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8-K - FORM 8-K - FARMERS NATIONAL BANC CORP /OH/d181385d8k.htm

Exhibit 99.1

April 20, 2016

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

2016 FIRST QUARTER FINANCIAL RESULTS

 

    22% organic annual loan growth since March 31, 2015

 

    133 consecutive quarters of profitability

 

    Net income for quarter ended March 31, 2016 was $4.8 million compared to $3.2 million for the linked quarter

 

    Annualized return on assets was 1.03% for the first quarter

 

    Noninterest income increased 22.5% compared to same quarter in 2015

 

    Non-performing assets to total assets remain at low levels, 0.55% at March 31, 2016

CANFIELD, Ohio (April 20, 2016) – Farmers National Banc Corp. (Farmers) (NASDAQ: FMNB) today reported financial results for the three months ended March 31, 2016.

Net income for the three months ended March 31, 2016 was $4.8 million, or $0.18 per diluted share, which compares to $2.2 million, or $0.12 per diluted share, for the three months ended March 31, 2015. In comparing the first quarter’s results to the most recent previous quarter, net income of $4.8 million increased 51% compared to $3.2 million for the quarter ended December 31, 2015.

Annualized return on average assets and return on average equity were 1.03% and 9.41%, respectively, for the three month period ending March 31, 2016.

During 2015, Farmers completed the mergers of National Bancshares Corporation (NBOH) the holding company for the First National Bank of Orrville, and Tri-State 1st Banc Inc. (Tri-State), the holding company for 1st National Community Bank of East Liverpool. These transactions resulted in the addition of $676 million in assets and 17 full-service branches in Northeastern Ohio and 1 in Beaver County in Pennsylvania.

Kevin J. Helmick, President and CEO, stated, “We are pleased to report that our earnings have increased through the successful integration of both mergers. We also continue to be encouraged by our organic loan growth, which has increased 22% during the past twelve months, and improvements in our level of noninterest income.”

2016 First Quarter Financial Highlights

 

    Loan growth

Total loans were $1.32 billion at March 31, 2016, compared to $673.8 million at March 31, 2015. Loans grew 22% organically during the past twelve months, which is in addition to the $430 million and $66 million increase in loans resulting from the NBOH and Tri-State acquisitions, respectively. 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 75.3% of the Bank’s first quarter average earning assets in 2016, an improvement compared to 62.5% in 2015. This improvement along with the growth in earning assets organically and through merger activity has resulted in a 97% increase in tax equated loan income from the first quarter of 2015 to the same quarter in 2016.

 

    Loan quality

Non-performing assets to total assets remain at a safe level, currently at 0.55%. Early stage delinquencies also continue to remain at low levels, at $10.1 million, or 0.74% of total loans, at March 31, 2016. Net charge-offs for the current quarter were $368 thousand, up slightly compared to $296 thousand in the previous quarter. It is important to note that annualized net charge-offs as a percentage of average net loans outstanding decreased from 0.22% for the 3 months ended March 31, 2015 to 0.11% for


0.11% the same period in 2016. Lending to the energy sector is insignificant and less than 1% of the loan portfolio.

 

    Net interest margin

The net interest margin for the three months ended March 31, 2016 was 4.07%, a 43 basis points increase from the quarter ended March 31, 2015. In comparing the first quarter of 2016 to the same period in 2015, asset yields increased 29 basis points, while the cost of interest-bearing liabilities decreased 20 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. The increased margin is also partially due to the additional accretion as a result of the discounted loan portfolios acquired in the NBOH and Tri-State mergers. Excluding the amortization of premium on time deposits and FHLB advances along with the accretion of the acquired loan discount, the net interest margin would have been 9 basis points lower or 3.98% for the quarter ended March 31, 2016.

 

    Noninterest income

Noninterest income increased 22.5% to $4.9 million for the quarter ended March 31, 2016 compared to $4.0 million in 2015. Deposit account income increased $332 thousand, or 55%, in the current year’s quarter compared to the same quarter in 2015 and gains on the sale of mortgage loans increased $279 thousand, or 227%, in comparing the same two quarters. Debit card interchange fees also increased $314 thousand or 101% in comparing the first quarter of 2015 to the same quarter in 2016.

