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8-K - FORM 8-K - FARMERS NATIONAL BANC CORP /OH/d201499d8k.htm

Exhibit 99.1

October 21, 2015

Press Release

 

Source:   

Farmers National Banc Corp.

Kevin J. Helmick, President and CEO

20 South Broad Street, P.O. Box 555

Canfield, OH 44406

330.533.3341

Email: exec@farmersbankgroup.com

FARMERS NATIONAL BANC CORP. ANNOUNCES

2015 THIRD QUARTER FINANCIAL RESULTS

 

    131 consecutive quarters of profitability

 

    First full quarter with recently acquired National Bancshares Corporation

 

    Net income for quarter ended September 30, 2015 was $1.9 million compared to $812 thousand for most recent quarter

 

    Costs related to acquisitions were $2.5 million pre-tax for the third quarter

 

    Noninterest income increased 20.8% compared to same quarter in 2014

 

    Non-performing assets to total assets remain at low levels, 0.62% at September 30, 2015

 

    Completed merger with Tri-State 1st Banc, Inc. on October 1, 2015

CANFIELD, Ohio (October 21, 2015) – Farmers National Banc Corp. (Farmers) (NASDAQ: FMNB) today reported financial results for the three and nine months ended September 30, 2015.

Net income for the three months ended September 30, 2015 was $1.9 million, or $0.07 per diluted share, which compares to $2.3 million, or $0.12 per diluted share, for the three months ended September 30, 2014. Excluding expenses related to acquisition activities, net income would have been $3.7 million or $0.15 per diluted share. In comparing net income excluding acquisition activities for the third quarter to the most recent quarter, net income excluding acquisition activities increased $1.4 million, or 59%.

Annualized return on average assets and return on average equity were 0.43% and 3.97%, respectively, for the three month period ending September 30, 2015. Excluding the expenses related to acquisition activities, the annualized return on average assets and the annualized return on average equity would have been 0.87% and 7.97%, respectively.

Net income for the nine months ended September 30, 2015 was $4.9 million, or $0.23 per diluted share, compared to $6.8 million or $0.36 per diluted share for the same period in 2014. Excluding expenses related to acquisition activities, net income for the current nine month period would have been $8.4 million, or $0.40 per share.

On October 1, 2015, Farmers announced that it had completed the merger of Tri-State, the holding company for 1st National Community Bank. Immediately following the merger, 1st National Community Bank was merged into The Farmers National Bank of Canfield. This transaction resulted in the addition of $135 million in assets and 4 full service branches in Columbiana County in Ohio and Beaver County in Pennsylvania.

Kevin J. Helmick, President and CEO, stated, “We are pleased to have completed our first full quarter after the merger with National Bancshares Corporation (NBOH), and to have announced the completion of our merger with Tri-State 1st Banc, Inc. (Tri-State) at the beginning of the fourth quarter. We are also delighted to report that organic loan growth has increased 16% during the past twelve months, and that our level of noninterest income continues to improve.”


2015 Third Quarter Financial Highlights

 

    Loan growth

Total loans were $1.18 billion at September 30, 2015, compared to $647.0 million at September 30, 2014. Loans grew 16% organically during the past twelve months, which is in addition to the $430 million increase in loans resulting from the NBOH acquisition. The organic increase in loans is a direct result of Farmers’ focus on loan growth utilizing a talented lending and credit team, while adhering to a sound underwriting discipline. Most of the increase in loans has occurred in the commercial real estate, commercial and industrial and residential real estate loan portfolios. Loans now comprise 73.8% of the Bank’s average earning assets in 2015, an improvement compared to 59.6% in 2014. This improvement along with the growth in earning assets organically and through merger activity has resulted in a 70.7% increase in tax equated loan income from the third quarter of 2014 to the same quarter in 2015.

 

    Loan quality

Non-performing assets to total assets remain at a safe level, currently at 0.62%. Early stage delinquencies also continue to remain at low levels, at $6.9 million, or 0.58% of total loans, at September 30, 2015. Net charge-offs for the current quarter were $211 thousand, which compares favorably to $1.3 million in the previous quarter and $448 thousand in the same quarter last year.

 

    Net interest margin

The net interest margin for the three months ended September 30, 2015 was 3.84%, a 26 basis points increase from the quarter ended September 30, 2014. In comparing the third quarter of 2015 to the same period in 2014, asset yields increased 10 basis points, while the cost of interest-bearing liabilities decreased 18 basis points. Another key contributor to the increase in net interest margin was the shift in the mix of earning assets from securities to loans as explained previously.

 

    Noninterest income

Noninterest income increased 20.8% to $4.7 million for the quarter ended September 30, 2015 compared to $3.9 million in 2014. Deposit account income increased $218 thousand, or 31%, in the current year’s quarter compared to the same quarter in 2014 and gains on the sale of mortgage loans increased $301 thousand, or 264%, in comparing the same two quarters.

