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8-K - FORM 8-K - FARMERS NATIONAL BANC CORP /OH/d576011d8k.htm
EX-99.2 - EX-99.2 - FARMERS NATIONAL BANC CORP /OH/d576011dex992.htm

Exhibit 99.1

July 24, 2013

Press Release

 

Source:   

FarmersNational Banc Corp.

John S. Gulas, President and CEO

20 South Broad Street P.O. Box 555

Canfield, OH 44406

330.533.3341

330.533.0451 (FAX)

Email: exec@farmersbankgroup.com

FARMERS NATIONAL BANC CORP. REPORTS RESULTS FOR SECOND QUARTER 2013

HIGHER NONINTEREST INCOME OFFSETS LOWER NET INCOME:

 

   

Noninterest income for the three months ended June 30, 2013 increased 14.3% from same quarter of 2012.

 

   

122 consecutive quarters of positive earnings.

 

   

Net income for three months ended June 30, 2013 is $1.9 million compared to $2.3 million for same quarter of 2012.

STRONG CAPITAL LEVELS:

 

   

Tier 1 Leverage Ratio improved to 9.64% from 9.44% at June 30, 2012.

 

   

Tangible common equity ratio at June 30, 2013 remains strong at 9.71%.

STABLE ASSET QUALITY:

 

   

Non-performing loans decreased from $9.9 million at June 30, 2012 to $8.1 million at June 30, 2013.

 

   

Non-performing assets to total assets decreased from 0.92% at June 30, 2012 to 0.75% at June 30, 2013.

CANFIELD, Ohio (July 24, 2013) – Farmers National Banc Corp. (Farmers) (NASDAQ: FMNB) today reported financial results for the three and six months ended June 30, 2013.

Net income for the three months ended June 30, 2013 was $1.9 million, compared to $2.3 million for the same three month period in 2012. On a per share basis, net income for the second quarter ended June 30, 2013 was $0.10 per diluted share, compared to $0.12 for the second quarter ended June 30, 2012 and $0.11 for the first quarter ended March 31, 2013. Net income for the six months ended June 30, 2013 was $3.9 million, compared to $4.8 million for the same six month period in 2012. On a per share basis, net income for the six months ended June 30, 2013 was $0.21, a decrease of 19.2% compared to the same six month period in 2012. Farmers’ total assets reported at June 30, 2013 were $1.123 billion, representing a 1% increase compared to $1.117 billion in total assets recorded at June 30, 2012.

John S. Gulas, President and CEO, stated “Although net income decreased in the current quarter compared to the same quarter last year, we are encouraged by the 14.3% improvement in noninterest income which is consistent with our strategy to diversify revenue streams and increase fee income. Our recent acquisition of National Associates, Inc., a retirement plan consulting firm located in Cleveland, Ohio, will further enhance our fee income and will be immediately accretive to earnings. This acquisition closed on July 1, 2013, therefore this quarter’s results do not include business activity from National Associates, Inc. We are also encouraged that asset quality continues to improve, as we have seen non-performing loans decrease 18% or $1.8 million during the past twelve months. Loan growth during the second quarter came from our commercial and indirect loan portfolios.”

Net loans increased $25.8 million (or 5%) in comparing the second quarter of 2013 to the same quarter of 2012. Most of the loan growth in the past twelve months has occurred in the commercial and indirect loans portfolios. Net loans were reported at $589.2 million at June 30, 2013, which compares to $563.4 million at the same time in 2012. Deposits increased $15.3 million, or 1.7%, from $886.6 million at June 30, 2012 to $901.9 million at June 30, 2013, as customers continue to seek the safety and security of FDIC insured deposit accounts. At June 30, 2013, core deposits – savings and money market accounts, time deposits less than $100 thousand, demand deposits and interest bearing demand deposits—represent approximately 90% of total deposits.

Stockholders’ equity totaled $114.3 million, or 10.2% of total assets, at June 30, 2013, a decrease of $4.6 million, or 3.9%, compared to $118.9 million at June 30, 2012. The decrease is mainly the result of mark to market adjustments in securities available for sale due to increases in long term interest rates, offset by retained net income. Shareholders received a total of $0.15 per share in cash dividends paid in the past four quarters, including a special $0.03 cash dividend paid on December 31, 2012. Book value per share decreased from $6.33 per share at June 30, 2012 to $6.16 per share at June 30, 2013. Farmers’ tangible book value per share also decreased from $5.99 per share at June 30, 2012 to $5.85 per share at June 30, 2013. The decreases in book value and tangible book value per share were also the result of the mark to market adjustments in securities available for sale.


