FMNB Farmers National Banc Corporation

• Earnings per diluted share of $0.40 ($0.41 excluding certain items, non-GAAP) for the second quarter of 2023
• 162 consecutive quarters of profitability
• Additional FHLB borrowing capacity of $707.8 million as of June 30, 2023
• Uninsured deposits (excluding collateralized deposits) are approximately 15.0% of customer deposit base
• Available for sale securities not pledged totaled $290.0 million at June 30, 2023
• Efficiency ratio of 56.3%, or 55.3% excluding certain items, non-GAAP, for the second quarter of 2023
• Return on average assets of 1.18% for the second quarter of 2023
• ROAE and ROATE (non-GAAP) of 16.1% and 33.6%, respectively, for the second quarter of 2023

Farmers National Banc Corp. (“Farmers” or the “Company”) (NASDAQ: FMNB) reported today net income of $15.0 million, or $0.40 per diluted share, for the three months ended June 30, 2023, compared to $16.0 million, or $0.47 per diluted share, for the three months ended June 30, 2022. Net income for the second quarter of 2023 included pretax items of $442,000 for acquisition related costs and combined net gains of $6,000 on the sale of securities and the sale of other assets. Excluding these items (non-GAAP), net income for the second quarter of 2023 would have been $15.3 million, or $0.41 per diluted share.

Kevin J. Helmick, President and CEO, stated “As we navigate an extremely fluid banking landscape, we will continue to focus on prudent expense management, growing revenue, and maintaining a strong balance sheet, while supporting our communities and investing in our growth strategies. We believe this approach will drive long-term shareholder value as we emerge from this challenging period a stronger and more profitable company,” concluded Mr. Helmick.

Balance Sheet

The Company’s total assets were $5.07 billion at June 30, 2023 compared to $5.11 billion at March 31, 2023 and $4.08 billion at December 31, 2022. The increase from December was primarily due to the acquisition of Emclaire Financial Corp. (“Emclaire”) which added $1.05 billion in assets in the first quarter of 2023. Gross loans (excluding loans held for sale) have increased by $750.5 million since December 31, 2022 and $2.9 million since March 31, 2023. Emclaire was responsible for $740.7 million of the increase in loans since December 31, 2022.

Securities available for sale were $1.32 billion at June 30, 2023, compared to $1.36 billion at March 31, 2023, and $1.27 billion at December 31, 2022. The increase since December is due to the addition of $127.0 million in available for sale securities from Emclaire and a reduction in the gross amount of unrealized losses which totaled $266.5 million at December 31, 2022 compared to a gross unrealized loss of $245.0 million at June 30, 2023. Offsetting these increases, the Company also had sales and runoff from the portfolio in the first six months of 2023. While bond market volatility is expected to continue throughout 2023, the Company will continue to look to opportunistically shrink the size of the securities portfolio to increase liquidity and optimize profitability.

Total customer deposits (excluding brokered time deposits) were $4.25 billion at June 30, 2023, compared to $4.31 billion at March 31, 2023 and $3.42 billion at December 31, 2022. The increase from December was driven by $875.8 million in deposits assumed in the acquisition of Emclaire. Competition for deposits remains high and the Company expects this will continue to place pressure on funding costs and deposit volumes.

Total stockholders’ equity was $367.0 million at June 30, 2023 compared to $374.6 million at March 31, 2023, and $292.3 million at December 31, 2022. The increase since December is primarily due to the acquisition of Emclaire and an increase in retained earnings along with a decrease in the loss from accumulated other comprehensive income offset by increased treasury stock activity. The Company repurchased 850,799 shares of its common stock during the first quarter of 2023 but did not repurchase any shares during the second quarter. The accumulated other comprehensive loss has declined $17.0 million between December 31, 2022 and June 30, 2023 as market rates declined during the first half of 2023 and pricing on available for sale securities improved.

Liquidity

The Company continues to monitor its deposit base and balance sheet composition as well as its access to other sources of liquidity. At June 30, 2023, the Company’s loan to deposit ratio was 73.9% and the Company’s average deposit balance per account was $27,539. In addition, the Company’s ratio of uninsured deposits (excluding collateralized deposits) is approximately 15.0% which remains significantly lower than the banking institutions that failed in the first quarter of 2023.

The Company has access to an additional $707.8 million of FHLB borrowing capacity at June 30, 2023 along with $290.0 million of available for sale securities that are not pledged. With a deep and diverse deposit base and access to a large amount of additional funding capacity, the Company is well positioned to navigate the current banking landscape.

Credit Quality

The provision for credit losses and unfunded commitments was $25,000 for the second quarter of 2023 compared to $616,000 for the second quarter of 2022. Annualized net charge-offs as a percentage of average loans was 0.10% for the three months ended June 30, 2023, compared to 0.01% for the same period in 2022. The allowance for credit losses to total loans was 1.11% at June 30, 2023 compared to 1.14% at March 31, 2023, and 1.12% at December 31, 2022.

