FMNB Farmers National Banc Corporation

• Earnings per diluted share of $0.36 ($0.40 excluding certain items, non-GAAP) for the third quarter of 2023
• 163 consecutive quarters of profitability
• Purchased hedges to improve asset sensitivity
• Additional FHLB borrowing capacity of $892.6 million as of September 30, 2023
• Available for sale securities not pledged totaled $353.8 million at September 30, 2023
• Strong asset quality with non-performing asset to total assets of 0.58% as of September 30, 2023
• Return on average assets of 1.06% for the third quarter of 2023
• ROAE and ROATE (non-GAAP) of 14.5% and 30.3%, respectively, for the third quarter of 2023

Farmers National Banc Corp. (“Farmers” or the “Company”) (NASDAQ: FMNB) today announced net income of $13.3 million, or $0.36 per diluted share, for the three months ended September 30, 2023, compared to $15.4 million, or $0.46 per diluted share, for the three months ended September 30, 2022. Net income for the third quarter of 2023 included pretax items of $268,000 for acquisition related costs, $785,000 for the settlement of a lawsuit and combined net losses of $764,000 on the sale of securities and the sale of other assets. Excluding these items (non-GAAP), net income for the third quarter of 2023 would have been $14.8 million, or $0.40 per diluted share.

Kevin J. Helmick, President and CEO, stated “Despite the rapid increase in interest rates over the past year and a half, Farmers produced solid third quarter financial results reflecting the benefits of our diverse business model as well as our focus on maintaining strong asset quality and controlling operating expenses. These core banking principals create a solid foundation for Farmers to navigate an increasingly uncertain near-term economic environment, while supporting our long-term growth strategies.”

Balance Sheet

Total assets at September 30, 2023, were $4.97 billion compared to $5.07 billion at June 30, 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. Loans (excluding loans held for sale) have increased by $763.8 million since December 31, 2022 and $13.4 million, or 1.7% annualized, since June 30, 2023. Emclaire was responsible for $740.7 million of the increase in loans since December 31, 2022.

Securities available for sale have declined to $1.21 billion at September 30, 2023 from $1.32 billion at June 30, 2023 and $1.27 billion at December 31, 2022. The decrease since December is due to the gross amount of unrealized losses which totaled $266.5 million at December 31, 2022, compared to a gross unrealized loss of $320.0 million at September 30, 2023. The Company also had sales and runoff from the portfolio during the nine months ended September 30, 2023. These decreases were offset by the addition of $127.0 million in available for sale securities from Emclaire. Bond market volatility is expected to continue through 2023, and the Company expects that it will continue to allow the size of the securities portfolio to shrink to optimize profitability.

Total customer deposits (excluding brokered time deposits) were $4.26 billion at September 30, 2023, compared to $4.25 billion at June 30, 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 equaled $316.0 million at September 30, 2023 compared to $367.0 million at June 30, 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 offset by an increase in the unrealized loss from accumulated other comprehensive income. The accumulated other comprehensive loss has increased $41.7 million between December 31, 2022 and September 30, 2023 as market rates spiked sharply during the third quarter of 2023.

Liquidity

At September 30, 2023, the Company’s loan to deposit ratio was 70.2% and the Company’s average deposit balance per account (excluding collateralized deposits) was $27,646. The Company has access to an additional $892.6 million of FHLB borrowing capacity at September 30, 2023 along with $353.8 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 Company’s non-performing loans totaled $18.4 million at September 30, 2023, compared to $18.0 million at June 30, 2023, and $14.8 million at December 31, 2022. The increase since December was primarily due to the addition of Emclaire. Non-performing loans to total loans ratio was 0.58% at September 30, 2023, 0.57% at June 30, 2023, and 0.62% at December 31, 2022. Non-performing assets to total assets was 0.37% at September 30, 2023, and 0.36% at both June 30, 2023, and December 31, 2022. The Company also continues to experience low levels of early stage delinquencies, defined as 30-89 days delinquent. At September 30, 2023, these delinquencies totaled $13.3 million, or 0.42% of total loans. They 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.

The provision for credit losses and unfunded commitments was $243,000 for the third quarter of 2023 compared to $25,000 for the second quarter of 2023 and $448,000 for the third quarter of 2022. Annualized net charge-offs as a percentage of average loans were 0.05% for the three months ended September 30, 2023, compared to 0.10% for the same period in 2022. The allowance for credit losses to total loans was 1.10% at September 30, 2023, compared to 1.11% at June 30, 2023, and 1.12% at December 31, 2022.