 

    Noninterest expenses

Farmers has remained committed to managing the level of noninterest expenses. Total noninterest expenses for the third quarter of 2015 were $15.5 million. Excluding expenses related to acquisition activities of $2.5 million, noninterest expenses were $13 million. Excluding expenses related to acquisition activities, noninterest expenses measured as a percentage of quarterly average assets decreased from 3.39% in the third quarter of 2014 to 3.03% in the third quarter of 2015. Salaries and employee benefits excluding severance expenses related to the merger as a percent of average assets decreased from 1.85% to 1.68%.

 

    Efficiency ratio

Excluding expenses related to acquisition activities, the efficiency ratio for the quarter ended September 30, 2015 improved to 61.94% compared to 70.17% for the same quarter in 2014. The main factors leading to the improvement in the efficiency ratio was the increase in net interest income and noninterest income, along with the stabilized level of noninterest expenses relative to average assets as explained in the preceding paragraphs.

2015 Outlook

Mr. Helmick added, “We are excited about the announcement of the completion of our merger with Tri-State, and are pleased with our first full quarter of results reflecting our merger with NBOH. We believe that the combination of Farmers with Tri-State, a strong community bank headquartered in East Liverpool, Ohio, will enhance our presence in Ohio and will serve as an entrance into the Pennsylvania market for Farmers. This transaction is an important step in the long-term strategy to expand our footprint and enhance profitability.”


Founded in 1887, Farmers National Banc Corp. is a diversified financial services company headquartered in Canfield, Ohio, with more than $1.8 billion in banking assets and $1 billion in trust 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 38 banking locations in Mahoning, Trumbull, Columbiana, Stark, Wayne, Medina and Cuyahoga Counties in Ohio and Beaver County in Pennsylvania, Farmers Trust Company, which operates two trust offices and offers services in the same geographic markets and National Associates, Inc. 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 and pre-tax, pre-provision income, 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. 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 the forward-looking statements can be found in Farmers’ Annual Report on Form 10-K for the year ended December 31, 2014, as amended, which has been filed with the Securities and Exchange Commission (SEC) and is available on Farmers’ website (www.farmersbankgroup.com) and on the SEC’s website (www.sec.gov). Factors that may cause or contribute to these differences may also include, without limitation, the Company’s failure to integrate Tri-State and its subsidiary in accordance with expectations, and deviations from performance expectations related to Tri-State and its subsidiary. 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,
2015
    June 30,
2015
    March 31,
2015
    Dec. 31,
2014
    Sept. 30,
2014
    Sept. 30,
2015
    Sept. 30,
2014
    Percent
Change
 

Total interest income

   $ 15,594      $ 10,753      $ 9,999      $ 10,321      $ 10,413      $ 36,346      $ 30,594        18.8

Total interest expense

     1,056        1,004        1,007        1,078        1,128        3,067        3,501        -12.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     14,538        9,749        8,992        9,243        9,285        33,279        27,093        22.8

Provision for loan losses

     1,220        850        450        825        425        2,520        1,055        138.9

Other income

     4,685        4,409        4,037        4,193        3,880        13,131        11,110        18.2

Merger related costs

     2,499        1,912        245        0        0        4,656        0     

Other expense

     13,022        10,175        9,506        9,867        9,776        32,703        28,295        15.6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     2,482        1,221        2,828        2,744        2,964        6,531        8,853        -26.2

Income taxes

     625        409        617        597        688        1,651        2,035        -18.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 1,857      $ 812      $ 2,211      $ 2,147      $ 2,276      $ 4,880      $ 6,818        -28.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average shares outstanding

     25,672        19,366        18,409        18,436        18,706        21,176        18,755     

Pre-tax pre-provision income

   $ 3,702      $ 2,071      $ 3,278      $ 3,569      $ 3,389      $ 9,051      $ 9,908     

Basic and diluted earnings per share

     0.07        0.04        0.12        0.12        0.12        0.23        0.36     

Cash dividends

     770        552        552        552        559        1,875        1,685     

Cash dividends per share

     0.03        0.03        0.03        0.03        0.03        0.09        0.09     

Performance Ratios

                

Net Interest Margin (Annualized)

     3.84     3.66     3.64     3.63     3.58     3.72     3.57  

Efficiency Ratio (Tax equivalent basis)

     76.55     81.03     70.71     71.20     70.17     76.27     69.91  

Return on Average Assets (Annualized)

     0.43     0.27     0.79     0.75     0.79     0.48     0.80  

Return on Average Equity (Annualized)

     3.97     2.74     7.14     6.91     7.37     4.31     7.61  

Dividends to Net Income

     41.46     67.98     24.97     25.71     24.56     38.42     24.71  


Consolidated Statements of Financial Condition

 

     Sept. 30,
2015
    June 30,
2015
    March 31,
2015
    Dec. 31,
2014
    Sept. 30,
2014
 

Assets

          