Non-performing loans (NPLs) were $18.0 million at June 30, 2023 compared to $18.0 million at March 31, 2023, and $14.8 million at December 31, 2022. The increase since December was primarily due to the addition of Emclaire. The NPL to loans ratio was 0.57% at June 30, 2023 compared to 0.57% at March 31, 2023 and 0.62% at December 31, 2022. Non-performing assets to assets was 0.36% at June 30, 2023, compared to 0.35% at March 31, 2023, and 0.36% at December 31, 2022. Early stage delinquencies, defined as 30-89 days delinquent, were $12.3 million, or 0.39% of total loans, at June 30, 2023, compared to $9.6 million, or 0.40% of total loans, at December 31, 2022.

Net Interest Income

The Company recorded net interest income of $34.6 million in the second quarter of 2023 compared to $31.7 million for the second quarter of 2022. The Company had more earning assets in 2023 due to the acquisition of Emclaire but this was partially offset by a decline of 33 basis point in the net interest margin. The net interest margin was 2.92% for the second quarter of 2023 compared to 3.07% in the first quarter of 2023 and 3.25% for the second quarter of 2022. The decline in net interest margin between the second quarter of 2023 and the second quarter of 2022 was due to increases in funding costs outstripping the increase in yields on earning assets. This increase in funding costs has been due to the rapid increase in deposit rates due to intense competition for deposits, the continued Federal Reserve rate hiking cycle, and runoff of deposit balances which are being replaced by more costly wholesale funding. Excluding the impact of acquisition marks and related accretion and PPP interest and fees, the net interest margin (non-GAAP) for the second quarter of 2023 was 2.68% compared to 2.86% for the first quarter of 2023 and 3.16% for the second quarter of 2022.

Noninterest Income

Noninterest income totaled $9.4 million for the three months ended June 30, 2023, compared to $9.5 million for the three months ended June 30, 2022. Service charges on deposit accounts have increased by $362,000 in the second quarter of 2023 compared to the second quarter of 2022. The increase is primarily due to the acquisition of Emclaire. Bank owned life insurance income, other mortgage banking fee income and debit card income have also increased in the second quarter of 2023 compared to the second quarter of 2022 due to the Emclaire acquisition. Insurance agency commissions are up $246,000 in the second quarter of 2023 compared to the second quarter of 2022 as growth in the insurance business and increased annuity sales have bolstered income. Investment commissions are down slightly for the quarter ended June 30, 2023 compared to the quarter ended June 30, 2022, as customers have been more interested in the annuities mentioned above as opposed to traditional investment products. Net gains on the sale of loans have increased but are still sluggish due to the high level of interest rates and lack of loan volume. Other noninterest income has declined by $1.3 million for the quarter ending June 30, 2023 compared to the second quarter of 2022. This decrease is primarily due to a decline in the income associated with the Company’s investments in SBA/SBIC funds. The performance of these funds in 2022 was much better than had been experienced historically and 2023 has returned to more normal levels of profitability.

Noninterest Expense

Noninterest expense was $26.4 million for the three months ended June 30, 2023, compared to $21.5 million for the three months ended June 30, 2022. The increase in expense is primarily due to the acquisition of Emclaire. Salaries and employee benefits increased $2.6 million to $13.6 million in the second quarter of 2023 compared to the same period in 2022. The acquisition of Emclaire along with normal raise activity were the primary reasons for the increase. Occupancy and equipment expense increased primarily due to the acquisition. FDIC and state and local taxes increased due to the acquisition and the increase in the rate paid for FDIC insurance in 2023. Intangible amortization expense increased due to the acquisition and due to some acceleration of the core deposit intangible recorded in the Cortland Bancorp acquisition in 2021. The Company recorded an additional $359,000 of intangible amortization in the second quarter of 2023 related to the Cortland acquisition. Merger related costs were $442,000 for the second quarter of 2023 compared to $674,000 in the second quarter of 2022.

About Farmers National Banc Corp.

Founded in 1887, Farmers National Banc Corp. is a diversified financial services company headquartered in Canfield, Ohio, with $5.1 billion in banking assets. Farmers National Banc Corp.’s wholly-owned subsidiaries are comprised of The Farmers National Bank of Canfield, a full-service national bank engaged in commercial and retail banking with 65 banking locations in Mahoning, Trumbull, Columbiana, Portage, Stark, Wayne, Medina, Geauga and Cuyahoga Counties in Ohio and Beaver, Butler, Allegheny, Jefferson, Clarion, Venango, Clearfield, Mercer, Elk and Crawford Counties in Pennsylvania, and Farmers Trust Company, which operates five trust offices and offers services in the same geographic markets. Total wealth management assets under care at June 30, 2023 are $3.2 billion. Farmers National Insurance, LLC, a wholly-owned subsidiary of The Farmers National Bank of Canfield, offers a variety of insurance products.

Non-GAAP Disclosure

This press release includes disclosures of Farmers’ tangible common equity ratio, return on average tangible assets, return on average tangible equity, net income excluding costs related to acquisition activities and certain items, return on average assets excluding merger costs and certain items, return on average equity excluding merger costs and certain items, net interest margin excluding acquisition marks and related accretion and PPP interest and fees and efficiency ratio less certain items, which are financial measures not prepared in accordance with generally accepted accounting principles in the United States (GAAP). A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed by GAAP. Farmers believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and Farmers’ marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with GAAP. The reconciliations of non-GAAP financial measures to their GAAP equivalents are included in the tables following Consolidated Financial Highlights below.