 

    Noninterest expenses

Farmers has remained committed to managing the level of noninterest expenses. Total noninterest expenses for the first quarter of 2016 were $14.4 million. Excluding expenses related to acquisition activities of $289 thousand, noninterest expenses were $14.2 million. Excluding expenses related to acquisition activities, annualized noninterest expenses measured as a percentage of quarterly average assets decreased from 3.34% in the first quarter of 2015 to 3.01% in the first quarter of 2016. Annualized salaries and employee benefits as a percent of average assets also decreased from 1.95% to 1.61% in comparing the first quarter of 2015 and 2016.

 

    Efficiency ratio

The efficiency ratio for the quarter ended March 31, 2016 improved to 62.7% compared to 70.7% for the same quarter in 2015. 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.

2016 Outlook

Mr. Helmick added, “We are encouraged by the promising start to 2016 in our financial results. We will continue to focus our energy on the seamless integration of the newly acquired banks and customers. We remain committed to the businesses and families we serve and to our community banking approach and culture.”

Founded in 1887, Farmers National Banc Corp. is a diversified financial services company headquartered in Canfield, Ohio, with $1.9 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 three 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, 2015, 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). 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  
     March 31,     Dec. 31,     Sept. 30,     June 30,     March 31,  
     2016     2015     2015     2015     2015  

Total interest income

   $ 17,747      $ 17,481      $ 15,594      $ 10,753      $ 9,999   

Total interest expense

     1,000        1,023        1,056        1,004        1,007   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     16,747        16,458        14,538        9,749        8,992   

Provision for loan losses

     780        990        1,220        850        450   

Other income

     4,946        5,175        4,685        4,409        4,037   

Merger related costs

     289        1,736        2,499        1,912        245   

Other expense

     14,155        14,884        13,022        10,175        9,506   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     6,469        4,023        2,482        1,221        2,828   

Income taxes

     1,671        848        625        409        617   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 4,798      $ 3,175      $ 1,857      $ 812      $ 2,211   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average shares outstanding

     26,937        27,027        25,672        19,366        18,409   

Pre-tax pre-provision income

   $ 7,249      $ 5,013      $ 3,702      $ 2,071      $ 3,278   

Basic and diluted earnings per share

     0.18        0.12        0.07        0.04        0.12   

Cash dividends

     1,077        809        770        552        552   

Cash dividends per share

     0.04        0.03        0.03        0.03        0.03   

Performance Ratios

          

Net Interest Margin (Annualized)

     4.07     3.99     3.84     3.66     3.64

Efficiency Ratio (Tax equivalent basis)

     62.65     73.07     76.55     81.03     70.71

Return on Average Assets (Annualized)

     1.03     0.68     0.43     0.27     0.79

Return on Average Equity (Annualized)

     9.41     6.51     3.97     2.74     7.14

Dividends to Net Income

     22.45     25.48     41.46     67.98     24.97

Consolidated Statements of Financial Condition

  

     March 31,     Dec. 31,     Sept. 30,     June 30,     March 31,  
     2016     2015     2015     2015     2015  

Assets

          

Cash and cash equivalents

   $ 34,619      $ 56,014      $ 34,344      $ 37,028      $ 26,929   

Securities available for sale

     387,093        394,312        379,138        386,319        369,919   

Loans held for sale

     488        1,769        566        399        146   

Loans

     1,315,501        1,296,865        1,183,016        1,134,838        673,784   


Less allowance for loan losses

     9,390        8,978        8,294        7,286        7,723   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Loans

     1,306,111        1,287,887        1,174,722        1,127,552        666,061   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other assets

     131,996        129,920        119,027        121,105        70,596   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Assets

   $ 1,860,307      $ 1,869,902      $ 1,707,797      $ 1,672,403      $ 1,133,651   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

          

Deposits

   $ 1,445,882      $ 1,409,047      $ 1,330,249      $ 1,320,569      $ 909,408   

Other interest-bearing liabilities

     192,078        247,985        179,701        155,591        80,338   

Other liabilities

     18,365        14,823        11,696        13,668        17,134   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     1,656,325        1,671,855        1,521,646        1,489,828        1,006,880   

Stockholders’ Equity

     203,982        198,047        186,151        182,575        126,771   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 1,860,307      $ 1,869,902      $ 1,707,797      $ 1,672,403      $ 1,133,651   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Period-end shares outstanding