Net Interest Income

The Company reported net interest income of $33.8 million in the third quarter of 2023 compared to $34.6 million in the second quarter of 2023 and $31.8 million for the third quarter of 2022. Earning assets were greater in 2023 due to the acquisition of Emclaire but this was partially offset by a decline of 35 basis point in the net interest margin. The net interest margin was 2.86% in the third quarter of 2023 compared to 2.92% for the second quarter of 2023 and 3.21% for the third quarter of 2022. Excluding the impact of acquisition marks and related accretion and PPP interest and fees, the net interest margin (non-GAAP) for the third quarter of 2023 was 2.61% compared to 2.68% for the second quarter of 2023 and 3.19% for the third quarter of 2022. The decline in net interest margin between the third quarter of 2023 and the third 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. To help offset the continued compression in the Company’s net interest margin, the Company purchased $100.0 million of pay-fixed/receive variable interest rate swaps during the quarter to improve asset sensitivity and net interest income. The hedges have a final maturity of three years and at inception had a pay rate of 4.35%. Based on rates at September 30, 2023, the swaps are expected to generate approximately $960,000 of annualized net interest income.

Noninterest Income

Noninterest income totaled $9.8 million for the three months ended September 30, 2023, compared to $8.8 million for the three months ended September 30, 2022. Service charges on deposit accounts increased to $1.7 million in the third quarter of 2023 compared to the same period in 2022 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 third quarter of 2023 compared to the third quarter of 2022 due to the Emclaire acquisition. Insurance agency commissions are flat in the third quarter of 2023 compared to the second quarter of 2022 but growth for the year has been solid as growth in the insurance business and increased annuity sales have bolstered income. Security losses in the third quarter of 2023 totaled $624,000 compared to losses of $17,000 in the third quarter of 2022. The Company sold securities during the quarter to improve net interest margin in future periods. Investment commissions are up slightly for the quarter ended September 30, 2023 compared to the quarter ended September 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.

Noninterest Expense

Noninterest expense was $27.7 million for the quarter ended September 30, 2023, compared to $21.4 million for the quarter ended September 30, 2022. The increase in expense is primarily due to the acquisition of Emclaire. Salaries and employee benefits increased $3.5 million to $14.2 million in the third 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 $782,000 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 and core processing charges increased due to the acquisition. Merger related costs were $268,000 for the third quarter of 2023 compared to $872,000 in the third quarter of 2022. Other noninterest expense increased due the acquisition and due to the recognition of $785,000 in expense related to the settlement of a lawsuit.

About Farmers National Banc Corp.

Founded in 1887, Farmers National Banc Corp. is a diversified financial services company headquartered in Canfield, Ohio, with $5.0 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 64 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 September 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 Nine Months Ended

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

Sept. 30,

 

Sept. 30,

 

Sept. 30,

 

Percent

 

2023

 

 

 

2023

 

 

 

2023

 

 

 

2022

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

Change

Total interest income

$

54,229

 

$

52,804

 

$

51,233

 

$

38,111

 

$

36,410

 

$

158,266

 

$

103,975

 

52.2

%

Total interest expense

 

20,461

 

 

18,226

 

 

14,623

 

 

8,679

 

 

4,629

 

 

53,310

 

 

9,241

 

476.9

%

Net interest income

 

33,768

 

 

34,578

 

 

36,610

 

 

29,432

 

 

31,781

 

 

104,956

 

 

94,734

 

10.8

%

Provision (credit) for credit losses

 

243

 

 

25

 

 

8,599

 

 

416

 

 

448

 

 

8,867

 

 

706

 

1155.9

%

Noninterest income

 

9,831

 

 

9,449

 

 

10,425

 

 

8,200

 

 

8,827

 

 

29,705

 

 

36,002

 

-17.5

%

Acquisition related costs

 

268

 

 

442

 

 

4,313

 

 

584

 

 

872

 

 

5,022

 

 

3,486

 

44.1

%

Other expense

 

27,448

 

 

25,944

 

 

26,409

 

 

20,511

 

 

20,527

 

 

79,802

 

 

69,830

 

14.3

%

Income before income taxes

 

15,640

 

 

17,616

 

 

7,714

 

 

16,121

 

 

18,761

 

 

40,970

 

 

56,714

 

-27.8

%

Income taxes

 

2,326

 

 

2,650

 

 

639

 

 

2,765

 

 

3,315

 

 

5,614

 

 

9,473

 

-40.7

%

Net income

$

13,314

 

$

14,966

 

$

7,075

 

$

13,356

 

$

15,446

 

