Farmers Bankshares, Inc. Reports Record Earnings for 2020

Rhea-AI Summary

Farmers Bankshares, Inc. (OTC-PINK: FBVA) announced record earnings of $5.4 million, or $1.74 per share, for 2020, marking a 6.07% increase from 2019. Fourth quarter earnings rose to $1.8 million, or $0.57 per share, up from $921 thousand in Q4 2019. Key financial metrics include a net interest margin of 3.53% and a return on average assets of 1.05%. The bank saw a significant increase in deposits, up $68.1 million to $454.7 million, aided by PPP loans and stimulus payments. Despite challenges, the bank effectively navigated economic pressures and maintained profitability.

Positive

• Record earnings of $5.4 million for 2020, a 6.07% increase from 2019.
• Fourth quarter earnings rose to $1.8 million from $921 thousand in Q4 2019.
• Total deposits increased by $68.1 million to $454.7 million.
• Non-interest income surged 24.35% year-over-year, reaching approximately $9.6 million.

Negative

• Net interest income decreased by 2.47% compared to 2019.
• Net interest margin fell to 3.53% from 3.83% in 2019.
• Return on average assets declined to 1.05%, down from 1.10% in 2019.

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' equity	64,190		56,184
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.

FAQ

What were the earnings per share (EPS) for Farmers Bankshares (FBVA) in 2020?

Farmers Bankshares reported earnings of $1.74 per share for the year 2020.

How did the earnings in the fourth quarter of 2020 for FBVA compare to the previous year?

In the fourth quarter of 2020, FBVA earned $1.8 million, or $0.57 per share, compared to $921 thousand, or $0.30 per share in Q4 2019.

What were the main drivers for the increase in deposits for Farmers Bankshares (FBVA)?

The increase in deposits was primarily due to PPP loan funds, stimulus payments, and seasonal municipality deposits.

What percentage did non-interest income increase for Farmers Bankshares (FBVA) in 2020?

Non-interest income increased by 24.35% year-over-year, reaching approximately $9.6 million.

What impact did the COVID-19 pandemic have on Farmers Bankshares' (FBVA) loan provision?

The bank made significant contributions to its provision for loan losses due to the economic uncertainty caused by the COVID-19 pandemic.