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

Rhea-AI Summary

Farmers Bankshares, Inc. (FBVA) reported unaudited earnings of $1.9 million or $0.63 per share for Q1 2021, an increase of 86.35% from $1.1 million or $0.34 per share in Q1 2020. Key metrics include a return on average assets of 1.38% and return on average equity of 12.14%. However, net interest margin decreased to 3.22% from 3.52%. Total deposits rose to $488.4 million. The company also terminated a $10 million interest rate swap, realizing a gain of $428 thousand.

Positive

• Earnings increased 86.35% year-over-year to $1.9 million.
• Return on average assets improved to 1.38% from 0.88% in 2020.
• Return on average equity increased to 12.14% from 7.40% in 2020.
• Total deposits rose by $35.1 million to $488.4 million.
• Non-interest income surged 32.97% to approximately $2.8 million.

Negative

• Net interest margin decreased to 3.22% from 3.52% in the prior year.
• Net loans decreased by $9.7 million, or 3.51%, compared to December 2020.

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.

FAQ

What were Farmers Bankshares' earnings for Q1 2021?

Farmers Bankshares reported unaudited earnings of $1.9 million or $0.63 per share for Q1 2021.

How did the deposit levels change for Farmers Bankshares?

Total deposits increased by $35.1 million to $488.4 million as of March 31, 2021.

What is the return on average assets for Farmers Bankshares?

The return on average assets was 1.38% for the first quarter of 2021.

What impact did the interest rate swap termination have?

The termination of a $10 million interest rate swap resulted in a gain of $428 thousand.

What was the increase in non-interest income for Farmers Bankshares in Q1 2021?

Non-interest income increased by 32.97% to approximately $2.8 million compared to Q1 2020.