$

35,356

 

$

47,241

 

-25.2

%

  Average diluted shares outstanding

 

37,379

 

 

37,320

 

 

37,933

 

 

33,962

 

 

33,932

 

 

37,533

 

 

33,925

 

Basic earnings per share

 

0.36

 

 

0.40

 

 

0.19

 

 

0.39

 

 

0.46

 

 

0.94

 

 

1.40

 

Diluted earnings per share

 

0.36

 

 

0.40

 

 

0.19

 

 

0.39

 

 

0.46

 

 

0.94

 

 

1.39

 

Cash dividends per share

 

0.17

 

 

0.17

 

 

0.17

 

 

0.17

 

 

0.16

 

 

0.51

 

 

0.48

 

Performance Ratios Net Interest Margin (Annualized)

 

2.86

%

 

2.92

%

 

3.07

%

 

2.99

%

 

3.21

%

 

2.95

%

 

3.24

%

Efficiency Ratio (Tax equivalent basis)

 

60.11

%

 

56.28

%

 

62.53

%

 

52.59

%

 

50.55

%

 

59.70

%

 

54.00

%

Return on Average Assets (Annualized)

 

1.06

%

 

1.18

%

 

0.56

%

 

1.31

%

 

1.48

%

 

0.93

%

 

1.51

%

Return on Average Equity (Annualized)

 

14.49

%

 

16.12

%

 

7.71

%

 

20.16

%

 

18.71

%

 

12.79

%

 

16.55

%

Dividends to Net Income

 

47.82

%

 

42.54

%

 

90.50

%

 

43.10

%

 

35.06

%

 

36.21

%

 

34.39

%

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

 

1.09

%

 

1.23

%

 

0.58

%

 

1.34

%

 

1.52

%

 

0.97

%

 

1.55

%

Return on Average Tangible Equity

 

30.29

%

 

33.55

%

 

16.31

%

 

32.81

%

 

27.06

%

 

26.80

%

 

22.62

%

 

Consolidated Statements of Financial Condition

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

Sept. 30,

 

2023

 

 

 

2023

 

 

 

2023

 

 

 

2022

 

 

 

2022

 

Assets Cash and cash equivalents

$

93,923

 

$

116,063

 

$

128,001

 

$

75,551

 

$

79,981

 

Securities available for sale

 

1,210,736

 

 

1,316,878

 

 

1,355,449

 

 

1,268,025

 

 

1,295,133

 

Other investments

 

35,342

 

 

44,975

 

 

39,670

 

 

33,444

 

 

34,399

 

  Loans held for sale

 

1,910

 

 

2,197

 

 

1,703

 

 

858

 

 

2,142

 

Loans

 

3,168,554

 

 

3,155,200

 

 

3,152,339

 

 

2,404,750

 

 

2,399,981

 

Less allowance for credit losses

 

34,753

 

 

34,957

 

 

36,011

 

 

26,978

 

 

27,282

 

Net Loans

 

3,133,801

 

 

3,120,243

 

 

3,116,328

 

 

2,377,772

 

 

2,372,699

 

  Other assets

 

495,451

 

 

473,098

 

 

468,735

 

 

326,550

 

 

335,668

 

Total Assets

$

4,971,163

 

$

5,073,454

 

$

5,109,886

 

$

4,082,200

 

$

4,120,022

 

  Liabilities and Stockholders' Equity Deposits Noninterest-bearing

$

1,039,524

 

$

1,084,232

 

$

1,106,870

 

$

896,957

 

$

934,638

 

Interest-bearing

 

3,217,869

 

 

3,165,381

 

 

3,207,121

 

 

2,526,760

 

 

2,590,054

 

Brokered time deposits

 

254,257

 

 

21,135

 

 

82,169

 

 

138,051

 

 

42,459

 

Total deposits

 

4,511,650

 

 

4,270,748

 

 

4,396,160

 

 

3,561,768

 

 

3,567,151

 

Other interest-bearing liabilities

 

88,550

 

 

388,437

 

 

292,324

 

 

183,211

 

 

243,098

 

Other liabilities

 

54,981

 

 

47,278

 

 

46,760

 

 

44,926

 

 

44,154

 

Total liabilities

 

4,655,181

 

 

4,706,463

 

 

4,735,244

 

 

3,789,905

 

 

3,854,403

 

Stockholders' Equity

 

315,982

 

 

366,991

 

 

374,642

 

 

292,295

 

 

265,619

 

Total Liabilities and Stockholders' Equity

$

4,971,163

 

$

5,073,454

 