Cautionary Statements Regarding Forward-Looking Statements

We make statements in this news release and our related investor conference call, and we may from time to time make other statements, that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Farmers’ financial condition, results of operations, asset quality trends and profitability. Forward-looking statements are not historical facts but instead represent only management’s current expectations and forecasts regarding future events, many of which, by their nature, are inherently uncertain and outside of Farmers’ control. Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions, as well as any statements related to future expectations of performance or conditional verbs, such as “will,” “would,” “should,” “could” or “may.” Farmers’ actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Factors that could cause Farmers’ actual results to differ materially from those described in certain forward-looking statements include significant changes in near-term local, regional, and U.S. economic conditions including those resulting from continued high rates of inflation, tightening monetary policy of the Board of Governors of the Federal Reserve, and possibility of a recession; Farmers’ failure to integrate Emclaire with Farmers in accordance with expectations; deviations from performance expectations related to Emclaire; continuing impacts from the length and extent of the economic impacts of the COVID-19 pandemic; and the other factors contained in Farmers’ Annual Report on Form 10-K for the year ended December 31, 2022 and subsequent Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (SEC) and available on Farmers’ website (www.farmersbankgroup.com) and on the SEC’s website (www.sec.gov). Forward-looking statements are not guarantees of future performance and should not be relied upon as representing management’s views as of any subsequent date. Farmers does not undertake any obligation to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.

Farmers National Banc Corp. and Subsidiaries Consolidated Financial Highlights (Amounts in thousands, except per share results) Unaudited     Consolidated Statements of Income For the Three Months Ended For the Six Months Ended June 30, March 31, Dec. 31, Sept. 30, June 30, June 30, June 30, Percent

 

2023

 

 

2023

 

 

2022

 

 

2022

 

 

2022

 

 

2023

 

 

2022

 

Change Total interest income

$

52,804

 

$

51,233

 

$

38,111

 

$

36,410

 

$

34,286

 

$

104,037

 

$

67,565

 

54.0

%

Total interest expense

 

18,226

 

 

14,623

 

 

8,679

 

 

4,629

 

 

2,575

 

 

32,849

 

 

4,612

 

612.3

%

Net interest income

 

34,578

 

 

36,610

 

 

29,432

 

 

31,781

 

 

31,711

 

 

71,188

 

 

62,953

 

13.1

%

Provision (credit) for credit losses

 

25

 

 

8,599

 

 

416

 

 

448

 

 

616

 

 

8,624

 

 

258

 

3242.6

%

Noninterest income

 

9,449

 

 

10,425

 

 

8,200

 

 

8,827

 

 

9,477

 

 

19,874

 

 

27,175

 

-26.9

%

Acquisition related costs

 

442

 

 

4,313

 

 

584

 

 

872

 

 

674

 

 

4,755

 

 

2,614

 

81.9

%

Other expense

 

25,944

 

 

26,409

 

 

20,511

 

 

20,527

 

 

20,787

 

 

52,353

 

 

49,303

 

6.2

%

Income before income taxes

 

17,616

 

 

7,714

 

 

16,121

 

 

18,761

 

 

19,111

 

 

25,330

 

 

37,953

 

-33.3

%

Income taxes

 

2,650

 

 

639

 

 

2,765

 

 

3,315

 

 

3,160

 

 

3,289

 

 

6,158

 

-46.6

%

Net income

$

14,966

 

$

7,075

 

$

13,356

 

$

15,446

 

$

15,951

 

$

22,041

 

$

31,795

 

-30.7

%

  Average diluted shares outstanding

 

37,320

 

 

37,933

 

 

33,962

 

 

33,932

 

 

33,923

 

 

37,624

 

 

33,927

 

Basic earnings per share

 

0.40

 

 

0.19

 

 

0.39

 

 

0.46

 

 

0.47

 

 

0.59

 

 

0.94

 

Diluted earnings per share

 

0.40

 

 

0.19

 

 

0.39

 

 

0.46

 

 

0.47

 

 

0.59

 

 

0.94

 

Cash dividends per share

 

0.17

 

 

0.17

 

 

0.17

 

 

0.16

 

 

0.16

 

 

0.34

 

 

0.32

 

Performance Ratios Net Interest Margin (Annualized)

 

2.92

%

 

3.07

%

 

2.99

%

 

3.21

%

 

3.25

%

 

3.00

%

 

3.25

%

Efficiency Ratio (Tax equivalent basis)

 

56.28

%

 

62.53

%

 

52.59

%

 

50.55

%

 

49.95

%

 

59.50

%

 

55.56

%

Return on Average Assets (Annualized)

 

1.18

%

 

0.56

%

 

1.31

%

 

1.48

%

 

1.54

%

 

0.87

%

 

1.53

%

Return on Average Equity (Annualized)

 

16.12

%

 

7.71

%

 

20.16

%

 

18.71

%

 

17.97

%

 

11.94

%

 

15.67

%

Dividends to Net Income

 

42.54

%

 

90.50

%

 

43.10

%

 

35.06

%

 

33.95

%

 

58.09

%

 

