Attached files

file filename
8-K - FORM 8-K - FARMERS NATIONAL BANC CORP /OH/d616546d8k.htm
EX-99.2 - EX-99.2 - FARMERS NATIONAL BANC CORP /OH/d616546dex992.htm

Exhibit 99.1

October 23, 2013

Press Release

 

Source:   

Farmers National Banc Corp.

Kevin J. Helmick, Interim 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 THIRD QUARTER 2013

NONINTEREST INCOME INCREASES 24%:

 

    Noninterest income for the three months ended September 30, 2013 increased 23.9% from same quarter of 2012.

 

    123 consecutive quarters of positive earnings.

 

    Net income for three months ended September 30, 2013 was $1.6 million compared to $2.5 million for same quarter of 2012.

 

    Excluding severance expenses, net income was $2.4 million, or $0.13 per diluted share for the 2013 third quarter.

STRONG CAPITAL LEVELS:

 

    Tier 1 Leverage Ratio of 9.49% remained steady from 9.51% at September 30, 2012.

 

    Tangible common equity ratio at September 30, 2013 remains strong at 8.96%.

STABLE ASSET QUALITY:

 

    Non-performing assets to total assets remain at low levels, currently 0.81% at September 30, 2013.

 

    Loans 30-89 days delinquent decreased from $3.2 million at September 30, 2012 to $2.3 million at September 30, 2013.

CANFIELD, Ohio (October 23, 2013) – Farmers National Banc Corp. (Farmers) (NASDAQ: FMNB) today reported financial results for the three and nine months ended September 30, 2013.

Net income for the three months ended September 30, 2013 was $1.6 million, compared to $2.5 million for the same period last year. On a per share basis, net income for the third quarter ended September 30, 2013 was $0.09 per diluted share, compared to $0.13 for the third quarter ended September 30, 2012 and $0.10 for the second quarter ended June 30, 2013. During the third quarter ended September 30, 2013, the Company recorded charges of $1.3 million related to severance costs for terminated employees. Excluding these severance expenses, net income for the quarter would have been $2.4 million, or $0.13 per share.

Net income for the nine months ended September 30, 2013 was $5.5 million, compared to $7.3 million for the same nine month period in 2012. On a per share basis, net income for the nine months ended September 30, 2013 was $0.29, a decrease of 25.6% compared to the same nine month period in 2012. For the nine month period ended September 30, 2013, net income excluding the severance expenses was $6.3 million, or $0.34 per share.

Farmers’ total assets reported at September 30, 2013 were $1.148 billion, representing a 1% increase compared to $1.133 billion in total assets recorded at September 30, 2012.

Kevin J. Helmick, Interim President and CEO, stated, “Net income decreased in the current quarter compared to the same quarter last year as a result of the severance charges. Adjusting for these expenses, net income in the third quarter would have increased $0.4 million. We are encouraged by the 24% improvement in noninterest income, which is consistent with our strategy to diversify revenue streams and increase fee income. Our July 1, 2013 acquisition of National Associates, Inc., a retirement plan consulting firm located in Cleveland, Ohio will further enhance our fee income. We are also pleased to report that net loans increased 7% during the past twelve months. Most of this growth came from our commercial and indirect loan portfolios.”

Net loans increased $39.7 million in comparing the third quarter of 2013 to the same quarter of 2012. Net loans were $604.0 million at September 30, 2013, compared to $564.3 million at the same time in 2012. Deposits increased $3.3 million, from $900.1 million at September 30, 2012 to $903.4 million at September 30, 2013, as customers continue to seek the safety and security of FDIC insured deposit accounts. At September 30, 2013, core deposits – savings and money market accounts, time deposits less than $100 thousand, demand deposits and interest bearing demand deposits - represented approximately 90% of total deposits.


Stockholders’ equity totaled $112.5 million, or 9.8% of total assets, at September 30, 2013, a decrease of $8.5 million, or 7%, compared to $121.0 million at September 30, 2012. Contributing to the decrease are mark to market adjustments in securities available for sale due to increases in long-term interest rates, partially offset by retained net income. Another contributing factor is the issuance of $1.4 million in stock and the related goodwill associated with the acquisition of National Associates, which closed at the beginning of the third quarter. 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 $6.44 per share at September 30, 2012 to $5.99 per share at September 30, 2013. Farmers’ tangible book value per share also decreased from $6.11 per share at September 30, 2012 to $5.43 per share at September 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 and the issuance of shares and related goodwill from the acquisition of National Associates.

