Farmers Bankshares, Inc. Reports Record Earnings for 2021
WINDSOR, VA, Feb. 4, 2022 — Farmers Bankshares, Inc. (OTC-PINK: FBVA) (the “Company”) reports unaudited earnings of $1.2 million, or $0.38 per share, for the fourth quarter of 2021. These results are decreased from the $1.8 million, or $0.57 per share, earned during the fourth quarter of 2020. The Company posted record earnings for the year, which amounted to $8.5 million or $2.72 per share, which is a 56.98% increase from the $5.4 million or $1.74 per share, reported for 2020.
At December 31, 2021, select financial information and key highlights for the year include:
- Return on average assets of 1.44%, compared to 1.05% in 2020.
- Return on average equity of 12.41%, compared to 8.70% in 2020.
- Return on average tangible common equity (1) of 14.56%, compared to 10.45% in 2020.
- Net interest margin, tax equivalent (1) was 3.06%, reduced from 3.53% in the prior year.
- Total cost of deposits decreased to 0.23% from 0.38% at December 31, 2020.
“We earned a record $8.5 million in 2021, with many factors contributing to this success. The gain on the sale of other real estate owned boosted net income by approximately $2.6 million, after-tax. Excluding that extraordinary item, we still posted record earnings of $5.9 million (1). Our mortgage and insurance partnerships also added meaningfully to earnings in 2021. By investing excess liquidity in the securities portfolio we were able to offset stagnant loan growth and continued margin compression. We are very aware that some of these favorable factors may not contribute as significantly in 2022 and are focused on organic loan growth and further opportunities to grow non-interest income. Our credit metrics continue to be strong, which positions us well for an improvement in loan demand. Near the end of the third quarter we invested in seasoned talent in Virginia Beach. We are encouraged by this decision, seeing notable loan growth in the fourth quarter from this market and a strong pipeline into 2022. We still believe there is a niche for expanding the Farmers Bank brand of banking in regions east of our traditional customer base,” said Vernon M. Towler, President and Chief Executive Officer.
Consolidated Balance Sheet
Net loans decreased $20.3 million, or 7.27%, as compared to December 31, 2020, however net loans grew $18.5 million or 7.69% during the fourth quarter of 2021 compared to the third quarter, primarily due to growth in newer markets. The year over year decrease was driven by forgiveness of loans associated with the Company’s participation in the CARES Act’s Paycheck Protection Program (“PPP”). The Company had approximately $2.8 million in PPP loans remaining on the balance sheet as of December 31, 2021 and during 2021 received $26.4 million for forgiveness of PPP loans originated in 2020 and 2021. Deposit balances increased by $78.4 million to $531.6 million as of December 31, 2021 from $453.2 million as of December 31, 2020. Non-interest bearing deposits increased by $39.2 million and make up approximately 35.52% of total deposits. The increase in the consumer savings rate, municipal deposits and overall liquidity in the economy all contributed to this increase in deposits.
Capital ratios at the bank level remain well within the well-capitalized guidelines of the regulatory framework.
Results of Operations
Net interest income increased by 1.46%, for the year ended December 31, 2021 compared to 2020. Continuing to invest excess cash into our securities portfolio, recognizing fees related to forgiven PPP loans and repricing of deposits contributed to this slight increase.
Non-interest income through the fourth quarter of 2021 was approximately $12.9 million and was increased by 35.39% over the same period in the prior year, primarily driven by a gain from terminating an interest rate swap that occurred in the first quarter and the gain on other real estate owned recognized in the second quarter.
Non-interest expense through December 31, 2021 increased 3.94% compared to same period in 2020. Investing in talent and premises to expand our Virginia Beach and Pungo markets predominantly drove this increase. Approximately, $180 thousand in non-recurring expenses related to talent acquisition and retirement benefits were included in the fourth quarter of 2021, increasing non-interest expense in that period.
No provision for loan losses was added during the fourth quarter of 2021. Total provision equaled $-0- for the year ended December 31, 2021 compared to $921 thousand for the same period in 2020. The Company considers local and national unemployment, housing and market trends when determining the estimated allowance. The allowance for loan losses was 2.32% of gross loans as of December 31, 2021.
Non-performing assets, which consists of nonaccrual loans and other real estate owned increased from $844 thousand at December 31, 2020 to $1.3 million at December 31, 2021, but showed no increase during the fourth quarter. The year over year increase was due to one loan being added to nonaccrual status during the third 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, 2021, loans greater than thirty days past due totaled $1.0 million, or 0.39% of total gross loans. This compared to $466 thousand, or 0.16% of total gross loans and $1.3 million, or 0.52% of total gross loans as of December 31, 2020 and September 30, 2021, respectively.
(1) Non-GAPP 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.