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| 8-K - FORM 8-K - FARMERS NATIONAL BANC CORP /OH/ | d822657d8k.htm |
 Investor Presentation
September 30, 2014
Exhibit 99.1 |
 2
Disclosure Statement
Forward-Looking Statements
This presentation contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements express management’s current expectations, forecasts of future
events or long-term-goals and, by their nature, are subject to
assumptions, risks and uncertainties. Actual results could
differ materially from those indicated. Farmers National Banc Corp. (“Farmers”) refers you to its periodic
reports and registration statements filed with the Securities and
Exchange Commission, including its Annual Report on Form
10-K for the year ended December 31, 2013 and Quarterly Report on Form 10-Q for the period
ended September 30, 2014 which have been filed with the Securities and
Exchange Commission and are available on Farmers’ website
(www.farmersbankgroup.com) and on the Securities and Exchange Commission’s website
(www.sec.gov), for additional discussion of these assumptions, risks
and uncertainties. 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 undertakes no obligation to update
forward-looking statements, whether as a result of new
information, future events or otherwise, except as may be required by law.
Use of Non-GAAP Financial Measures
This presentation contains certain financial information
determined by methods other than in accordance with accounting
principles generally accepted in the United States (“GAAP”). These non-GAAP financial measures
include “Core Deposits” and “Pre-tax,
Pre-provision Earnings”. Farmers believes that these non-GAAP financial
measures provide both management and investors a more complete
understanding of the Company’s deposit profile and
profitability. These non-GAAP financial measures are supplemental and are not a substitute for any analysis
based on GAAP financial measures. Because not all companies use
the same calculation of “Core Deposits” and
“Pre-tax, Pre-provision Earnings”, this presentation
may not be comparable to other similarly titled measures as
calculated by other companies.
|
 3
About Farmers National Banc Corp.
•
Strong Capital Position
•
Strong Asset Quality
•
Loan Growth
•
Diversifying Revenue Stream
•
Controlling Non-interest Expenses (PIC)
•
Headquarters: Canfield, OH
•
Assets: $1.14 billion
•
Loans: $647 million
•
Deposits: $913.0 million
•
Banking Locations: 19
Growing Community
Financial Services
Company
•
Stock Price (10-31-14): $8.10
•
Market Capitalization (10-31-14): $150.33 million
•
Dividend (yield): $0.12 (1.50%)
•
Cash Dividends: $1.7 million
•
Tangible Book Value: $6.02
Stock Data –
NASDAQ: FMNB
•
Revenue: $38.1 million
Market share
•
Net Income: $6.8 million
•
Net Income-Diluted Share:
$0.36
•
ROAA: 0.80%
•
ROAE:
7.63%
Operating Results for
Nine Months Ended
9/30/14
Operating Strategy
-
#16 Stark
-
#6 Trumbull
-
#3 Columbiana
-
#4 Mahoning |
 Years of Experience
FMNB
Industry
President & Chief Executive Officer
Kevin J. Helmick (42)
20+
20+
EVP, Chief Financial Officer
Carl D. Culp (51)
25+
29+
EVP, Chief Credit Officer
Mark L. Graham (59)
36+
36+
SVP, Chief Retail & Marketing Officer
Amber Wallace (48)
6+
6+
SVP, Chief Information Officer
Brian Jackson (45)
5+
21+
Community
President
-
Stark
County
&
Chief
Lending Officer
Joseph Gerzina (58)
3+
32+
SVP, Director of Human Resources
Mark A. Nicastro (43)
5+
16+
VP, Chief Risk Officer
Dale Sturdevant (60)
3+
24+
VP, Director of Commercial Banking & Private
Client
Services
-
Mahoning
Valley
Tim Shaffer (52)
2+
28+
President, Farmers Trust Company
Joseph J. DePascale (49)
3+
20+
President, National Associates Inc.
Gerrit C. Kuechle (73)
1+
40+
•
Established and experienced management team with over 272 years of
combined experience, 109 of which has been with Farmers.