Net Interest Income — Net interest income was $8.8 million for the third quarter of 2013, compared to $9.1 million in the third quarter of 2012. The net interest margin to average earning assets on a fully taxable equivalent basis decreased 20 basis points to 3.47% for the three months ended September 30, 2013, compared to 3.67% 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. Also contributing to the decrease was the amortization of premiums related to the Company’s holdings of mortgage-backed securities during the first month of the quarter, as the Company received significant prepayments of principal on these securities. Prepayments on mortgage-backed securities slowed in the latter half of the quarter. In comparing the quarters ending September 30, 2013 and 2012, yields on earning assets decreased 31 basis points, while the cost of interest bearing liabilities decreased 11 basis points.

Net interest income decreased to $26.9 million for the nine month period ended September 30 2013, compared to $27.6 million in the same period in 2012. The annualized net interest margin to average earning assets on a fully taxable equivalent basis was 3.59% for the nine months ended September 30, 2013, compared to 3.80% for the same period in the prior year. The decline is primarily a result of factors similar to the three months results previously stated.

Noninterest Income — Noninterest income was $4.2 million for the third quarter of 2013, increasing 23.9% from $3.4 million compared to the same quarter of 2012. Security gains were $597 thousand in the third quarter of 2013 compared to $473 thousand in 2012, as the Company sold shares of Fannie Mae preferred stock during the third quarter of 2013. Service charges on deposit accounts increased $93 thousand or 17%, and retirement plan consulting fees increased to $205 thousand compared to none in the third quarter of 2012, reflecting the income earned from the newly acquired entity, National Associates. Insurance agency commissions increased from $28 thousand in the third quarter of 2012 to $56 thousand in the third quarter of 2013, and trust fees also increased $40 thousand to $1.4 million in comparing the same time periods. Bank owned life insurance increased $208 thousand as the Company received tax free death benefits, which are included in income. Other operating income also increased $271 thousand, which is primarily the result of a gain on the sale of land that was owned by the Company.

Noninterest income for the nine months ended September 30, 2013 was $10.3 million, compared to $9.0 million for the same period in 2012. The increase in noninterest income is due to security gains of $853 thousand in 2013 compared to $473 thousand in 2012 and retirement plan consulting fees increasing to $205 thousand compared to none in 2012. Other operating income increased $280 thousand as a result of the gain on sale of land as explained in the preceding paragraph. Bank owned life insurance increased $181 thousand or 47%, and service charges on deposit accounts increased $149 thousand or 10%.

Noninterest Expense — Noninterest expense totaled $10.9 million for the third quarter of 2013, which is $2.0 million more than the $8.9 million in the same quarter in 2012. Most of this increase is a result of a $1.7 million or 34.7% increase in salaries and employee benefits, mainly due to $1.3 million recorded in severance costs. Professional fees increased $252 thousand, mainly as a result of consulting fees. Other operating expenses decreased $117 thousand.

Noninterest expenses for the nine months ended September 30, 2013 was $29.8 million, compared to $26.3 million for the same period in 2012, representing an increase of $3.5 million, or 13.3%. The increase is mainly the result of the previously mentioned increase in salaries and employee benefits resulting from severance costs in the current year, an increase in merger related costs of $270 thousand and a $34 thousand increase in other operating expenses.

Farmers’ tax equivalent efficiency ratio for the nine month period ended September 30, 2013 was 77.2% compared to 69.0% for the same period in 2012. The change in the efficiency ratio was the result of the $3.5 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 implemented in this process was the decision to close two retail branches located in Warren and Leetonia, Ohio. With declining branch transaction counts and banking trends driving our customers towards online banking offerings, the two branches were underutilized. Efficiencies will be gained as these branches sat in close proximity to other branch locations. The branches were closed on October 1, 2013.