$

5,109,886

 

$

4,082,200

 

$

4,120,022

 

  Period-end shares outstanding

 

37,489

 

 

37,457

 

 

37,439

 

 

34,055

 

 

34,060

 

Book value per share

$

8.43

 

$

9.80

 

$

10.01

 

$

8.58

 

$

7.80

 

Tangible book value per share (Non-GAAP)*

 

3.33

 

 

4.67

 

 

4.84

 

 

5.60

 

 

4.79

 

  * 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)

 

10.54

%

 

10.25

%

 

10.04

%

 

13.71

%

 

13.36

%

Total Risk Based Capital Ratio (a)

 

14.06

%

 

13.76

%

 

13.60

%

 

17.79

%

 

17.44

%

Tier 1 Risk Based Capital Ratio (a)

 

11.04

%

 

10.74

%

 

10.54

%

 

14.32

%

 

13.97

%

Tier 1 Leverage Ratio (a)

 

7.85

%

 

7.68

%

 

7.43

%

 

9.84

%

 

10.24

%

Equity to Asset Ratio

 

6.36

%

 

7.23

%

 

7.33

%

 

7.16

%

 

6.45

%

Tangible Common Equity Ratio (b)

 

2.61

%

 

3.58

%

 

3.69

%

 

4.79

%

 

4.06

%

Net Loans to Assets

 

63.04

%

 

61.50

%

 

60.99

%

 

58.25

%

 

57.59

%

Loans to Deposits

 

70.23

%

 

73.88

%

 

71.71

%

 

67.52

%

 

67.28

%

Asset Quality Non-performing loans

$

18,368

 

$

17,956

 

$

17,959

 

$

14,803

 

$

12,976

 

Non-performing assets

 

18,522

 

 

18,167

 

 

18,053

 

 

14,876

 

 

13,042

 

Loans 30 - 89 days delinquent

 

13,314

 

 

12,321

 

 

10,219

 

 

9,605

 

 

6,659

 

Charged-off loans

 

525

 

 

971

 

 

469

 

 

754

 

 

783

 

Recoveries

 

139

 

 

172

 

 

198

 

 

184

 

 

178

 

Net Charge-offs

 

386

 

 

799

 

 

271

 

 

570

 

 

605

 

Annualized Net Charge-offs to Average Net Loans

 

0.05

%

 

0.10

%

 

0.03

%

 

0.10

%

 

0.10

%

Allowance for Credit Losses to Total Loans

 

1.10

%

 

1.11

%

 

1.14

%

 

1.12

%

 

1.14

%

Non-performing Loans to Total Loans

 

0.58

%

 

0.57

%

 

0.57

%

 

0.62

%

 

0.54

%

Allowance to Non-performing Loans

 

189.20

%

 

194.68

%

 

200.52

%

 

182.25

%

 

210.25

%

Non-performing Assets to Total Assets

 

0.37

%

 

0.36

%

 

0.35

%

 

0.36

%

 

0.32

%

  (a) September 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

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

Sept. 30,

End of Period Loan Balances

 

2023

 

 

 

2023

 

 

 

2023

 

 

 

2022

 

 

 

2022

 

Commercial real estate

$

1,295,847

 

$

1,284,974

 

$

1,286,830

 

$

1,028,050

 

$

1,028,484

 

Commercial

 

357,691

 

 

362,664

 

 

361,845

 

 

293,643

 

 

296,932

 

Residential real estate

 

842,729

 

 

849,533

 

 

853,074

 

 

475,791

 

 

474,014

 

HELOC

 

140,772

 

 

138,535

 

 

137,319

 

 

132,179

 

 

132,267

 

Consumer

 

261,136

 

 

260,326

 

 

260,596

 

 

221,260

 

 

222,706

 

Agricultural loans

 

261,738

 

 

250,807

 

 

244,938

 

 

246,937

 

 

239,081

 

Total, excluding net deferred loan costs

$

3,159,913

 

$

3,146,839

 

$

3,144,602

 

$

2,397,860

 

$

2,393,484

 

 

For the Three Months Ended

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

Sept. 30,

End of Period Customer Deposit Balances

 

2023

 

 

 

2023

 

 

 

2023

 

 

 

2022

 

 

 

2022

 

Noninterest-bearing demand

$

1,039,524

 

$

1,084,232

 

$

1,106,870

 

$

896,957

 

$

934,638

 

Interest-bearing demand

 

1,426,349

 

 

1,383,326

 

 

1,473,001

 

 

1,224,884

 

 

1,399,227

 

Money market

 