Experienced Management Team
4 |
 5
Who We Are
•
Leading community bank in Ohio with deposit market share in the
top ten in the core counties in which we operate
–
Founded over 127 years ago
–
19 banking locations and 19 ATMs
•
Sound franchise with commitment to independence and positioned
for growth
•
Profitable throughout cycle, growing tangible book value per share
and growth in current year earnings
•
Diversified and growing revenue streams
•
Compelling valuation:
–
1.33x of tangible book value
–
11.30x LTM pre-tax pre-provision earnings (excludes security
gains) –
1.50% dividend yield |
 6
Note: Deposit data as of June 30,
2012 Source: SNL
•
Opportunity for growth with approximately 10.50% deposit market share
in the Mahoning Valley –
Large regional competitors lack
focus -
Community competitors inwardly focused
Attractive Deposit Franchise –
Deposit Market Share by MSA & County
Columbiana Top 10
2014
Rank
Company
Branches
Dep.
($M)
Market
Share
1
Huntington National Bank
11
341,146
25.45
2
Home Savings and Loan Co. of Youngstown
6
243,226
18.14
3
Farmers National Bank of Canfield
3
140,433
10.48
4
JPMorgan Chase Bank NA
3
122,844
9.16
5
PNC Bank NA
3
104,040
7.76
6
1
st
National Community Bank
4
100,780
7.52
7
Consumers National Bank
3
96,128
7.17
8
CFBank
2
85,322
6.36
9
Citizens Bank NA
1
46,937
3.50
10
KeyBank NA
1
42,666
3.18
Total for Institutions in the Market
40
1,340,573
100.00
Mahoning Top 10
2014
Rank
Company
Branches
Dep.
($M)
Market
Share
1
Huntington National Bank
20
1,243,177
29.38
2
Home Savings and Loan Co. of Youngstown
11
771,832
18.24
3
PNC Bank NA
9
553,655
13.09
4
Farmers National Bank of Canfield
8
529,809
12.52
5
JPMorgan Chase Bank NA
7
397,944
9.41
6
Talmer Bank and Trust
8
345,916
8.18
7
First National Bank of Pennsylvania
5
209,867
4.96
8
KeyBank NA
4
79,576
1.88
9
Citizens Bank NA
2
58,291
1.38
10
Cortland Savings and Banking Co.
2
39,622
0.94
Total for Institutions in the Market
77
4,230,898
100.00
Trumbull Top 10
2014
Rank
Company
Branches
Dep.
($M)
Market
Share
1
Huntington National Bank
15
570,189
20.98
2
Talmer Bank and Trust
8
427,268
15.72
3
JPMorgan Chase Bank NA
9
420,471
15.47
4
Cortland Savings and Banking Co.
7
340,862
12.54
5
PNC Bank NA
5
261,889
9.64
6
Farmers National Bank of Canfield
7
230,625
8.49
7
Home Savings and Loan Co. of Youngstown
4
126,483
4.65
8
First National Bank of Pennsylvania
3
96,020
3.53
9
Citizens Bank NA
3
64,789
2.38
10
Home FS&LA of Niles Ohio
1
61,914
2.28
Total for Institutions in the Market
66
2,717,421
100.00
* YTD as of 9-30-14
600.0
650.0
700.0
750.0
800.0
850.0
900.0
950.0
08
09
10
11
12
13
14*
Total Deposits
($ in millions) |
 7
Commitment to Independence
•
Four Pillars
–
Shareholders
o
2014 Strategic Initiative
o
Increased Communication Plan
–
Customers
o
Small Business Support
o
45% of small business
lending
comes from community banks*
–
Associates
o
331 associates
o
Top 100 employer in the region
–
Community
o
$189,059 Annual Giving
*Source: FDIC
Quarterly
Banking
Profile
-
Second
Quarter
2014
Education
/
Higher
Education
$43,766
Social Services
$46,027
Health &
Wellness
$40,510
Civic
$41,793
Arts
$11,560
Community
Athletics
$3,727
Religious
$1,675
2014 Community Giving: $189,059
YTD 10/23/14 |
 8
Increasing Shareholder Value
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10
11
12
13
14*
Stock Price
Stable Dividend Policy
•
Consistently paid a quarterly cash
dividend
•
Current yield 1.50%
•
Dividend payout through September
30, 2014 was 24.71% of net income |
 9
Headquartered in Mahoning Valley
Compelling Demographics
•
Approximately 75 -
100 miles from
Cleveland, Pittsburgh & Erie
•
6.8 million people within 100 mile radius
•
17 Fortune 500 company world
headquarters
•
95 colleges and universities campus
locations
•
Northeast Ohio’s manufacturing
productivity is on track to outpace the rest
of the nation by 10 percent as early as 2015,
according to a report released by Team
Northeast Ohio.