Asset Quality — Non-performing loans equaled 1.49% of total loans at September 30, 2013, lower than the 1.51% reported at the same time in 2012, but slightly higher than the 1.35% reported at June 30, 2013. Loans 30–89 days delinquent decreased $149 thousand or 6%, to $2.3 million since June 30, 2013. Non-performing loans totaled $9.1 million at September 30, 2013, an increase of $462 thousand compared to September 30, 2012. On September 30, 2013, the ratio of the allowance for loan losses (ALLL) to non-performing loans was 80.8%, compared to 94.0% at June 30, 2013 and 99.6% at September 30, 2012. At September 30, 2013, the ALLL/total loan ratio was 1.21%, compared to 1.51% at September 30, 2012. The decrease is a result of increased loan balances and a decrease in historical loss factors. For the three months ended September 30, 2013, management recorded a $340 thousand provision to the allowance for loan losses, compared to $170 thousand in the preceding quarter and a $325 thousand provision in the same three month period in the prior year. It is important to note that net charge-offs in the third quarter of 2013 were $561 thousand compared to $748 thousand in the third 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 Nine Months Ended  
     Sept 30,
2013
    June 30,
2013
    March 31,
2013
    Dec 31,
2012
    Sept 30,
2012
    Sept 30,
2013
    Sept 30,
2012
    Percent
Change
 

Total interest income

   $ 10,122      $ 10,273      $ 10,266      $ 10,691      $ 10,630      $ 30,661      $ 32,419        -5.4

Total interest expense

     1,274        1,234        1,298        1,435        1,529        3,806        4,777        -20.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     8,848        9,039        8,968        9,256        9,101        26,855        27,642        -2.8

Provision for loan losses

     340        170        255        0        325        765        725        5.5

Other income

     4,173        3,225        2,875        3,671        3,367        10,273        8,952        14.8

Other expense

     10,926        9,822        9,088        9,465        8,896        29,836        26,344        13.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     1,755        2,272        2,500        3,462        3,247        6,527        9,525        -31.5

Income taxes

     143        404        495        825        758        1,042        2,230        -53.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 1,612      $ 1,868      $ 2,005      $ 2,637      $ 2,489      $ 5,485      $ 7,295        -24.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average shares outstanding

     18,776        18,747        18,795        18,799        18,802        18,773        18,789     

Pre-tax pre-provision income

   $ 2,095      $ 2,442      $ 2,755      $ 3,462      $ 3,572      $ 7,292      $ 10,250     

Basic and diluted earnings per share

     0.09        0.10        0.11        0.14        0.13        0.29        0.39     

Cash dividends

     563        557        564        1,128        564        1,684        2,254     

Cash dividends per share

     0.03        0.03        0.03        0.06        0.03        0.09        0.12     

Performance Ratios

                

Net Interest Margin (Annualized)

     3.47     3.63     3.68     3.67     3.67     3.59     3.80  

Efficiency Ratio (Tax equivalent basis)

     81.64     77.16     72.48     72.48     70.12     77.21     69.01  

Return on Average Assets (Annualized)

     0.56     0.66     0.92     0.92     0.88     0.64     0.88  

Return on Average Equity (Annualized)

     5.60     6.21     8.65     8.65     8.22     6.26     8.28  

Dividends to Net Income

     34.93     29.82     28.13     42.78     22.66     30.70     30.90  

Consolidated Statements of Financial Condition

 

     Sept 30,
2013
    June 30,
2013
    March 31,
2013
   

Dec 31,

2012

    Sept 30,
2012
 

Assets

          

Cash and cash equivalents

   $ 40,303      $ 26,587      $ 57,312      $ 37,759      $ 79,494   

Securities available for sale

     438,127        443,833        439,540        464,088        429,845   

Loans held for sale

     1,016        4,612        4,330        3,624        4,574   

Loans

     611,349        596,838        592,520        586,592        572,903   

Less allowance for loan losses

     7,369        7,590        7,508        7,629        8,625   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Loans

     603,980        589,248        585,012        578,963        564,278   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other assets

     64,693        59,209        56,905        55,261        54,555   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Assets

   $ 1,148,119      $ 1,123,489      $ 1,143,099      $ 1,139,695      $ 1,132,746   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