34.07

%

Other Performance Ratios (Non-GAAP) Return on Average Tangible Assets

 

1.23

%

 

0.58

%

 

1.34

%

 

1.52

%

 

1.57

%

 

0.90

%

 

1.56

%

Return on Average Tangible Equity

 

33.55

%

 

16.31

%

 

32.81

%

 

27.06

%

 

25.23

%

 

25.05

%

 

20.96

%

Consolidated Statements of Financial Condition June 30, March 31, Dec. 31, Sept. 30, June 30,

2023

2023

2022

2022

2022

Assets Cash and cash equivalents

$

116,063

$

128,001

$

75,551

$

79,981

$

65,458

Securities available for sale

 

1,316,878

 

1,355,449

 

1,268,025

 

1,295,133

 

1,361,682

Other investments

 

44,975

 

39,670

 

33,444

 

34,399

 

34,451

  Loans held for sale

 

2,197

 

1,703

 

858

 

2,142

 

2,714

Loans

 

3,155,200

 

3,152,339

 

2,404,750

 

2,399,981

 

2,374,485

Less allowance for credit losses

 

34,957

 

36,011

 

26,978

 

27,282

 

27,454

Net Loans

 

3,120,243

 

3,116,328

 

2,377,772

 

2,372,699

 

2,347,031

  Other assets

 

473,098

 

468,735

 

326,550

 

335,668

 

303,028

Total Assets

$

5,073,454

$

5,109,886

$

4,082,200

$

4,120,022

$

4,114,364

  Liabilities and Stockholders' Equity Deposits Noninterest-bearing

$

1,084,232

$

1,106,870

$

896,957

$

934,638

$

983,713

Interest-bearing

 

3,165,381

 

3,207,121

 

2,526,760

 

2,590,054

 

2,586,829

Brokered time deposits

 

21,135

 

82,169

 

138,051

 

42,459

 

54,996

Total deposits

 

4,270,748

 

4,396,160

 

3,561,768

 

3,567,151

 

3,625,538

Other interest-bearing liabilities

 

388,437

 

292,324

 

183,211

 

243,098

 

137,985

Other liabilities

 

47,278

 

46,760

 

44,926

 

44,154

 

29,392

Total liabilities

 

4,706,463

 

4,735,244

 

3,789,905

 

3,854,403

 

3,792,915

Stockholders' Equity

 

366,991

 

374,642

 

292,295

 

265,619

 

321,449

Total Liabilities and Stockholders' Equity

$

5,073,454

$

5,109,886

$

4,082,200

$

4,120,022

$

4,114,364

  Period-end shares outstanding

 

37,457

 

37,439

 

34,055

 

34,060

 

34,032

Book value per share

$

9.80

$

10.01

$

8.58

$

7.80

$

9.45

Tangible book value per share (Non-GAAP)*

 

4.67

 

4.84

 

5.60

 

4.79

 

6.46

* Tangible book value per share is calculated by dividing tangible common equity by outstanding shares Capital and Liquidity Common Equity Tier 1 Capital Ratio (a)

 

10.39

%

 

10.04

%

 

13.71

%

 

13.36

%

 

13.30

%

Total Risk Based Capital Ratio (a)

 

13.94

%

 

13.60

%

 

17.79

%

 

17.44

%

 

17.46

%

Tier 1 Risk Based Capital Ratio (a)

 

10.89

%

 

10.54

%

 

14.32

%

 

13.97

%

 

13.92

%

Tier 1 Leverage Ratio (a)

 

7.68

%

 

7.43

%

 

9.84

%

 

10.24

%

 

9.56

%

Equity to Asset Ratio

 

7.23

%

 

7.33

%

 

7.16

%

 

6.45

%

 

7.81

%

Tangible Common Equity Ratio (b)

 

3.58

%

 

3.69

%

 

4.79

%

 

4.06

%

 

5.47

%

Net Loans to Assets

 

61.50

%

 

60.99

%

 

58.25

%

 

57.59

%

 

57.04

%

Loans to Deposits

 

73.88

%

 

71.71

%

 

67.52

%

 

67.28

%

 

65.49

%

Asset Quality Non-performing loans

$

17,956

 

$

17,959

 

$

14,803

 

$

12,976

 

$

14,107

 

Non-performing assets

 

18,167

 

 

18,053

 

 

14,876

 

 

13,042

 

 

14,107

 

Loans 30 - 89 days delinquent

 

12,321

 

 

10,219

 

 

9,605

 

 

6,659

 

 

8,716

 

Charged-off loans

 

971

 

 

469

 

 

754

 

 

783

 

 

177

 

Recoveries

 

172

 

 

198

 

 

184

 

 

178

 

 

135

 

Net Charge-offs

 

799

 

 

271

 

 

570

 

 

605

 

 

42

 

Annualized Net Charge-offs to Average Net Loans

 

0.10

%

 

0.03

%

 

0.10

%

 

0.10

%

 

0.01

%

Allowance for Credit Losses to Total Loans

 

1.11

%

 

1.14

%

 

1.12

%

 

1.14

%

 

1.16

%

Non-performing Loans to Total Loans

 

0.57

%

 

0.57

%

 

0.62

%

 