     26,924        26,944        25,674        25,672        18,409   

Book value per share

   $ 7.58      $ 7.35      $ 7.25      $ 7.11      $ 6.89   

Tangible book value per share

     5.99        5.77        5.72        5.57        6.42   

Capital and Liquidity

          

Common Equity Tier 1 Capital Ratio (a)

     11.72     11.59     12.12     12.61     15.03

Total Risk Based Capital Ratio (a)

     12.37     12.37     12.77     13.20     16.02

Tier 1 Risk Based Capital Ratio (a)

     11.72     11.74     12.12     12.61     15.03

Tier 1 Leverage Ratio (a)

     9.14     9.21     9.27     9.27     10.44

Equity to Asset Ratio

     10.96     10.59     10.90     10.92     11.18

Tangible Common Equity Ratio

     8.88     8.50     8.80     8.76     10.50

Net Loans to Assets

     70.21     68.87     68.79     67.42     58.75

Loans to Deposits

     90.98     92.04     88.93     85.94     74.09

Asset Quality

          

Non-performing loans

   $ 9,710      $ 10,445      $ 9,620      $ 7,984      $ 7,939   

Other Real Estate Owned

     555        942        1,052        1,128        144   

Non-performing assets

     10,265        11,387        10,672        9,112        8,083   

Loans 30 - 89 days delinquent

     10,072        9,130        6,974        7,146        4,344   

Charged-off loans

     578        447        631        1,496        618   

Recoveries

     210        151        420        209        259   

Net Charge-offs

     368        296        211        1,287        359   

Annualized Net Charge-offs to

          

Average Net Loans Outstanding

     0.11     0.09     0.10     0.71     0.22

Allowance for Loan Losses to Total Loans (b)

     0.71     0.69     0.70     0.64     1.15

Non-performing Loans to Total Loans

     0.74     0.81     0.81     0.70     1.18

Allowance to Non-performing Loans

     96.70     85.96     86.22     91.26     97.28

Non-performing Assets to Total Assets

     0.55     0.61     0.62     0.54     0.71

 

(a)    March 31, 2016 ratio is estimated

       

(b)    Decrease from March 31, 2015 is the result of the acquired loan portfolios being recorded at fair market value without an associated allowance.

        

Reconciliation of Common Stockholders’ Equity to Tangible Common Equity

  

     March 31,     Dec. 31,     Sept. 30,     June 30,     March 31,  
     2016     2015     2015     2015     2015  

Stockholders’ Equity

   $ 203,982      $ 198,047      $ 186,151      $ 182,575      $ 126,771   

Less Goodwill and other intangibles

     42,604        42,661        39,265        39,569        8,646   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tangible Common Equity

   $ 161,378      $ 155,386      $ 146,886      $ 143,006      $ 118,125   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


Reconciliation of Total Assets to Tangible Assets

  

     March 31,      Dec. 31,      Sept. 30,      June 30,      March 31,  
     2016      2015      2015      2015      2015  

Total Assets

   $ 1,860,307       $ 1,869,902       $ 1,707,797       $ 1,672,403       $ 1,133,651   

Less Goodwill and other intangibles

     42,604         42,661         39,265         39,569         8,646   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Tangible Assets

   $ 1,817,703       $ 1,827,241       $ 1,668,532       $ 1,632,834       $ 1,125,005   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Reconciliation of Net Income, Excluding Costs Related to Acquisition Activities

  

     For the Three Months Ended  
     March 31,      Dec. 31,      Sept. 30,      June 30,      March 31,  
     2016      2015      2015      2015      2015  

Income before income taxes - Reported

   $ 6,469       $ 4,023       $ 2,482       $ 1,221       $ 2,828   

Acquisition Costs

     289         1,736         2,499         1,912         245   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes - Adjusted

     6,758         5,759         4,981         3,133         3,073   

Income tax expense

     1,746         1,434         1,255         698         673   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income - Adjusted

   $ 5,012       $ 4,325       $ 3,726       $ 2,435       $ 2,400   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

  

     For the Three Months Ended  
     March 31,      Dec. 31,      Sept. 30,      June 30,      March 31,  
     2016      2015      2015      2015      2015  