          

Deposits

   $ 903,410      $ 901,886      $ 915,855      $ 919,009      $ 900,138   

Other interest-bearing liabilities

     118,322        101,589        101,659        90,309        107,358   

Other liabilities

     13,863        5,698        5,009        9,585        4,242   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     1,035,595        1,009,173        1,022,523        1,018,903        1,011,738   

Stockholders’ Equity

     112,524        114,316        120,576        120,792        121,008   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 1,148,119      $ 1,123,489      $ 1,143,099      $ 1,139,695      $ 1,132,746   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Period-end shares outstanding

     18,776        18,547        18,795        18,795        18,802   

Book value per share

   $ 5.99      $ 6.16      $ 6.42      $ 6.43      $ 6.44   

Tangible book value per share

     5.43        5.85        6.10        6.11        6.11   

Capital and Liquidity

          

Total Capital to Risk Weighted Assets (a)

     16.76     17.25     17.48     17.35     17.68

Tier 1 Capital to Risk Weighted Assets (a)

     15.69     16.08     16.31     16.18     16.42

Tier 1 Capital to Average Assets (a)

     9.49     9.64     9.77     9.54     9.51

Equity to Asset Ratio

     9.80     10.18     10.55     10.60     10.68

Tangible Common Equity Ratio

     8.96     9.71     10.08     10.12     10.20

Net Loans to Assets

     52.61     52.45     51.18     50.80     49.82

Loans to Deposits

     67.67     66.18     64.70     63.83     63.65

Asset Quality

          

Non-performing loans (b)

   $ 9,124      $ 8,079      $ 7,368      $ 8,202      $ 8,662   

Other Real Estate Owned

     208        295        410        334        171   

Non-performing assets

     9,332        8,374        7,778        8,536        8,833   

Loans 30 - 89 days delinquent (b)

     2,348        2,497        3,536        3,658        3,173   

Charged-off loans

     915        456        663        1,377        938   

Recoveries

     354        367        287        382        190   

Net Charge-offs

     561        89        376        995        748   

Annualized Net Charge-offs to Average Net Loans Outstanding

     0.38     0.06     0.26     0.71     0.54

Allowance for Loan Losses to Total Loans

     1.21     1.27     1.27     1.30     1.51

Non-performing Loans to Total Loans

     1.49     1.35     1.24     1.40     1.51

Allowance to Non-performing Loans

     80.77     93.95     101.90     93.01     99.57

Non-performing Assets to Total Assets

     0.81     0.75     0.68     0.75     0.78

 

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


Reconciliation of Common Stockholders’ Equity to Tangible Common Equity

 

     Sept 30,
2013
     June 30,
2013
     March 31,
2013
    

Dec 31,

2012

     Sept 30,
2012
 

Stockholders’ Equity

   $ 112,524       $ 114,316       $ 120,576       $ 120,792       $ 121,008   

Less Goodwill and other intangibles

     10,546         5,836         5,934         6,032         6,134   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Tangible Common Equity

   $ 101,978       $ 108,480       $ 114,642       $ 114,760       $ 114,874   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Reconciliation of Total Assets to Tangible Assets

     Sept 30,
2013
     June 30,
2013
     March 31,
2013
    

Dec 31,

2012

     Sept 30,
2012
 

Total Assets

   $ 1,148,119       $ 1,123,489       $ 1,143,099       $ 1,139,695       $ 1,132,746   

Less Goodwill and other intangibles

     10,546         5,836         5,934         6,032         6,134   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Tangible Assets

   $ 1,137,573       $ 1,117,653       $ 1,137,165       $ 1,133,663       $ 1,126,612   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Reconciliation of Income Before Taxes to Pre-Tax, Pre-Provision 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,  
     2013      2013      2013      2012      2012      2013      2012  

Income before income taxes

   $ 1,755       $ 2,272       $ 2,500       $ 3,462       $ 3,247       $ 6,527       $ 9,525   

Provision for loan losses

     340         170         255         0         325         765         725   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Pre-tax, pre-provision income

   $ 2,095       $ 2,442       $ 2,755       $ 3,462       $ 3,572       $ 7,292       $ 10,250