0.54

%

 

0.59

%

Allowance to Non-performing Loans

 

194.68

%

 

200.52

%

 

182.25

%

 

210.25

%

 

194.61

%

Non-performing Assets to Total Assets

 

0.36

%

 

0.35

%

 

0.36

%

 

0.32

%

 

0.34

%

  (a) June 30, 2023 ratio is estimated (b) This is a non-GAAP financial measure. A reconciliation to GAAP is shown below For the Three Months Ended

June 30,

March 31,

Dec. 31,

Sept. 30,

June 30,

End of Period Loan Balances

2023

2023

2022

2022

2022

Commercial real estate

$

1,284,974

$

1,286,830

$

1,028,050

$

1,028,484

$

1,040,243

Commercial

 

362,664

 

361,845

 

293,643

 

296,932

 

285,981

Residential real estate

 

849,533

 

853,074

 

475,791

 

474,014

 

464,489

HELOC

 

138,535

 

137,319

 

132,179

 

132,267

 

129,392

Consumer

 

260,326

 

260,596

 

221,260

 

222,706

 

218,219

Agricultural loans

 

250,807

 

244,938

 

246,937

 

239,081

 

230,477

Total, excluding net deferred loan costs

$

3,146,839

$

3,144,602

$

2,397,860

$

2,393,484

$

2,368,801

For the Three Months Ended   June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,   End of Period Customer Deposit Balances

 

 

2023

 

 

2023

 

 

2022

 

 

2022

 

 

2022

  Noninterest-bearing demand

$

 

1,084,232

 

$

1,106,870

 

$

896,957

 

$

934,638

 

$

983,713

  Interest-bearing demand

 

 

1,383,326

 

 

1,473,001

 

 

1,224,884

 

 

1,399,227

 

 

1,416,129

  Money market

 

 

610,051

 

 

599,037

 

 

435,369

 

 

393,005

 

 

372,723

  Savings

 

 

511,642

 

 

535,321

 

 

441,978

 

 

460,709

 

 

455,555

  Certificate of deposit

 

 

660,362

 

 

599,762

 

 

424,529

 

 

337,113

 

 

342,422

  Total customer deposits

$

 

4,249,613

 

$

4,313,991

 

$

3,423,717

 

$

3,524,692

 

$

3,570,542

 

For the Three Months Ended

For the Six Months Ended

June 30,

March 31,

Dec. 31,

Sept. 30,

June 30,

June 30,

June 30,

Noninterest Income

2023

 

2023

 

2022

 

 

2022

 

 

2022

 

 

2023

 

2022

 

Service charges on deposit accounts $

1,501

$

1,432

$

1,203

 

$

1,229

 

$

1,139

 

$

2,933

$

2,284

 

Bank owned life insurance income, including death benefits

584

 

547

 

590

 

 

406

 

 

405

 

 

1,131

 

814

 

Trust fees

2,248

 

2,587

 

2,373

 

 

2,370

 

 

2,376

 

 

4,835

 

4,895

 

Insurance agency commissions

1,332

 

1,456

 

1,133

 

 

1,136

 

 

1,086

 

 

2,788

 

2,133

 

Security gains (losses), including fair value changes for equity securities

13

 

121

 

(366

)

 

(17

)

 

(60

)

 

134

 

(71

)

Retirement plan consulting fees

382

 

307

 

337

 

 

332

 

 

323

 

 

689

 

720

 

Investment commissions

476

 

393

 

508

 

 

424

 

 

557

 

 

869

 

1,251

 

Net gains on sale of loans

406

 

310

 

242

 

 

326

 

 

365

 

 

716

 

1,494

 

Other mortgage banking fee income (loss), net

234

 

153

 

98

 

 

94

 

 

39

 

 

387

 

99

 

Debit card and EFT fees

1,810

 

1,789

 

1,407

 

 

1,463

 

 

1,528

 

 

3,599

 

2,944

 

Other noninterest income

463

 

1,330

 

675

 

 

1,064

 

 

1,719

 

 

1,793

 

10,612

 

Total Noninterest Income $

9,449

$

10,425

$

8,200

 

$

8,827

 

$

9,477

 

$

19,874

$

27,175

 

  For the Three Months Ended For the Six Months Ended

June 30,

March 31,

Dec. 31,

Sept. 30,

June 30,

June 30,

June 30,

Noninterest Expense

 

2023

 

2023

 

2022

 

2022

 

2022

 

2023

 

2022

Salaries and employee benefits

$

13,625

$

14,645

$

11,385

$

10,724

$

11,073

$

28,270

$

22,904

Occupancy and equipment

 

3,859

 

3,869

 

2,753

 

3,028

 

2,918

 

7,728

 

5,598

FDIC insurance and state and local taxes

 

1,494

 

1,222

 

1,010

 

1,017

 

979

 

2,716

 

1,924

Professional fees

 

1,190

 

1,114

 

938

 

985

 

1,056

 

2,304

 

4,191

Merger related costs

 

442

 

4,313

 

584

 

872

 

674

 

4,755

 

2,614

Advertising

 

478

 

409

 

472

 

596

 

487

 

887

 

879

Intangible amortization

 

1,222

 

909

 

702

 

