PR Newswire | Jul 23, 2021 01:07PM EDT

07/23 12:06 CDT

Farmers Bankshares, Inc. Reports Second Quarter and Year-to-Date Earnings WINDSOR, Va., July 23, 2021

WINDSOR, Va., July 23, 2021 /PRNewswire/ -- Farmers Bankshares, Inc. (OTC-PINK: FBVA) reports unaudited earnings of $3.7 million, or $1.19 per share, for the second quarter of 2021. These results increased approximately 183.30% from the $1.3 million, or $0.42 per share, earned during the second quarter of 2020. Net income through the six months ended June 30, 2021 amounted to $5.7 million or $1.82 per share, which is a 140.11% increase from the $2.4 million or $0.76 per share, reported for 2020.

At June 30, 2021, select financial information and key highlights include:

* Return on average assets of 1.97%, compared to 0.96% in 2020. * Return on average equity of 17.05%, compared to 7.94% in 2020. * Return on average tangible common equity (1) of 20.12%, compared to 9.64% in 2020. * Net interest margin was 3.20%, reduced from 3.47% in the prior year. * Total cost of deposits decreased to 0.28% from 0.45% at June 30, 2020.

Consolidated Balance Sheet

Net loans decreased $21.1 million, or 7.56%, 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 $14.2 million in the CARES Act's Paycheck Protection Program ("PPP") loans on the balance sheet as of June 30, 2021. Deposit balances have increased by $46.8 million to $500.1 million as of June 30, 2021 from $453.2 million as of December 31, 2020. Non-interest bearing deposits increased by $21.9 million and make up approximately 34.31% of total deposits. The influx of customer stimulus payments, PPP loan funds and seasonal municipality deposits all contributed to this increase in deposits. Management has focused on minimizing cash held in federal funds by deploying excess into high quality investments when prudent and to offset tepid loan growth being seen throughout our market.

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

"As previously disclosed we completed the sale of other real estate owned that resulted in a net, pre-tax gain of $3.1 million during the second quarter. This one-time gain provides a boost to our already strong capital position and will help to further our strategy of investing for growth, to include the acquisition of other non-interest income business lines. We remain keenly focused on creating value for our shareholders via increased profitability and returning capital through increasing common dividends. We will continue to look for new and innovative ways to serve our customers with an emphasis on improving efficiency and expanding product offerings" stated Vernon M. Towler, President and Chief Executive Officer.

Results of Operations

Net interest income decreased less than 1.00% in the second quarter of 2021 compared to the second quarter of 2020. The inflation of our balance sheet due to stimulus funds for consumers, businesses and municipalities coupled with the downward pressure on loan rates has caused much of the reduction in net interest margin. While we still have a small percentage of deposits that will reprice downward over the next twelve months, our cost of funds will not be reduced at the same pace as the previous twelve months going forward.

Non-interest income through the second quarter of 2021 was approximately $8.0 million and was increased by 87.20% over the same period in the prior year due primarily to the gain from unwinding the interest rate swap that occurred in the first quarter and the gain on other real estate owned recognized in the second quarter. In April 2021, the Company closed on the sale of other real estate owned that had been 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.

Non-interest expense increased 1.49% through the first quarter of 2021 compared to same period in 2020. Management continues to balance investing in growth and new markets with prudent expense control.

No provision for loan losses was added during the second 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 June 30, 2021, including loans originated through the PPP, and 2.45% 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 $844 thousand at December 31, 2020 to $277 thousand at June 30, 2021. The decrease was due to the sale of the other real estate owned previously discussed. 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 June 30, 2021, loans greater than thirty days past due totaled $374 thousand, or 0.14% of total gross loans. This compared to $467 thousand or 0.13% of total gross loans as of December 31, 2020.

(1) Non-GAAP financial measure. Return on average tangible common equityexcludes 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)

6/30/2021 12/31/2020

Assets (Unaudited)

Total cash & cash equivalents $ 29,395 $ 28,557

Available-for-sale securities 263,465 203,766

Non-marketable equity securities 5,821 6,279

Loans held for investment 263,700 285,009

Allowance for loan losses (6,118) (6,347)

Loans held for investment, net 257,582 278,662

Premises and equipment, net 6,193 6,277

Goodwill and other intangible assets, net 10,070 10,250

Other real estate owned 147 672

Bank-owned life insurance 11,527 11,378

Other assets 6,772 6,077

Total assets $ 590,972 $ 551,918

Liabilities & Stockholders' Equity

Deposits

Non-interest bearing deposits $ 171,574 $ 149,637

Interest-bearing deposits 328,496 303,586

Total deposits 500,070 453,223

Federal Home Loan Bank borrowings - 10,000

Capital notes 8,500 8,500

Securities sold under agreements to repurchase 6,922 6,637

Other liabilities 5,857 6,912

Total liabilities 521,349 485,272

Common stock 391 389

Capital surplus 3,541 3,357

Retained earnings 58,980 54,103

Accumulated other comprehensive income 4,315 6,341

Total Farmers Bankshares, Inc. stockholders' 67,227 64,190equity

Noncontrolling interest 2,396 2,456

Total stockholders' equity 69,623 66,646

Total liabilities and stockholders' equity $ 590,972 $ 551,918

Farmers Bankshares, Inc.