Net Interest Income — Net interest income was $9.0 million for the second quarter of 2013, which compared to $9.3 million in the second quarter of 2012. The net interest margin to average earning assets on a fully taxable equivalent basis decreased 17 basis points to 3.63% for the three months ended June 30, 2013, compared to 3.80% for the same period in the prior year. The decrease in net interest margin is largely a result of interest-earning assets repricing at lower rates. In comparing the quarters ending June 30, 2013 and 2012, yields on earning assets decreased 33 basis points, while the cost of interest bearing liabilities decreased 16 basis points.

On a year-to-date basis, net interest income decreased to $18.0 million for the six month period ended June 30 2013, compared to $18.5 million in the same period in 2012. The annualized net interest margin to average earning assets on a fully taxable equivalent basis was 3.65% for the six months ended June 30, 2013, compared to 3.85% for the same period in the prior year.

Noninterest Income — Noninterest income was $3.2 million for the second quarter of 2013, increasing 14.3% from $2.8 million compared to the same quarter of 2012. Security gains were $242 thousand in the second quarter of 2013 compared to none in 2012 as the company sold shares of Fannie Mae preferred stock. Service charges on deposit accounts increased $39 thousand or 8%, and net gains on the sale of loans also increased $50 thousand or 36% as the Company continues to develop its’ operations to originate and sell residential real estate loans in the secondary market. Insurance agency commissions increased from $25 thousand in the second quarter of 2012 to $41 thousand in the second quarter of 2013, and trust fees also increased $26 thousand to $1.4 million in comparing the same time periods.

Noninterest income for the six months ended June 30 2013 was $6.1 million, compared to $5.5 million for the same period in 2012. The increase in noninterest income is primarily due to security gains of $256 thousand in 2013 compared to none in 2012 and income from the sale of loans, increasing from $203 thousand for the six months ended June 30, 2012 to $302 thousand for the same six month period in 2013. Income from investment commissions was also $78 thousand higher in 2013.

Noninterest Expense — Noninterest expense totaled $9.8 million for the second quarter of 2013, which is $1.1 million more than the $8.7 million in the same quarter in 2012. Most of this increase is a result of a $461 thousand or 9.3% increase in salaries and employee benefits, due to increased health care costs and a higher number of employees in the current quarter. The higher employee count is attributed primarily to our expanded branch network and lending support function. Professional fees increased $270 thousand or 59%, mainly as a result of legal and investment banking fees related to the acquisition of National Associates, Inc. Other operating expenses also increased $255 thousand or 22% as a result of increased loan expenses, and increased intangible tax expense.

Noninterest expenses for the six months ended June 30, 2013 was $18.9 million, compared to $17.4 million for the same period in 2012, representing an increase of $1.5 million, or 8.7%. The increase is mainly the result of the previously mentioned increase in salaries and employee benefits, resulting from a higher number of employees in the current year, an increase in professional fees of $347 thousand and a $196 thousand increase in other operating expenses.

Farmers’ tax equivalent efficiency ratio for the six month period ended June 30, 2013 was 74.9% compared to 68.5% for the same period in 2012. The change in the efficiency ratio was the result of the $1.5 million increase in noninterest expenses as explained in the previous paragraph. Management has focused on increasing the levels of noninterest income and reducing the level of noninterest expenses. One of the steps that was implemented in this process is the decision to close two retail branch locations that are located in Warren and Leetonia, Ohio. With declining branch transaction counts and banking trends driving our customers towards online banking offerings, the two branches are currently underutilized. We believe that efficiencies will be gained as these branches sit in close proximity to other branch locations. The branch closings are expected to commence October 1, 2013.

Asset Quality— Non-performing loans equaled 1.35% of total loans at June 30, 2013, lower than the 1.73% reported at the same time in 2012, but slightly higher than the 1.24% reported at March 31, 2013. Loans 30–89 days delinquent decreased $1.04 million, or 29.4%, to $2.5 million since March, 31, 2013. Non-performing loans totaled $8.1 million at June 30, 2013, a decrease of $1.8 million compared to June 30, 2012. On June 30, 2013, the ratio of the allowance for loan losses (ALLL) to non-performing loans was 94.0%, compared to 101.9% at March 31, 2013 and 91.4% at June 30, 2012. At June 30, 2013, the ALLL/total loan ratio was 1.27%, compared to 1.58% at June 30, 2012. For the three months ended June 30, 2013, management recorded a $170 thousand provision to the allowance for loan losses, compared to $255 thousand in the preceding quarter and a $400 thousand provision in the same three month period in the prior year. It is important to note that net charge-offs in the second quarter of 2013 were $89 thousand compared to $376 thousand in the first quarter of 2013 and $798 thousand in second quarter of 2012. In determining the estimate of the allowance for loan losses, management considers the historical loss percentage based upon the loss history of the past 12 quarters, among other factors.