432

 

419

 

2,131

 

839

Core processing charges

 

1,144

 

1,164

 

742

 

738

 

1,123

 

2,308

 

1,868

Other noninterest expenses

 

2,932

 

3,077

 

2,509

 

3,007

 

2,732

 

6,009

 

11,100

Total Noninterest Expense

$

26,386

$

30,722

$

21,095

$

21,399

$

21,461

$

57,108

$

51,917

  Business Combination   Consideration   Cash

$

33,440

  Stock

 

59,202

  Fair value of total consideration transferred

$

92,642

  Fair value of assets acquired   Cash and cash equivalents

$

20,265

  Securities available for sale

 

126,970

  Other investments

 

7,795

  Loans, net

 

740,659

  Premises and equipment

 

16,103

  Bank owned life insurance

 

22,485

  Core deposit intangible

 

19,249

  Current and deferred taxes

 

17,246

  Other assets

 

6,387

  Total assets acquired

 

977,159

  Fair value of liabilities assumed   Deposits

 

875,813

  Short-term borrowings

 

75,000

  Accrued interest payable and other liabilities

 

7,104

  Total liabilities

 

957,917

  Net assets acquired

$

19,242

  Goodwill created

 

73,400

  Total net assets acquired

$

92,642

  Average Balance Sheets and Related Yields and Rates (Dollar Amounts in Thousands) Three Months Ended Three Months Ended June 30, 2023 June 30, 2022 AVERAGE YIELD/ AVERAGE YIELD/ BALANCE INTEREST (1) RATE (1) BALANCE INTEREST (1) RATE (1) EARNING ASSETS Loans (2)

$

3,144,461

$

42,422

5.40

%

$

2,337,251

$

25,792

4.41

%

Taxable securities

 

1,157,284

 

6,654

2.30

 

 

1,100,538

 

5,223

1.90

 

Tax-exempt securities (2)

 

415,003

 

3,278

3.16

 

 

474,034

 

3,832

3.23

 

Other investments

 

41,361

 

594

5.74

 

 

34,030

 

216

2.54

 

Federal funds sold and other

 

72,801

 

551

3.03

 

 

69,532

 

95

0.55

 

Total earning assets

 

4,830,910

 

53,499

4.43

 

 

4,015,385

 

35,158

3.50

 

Nonearning assets

 

225,131

 

140,334

Total assets

$

5,056,041

$

4,155,719

INTEREST-BEARING LIABILITIES Time deposits

$

646,782

$

4,525

2.80

%

$

354,692

$

552

0.62

%

Brokered time deposits

 

59,402

 

686

4.62

 

 

45,767

 

49

0.43

 

Savings deposits

 

1,133,371

 

2,402

0.85

 

 

837,726

 

141

0.07

 

Demand deposits - interest bearing

 

1,428,409

 

6,878

1.93

 

 

1,430,273

 

909

0.25

 

Short term borrowings

 

213,549

 

2,727

5.11

 

 

42,527

 

97

0.91

 

Long term borrowings

 

88,382

 

1,008

4.56

 

 

87,914

 

827

3.76

 

Total interest-bearing liabilities

$

3,569,895

 

18,226

2.04

 

$

2,798,899

 

2,575

0.37

 

NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS' EQUITY Demand deposits - noninterest bearing

 

1,067,605

 

972,174

Other liabilities

 

47,120

 

29,665

Stockholders' equity

 

371,421

 

354,981

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

5,056,041

$

4,155,719

Net interest income and interest rate spread

$

35,273

2.39

%

$

32,583

3.13

%

Net interest margin

2.92

%

3.25

%

(1) Interest and yields are calculated on a tax-equivalent basis where applicable. (2) For 2023, adjustments of $91 thousand and $604 thousand, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2022, adjustments of $78 thousand and $794 thousand, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. These adjustments were based on a marginal federal income tax rate of 21%, less disallowances. Six Months Ended   Six Months Ended June 30, 2023   June 30, 2022 AVERAGE     YIELD/   AVERAGE     YIELD/ BALANCE   INTEREST (1)   RATE (1)   BALANCE   INTEREST (1)   RATE (1) EARNING ASSETS           Loans (2)

$

3,140,500

 

$

83,365

 

5.31

%

 

$

2,326,392

 

$

51,438

 

4.42

%

Taxable securities

 

1,164,400

 

 

13,204

 

2.27

 

 

 

1,054,506

 

 

9,810

 

1.86

 

Tax-exempt securities (2)

 

426,743

 

 

6,797

 

3.19

 

 

 

467,947

 

 

7,559

 

3.23

 

Other investments

 

38,976

 

 

970

 

4.98

 

 

 

32,584

 

 

346

 

2.12

 

Federal funds sold and other

 

77,870

 

 

1,161

 

2.98

 

 

 

93,591

 

 

143

 

0.31

 

Total earning assets

 

4,848,489

 

 

105,497

 

4.35

 

 

 

3,975,020

 

 

69,296

 

3.49

 

Nonearning assets

 

221,955

     

 

192,085

    Total assets

$

5,070,444

     

$

4,167,105

    INTEREST-BEARING LIABILITIES           Time deposits

$

618,637

 

