Attached files
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| 8-K - 8-K - FARMERS NATIONAL BANC CORP /OH/ | d27442d8k.htm |
 Investor Presentation June 30, 2015 Exhibit 99.1 |
 2 Disclosure Statements Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995, including statements
about the financial condition, results of operations, asset quality trends and profitability of Farmers National Banc Corp. (“Farmers”). Forward-looking statements are not historical facts but instead express
management’s current expectations, forecasts of future events or long-term-goals, 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 could differ, possibly materially, from those 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’ 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, 2014, as amended, and Quarterly Report on Form 10-Q for the period ended June 30, 2015, 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).
Factors
that
may
cause
or
contribute
to
these
differences
may
also
include,
without limitation, Farmers’ 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
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 Disclosure Statement Important Additional Information About the Merger. In connection with the proposed merger with Tri-State 1 st Banc, Inc. (Tri-State), Farmers has filed with the Securities and Exchange Commission (the “SEC”) a Registration Statement on Form S-4 that includes a proxy statement and a
prospectus, as well as other relevant
documents concerning the proposed
transaction. SHAREHOLDERS OF TRI-STATE
AND OTHER INVESTORS ARE URGED TO CAREFULLY READ THE PROXY STATEMENT/PROSPECTUS TO BE INCLUDED IN THE REGISTRATION STATEMENT ON FORM S-4, BECAUSE IT WILL
CONTAIN IMPORTANT INFORMATION ABOUT FARMERS,
TRI-STATE, THE PROPOSED MERGER, THE PERSONS SOLICITING PROXIES WITH RESPECT TO THE PROPOSED MERGER AND THEIR INTERESTS IN THE PROPOSED MERGER AND RELATED MATTERS. The respective directors and executive officers of Farmers and Tri-State and other persons may be deemed to be
participants in the
solicitation
of
proxies
from
shareholders
of
Tri-State
with
respect
to
the
proposed
merger.
Information
regarding
the
directors
and
executive officers of Farmers is available in its proxy
statement filed with the SEC on March 13, 2015. Information regarding directors and executive officers of Tri-State is available on its website at http://www.1stncb.com/. Other information regarding the participants in the solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will
be contained in the proxy
statement/prospectus to be included in the Registration
Statement on Form S-4 and other relevant materials filed with the SEC when they become available. Investors and security holders will be able to obtain free copies of the registration statement and other
documents filed with the SEC by
Farmers
through
the
website
maintained
by
the
SEC
at
http://www.sec.gov. Copies of the documents filed with the SEC by Farmers will be available free of charge on Farmers’ website at https://www.farmersbankgroup.com. This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities nor
shall there be any sale of securities in
any jurisdiction in which the offer, solicitation or sale is unlawful before registration or qualification of the securities under the securities laws of the jurisdiction. No offer of securities shall be made except by means of a prospectus satisfying the requirements of Section 10 of the Securities Act. |
 4 FMNB - Legacy Financial Highlights at March 31, 2015 • Banking Locations: 19 • Assets: $1.13 billion • Loans: $673.78 million • Deposits: $909.41 million • Loan/Deposit Ratio: 74.09% • Tangible Common Equity: 10.50% • Market Capitalization: $150.77 million Strategic Objectives • Strong Capital Position • Strong Asset Quality • Loan Growth • Diversifying Revenue Stream • Controlling Non-interest Expenses (PIC) |