588,043

 

 

610,051

 

 

599,037

 

 

435,369

 

 

393,005

 

Savings

 

488,991

 

 

511,642

 

 

535,321

 

 

441,978

 

 

460,709

 

Certificate of deposit

 

714,486

 

 

660,362

 

 

599,762

 

 

424,529

 

 

337,113

 

Total customer deposits

$

4,257,393

 

$

4,249,613

 

$

4,313,991

 

$

3,423,717

 

$

3,524,692

 

   

For the Three Months Ended

 

For the Nine Months Ended

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

Sept. 30,

 

Sept. 30,

 

Sept. 30,

Noninterest Income

 

2023

 

 

 

2023

 

 

 

2023

 

 

 

2022

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Service charges on deposit accounts

$

1,712

 

$

1,501

 

$

1,432

 

$

1,203

 

$

1,229

 

$

4,646

 

$

3,513

 

Bank owned life insurance income, including death benefits

 

694

 

 

584

 

 

547

 

 

590

 

 

406

 

 

1,825

 

 

1,220

 

Trust fees

 

2,617

 

 

2,248

 

 

2,587

 

 

2,373

 

 

2,370

 

 

7,453

 

 

7,265

 

Insurance agency commissions

 

1,116

 

 

1,332

 

 

1,456

 

 

1,133

 

 

1,136

 

 

3,904

 

 

3,269

 

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

 

(624

)

 

13

 

 

121

 

 

(366

)

 

(17

)

 

(490

)

 

(88

)

Retirement plan consulting fees

 

360

 

 

382

 

 

307

 

 

337

 

 

332

 

 

1,049

 

 

1,052

 

Investment commissions

 

520

 

 

476

 

 

393

 

 

508

 

 

424

 

 

1,389

 

 

1,675

 

Net gains on sale of loans

 

395

 

 

406

 

 

310

 

 

242

 

 

326

 

 

1,111

 

 

1,820

 

Other mortgage banking fee income (loss), net

 

185

 

 

234

 

 

153

 

 

98

 

 

94

 

 

571

 

 

193

 

Debit card and EFT fees

 

1,763

 

 

1,810

 

 

1,789

 

 

1,407

 

 

1,463

 

 

5,362

 

 

4,407

 

Other noninterest income

 

1,093

 

 

463

 

 

1,330

 

 

675

 

 

1,064

 

 

2,885

 

 

11,676

 

Total Noninterest Income

$

9,831

 

$

9,449

 

$

10,425

 

$

8,200

 

$

8,827

 

$

29,705

 

$

36,002

 

   

For the Three Months Ended

 

For the Nine Months Ended

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

Sept. 30,

 

Sept. 30,

 

Sept. 30,

Noninterest Expense

 

2023

 

 

 

2023

 

 

 

2023

 

 

 

2022

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Salaries and employee benefits

$

14,233

 

$

13,625

 

$

14,645

 

$

11,385

 

$

10,724

 

$

42,503

 

$

33,628

 

Occupancy and equipment

 

3,810

 

 

3,859

 

 

3,869

 

 

2,753

 

 

3,028

 

 

11,538

 

 

8,626

 

FDIC insurance and state and local taxes

 

1,648

 

 

1,494

 

 

1,222

 

 

1,010

 

 

1,017

 

 

4,365

 

 

2,941

 

Professional fees

 

1,043

 

 

1,190

 

 

1,114

 

 

938

 

 

985

 

 

3,347

 

 

5,176

 

Merger related costs

 

268

 

 

442

 

 

4,313

 

 

584

 

 

872

 

 

5,022

 

 

3,486

 

Advertising

 

492

 

 

478

 

 

409

 

 

472

 

 

596

 

 

1,379

 

 

1,475

 

Intangible amortization

 

725

 

 

1,222

 

 

909

 

 

702

 

 

432

 

 

2,856

 

 

1,271

 

Core processing charges

 

1,274

 

 

1,144

 

 

1,164

 

 

742

 

 

738

 

 

3,582

 

 

2,606

 

Other noninterest expenses

 

4,223

 

 

2,932

 

 

3,077

 

 

2,509

 

 

3,007

 

 

10,232

 

 

14,107

 

Total Noninterest Expense

$

27,716

 

$

26,386

 

$

30,722

 

$

21,095

 

$

21,399

 

$

84,824

 

$

0

 

  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 September 30, 2023 September 30, 2022 AVERAGE YIELD/ AVERAGE YIELD/ BALANCE INTEREST (1) RATE (1) BALANCE INTEREST (1) RATE (1) EARNING ASSETS Loans (2)