•
Land acquisition, construction and labor
costs are significantly below national
averages. |
 10
•
Youngstown Business Incubator ranked No. 1 in the world by the 2014
University Business Incubator Index
•
The TechBelt Initiative received the International Economic Development
Council’s Bronze Award for 2013
•
Youngstown-Warren Metro ranked number one in the USA in export
growth percentage from 2009-2012 by the Brookings
Institute •
Economic Growth Potential category among U.S. metro areas with less
than 450,000 people employed
•
Victory
Media,
Inc.
names
Youngstown
a
“Top
50
Military
Friendly
City”
for
2013
•
General
Motors
committed
an
investment
of
more
than
$250
million
in
the
past
three years to manufacture the Chevrolet Cruze at the Lordstown
Assembly Plant Regional Growth Opportunities
Source: Regional Chamber, Valley Economic Update, Economic Development
Report Card, 2013 Reporting Year Source: Regional Chamber,
Youngstown-Warren, Ohio Metropolitan Profile ,Valley Leads in Industrial Job Growth in NE Ohio, The Vindicator ,Ohio’s Economic Impact Study – September, 2011 & 2012
Business Facilities Magazine ranked
Youngstown-Warren Metro area sixth in the |
 11
Source: Regional Chamber, Valley Economic Update, Economic Development
Report Card, 2013 Reporting Year •
$1.5 billion project investment in the Youngstown-Warren region in
2013 Regional Growth Opportunities
Agency-Assisted
Investment
600,271,951
Transportation/
Infrastructure
34,171,647
D6 Public Works
Commission
31,831,720
Area Construction
671,267,000
Company-Completed
Investment
198,286,500
Total Amounts: $1,535,828,818 |
 12
Source: Regional Chamber, Youngstown-Warren, Ohio Metropolitan
Profile ,Valley Leads in Industrial Job Growth in NE Ohio, The Vindicator
,Ohio’s Economic Impact Study –
September,
2013
Ohio Department of Natural Resources, 2014, Horizontal Utica-Point
Pleasant Well Activity in Ohio: Columbus, scale 1:1,300,000, revised 7/11/2014.
•
Energy Products
–
As of July 5, 2014, 472 wells reported
production
•
Economic Impact
–
Ohio’s Natural Gas/Crude Oil
Exploration Production Industry and the
Utica Gas Formation impact:
o
Jobs (204,000 created or supported
by 2015)
o
Income (Economic Output will
increase by over $22 billion by
2015)
Utica Shale Impact |
 13
•
Key Commitments
–
Steelmaker Vallourec’s $650 million
expansion
-
350
jobs
created.
($57
million Finishing Plant)
–
Exterran
$13
million
plant
-
100
jobs
created
–
Pennant Midstream, LLC constructed a
$375 million pipeline and natural gas
processing plant in eastern Mahoning
County. The Hickory Bend Pipeline
System and associated cryogenic gas-
processing plant is ready to begin
operation.
Utica Shale Impact
Source: Regional Chamber, Youngstown-Warren, Ohio Metropolitan
Profile ,Valley Leads in Industrial Job Growth in NE Ohio, The Vindicator ,Ohio’s Economic Impact Study – September, 2013
|
 Farmers’
Strategy
for
Growth
•
Growth of Non Interest Income Through Wealth Management and
Bank Fee Revenues
•
Grow Loan Production Volume
•
Technology and the Automated Virtual Bank
–
Continued investment in rapidly expanding mobile opportunities
•
Expense Control
•
Company Culture
•
Enterprise Risk Management
•
Acquisition or “Lift Outs”
•
Shareholder Management
14 |
 Virtual Bank
15 |
 Competitive Landscape
•
Regulatory and Competitive Landscape
–
Significant Competition for Customer’s Share of Wallet
–
Consolidation of Banks in Ohio and Nationally
–
Increasing Regulatory Concerns
–
Economic Challenges
•
Strategy for Profitability
–
Strong Capital Position
–
Strong Asset Quality
–
Loan Growth
–
Diversifying Revenue Stream
–
Controlling Non-interest Expenses
o
Profit Improvement Committee
16 |
 17
•
Focus for Growth
–
Continued organic growth in current markets
–
Growth opportunities in new markets with Private Banking, Trust
and Investments
–
Targeted acquisitions include fee-based business and banks
•
Target Metrics for Acquisition
–
Accretive to earnings near term (excluding one-time charges)