 5 FMNB-NBOH Merger Financial Highlights at June 30, 2015 • Banking Locations: 33 • Assets: $1.67 billion • Loans: $1.13 billion • Deposits: $1.32 billion • Loan/Deposit Ratio: 85.94% • Tangible Common Equity: 8.76% • Market Capitalization: $211.8 million Strategic Objectives • Creates the third largest community bank 1 by asset size headquartered in NE Ohio • Complementary business lines & compelling cultural fit • Enhanced board of directors and management team bringing strengths and best practices from both sides • Catalyst for additional growth opportunities (1) Community Banks defined as those with assets less than $20.0 billion. Northeast Ohio includes area codes
216, 330 and 440 |
 6 FMNB-NBOH Combined with TSOH Acquisition Pro Forma Financial Highlights • Banking Locations: 38 • Assets: $1.8 billion • Loans: $1.2 billion • Deposits: $1.5 billion • Loan/Deposit Ratio: 78.16% • Tangible Common Equity: 8.75% • Market Capitalization: $223 million 1 Strategic Objectives • Pro-forma, Farmers will rank 2 nd in market share with ~20% of the county’s deposits • TSOH provides an attractive deposit base with $54.3 million of demand deposits and an overall cost of deposits of 0.19% • Entrance into the Pennsylvania market (1) Based on FMNB’s stock price of $8.25 on June 30, 2015
Source: SNL Financial
|
 7 Who We Are Today • Operating in eight counties in Ohio – Founded over 128 years ago • Sound franchise with commitment to independence and positioned
for growth
• Profitable throughout cycle and growth in current year core
earnings
• Diversified and growing revenue streams • Compelling valuation: – 1.48x of tangible book value – 13.30x LTM pre-tax pre-provision earnings (excludes security gains)
– 1.45% dividend yield |
 8 About Farmers National Banc Corp. • Stock Price: $8.25 • Dividend (yield): $0.03 (1.45%) • Cash Dividends: $552 thousand • Tangible Book Value: $5.57 Stock Data – NASDAQ: FMNB as of 6/30/15 • Revenue: $15.13 million • Net Income: $812 thousand • Net Income-Diluted Share: $0.04
•
ROAA: 0.27%
•
ROAE:
2.74% Operating Results for 3 Months Ended 6/30/15 • Revenue: $15.13 million • Net Income: $2.4 million • Net Income-Diluted Share: $0.12
•
ROAA: 0.82%
•
ROAE:
8.33% Operating Results for 3 Months Ended 6/30/15 excluding One-time Acquisition Expenses |
 • Established and experienced management team with over 300 years of combined experience,
130 of which has been with Farmers.
Experienced Management Team
9 Years of Experience FMNB Industry President & Chief Executive Officer Kevin J. Helmick (43) 21+ 21+ Senior EVP, Chief Banking Officer Mark Witmer (51) <1 25+ EVP, Chief Financial Officer Carl D. Culp (52) 26+ 30+ EVP, Chief Credit Officer Mark L. Graham (60) 37+ 37+ SVP, Chief Retail & Marketing Officer Amber Wallace (49) 7+ 7+ SVP, Chief Information Officer Brian Jackson (46) 6+ 22+ SVP, Chief Risk Officer Jay VanSickle (45) <1 20+ SVP, Chief Lending Officer and Regional President Joseph Gerzina (59) 4+ 33+ SVP, Regional President Tim Shaffer (53) 3+ 29+ SVP, Director of Human Resources Mark A. Nicastro (44) 6+ 17+ President, Farmers Trust Company Joseph J. DePascale (50) 4+ 21+ President, National Associates Inc. Aubrey Christ (41) <1 20+ VP, Farmers National Investments/Farmers National Insurance Dan Cvercko (43) 14+ 17+ |
 10 Seven Key Focuses • Lending/Credit • Wealth Management • Retail/Marketing • Finance • Information Technology • Enterprise Risk Management • Human Resources |
 11 New Locations - Alliance |
 12 New Locations - Fairlawn |
 13 Commitment to Stakeholders • Four Pillars – Shareholders o 2015 Strategic Initiative o Increased Communication Plan – Customers o Small Business Support o 45% of small business
lending
comes from community banks* – Associates o 429 associates o Top 100 employer in the region – Community o 2015 Community Giving as of June 30, 2015: $169,595
*Source:
FDIC
Quarterly
Banking
Profile
-
Second
Quarter
2014
Arts
5%
Civic
18%
Community
Athletics
2%
Education
/
Higher
Education
23%
Health &
Wellness
17%
Religious
1%
Social
Services
16%
CRA
18%
2015 Community Giving
YTD 06/30/15 |
 14 Increasing Shareholder Value Stable Dividend Policy • Consistently paid a quarterly cash dividend • Current yield 1.45% • Dividend payout range policy of 25% - 35% • Dividend payout 2015 YTD* is 36.55% of net income *As of June 30, 2015 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 15* 3.62 4.95 6.20 6.55 8.35 8.25 Stock Price |