Farmers National Banc Corp. is the bank holding company for the Farmers National Bank of Canfield, Farmers National Insurance, LLC, Farmers Trust Company and National Associates, Inc. Farmers’ operates eighteen banking offices throughout Mahoning, Trumbull, Columbiana and Stark Counties and two trust offices located in Boardman and Howland. Farmers offers a wide range of banking and investment services to companies and individuals, and maintains a website at www.farmersbankgroup.com.

Non-GAAP Disclosure

This press release includes disclosures of Farmers tangible common equity ratio and pre-tax, pre-provision income and pre-tax, pre-provision income, excluding gains (losses) on sales of securities, 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 are included in the tables following Consolidated Financial Highlights below.

Forward-Looking Statements

This earnings release contains 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. 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 the forward-looking statements can be found in Farmers’ Annual Report on Form 10-K for the year ended December 31, 2012, which has been filed with the Securities and Exchange Commission and is available on Farmers’ website (www.farmersbankgroup.com) and on the Securities and Exchange Commission’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,
2013
     March 31,
2013
     Dec 31,
2012
     Sept 30,
2012
     June 30,
2012
     June 30,
2013
     June 30,
2012
     Percent
Change
 

Total interest income

   $ 10,273       $ 10,266       $ 10,691       $ 10,630       $ 10,903       $ 20,539       $ 21,789         -5.7

Total interest expense

     1,234         1,298         1,435         1,529         1,583         2,532         3,248         -22.0
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income

     9,039         8,968         9,256         9,101         9,320         18,007         18,541         -2.9

Provision for loan losses

     170         255         0         325         400         425         400         6.3

Other income

     3,225         2,875         3,671         3,367         2,821         6,100         5,540         10.1

Other expense

     9,822         9,088         9,465         8,896         8,773         18,910         17,403         8.7
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     2,272         2,500         3,462         3,247         2,968         4,772         6,278         -24.0

Income taxes

     404         495         825         758         682         899         1,472         -38.9
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 1,868       $ 2,005       $ 2,637       $ 2,489       $ 2,286       $ 3,873       $ 4,806         -19.4
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Average shares outstanding

     18,747         18,795         18,799         18,802         18,800         18,771         18,783      

Pre-tax pre-provision income

   $ 2,442       $ 2,755       $ 3,462       $ 3,572       $ 3,368       $ 5,197       $ 6,678      


Basic and diluted earnings per share

     0.10        0.11        0.14        0.13        0.12        0.21        0.26   

Cash dividends

     557        564        1,128        564        564        1,121        1,690   

Cash dividends per share

     0.03        0.03        0.06        0.03        0.03        0.06        0.09   

Performance Ratios

              

Net Interest Margin (Annualized)

     3.63     3.68     3.67     3.67     3.80     3.65     3.85

Efficiency Ratio (Tax equivalent basis)

     77.16     72.57     72.48     70.12     68.66     74.88     68.48

Return on Average Assets (Annualized)

     0.66     0.72     0.92     0.88     0.82     0.69     0.88

Return on Average Equity (Annualized)

     6.21     6.70     8.65     8.22     7.81     6.48     8.32

Dividends to Net Income

     29.82     28.13     42.78     22.66     24.67     28.94     35.16

Consolidated Statements of Financial Condition

 

     June 30,
2013
    March 31,
2013
   

Dec 31,

2012

    Sept 30,
2012
    June 30,
2012
 

Assets

          

Cash and cash equivalents

   $ 26,587      $ 57,312      $ 37,759      $ 79,494      $ 75,559   

Securities available for sale

     443,833        439,540        464,088        429,845        420,147   

Loans held for sale

     4,612        4,330        3,624        4,574        3,718   

Loans

     596,838        592,520        586,592        572,903        572,453   

Less allowance for loan losses

     7,590        7,508        7,629        8,625        9,048   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Loans

     589,248        585,012        578,963        564,278        563,405   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other assets

     59,209        56,905        55,261        54,555        54,004   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Assets

