Farmers Bankshares Reports Third Quarter and Year-to-Date Earnings


Farmers Bankshares, Inc. (OTC-PINK: FBVA) reports unaudited earnings of $1.3 million, or $0.41 per share, for the third quarter of 2020. These results are decreased from the $1.5 million, or $0.49 per share, earned during the third quarter of 2019. Net income through the nine months ended September 30, 2020 amounted to $3.6 million, or $1.17 per share, down 13.16% from the $4.2 million, or $1.35 per share, reported through the first nine months of 2019.

At September 30, 2020, select financial information and key highlights include:

  • Return on average assets of 0.96%, compared to 1.21% for the same time period in 2019.
  • Return on average equity of 7.90%, compared to 10.57% for the same time period in 2019.
  • Return on average tangible common equity (1) of 9.54%, compared to 13.08% for the same time period in 2019.
  • Net interest margin through the third quarter was 3.37%, significantly reduced from 3.85% for the same period in the prior year.
  • Total cost of deposits decreased to 0.39% from 0.65% at September 30, 2019.

"Our financial performance in the midst of such uncertain times continues to give us confidence that we are making decisions that are positively effecting the Company's long term value. While year over year earnings are down, this is largely due to additional provision expense in the current year. Because there continues to be uncertainty surrounding the economic and credit environment as it relates to the lasting effects of COVID-19 we have continued to increase our allowance for loan loss calculation" said Vernon M. Towler, President and Chief Executive Officer.

Consolidated Balance Sheet

Net loans have increased $22.9 million, or 8.75%, 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 we have also had productive loan growth in some of our newer markets, balances on operating lines of credit continue to trend downward as many small businesses are still experiencing healthy cash positions aided by the various government stimulus programs. The Company still had approximately $24.9 million in PPP loans on the balance sheet as of September 30, 2020. Deposit balances have increased by $51.1 million to $436.6 million as of September 30, 2020 from $385.5 million as of December 31, 2019. Non-interest bearing deposits increased by $25.5 million and make up approximately 32.46% of total deposits. Customer stimulus payments and PPP loan fundings both contributed to this increase in deposits.

The Company redeemed $6 million of capital notes bearing an interest rate of 3.25% as of August 14, 2020. Capital notes totaling $8.5 million were issued on the same day. Of the $8.5 million in newly issued capital notes, $2.7 million will mature in August 2025 and bear an interest rate of 3.00% and $5.8 million will mature in August 2027 and bear an interest rate of 3.25%. This transaction will lengthen the term of the capital notes and lock in funding costs during this low interest rate environment.

Capital ratios at the bank level remain well within the well-capitalized guidelines of the regulatory framework.

Results of Operations

Net interest income decreased 3.00% when comparing the third quarter of 2020 to the third quarter of 2019. Net interest margin through the third quarter decreased to 3.37%, including PPP and 3.47% excluding PPP, when compared to the third quarter of 2019 of 3.85%. 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.

Non-interest income through the third quarter of 2020 was approximately $6.5 million and was increased by 5.34% 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 decreased by 1.71% through the third 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 100th anniversary in the prior year.

Provision for loan losses of $270 thousand were added during the third quarter, bringing year to date provisions to $921 thousand for 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 continues to drive the additional provision expense. Our allowance for loan losses was 2.20% of gross loans as of September 30, 2020, including loans originated through the PPP, and 2.41% of gross loans excluding loans originated through the PPP (1).

Asset Quality

Non-performing assets, which consist of nonaccrual loans and other real estate owned remained relatively consistent decreasing from $1.4 million at December 31, 2019 to $962 thousand at September 30, 2020. There was one addition 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 September 30, 2020, loans greater than thirty days past due totaled $289 thousand, or 0.10% 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 payment deferral plan as of the end of the first quarter of 2020, all have returned to normal payment schedules.

(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,

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