 15 Source: Debrosse Memorial Report, 2014 Ohio and Gas Activity in Ohio, Ohio Oil and Gas Association
• Completions – Top 10 Counties in Ohio – Columbiana #3 – Stark # 6 • Top 12 Most Active Counties in Ohio – By Well – Columbiana #3 – Stark #5 • Top 12 Most Active Counties in Ohio – By Footage – Columbiana #3 – Stark #7 – Trumbull #8 – Mahoning #9 Utica Shale Impact |
 16 Source: Debrosse Memorial Report, 2014 Ohio and Gas Activity in Ohio, Ohio Oil and Gas Association
Utica Shale Impact |
 17 Source: Debrosse Memorial Report, 2014 Ohio and Gas Activity in Ohio, Ohio Oil and Gas Association
Utica Shale Impact |
 Virtual Bank 18 |
 Mobile Banking Analytics Transactions • Account to Account Transfers • Bill Payments • Mobile Captures • Picture Payments Growth: 285% * Farmers’ Active Users: 85% Active User Target: 75% 19 1170 4500 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 Mobile Banking Users 2013 2014 2015 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 1,608 8,760 Mobile Transactions |
 Online Banking Analytics 20 Transactions - Fiserv • Bill Pay • PopMoney • Account to Account Transactions • Same Day EBT • All Other Electronic Payments • Overnight Checks • All Other Paper Payments 2012 2013 2014 2015 21447 15258 Online Banking Users 10,000 12,000 14,000 16,000 18,000 20,000 22,000 24,000 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 Online Banking Transactions 16,296 17,323 |
 21 • 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 2015*: 28.8% 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. *For the six months ended June 30, 2015 22 |
 23 • 130 consecutive quarters of profitability • Completed merger with National Bancshares on June 19, 2015
• Announced proposed merger with Tri-State 1 st Banc, Inc. on June 24, 2015 • Net income for quarter ended June 30, 2015 was $812 thousand
compared to $2.2 million for most recent
quarter •
On-time costs related to acquisitions were $1.9
million pre-tax for the second
quarter •
Noninterest income increased 16.1% compared to same
quarter in 2014
• Non-performing assets to total assets remain at low levels, 0.54%
at June 30, 2015
Continued Strong Results –
Overview of 2Q 2015 |
 24 Net Interest Income and Margin Dollars in thousands $8,952 $9,285 $9,243 $8,992 $9,749 3.54% 3.58% 3.63% 3.64% 3.66% 3.50% 3.55% 3.60% 3.65% 3.70% 3.75% 3.80% 3.85% 3.90% $8,400 $8,600 $8,800 $9,000 $9,200 $9,400 $9,600 $9,800 $10,000 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 Net Interest Income Net Interest Margin |
 25 Growing and Diverse Revenue Stream • Continued Focus on Growing Noninterest Income • Non-interest Revenue: 28.7% of Total Revenue *For the six months ended June 30, 2015 71.2% 10.8% 10.8% 2.8% 4.4% Total Revenue 2015*: $29.2 million Net Interest Income Other Non -interest Income Trust Income Insurance & Investment Income Retirement Planning Income |
 26 Loan Growth $- $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 6/30/2012 6/30/2013 6/30/2014 6/30/2015 $572,453 $596,838 $637,774 $704,838 $430,000 Farmers Total Loans NBOH Acquisition YOY Growth: 4.26% YOY Growth: 77.94% Organic Growth:10.52% YOY Growth: 6.86% $1,134,838 |
 27 • 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 4.5% of loan portfolio is construction loans Loan Portfolio Mix – June 30, 2015 Overview of Loan Portfolio Note: Dollars in thousands Commercial Real Estate $392,103 34.6% Residential Real Estate $305,134 26.9% Consumer $187,579 16.5% Commercial & Industrial $202,004 17.8% Commercial Construction $34,214 3.0% Residential Construction $13,804 1.2% |
 28 Excellent Asset Quality Note: Dollars in millions; Asset quality ratios exclude troubled debt restructuring
6/30/2015
Nonaccrual loans
$7.0
Accruing loans past due 90 days or more
1.0
OREO
1.1
Total nonperforming assets (NPAs)
$9.1
Troubled Debt Restructuring (TDR)
$8.5
Loans 30-89 days delinquent
7.1
Gross portfolio loans
1,134.8
Loans held for sale (HFS)
0.4
Allowance for loan losses (ALL)
7.3
Total Assets
$1,672.4
NPLs & 90 days past due/Gross loans (excl.
HFS) 0.70%
NPAs/Total Assets
0.54%
TDR/Gross loans (excl. HFS)
0.75%
30-89 days delinquent/Gross loans (excl.
