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

News provided by

Jul 24, 2020, 11:54 ET

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 100^th 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' equity	61,028	56,184
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 losses	7,094,580	7,987,779

Noninterest income
Service charges and other fee income	235,952	284,500
Income from automated teller machines and interchange	269,560	280,311
Insurance commissions	2,964,903	2,811,016
Net gain on disposition of available-for-sale securities	351,912	329,365
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 interest	2,887,583	3,178,488
Income tax expense	339,464	392,725
Net income	2,548,119	2,785,763
Net income attributable to noncontrolling interest	181,998	132,205
Net income attributable to Farmers Bankshares, Inc.	$ 2,366,121	$ 2,653,558