–
Manageable initial tangible book value dilution
–
Growth of fee revenue to 30+% of total revenue
–
Must enhance shareholder value
–
Must sustain our culture
–
Not materially change our investment merits
–
Sustain our TCE and regulatory ratios
Growth Focus and Target Metrics |
 The Health of Our Wealth
•
Wealth Management Creates Fee-based Income
–
Fee Income 2009: 14.5% of total gross income
o
Noninterest income excluding security gains
–
Fee Income 2014 YTD*: 29% of total gross income
o
Noninterest income excluding security gains
•
Wealth Management Build-out Timeline
–
2000 Farmers National Investments
–
2009 Farmers Trust Company
–
2010 Farmers National Insurance
–
2012 Private Client Services
–
2013 National Associates, Inc.
* YTD as of 9-30-14
18 |
 19
•
Butler Wick Trust Company Acquisition
–
Acquired for cash on March 31, 2009
–
Only locally owned trust company in the Mahoning Valley
–
Rebranded to Farmers Trust Company
–
Trust assets increased approximately 84% since acquisition
–
Contributed $5.7 million to non-interest income in 2013
•
National Associates, Inc. Acquisition
–
Acquired on July 1, 2013 from owner for cash and stock
–
A leading independent consultant to retirement plans. Offers
actuarial, plan design, compliance and administrative services
–
Located in Cleveland, Ohio
–
200 retirement plans with assets under administration of $661
million
Acquisitions to Enhance
Fee-Based Revenue |
 •
Stable Net Interest Margin
–
Low Cost Core Deposit Funding
•
Strong record of profitability
–
127 consecutive quarters of profitability
–
Average ROAA and ROAE from 2009 through 2014 YTD of 0.79% and
8.21%, respectively
o
ROAA impacted by investment into new markets and services such as
private client services
•
Continue to invest in operations to support ongoing growth, yet
maintain a strong balance sheet
*YTD as of 9-30-14
20
Historical Operating Results
3.47
3.53
3.56
3.54
3.58
2.00
2.50
3.00
3.50
4.00
2013 fq3
2013 fq4
2014 fq1
2014 fq2
2014 fq3
Farmers National Banc Corp.
Net Interest Margin (%) (Annualized) |
 21
•
127 consecutive quarters of profitability
•
Net income per diluted share for three months ended September 30,
2014 was $0.12, an increase of 33% compared to $0.09 for the
third quarter, 2013
•
Efficiency ratio for the first three quarters in 2014 improved to
69.91%, compared to 77.21% for the same period in 2013
•
Loans increased 5.8% since September 30, 2013
•
Non-performing assets to total assets remain at low levels, 0.67%
at September 30, 2014
Continued Strong Results –
Overview of 3Q 2014 |
 22
Growing and Diverse Revenue Stream
*YTD as of 9-30-14
•
Continued Focus on Growing Noninterest Income
•
Non-interest Revenue: 29% of Total Revenue
71.0%
14.1%
12.1%
2.8%
Total Revenue YTD 2014*: $38.1 million
Net Interest Income
Trust Income
Insurance & Investment Income
Other Non-interest Income |
 23
•
Diverse loan mix
•
No national lending
•
No sub-prime lending
•
Farmers’
practice is to lend
primarily within its market area
•
Less than 2% of loan portfolio is
participations purchased
•
Less than 3% of loan portfolio is
construction loans
Loan Portfolio Mix -
September 30, 2014
Overview of Loan Portfolio
Note: Dollars in thousands
Commercial Real
Estate
$203,376
31.4%
Residential Real
Estate
$173,758
26.9%
Consumer
$138,476
21.4%
Commercial &
Industrial
$115,102
17.8%
Commercial
Construction
$11,096
1.7%
Residential
Construction
$5,173
0.8% |
 24
Excellent Asset Quality
Note: Dollars in millions; Asset quality ratios exclude troubled
debt restructuring
9/30/2014
Nonaccrual loans
$7.0
Accruing loans past due 90 days or more