$

3,153,309

$

43,928

5.57

%

$

2,386,184

$

27,570

4.62

%

Taxable securities

 

1,132,959

 

 

6,492

 

2.29

 

 

1,112,411

 

 

5,477

 

1.97

 

Tax-exempt securities (2)

 

413,117

 

 

3,251

 

3.15

 

 

473,677

 

 

3,814

 

3.22

 

Other investments

 

42,581

 

 

487

 

4.57

 

 

33,524

 

 

199

 

2.37

 

Federal funds sold and other

 

78,922

 

 

751

 

3.81

 

 

59,289

 

 

205

 

1.38

 

Total earning assets

 

4,820,888

 

 

54,909

 

4.56

 

 

4,065,085

 

 

37,265

 

3.67

 

Nonearning assets

 

215,445

 

 

99,770

 

Total assets

$

5,036,333

 

$

4,164,855

 

INTEREST-BEARING LIABILITIES Time deposits

$

677,291

 

$

5,308

 

3.13

%

$

338,794

 

$

586

 

0.69

%

Brokered time deposits

 

145,839

 

 

1,882

 

5.16

 

 

50,494

 

 

142

 

1.12

 

Savings deposits

 

1,099,682

 

 

2,625

 

0.95

 

 

832,828

 

 

165

 

0.08

 

Demand deposits - interest bearing

 

1,412,922

 

 

7,647

 

2.16

 

 

1,426,801

 

 

2,317

 

0.65

 

Short term borrowings

 

141,717

 

 

1,961

 

5.53

 

 

90,978

 

 

533

 

2.34

 

Long term borrowings

 

88,494

 

 

1,038

 

4.69

 

 

88,031

 

 

886

 

4.03

 

Total interest-bearing liabilities

$

3,565,945

 

 

20,461

 

2.30

 

$

2,827,926

 

 

4,629

 

0.65

 

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

 

1,052,062

 

 

969,700

 

Other liabilities

 

50,726

 

 

36,929

 

Stockholders' equity

 

367,600

 

 

330,300

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

5,036,333

 

$

4,164,855

 

Net interest income and interest rate spread

$

34,448

 

2.26

%

$

32,636

 

3.02

%

Net interest margin

2.86

%

3.21

%

  (1) Interest and yields are calculated on a tax-equivalent basis where applicable. (2) For 2023, adjustments of $90 thousand and $590 thousand, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2022, adjustments of $76 thousand and $779 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. Nine Months Ended Nine Months Ended September 30, 2023 September 30, 2022 AVERAGE YIELD/ AVERAGE YIELD/ BALANCE INTEREST (1) RATE (1) BALANCE INTEREST (1) RATE (1) EARNING ASSETS Loans (2)

$

3,144,817

$

127,293

5.40

%

$

2,346,542

$

79,008

4.49

%

Taxable securities

 

1,153,804

 

 

19,697

 

2.28

 

 

1,074,020

 

 

15,287

 

1.90

 

Tax-exempt securities (2)

 

422,151

 

 

10,048

 

3.17

 

 

469,878

 

 

11,372

 

3.23

 

Other investments

 

40,211

 

 

1,457

 

4.83

 

 

32,901

 

 

545

 

2.21

 

Federal funds sold and other

 

78,224

 

 

1,911

 

3.26

 

 

82,031

 

 

348

 

0.57

 

Total earning assets

 

4,839,207

 

 

160,406

 

4.42

 

 

4,005,372

 

 

106,560

 

3.55

 

Nonearning assets

 

219,762

 

 

160,975

 

Total assets

$

5,058,969

 

$

4,166,347

 

INTEREST-BEARING LIABILITIES Time deposits

$

636,939

 

$

13,171

 

2.76

%

$

357,241

 

$

1,782

 

0.67

%

Brokered time deposits

 

145,115

 

 

4,889

 

4.49

 

 

37,400

 

 

206

 

0.73

 

Savings deposits

 

1,128,760

 

 

6,981

 

0.82

 

 

837,937

 

 

473

 

0.07

 

Demand deposits - interest bearing

 

1,421,208

 

 

19,619

 

1.84

 

 

1,422,583

 

 

3,644

 

0.34

 

Short term borrowings

 

145,509

 

 

5,608

 

5.14

 

 

45,568

 

 

631

 

1.85

 

Long term borrowings

 

88,382

 

 

3,043

 

4.59

 

 

87,915

 

 

2,505

 

3.80

 

Total interest-bearing liabilities

$

3,565,913

 

 

