SOURCE Farmers Bankshares, Inc.