HFS) 0.63%
ALL/NPLs & 90 days past due
91.26%
ALL/Gross loans (excl. HFS)
0.64%
Texas
Ratio
6.06%
Nonaccrual Loans by Type
Nonaccrual
$7.0mm
77.1%
Accruing
loans past
due 90 days
or more
$1.0mm
10.6%
OREO
$1.1mm
12.4%
Commercial
Real Estate
43.5%
Residential
Real Estate
42.4%
Commercial
11.9%
Consumer
2.2% |
 29 Supplemental Information |
 30 GAAP to Non-GAAP Reconciliation Reconciliation of Common Stockholders' Equity to Tangible Common Equity
June 30,
March 31,
Dec. 31,
Sept. 30,
June 30,
2015
2015
2014
2014
2014
Stockholders' Equity
$182,575
$126,771
$123,560
$121,401
$121,020
Less Goodwill and other intangibles
39,569
8,646
8,813
9,768
9,960
Tangible Common Equity
$143,006
$118,125
$114,747
$111,633
$111,060
Reconciliation of Income Before Taxes to Pre-Tax,
Pre-Provision Income For the Three
Months Ended For the Six Months
Ended
June 30,
March 31,
Dec. 31,
Sept. 30,
June 30,
June 30,
June 30,
2015
2015
2014
2014
2014
2015
2014
Income before income taxes
$1,221
$2,828
$2,744
$2,964
$3,071
$4,049
$5,889
Provision for loan losses
850
450
825
425
300
1,300
630
Pre-tax, pre-provision income
$2,071
$3,278
$3,569
$3,389
$3,371
$5,349
$6,519
Reconciliation of Total Assets to Tangible
Assets June 30,
March 31,
Dec. 31,
Sept. 30,
June 30,
2015
2015
2014
2014
2014
Total Assets
$1,672,403
$1,133,651
$1,136,967
$1,139,739
$1,133,286
Less Goodwill and other intangibles
39,569
8,646
8,813
9,768
9,960
Tangible Assets
$1,632,834
$1,125,005
$1,128,154
$1,129,971
$1,123,326 |
 31 Consolidated Statements of Income Consolidated Statements of Income For the Three Months Ended For the Six Months Ended June 30, March 31, Dec. 31, Sept. 30, June 30, June 30, June 30, Percent 2015 2015 2014 2014 2014 2015 2014 Change Total interest income $10,753 $9,999 $10,321 $10,413 $10,118 $20,752 $20,181 2.8% Total interest expense 1,004 1,007 1,078 1,128 1,166 2,011 2,373 -15.3% Net interest income 9,749 8,992 9,243 9,285 8,952 18,741 17,808 5.2% Provision for loan losses 850 450 825 425 300 1,300 630 106.3% Other income 4,409 4,037 4,193 3,880 3,797 8,446 7,230 16.8% Other expense 12,087 9,751 9,867 9,776 9,378 21,838 18,519 17.9% Income before income taxes 1,221 2,828 2,744 2,964 3,071 4,049 5,889 -31.2% Income taxes 409 617 597 688 720 1,026 1,347 -23.8% Net income $812 $2,211 $2,147 $2,276 $2,351 $3,023 $4,542 -33.4% |
 32 Consolidated Statements of Financial Condition Consolidated Statements of Financial Condition June 30, March 31, Dec. 31, Sept. 30, June 30, 2015 2015 2014 2014 2014 Assets Cash and cash equivalents $37,028 $26,929 $27,428 $28,294 $28,070 Securities available for sale 386,319 369,919 389,829 404,895 409,285 Loans held for sale 399 146 511 895 275 Loans 1,134,838 673,784 663,852 646,981 637,774 Less allowance for loan losses 7,286 7,723 7,632 7,333 7,356 Net Loans 1,127,552 666,061 656,220 639,648 630,418 Other assets 121,105 70,596 62,979 66,007 65,238 Total Assets $1,672,403 $1,133,651 $1,136,967 $1,139,739 $1,133,286 Liabilities and Stockholders' Equity Deposits $1,320,569 $909,408 $915,703 $913,000 $907,443 Other interest-bearing liabilities 155,591 80,338 87,517 90,649 93,807 Other liabilities 13,668 17,134 10,187 14,689 11,016 Total liabilities 1,489,828 1,006,880 1,013,407 1,018,338 1,012,266 Stockholders' Equity 182,575 126,771 123,560 121,401 121,020 Total Liabilities and Stockholders' Equity $1,672,403 $1,133,651 $1,136,967 $1,139,739 $1,133,286 |
 • Opportunity for growth with approximately 10.50% deposit market share in the Mahoning Valley
–
Large regional competitors lack
focus – Community competitors inwardly focused Deposit Market Share by County 33 Note: Market share data as of June 30, 2014 Source:
SNL |
 Note: Market share data as of June 30, 2014 Source:
SNL Deposit Market Share by
County 34 |