53,311

 

1.99

 

$

2,788,644

 

 

9,241

 

0.44

 

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

$

1,075,493

 

$

966,173

 

Other liabilities

 

48,936

 

 

30,904

 

Stockholders' equity

 

368,627

 

 

380,626

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

5,058,969

 

$

4,166,347

 

Net interest income and interest rate spread

$

107,095

 

2.43

%

$

97,319

 

3.11

%

Net interest margin

2.95

%

3.24

%

  (1) Interest and yields are calculated on a tax-equivalent basis where applicable. (2) For 2023, adjustments of $268 thousand and $1.9 million, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2022, adjustments of $238 thousand and $2.3 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 Nine Months Ended

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

Sept. 30,

 

Sept. 30,

 

Sept. 30,

 

2023

 

 

 

2023

 

 

 

2023

 

 

 

2022

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Total Assets

$

4,971,163

 

$

5,073,454

 

$

5,109,886

 

$

4,082,200

 

$

4,120,022

 

$

4,971,163

 

$

4,120,022

 

Less Goodwill and other intangibles

 

191,326

 

 

192,052

 

 

193,273

 

 

101,666

 

 

102,368

 

 

191,326

 

 

102,368

 

Tangible Assets

$

4,779,837

 

$

4,881,402

 

$

4,916,613

 

$

3,980,534

 

$

4,017,654

 

$

4,779,837

 

$

4,017,654

 

Average Assets

 

5,058,969

 

 

5,070,444

 

 

5,085,009

 

 

4,080,497

 

 

4,164,855

 

 

5,058,969

 

 

4,166,347

 

Less average Goodwill and other intangibles

 

191,804

 

 

192,972

 

 

193,368

 

 

102,126

 

 

101,981

 

 

192,709

 

 

102,160

 

Average Tangible Assets

$

4,867,165

 

$

4,877,472

 

$

4,891,641

 

$

3,978,371

 

$

4,062,874

 

$

4,866,260

 

$

4,064,187

 

    Reconciliation of Common Stockholders' Equity to Tangible Common Equity

For the Three Months Ended

 

For the Nine Months Ended

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

Sept. 30,

 

Sept. 30,

 

Sept. 30,

 

2023

 

 

 

2023

 

 

 

2023

 

 

 

2022

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Stockholders' Equity

$

315,982

 

$

366,991

 

$

374,642

 

$

292,295

 

$

265,619

 

$

315,982

 

$

265,619

 

Less Goodwill and other intangibles

 

191,326

 

 

192,052

 

 

193,273

 

 

101,666

 

 

102,368

 

 

191,326

 

 

102,368

 

Tangible Common Equity

$

124,656

 

$

174,939

 

$

181,369

 

$

190,629

 

$

163,251

 

$

124,656

 

$

163,251

 

Average Stockholders' Equity

 

367,600

 

 

371,421

 

 

366,851

 

 

264,939

 

 

330,300

 

 

368,627

 

 

380,626

 

Less average Goodwill and other intangibles

 

191,804

 

 

192,972

 

 

193,368

 

 

102,126

 

 

101,981

 

 

192,709

 

 

102,160

 

Average Tangible Common Equity

$

175,796

 

$

178,449

 

$

173,483

 

$

162,813

 

$

228,319

 

$

175,918

 

$

278,466

 

    Reconciliation of Net Income, Less Merger and Certain Items

For the Three Months Ended

 

For the Nine Months Ended

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

Sept. 30,

 

Sept. 30,

 

Sept. 30,

 

2023

 

 

 

2023

 

 

 

2023

 

 

 

2022

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net income

$

13,314

 

$

14,966

 

$

7,075

 

$

13,356

 

$

15,446

 

$

35,356

 

$

47,241

 

Acquisition related costs - after tax

 

234

 

 

354

 

 

3,449

 

 

475

 

 

711

 

 

4,037

 

 

2,815

 

Acquisition related provision - after tax

 

0

 

 

0

 

 

6,077

 

 

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

 

Lawsuit settlement expense - after tax

 

620

 

 

0

 

 

0

 

 

0

 

 

0

 

 

620

 

 

0

 

Charitable donation - after tax

 

0

 

 

0

 

 

0

 

 

0

 

 

0

 

 

0

 

 

4,740

 

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

 

604

 

 

(5

)

 

(72

)

 

268

 

 

4

 

 

527

 

 

76

 

Net income - Adjusted

$

14,772

 

$

15,315

 

$

16,529

 

$

14,099

 

$

16,161

 

$

46,617

 

$

49,895

 