Consolidated Income Statement (Unaudited)

($ in thousands)

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Interest income

Interest and feeson loans held for $ 2,907 $ 3,494 $ 6,194 $ 6,871investment

Interest onavailable-for-sale 1,215 955 2,306 1,946securities

Interest on 3 2 9 78federal funds sold

Other interest 7 64 15 68income

Total interest and 4,132 4,515 8,524 8,963dividend income

Interest expense

Interest on 329 436 660 1,030deposits

Interest on FHLBand other 3 12 30 72borrowings

Interest on 70 49 136 98capital notes

Interest onrepurchase 9 8 21 17agreements

Total interest 411 505 847 1,217expense

Net interest 3,721 4,010 7,677 7,746income

Provision for loan - 526 - 651losses

Net interestincome after 3,721 3,484 7,677 7,095provision for loanlosses

Noninterest income

Service chargesand other fee 105 101 217 236income

Income fromautomated teller 181 142 341 270machines andinterchange

Insurance 1,344 1,307 2,935 2,965commissions

Net gain ondisposition of 2 259 275 352available-for-salesecurities

Gain on interest - - 423 -rate swap

Income on bankowned life 75 74 149 150insurance

Gain on sale ofother real estate 3,110 - 3,110 -owned

Other income 360 266 555 303

Total noninterest 5,177 2,149 8,005 4,276income

Noninterestexpense

Salaries and 2,579 2,420 5,143 4,982employee benefits

Occupancy and 457 481 972 997equipment

Bank franchise and 155 162 340 346other taxes

Advertising and 97 84 202 205marketing

Data processing 391 376 755 774

Other noninterest 617 530 1,197 1,179expense

Total non-interest 4,296 4,053 8,609 8,483expense

Income beforeincome taxes and 4,602 1,580 7,073 2,888noncontrollinginterest

Income tax expense 812 184 1,195 340

Net income 3,790 1,396 5,878 2,548

Net incomeattributable to 73 84 197 182noncontrollinginterest

Net incomeattributable to $ 3,717 $ 1,312 $ 5,681 $ 2,366FarmersBankshares, Inc.

Financial Highlights

June 30, March 31, December 31, September 30, June 30,

At or For the Three Months Ended, 2021 2021 2020 2020 2020

Per Share and Shares Outstanding (1)

Basic net income $ 1.19 $ 0.63 $ 0.57 $ 0.41 $ 0.42

Book value at end of period $ 21.51 $ 19.77 $ 20.65 $ 19.92 $ 18.94

Tangible book value at end of period $ 18.29 $ 16.52 $ 17.35 $ 16.60 $ 15.59

Basic weighted average shares outstanding 3,121,308 3,116,938 3,104,776 3,104,004 3,102,617

Dividends per share $ 0.13 $ 0.13 $ 0.12 $ 0.12 $ 0.12

Shares outstanding at period end 3,125,678 3,125,678 3,108,462 3,106,809 3,106,809

Selected Performance Ratios

Return on average assets 1.97% 1.38% 1.05% 0.96% 0.96%

Return on average stockholders' equity 17.05% 12.14% 8.70% 7.90% 7.94%

Return on average tangible stockholders' equity 20.12% 14.41% 10.45% 9.54% 9.64%

Net interest margin, tax equivalent (2) 3.20% 3.22% 3.53% 3.37% 3.47%

Cost of deposits 0.28% 0.35% 0.38% 0.39% 0.45%

Non-interest income as a percentage of total revenue (3) 58.18% 41.69% 44.17% 37.23% 34.89%

Efficiency ratio (4) 48.28% 63.58% 69.09% 69.63% 70.52%

Balance Sheet Ratios

Loans to deposits 51.51% 53.78% 61.29% 65.03% 67.11%

Tangible common equity to tangible assets 11.57% 10.91% 11.92% 11.74% 11.47%

Nonperforming loans to period-end loans 0.14% 0.10% 0.13% 0.10% 0.07%

Allowance for loan losses to period-end loans 2.32% 2.32% 2.23% 2.20% 2.11%

Net charge-offs to average loans outstanding 0.04% 0.04% 0.09% 0.09% 0.11%

(1) Computed based on the weighted average number of shares outstanding duringeach period.

(2) Net interest margin is net interest income divided by average interestearning 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 interestincome and non-interest income.

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SOURCE Farmers Bankshares, Inc.