0.3
OREO
0.3
Total nonperforming assets (NPAs)
$7.6
Troubled Debt Restructuring (TDR)
$8.4
Loans 30-89 days delinquent
4.9
Gross portfolio loans
647.0
Loans held for sale (HFS)
0.9
Allowance for loan losses (ALL)
7.3
Total Assets
$1,139.7
NPLs & 90 days past due/Gross loans (excl. HFS)
1.12%
NPAs/Total Assets
0.67%
TDR/Gross loans (excl. HFS)
1.30%
30-89 days delinquent/Gross loans (excl. HFS)
0.76%
ALL/NPLs & 90 days past due
101.58%
ALL/Gross loans (excl. HFS)
1.13%
Texas Ratio
6.35%
Nonaccrual Loans by Type
Nonaccrual
$7.0mm
92.1%
Accruing loans
past due 90
days or more
$0.3mm
3.9%
OREO
$0.3mm
3.9%
Owner
Occupied
Commercial
Real Estate
$2.2 mm
Residential
Real Estate
$3.1 mm
Commercial
$1.5 mm
Consumer
$0.2 mm |
 25
Supplemental Information |
 26
GAAP to Non-GAAP Reconciliation
Reconciliation
of
Common
Stockholders'
Equity
to
Tangible
Common
Equity
Sept 30,
June 30,
March 31,
Dec 31,
Sept 30,
2014
2014
2014
2013
2013
Stockholders' Equity
$121,401
$121,020
$117,323
$113,007
$112,524
Less Goodwill and other intangibles
9,768
9,960
10,151
10,343
10,546
Tangible Common Equity
$111,633
$111,060
$107,172
$102,664
$101,978
Reconciliation of Total Assets to Tangible Assets
Sept 30,
June 30,
March 31,
Dec 31,
Sept 30,
2014
2014
2014
2013
2013
Total Assets
$1,139,739
$1,133,286
$1,141,000
$1,137,326
$1,148,119
Less Goodwill and other intangibles
9,768
9,960
10,151
10,343
10,546
Tangible Assets
$1,129,971
$1,123,326
$1,130,849
$1,126,983
$1,137,573
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,
2014
2014
2014
2013
2013
2014
2013
Income before income taxes
$2,964
$3,071
$2,818
$2,936
$1,755
$8,853
$6,527
Provision for loan losses
425
300
330
525
340
1,055
765
Pre-tax, pre-provision income
$3,389
$3,371
$3,148
$3,461
$2,095
$9,908
$7,292 |
 27
Consolidated Statements of Income
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
2014
2014
2014
2013
2013
2014
2013
Change
Total interest income
$10,413
$10,118
$10,063
$10,298
$10,122
$30,594
$30,661
-0.2%
Total interest expense
1,128
1,166
1,207
1,257
1,274
3,501
3,806
-8.0%
Net interest income
9,285
8,952
8,856
9,041
8,848
27,093
26,855
0.9%
Provision for loan losses
425
300
330
525
340
1,055
765
37.9%
Other income
3,880
3,797
3,433
3,641
4,173
11,110
10,273
8.1%
Other expense
9,776
9,378
9,141
9,221
10,926
28,295
29,836
-5.2%
Income before income taxes
2,964
3,071
2,818
2,936
1,755
8,853
6,527
35.6%
Income taxes
688
720
627
641
143
2,035
1,042
95.3%
Net income
$2,276
$2,351
$2,191
$2,295
$1,612
$6,818
$5,485
24.3% |
 28
Consolidated Statements of
Financial Condition
Consolidated Statements of Financial Condition
Sept 30,
June 30,
March 31,
Dec 31,
Sept 30,
2014
2014
2014
2013
2013
Assets
Cash and cash equivalents
$28,294
$28,070
$29,333
$27,513
$40,303
Securities available for sale
404,895
409,285
427,625
422,985
438,127
Loans held for sale
895
275
1,026
158
1,016
Loans
646,981
637,774
626,186
630,684
611,349
Less allowance for loan losses
7,333
7,356
7,387
7,568
7,369
Net Loans
639,648
630,418
618,799
623,116
603,980
Other assets
66,007
65,238
64,217
63,554
64,693
Total Assets
$1,139,739
$1,133,286
$1,141,000
$1,137,326
$1,148,119
Liabilities and Stockholders' Equity
Deposits
$913,000
$907,443
$923,033
$915,216
$903,410
Other interest-bearing liabilities
90,649
93,807
92,815
101,439
118,322
Other liabilities
14,689
11,016
7,829
7,664
13,863
Total liabilities
1,018,338
1,012,266
1,023,677
1,024,319
1,035,595
Stockholders' Equity
121,401
121,020
117,323
113,007
112,524
Total Liabilities
and Stockholders' Equity
$1,139,739
$1,133,286
$1,141,000
$1,137,326
$1,148,119 |