$

7,864

 

2.54

%

 

$

366,617

 

$

1,196

 

0.65

%

Brokered time deposits

 

144,747

 

 

3,007

 

4.15

 

 

 

30,745

 

 

64

 

0.42

 

Savings deposits

 

1,143,539

 

 

4,356

 

0.76

 

 

 

840,533

 

 

308

 

0.07

 

Demand deposits - interest bearing

 

1,423,211

 

 

11,971

 

1.68

 

 

 

1,420,957

 

 

1,327

 

0.19

 

Short term borrowings

 

147,436

 

 

3,648

 

4.95

 

 

 

22,486

 

 

98

 

0.87

 

Long term borrowings

 

88,326

 

 

2,003

 

4.54

 

 

 

87,856

 

 

1,619

 

3.69

 

Total interest-bearing liabilities

$

3,565,896

 

 

32,849

 

1.84

 

 

$

2,769,194

 

 

4,612

 

0.33

 

NONINTEREST-BEARING LIABILITIES           AND STOCKHOLDERS' EQUITY           Demand deposits - noninterest bearing

$

1,087,403

     

$

964,380

    Other liabilities

 

47,996

     

 

27,842

    Stockholders' equity

 

369,149

     

 

405,689

    TOTAL LIABILITIES AND           STOCKHOLDERS' EQUITY

$

5,070,444

     

$

4,167,105

    Net interest income and interest rate spread  

$

72,648

 

2.51

%

   

$

64,684

 

3.16

%

Net interest margin    

3.00

%

     

3.25

%

          (1) Interest and yields are calculated on a tax-equivalent basis where applicable. (2) For 2023, adjustments of $178 thousand and $1.3 million, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2022, adjustments of $162 thousand and $1.6 million, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. These adjustments were based on a marginal federal income tax rate of 21%, less disallowances. Reconciliation of Total Assets to Tangible Assets For the Three Months Ended For the Six Months Ended

June 30,

March 31,

Dec. 31,

Sept. 30,

June 30,

June 30,

June 30,

 

2023

 

2023

 

2022

 

2022

 

2022

 

2023

 

2022

Total Assets

$

5,073,454

$

5,109,886

$

4,082,200

$

4,120,022

$

4,114,364

$

5,073,454

$

4,114,364

Less Goodwill and other intangibles

 

192,052

 

193,273

 

101,666

 

102,368

 

101,767

 

192,052

 

101,767

Tangible Assets

$

4,881,402

$

4,916,613

$

3,980,534

$

4,017,654

$

4,012,597

$

4,881,402

$

4,012,597

Average Assets

 

5,070,444

 

5,085,009

 

4,080,497

 

4,164,855

 

4,155,719

 

5,070,444

 

4,167,105

Less average Goodwill and other intangibles

 

192,972

 

193,368

 

102,126

 

101,981

 

102,042

 

193,169

 

102,251

Average Tangible Assets

$

4,877,472

$

4,891,641

$

3,978,371

$

4,062,874

$

4,053,677

$

4,877,275

$

4,064,854

    Reconciliation of Common Stockholders' Equity to Tangible Common Equity For the Three Months Ended For the Six Months Ended

June 30,

March 31,

Dec. 31,

Sept. 30,

June 30,

June 30,

June 30,

 

2023

 

2023

 

2022

 

2022

 

2022

 

2023

 

2022

Stockholders' Equity

$

366,991

$

374,642

$

292,295

$

265,619

$

321,449

$

366,991

$

321,449

Less Goodwill and other intangibles

 

192,052

 

193,273

 

101,666

 

102,368

 

101,767

 

192,052

 

101,767

Tangible Common Equity

$

174,939

$

181,369

$

190,629

$

163,251

$

219,682

$

174,939

$

219,682

Average Stockholders' Equity

 

371,421

 

366,851

 

264,939

 

330,300

 

354,981

 

369,149

 

405,689

Less average Goodwill and other intangibles

 

192,972

 

193,368

 

102,126

 

101,981

 

102,042

 

193,169

 

102,251

Average Tangible Common Equity

$

178,449

$

173,483

$

162,813

$

228,319

$

252,939

$

175,980

$

303,438

    Reconciliation of Net Income, Less Merger and Certain Items For the Three Months Ended For the Six Months Ended

June 30,

March 31,

Dec. 31,

Sept. 30,

June 30,

June 30,

June 30,

 

2023

 

 

2023

 

 

2022

 

 

2022

 

 

2022

 

 

2023

 

 

2022

 

Net income

$

14,966

 

$

7,075

 

$

13,356

 

$

15,446

 

$

15,951

 

$

22,041

 

$

31,795

 

Acquisition related costs - after tax

 

354

 

 

3,449

 

 

475

 

 

711

 

 

564

 

 

3,803

 

 

2,104

 

Acquisition related provision - after tax

 

0

 

 

6,077

 

 

0

 

 

0

 

 

0

 

 

6,077

 

 

0

 

Lawsuit settlement income - after tax

 

0

 

 

0

 

 

0

 

 

0

 

 

0

 

 

0

 

 

(6,616

)

Lawsuit settlement contingent legal expense - after tax

 

0

 

 

0

 

 

0

 