Diluted EPS excluding merger and certain items

$

0.40

 

$

0.41

 

$

0.44

 

$

0.42

 

$

0.48

 

$

1.24

 

$

1.47

 

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

 

1.17

%

 

1.21

%

 

1.30

%

 

1.36

%

 

1.55

%

 

1.23

%

 

1.60

%

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

 

16.07

%

 

16.49

%

 

18.02

%

 

21.29

%

 

19.57

%

 

16.86

%

 

17.48

%

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

 

33.61

%

 

34.33

%

 

38.11

%

 

34.64

%

 

28.31

%

 

35.33

%

 

23.89

%

    Efficiency ratio excluding certain items

For the Three Months Ended

 

For the Nine Months Ended

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

Sept. 30,

 

Sept. 30,

 

Sept. 30,

 

2023

 

 

 

2023

 

 

 

2023

 

 

 

2022

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net interest income, tax equated

$

34,448

 

$

35,273

 

$

37,374

 

$

30,212

 

$

32,636

 

$

107,095

 

$

97,319

 

Noninterest income

 

9,831

 

 

9,449

 

 

10,425

 

 

8,200

 

 

8,827

 

 

29,705

 

 

36,002

 

Legal settlement income

 

0

 

 

0

 

 

0

 

 

0

 

 

0

 

 

0

 

 

(8,375

)

Net loss (gain) on asset/security sales

 

764

 

 

(6

)

 

(91

)

 

338

 

 

6

 

 

667

 

 

97

 

Net interest income and noninterest income adjusted

 

45,043

 

 

44,716

 

 

47,708

 

 

38,750

 

 

41,469

 

 

137,467

 

 

125,043

 

Noninterest expense less intangible amortization

 

26,991

 

 

25,163

 

 

29,813

 

 

20,393

 

 

20,967

 

 

81,968

 

 

72,045

 

Charitable donation

 

0

 

 

0

 

 

0

 

 

0

 

 

0

 

 

0

 

 

6,000

 

Legal settlement expense

 

785

 

 

0

 

 

0

 

 

0

 

 

0

 

 

785

 

 

0

 

Contingent legal settlement expense

 

0

 

 

0

 

 

0

 

 

0

 

 

0

 

 

0

 

 

2,075

 

Acquisition related costs

 

268

 

 

442

 

 

4,313

 

 

584

 

 

872

 

 

5,022

 

 

3,486

 

Noninterest expense adjusted

 

25,938

 

 

24,721

 

 

25,500

 

 

19,809

 

 

20,095

 

 

76,161

 

 

60,484

 

Efficiency ratio excluding certain items

 

57.58

%

 

55.28

%

 

53.45

%

 

51.12

%

 

48.46

%

 

55.40

%

 

48.37

%

    Net interest margin excluding acquisition marks and PPP interest and fees

For the Three Months Ended

 

For the Nine Months Ended

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

Sept. 30,

 

Sept. 30,

 

Sept. 30,

 

2023

 

 

 

2023

 

 

 

2023

 

 

 

2022

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net interest income, tax equated

$

34,448

 

$

35,273

 

$

37,374

 

$

30,212

 

$

32,636

 

$

107,095

 

$

97,319

 

Acquisition marks

 

2,959

 

 

2,884

 

 

2,628

 

 

174

 

 

215

 

 

8,471

 

 

1,584

 

PPP interest and fees

 

1

 

 

3

 

 

0

 

 

10

 

 

62

 

 

4

 

 

1,382

 

Adjusted and annualized net interest income

 

125,952

 

 

129,544

 

 

138,984

 

 

120,112

 

 

129,436

 

 

131,493

 

 

125,804

 

Average earning assets

 

4,820,888

 

 

4,830,910

 

 

4,866,263

 

 

4,047,343

 

 

4,065,085

 

 

4,839,207

 

 

4,005,372

 

Less PPP average balances

 

247

 

 

277

 

 

310

 

 

485

 

 

1,586

 

 

262

 

 

15,766

 

Adjusted average earning assets

 

4,820,641

 

 

4,830,633

 

 

4,865,953

 

 

4,046,858

 

 

4,063,499

 

 

4,838,945

 

 

3,989,606

 

Net interest margin excluding marks and PPP interest and fees

 

2.61

%

 

2.68

%

 

2.86

%

 

2.97

%

 

3.19

%

 

2.72

%

 

3.15

%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231024569063/en/

Farmers National Banc Corp. Kevin J. Helmick, President and CEO 330.533.3341 Email: exec@farmersbankgroup.com