   $ 1,123,489      $ 1,143,099      $ 1,139,695      $ 1,132,746      $ 1,116,833   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

          

Deposits

   $ 901,886      $ 915,855      $ 919,009      $ 900,138      $ 886,593   

Other interest-bearing liabilities

     101,589        101,659        90,309        107,358        107,048   

Other liabilities

     5,698        5,009        9,585        4,242        4,254   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     1,009,173        1,022,523        1,018,903        1,011,738        997,895   

Stockholders’ Equity

     114,316        120,576        120,792        121,008        118,938   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 1,123,489      $ 1,143,099      $ 1,139,695      $ 1,132,746      $ 1,116,833   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Period-end shares outstanding

     18,547        18,795        18,795        18,802        18,802   

Book value per share

   $ 6.16      $ 6.42      $ 6.43      $ 6.44      $ 6.33   

Tangible book value per share

     5.85        6.10        6.11        6.11        5.99   

Capital and Liquidity

          

Total Capital to Risk Weighted Assets (a)

     17.37     17.48     17.35     17.68     17.68

Tier 1 Capital to Risk Weighted Assets (a)

     16.20     16.31     16.18     16.42     16.40

Tier 1 Capital to Average Assets (a)

     9.64     9.77     9.54     9.51     9.44

Equity to Asset Ratio

     10.18     10.55     10.60     10.68     10.65

Tangible Common Equity Ratio

     9.71     10.08     10.12     10.20     10.15

Net Loans to Assets

     52.45     51.18     50.80     49.82     50.45

Loans to Deposits

     66.18     64.70     63.83     63.65     64.57

Asset Quality

          

Non-performing loans (b)

   $ 8,079      $ 7,368      $ 8,202      $ 8,662      $ 9,900   

Other Real Estate Owned

     295        410        334        171        412   

Non-performing assets

     8,374        7,778        8,536        8,833        10,312   

Loans 30—89 days delinquent (b)

     2,497        3,536        3,658        3,173        2,778   


Charged-off loans

     456        663        1,377        938        1,015   

Recoveries

     367        287        382        190        217   

Net Charge-offs

     89        376        995        748        798   

Annualized Net Charge-offs to Average Net Loans Outstanding

     0.06     0.26     0.71     0.54     0.57

Allowance for Loan Losses to Total Loans

     1.27     1.27     1.30     1.51     1.58

Non-performing Loans to Total Loans

     1.35     1.24     1.40     1.51     1.73

Allowance to Non-performing Loans

     93.95     101.90     93.01     99.57     91.39

Non-performing Assets to Total Assets

     0.75     0.68     0.75     0.78     0.92

 

(a) June 30, 2013 ratio is estimated
(b) Amounts reported are unpaid principal balance

Reconciliation of Common Stockholders’ Equity to Tangible Common Equity

 

     June 30,
2013
     March 31,
2013
     Dec 31,
2012
     Sept 30,
2012
     June 30,
2012
 

Stockholders’ Equity

   $ 114,316       $ 120,576       $ 120,792       $ 121,008       $ 118,938   

Less Goodwill and other intangibles

     5,836         5,934         6,032         6,134         6,237   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Tangible Common Equity

   $ 108,480       $ 114,642       $ 114,760       $ 114,874       $ 112,701   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Reconciliation of Total Assets to Tangible Assets

 

     June 30,
2013
     March 31,
2013
    

Dec 31,

2012

     Sept 30,
2012
     June 30,
2012
 

Total Assets

   $ 1,123,489       $ 1,143,099       $ 1,139,695       $ 1,132,746       $ 1,116,833   

Less Goodwill and other intangibles

     5,836         5,934         6,032         6,134         6,237   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Tangible Assets

   $ 1,117,653       $ 1,137,165       $ 1,133,663       $ 1,126,612       $ 1,110,596   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Reconciliation of Income Before Taxes to Pre-Tax, Pre-Provision Income

 

     For the Three Months Ended      For the Six Months
Ended
 
     June 30,
2013
     March 31,
2013
     Dec 31,
2012
     Sept 30,
2012
     June 30,
2012
     June 30,
2013
     June 30,
2012
 

Income before income taxes

   $ 2,272       $ 2,500       $ 3,462       $ 3,247       $ 2,968       $ 4,772       $ 6,278   

Provision for loan losses

     170         255         0         325         400         425         400   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Pre-tax, pre-provision income

   $ 2,442       $ 2,755       $ 3,462       $ 3,572       $ 3,368       $ 5,197       $ 6,678