 

0

 

 

0

 

 

0

 

 

1,639

 

Charitable donation - after tax

 

0

 

 

0

 

 

0

 

 

0

 

 

0

 

 

0

 

 

4,740

 

Net loss (gain) on asset/security sales - after tax

 

(5

)

 

(72

)

 

268

 

 

4

 

 

(25

)

 

(77

)

 

72

 

Net income - Adjusted

$

15,315

 

$

16,529

 

$

14,099

 

$

16,161

 

$

16,490

 

$

31,844

 

$

33,734

 

Diluted EPS excluding merger and one-time items

$

0.41

 

$

0.44

 

$

0.42

 

$

0.48

 

$

0.49

 

$

0.85

 

$

0.99

 

Return on Average Assets excluding merger and certain items (Annualized)

 

1.21

%

 

1.30

%

 

1.36

%

 

1.55

%

 

1.59

%

 

1.26

%

 

1.62

%

Return on Average Equity excluding merger and certain items (Annualized)

 

16.49

%

 

18.02

%

 

21.29

%

 

19.57

%

 

18.58

%

 

17.25

%

 

16.63

%

Return on Average Tangible Equity excluding acquisition costs and certain items (Annualized)

 

34.33

%

 

38.11

%

 

34.64

%

 

28.31

%

 

26.08

%

 

36.19

%

 

22.23

%

  Efficiency ratio excluding certain items For the Three Months Ended For the Six Months Ended June 30, March 31, Dec. 31, Sept. 30, June 30, June 30, June 30,

 

2023

 

 

2023

 

 

2022

 

 

2022

 

 

2022

 

 

2023

 

 

2022

 

Net interest income, tax equated

$

35,273

 

$

37,374

 

$

30,212

 

$

32,636

 

$

32,583

 

$

72,648

 

$

64,684

 

Noninterest income

 

9,449

 

 

10,425

 

 

8,200

 

 

8,827

 

 

9,477

 

 

19,874

 

 

27,175

 

Legal settlement income

 

0

 

 

0

 

 

0

 

 

0

 

 

0

 

 

0

 

 

(8,375

)

Net loss (gain) on asset/security sales

 

(6

)

 

(91

)

 

338

 

 

6

 

 

(32

)

 

(97

)

 

91

 

Net interest income and noninterest income adjusted

 

44,716

 

 

47,708

 

 

38,750

 

 

41,469

 

 

42,028

 

 

92,425

 

 

83,575

 

Noninterest expense less intangible amortization

 

25,163

 

 

29,813

 

 

20,393

 

 

20,967

 

 

21,042

 

 

54,976

 

 

51,078

 

Charitable donation

 

0

 

 

0

 

 

0

 

 

0

 

 

0

 

 

0

 

 

6,000

 

Contingent legal settlement expense

 

0

 

 

0

 

 

0

 

 

0

 

 

0

 

 

0

 

 

2,075

 

Acquisition related costs

 

442

 

 

4,313

 

 

584

 

 

872

 

 

674

 

 

4,755

 

 

2,614

 

Noninterest income adjusted

 

24,721

 

 

25,500

 

 

19,809

 

 

20,095

 

 

20,368

 

 

50,221

 

 

40,389

 

Efficiency ratio excluding one-time items

 

55.28

%

 

53.45

%

 

51.12

%

 

48.46

%

 

48.46

%

 

54.34

%

 

48.33

%

  Net interest margin excluding acquisition marks and PPP interest and fees For the Three Months Ended For the Six Months Ended June 30, March 31, Dec. 31, Sept. 30, June 30, June 30, June 30,

 

2023

 

 

2023

 

 

2022

 

 

2022

 

 

2022

 

 

2023

 

 

2022

 

Net interest income, tax equated

$

35,273

 

$

37,374

 

$

30,212

 

$

32,636

 

$

32,583

 

$

72,648

 

$

64,684

 

Acquisition marks

 

2,884

 

 

2,628

 

 

174

 

 

215

 

 

349

 

 

5,512

 

 

1,338

 

PPP interest and fees

 

3

 

 

0

 

 

10

 

 

62

 

 

634

 

 

3

 

 

1,320

 

Adjusted and annualized net interest income

 

129,544

 

 

138,984

 

 

120,112

 

 

129,436

 

 

126,400

 

 

134,266

 

 

124,052

 

Average earning assets

 

4,830,910

 

 

4,866,263

 

 

4,047,343

 

 

4,065,085

 

 

4,015,385

 

 

4,848,489

 

 

3,975,020

 

Less PPP average balances

 

277

 

 

310

 

 

485

 

 

1,586

 

 

16,019

 

 

271

 

 

22,972

 

Adjusted average earning assets

 

4,830,633

 

 

4,865,953

 

 

4,046,858

 

 

4,063,499

 

 

3,999,366

 

 

4,848,218

 

 

3,952,048

 

Net interest margin excluding marks and PPP interest and fees

 

2.68

%

 

2.86

%

 

2.97

%

 

3.19

%

 

3.16

%

 

2.77

%

 

3.14

%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230725994151/en/

Farmers National Banc Corp. Kevin J. Helmick, President and CEO Email: exec@farmersbankgroup.com