WINDSOR, VA, July 23, 2021 – 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).
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.
- 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.