Cash and cash equivalents

   $ 34,344      $ 37,028      $ 26,929      $ 27,428      $ 28,294   

Securities available for sale

     379,138        386,319        369,919        389,829        404,895   

Loans held for sale

     566        399        146        511        895   

Loans

     1,183,016        1,134,838        673,784        663,852        646,981   

Less allowance for loan losses

     8,294        7,286        7,723        7,632        7,333   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Loans

     1,174,722        1,127,552        666,061        656,220        639,648   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other assets

     119,027        121,105        70,596        62,979        66,007   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Assets

   $ 1,707,797      $ 1,672,403      $ 1,133,651      $ 1,136,967      $ 1,139,739   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

          

Deposits

   $ 1,330,249      $ 1,320,569      $ 909,408      $ 915,703      $ 913,000   

Other interest-bearing liabilities

     179,701        155,591        80,338        87,517        90,649   

Other liabilities

     11,696        13,668        17,134        10,187        14,689   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     1,521,646        1,489,828        1,006,880        1,013,407        1,018,338   

Stockholders’ Equity

     186,151        182,575        126,771        123,560        121,401   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 1,707,797      $ 1,672,403      $ 1,133,651      $ 1,136,967      $ 1,139,739   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Period-end shares outstanding

     25,674        25,672        18,409        18,409        18,559   

Book value per share

   $ 7.25      $ 7.11      $ 6.89      $ 6.71      $ 6.54   

Tangible book value per share

     5.72        5.57        6.42        6.23        6.02   

Capital and Liquidity

          

Common Equity Tier 1 Capital Ratio (a)

     12.12     12.61     15.03     N/A        N/A   

Total Risk Based Capital Ratio (a)

     12.77     13.20     16.02     16.48     16.54

Tier 1 Risk Based Capital Ratio (a)

     12.12     12.61     15.03     15.43     15.52

Tier 1 Leverage Ratio (a)

     9.27     9.27     10.44     10.03     9.89

Equity to Asset Ratio

     10.90     10.92     11.18     10.87     10.65

Tangible Common Equity Ratio

     8.80     8.76     10.50     10.17     9.88

Net Loans to Assets

     68.79     67.42     58.75     57.72     56.12

Loans to Deposits

     88.93     85.94     74.09     72.50     70.86

Asset Quality

          

Non-performing loans

   $ 9,620      $ 7,984      $ 7,939      $ 8,481      $ 7,218   

Other Real Estate Owned

     1,052        1,128        144        148        381   

Non-performing assets

     10,672        9,112        8,083        8,629        7,599   

Loans 30—89 days delinquent

     6,974        7,146        4,344        5,426        4,938   

Charged-off loans

     631        1,496        618        891        756   

Recoveries

     420        209        259        365        308   

Net Charge-offs

     211        1,287        359        526        448   

Annualized Net Charge-offs to

          

Average Net Loans Outstanding

     0.10     0.71     0.22     0.33     0.28

Allowance for Loan Losses to Total Loans

     0.70     0.64     1.15     1.15     1.13

Non-performing Loans to Total Loans

     0.81     0.70     1.18     1.28     1.12

Allowance to Non-performing Loans

     86.22     91.26     97.28     89.99     101.59

Non-performing Assets to Total Assets

     0.62     0.54     0.71     0.76     0.67

 

(a) September 30, 2015 ratio is estimated


Reconciliation of Common Stockholders’ Equity to Tangible Common Equity

 

     Sept. 30,
2015
     June 30,
2015
     March 31,
2015
    

Dec. 31,

2014

     Sept. 30,
2014
               

Stockholders’ Equity

   $ 186,151       $ 182,575       $ 126,771       $ 123,560       $ 121,401         

Less Goodwill and other intangibles

     39,265         39,569         8,646         8,813         9,768         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

       

Tangible Common Equity

   $ 146,886       $ 143,006       $ 118,125       $ 114,747       $ 111,633         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

       

Reconciliation of Total Assets to Tangible Assets

 

  

     Sept. 30,
2015
     June 30,
2015
     March 31,
2015
    

Dec. 31,

2014

     Sept. 30,
2014
               

Total Assets

   $ 1,707,797       $ 1,672,403       $ 1,133,651       $ 1,136,967       $ 1,139,739         

Less Goodwill and other intangibles

     39,265         39,569         8,646         8,813         9,768         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

       

Tangible Assets

   $ 1,668,532       $ 1,632,834       $ 1,125,005       $ 1,128,154       $ 1,129,971         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

       

 

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

 

  

     For the Three Months Ended      For the Nine Months
Ended
 
     Sept. 30,
2015
     June 30,
2015
     March 31,
2015
     Dec. 31,
2014
     Sept. 30,
2014
     Sept. 30,
2015
     Sept. 30,
2014
 

Income before income taxes

   $ 2,482       $ 1,221       $ 2,828       $ 2,744       $ 2,964       $ 6,531       $ 8,853   

Provision for loan losses

     1,220         850         450         825         425         2,520         1,055   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Pre-tax, pre-provision income

   $ 3,702       $ 2,071       $ 3,278       $ 3,569       $ 3,389       $ 9,051       $ 9,908