PR Newswire | Jul 24, 2020 11:55AM EDT

07/24 10:54 CDT

Farmers Bankshares, Inc. Reports Second Quarter and Year-to-Date Earnings WINDSOR, Va., July 24, 2020

WINDSOR, Va., July 24, 2020 /PRNewswire/ -- Farmers Bankshares, Inc. (OTC-PINK: FBVA) reports unaudited earnings of $1.3 million, or $0.42 per share, for the second quarter of 2020. These results are in line with the $1.3 million, or $0.42 per share, earned during the second quarter of 2019.

Return on average assets on an annualized basis was 0.96% for the second quarter of 2020, a decrease from 1.15% for the second quarter of 2019. Return on average equity during the second quarter of 2020 was 7.94% as compared to 10.38% for the second quarter of 2019. Return on average tangible common equity (1) was 9.64% for the period ended June 30, 2020 and compared to 12.83% for the period ended June 30, 2019.

Net loans have increased $25.9 million, or 9.92%, 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"). The Bank serviced customers through the PPP with 257 loans totaling approximately $24.9 million processed through the end of the second quarter. Deposit balances have increased by $42.1 million to $427.6 million as of June 30, 2020 from $385.5 million as of December 31, 2019. Non-interest bearing deposits increased by $25.0 million and make up approximately 33.04% of total deposits. Customer stimulus payments and PPP loan fundings both contributed to this increase in deposits. Net interest income decreased 3.03% when comparing the second quarter of 2020 to the second quarter of 2019. Net interest margin for the second quarter decreased to 3.47%, including PPP and 3.55% excluding PPP, when compared to the second quarter of 2019 of 3.85%. This reduction is primarily due to the impact of significantly lower market interest rates since the second quarter of 2019 and the rate associated with loans originated through the PPP.

"I am pleased with our financial results for the first half of 2020, especially given the current interest rate environment and challenging economic situation. I am most proud of the way our entire team have shown a new level of commitment and support for our customers and communities while navigating these unparalleled times. Being a community bank, we strive to be flexible to meet the changing needs of our customers and present conditions have proven we are able to do that. We successfully opened our branch in the Pungo area of Virginia Beach during the second quarter and are very encouraged with the reception from that community." said Vernon M. Towler, President and Chief Executive Officer.

Non-interest income through the second quarter of 2020 was approximately $4.3 million and was increased by 9.61% over the same period in the prior year due primarily to increased insurance revenues from Manry Rawls Insurance and our investment in Tidewater Home Funding. Non-interest expense decreased by 2.61% during the second quarter 2020 compared to same period in 2019. This decrease was partially due to deferred salary costs related to participation in the PPP and reduced marketing expenses after celebrating our 100th anniversary in the prior year. Provision for loan losses of $526 thousand was added during the second quarter, bringing year to date provisions to $651 thousand for 2020 compared to $0 for the same period in 2019. Our allowance for loan losses was 2.11% of gross loans as of June 30, 2020, including loans originated through the PPP, and 2.30% of gross loans excluding loan originated through the PPP (1). Of the $37.6 million in loans that were on a payment deferral plan as of the end of the first quarter of 2020, $36.6 million have returned to a normal payment schedule as of June 30, 2020.

"We remain committed to managing our balance sheet in a manner that enables us to meet our long-term strategic goals while providing shareholders a competitive rate of return. A large deposit repriced, to lower current market rates, during the second quarter and helped to stabilize net interest margin when compared to the first quarter of 2020. While our credit metrics remain very healthy and have shown little deterioration, we did increase loan loss reserves during the second quarter to account for the high level of economic uncertainty. Consistent returns from our insurance subsidiary and favorable results from our mortgage partnership also contributed positively to second quarter earnings. Liquidity and capital levels remain strong and position us well for future opportunities." stated Kristy DeJarnette, Chief Financial Officer.

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

Farmers Bank, founded in 1919, is headquartered in Windsor, VA, 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 as an Over-the-Counter Bulletin Board stock 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)

6/30/2020 12/31/2019

Assets (Unaudited)

Total cash & cash equivalents $ 27,272 $ 30,010

Available-for-sale securities 168,903 145,300

Non-marketable equity securities 5,286 5,265

Loans held for investment 293,141 266,741

Allowance for loan losses (6,175) (5,677)

Loans held for investment, net 286,966 261,064

Premises and equipment, net 6,396 5,796

Goodwill and other intangible assets, net 10,412 10,609

Other real estate owned 672 672

Bank-owned life insurance 11,307 11,157

Other assets 7,663 6,698

Total assets $ 524,877 $ 476,571

Liabilities & Stockholders' Equity

Deposits

Non-interest bearing $ 141,260 $ 116,235

Interest-bearing deposits 286,306 269,282

Total deposits 427,566 385,517

Federal Home Loan Bank borrowings 15,000 15,000

Capital notes 6,000 6,000

Securities sold under agreements to repurchase 5,417 5,142

Total other liabilities 7,695 6,626

Total liabilities 461,678 418,285

Common stock 388 386

Capital surplus 3,269 3,000

Retained earnings 51,803 50,176

Accumulated other comprehensive income 5,568 2,622

Total Farmers Bankshares, Inc. stockholders' 61,028 56,184equity

Noncontrolling interest 2,171 2,102

Total stockholders' equity 63,199 58,286

Total liabilities and stockholders' equity $ 524,877 $ 476,571

Farmers Bankshares, Inc.

Consolidated Income Statement

For the Six Months Ended June 30,

2020 2019

Interest income (Unaudited)

Interest and fees on loans held for investment $ 6,870,730 $ 7,209,967

Interest on available-for-sale securities 1,945,534 2,276,824

Interest on federal funds sold 78,275 16,989

Other interest income 68,194 67,249

Total interest and dividend income 8,962,733 9,571,029

Interest expense

Interest on deposits 1,029,854 1,237,556

Interest on Federal Home Loan Bank advances 72,471 198,994

Interest on capital notes 97,500 97,500

Interest on repurchase agreements 16,723 13,420

Interest on federal funds purchased 605 35,780

Total interest expense 1,217,153 1,583,250

Net interest income 7,745,580 7,987,779

Provision for loan losses 651,000 -

Net interest income after provision for loan 7,094,580 7,987,779losses

Noninterest income

Service charges and other fee income 235,952 284,500

Income from automated teller machines and 269,560 280,311interchange

Insurance commissions 2,964,903 2,811,016

Net gain on disposition of available-for-sale 351,912 329,365securities

Income on bank owned life insurance 150,506 153,278

Other income 303,120 42,440

Total noninterest income 4,275,953 3,900,910

Noninterest expense

Salaries and employee benefits 4,982,496 5,102,259

Occupancy and equipment 997,336 1,027,778

Bank franchise and other taxes 346,412 223,802

Advertising and marketing 204,866 295,982

Data processing 774,339 813,705

Other noninterest expense 1,177,501 1,246,675

Total non-interest expense 8,482,950 8,710,201

Income before income taxes and noncontrolling 2,887,583 3,178,488interest

Income tax expense 339,464 392,725

Net income 2,548,119 2,785,763

Net income attributable to noncontrolling 181,998 132,205interest

Net income attributable to Farmers Bankshares, $ 2,366,121 $ 2,653,558Inc.

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SOURCE Farmers Bankshares, Inc.