Income before income taxes

   $ 6,469       $ 4,023       $ 2,482       $ 1,221       $ 2,828   

Provision for loan losses

     780         990         1,220         850         450   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Pre-tax, pre-provision income

   $ 7,249       $ 5,013       $ 3,702       $ 2,071       $ 3,278   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     March 31,      Dec. 31,      Sept. 30,      June 30,      March 31,  
     2016      2015      2015      2015      2015  

End of Period Loan Balances

              

Commercial real estate

   $ 491,605       $ 492,430       $ 442,181       $ 427,028       $ 231,990   

Commercial

     234,369         228,455         204,726         202,552         122,762   

Residential real estate

     406,039         392,849         360,586         319,820         186,386   

Consumer

     180,791         180,525         173,041         183,785         130,505   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total, excluding net deferred loan costs

   $ 1,312,804       $ 1,294,259       $ 1,180,534       $ 1,133,185       $ 671,643   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     For the Three Months Ended  
     March 31,      Dec. 31,      Sept. 30,      June 30,      March 31,  
     2016      2015      2015      2015      2015  

Noninterest Income

              

Service charges on deposit accounts

   $ 935       $ 1,049       $ 929       $ 672       $ 603   

Bank owned life insurance income

     212         214         184         165         139   

Trust fees

     1,496         1,518         1,482         1,509         1,647   

Insurance agency commissions

     139         175         130         118         146   

Security gains

     0         46         3         35         10   

Retirement plan consulting fees

     489         425         423         778         504   

Investment commissions

     236         286         332         256         298   

Net gains on sale of loans

     402         407         415         156         123   

Other operating income

     1,037         1,055         787         720         567   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Noninterest Income

   $ 4,946       $ 5,175       $ 4,685       $ 4,409       $ 4,037   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 


     For the Three Months Ended  
     March 31,      Dec. 31,      Sept. 30,      June 30,      March 31,  
     2016      2015      2015      2015      2015  

Noninterest Expense

              

Salaries and employee benefits

   $ 7,554       $ 8,220       $ 7,213       $ 5,663       $ 5,542   

Occupancy and equipment

     1,664         1,772         1,368         1,201         1,111   

State and local taxes

     393         283         400         243         245   

Professional fees

     529         833         738         546         476   

Merger related costs

     289         1,736         2,499         1,912         245   

Advertising

     345         482         344         282         217   

FDIC insurance

     283         326         256         178         177   

Intangible amortization

     361         345         304         167         167   

Core processing charges

     638         770         643         382         381   

Other operating expenses

     2,388         1,853         1,756         1,513         1,190   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Noninterest Expense

   $ 14,444       $ 16,620       $ 15,521       $ 12,087       $ 9,751   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Average Balance Sheets and Related Yields and Rates

(Dollar Amounts in Thousands)

 

     Three Months Ended     Three Months Ended  
     March 31, 2016     March 31, 2015  
     AVERAGE
BALANCE
     INTEREST (1)      RATE (1)     AVERAGE
BALANCE
     INTEREST (1)      RATE (1)  

EARNING ASSETS

                

Loans (2)

   $ 1,292,415       $ 15,430         4.80   $ 658,496       $ 7,819         4.82

Taxable securities

     260,677         1,437         2.22        296,744         1,647         2.25   

Tax-exempt securities (2)

     128,527         1,356         4.24        79,663         939         4.78   

Equity securities

     9,559         113         4.75        4,282         48         4.55   

Federal funds sold and other

     24,957         38         0.61        14,599         5         0.14   
  

 

 

    

 

 

      

 

 

    

 

 

    

Total earning assets

   $ 1,716,135         18,374         4.31      $ 1,053,784         10,458         4.02   
  

 

 

         

 

 

       

INTEREST-BEARING LIABILITIES

                

Time deposits

   $ 243,511       $ 409         0.68   $ 202,791       $ 768         1.54

Savings deposits

     529,921         151         0.11        398,633         110         0.11   

Demand deposits

     317,513         147         0.19        130,594         9         0.03   

Short term borrowings

     215,477         175         0.33        56,290         11         0.08   

Long term borrowings

     22,021         118         2.16        36,646         109         1.22   
  

 

 

    

 

 

      

 

 

    

 

 

    

Total interest-bearing liabilities

   $ 1,328,443         1,000         0.30      $ 824,954         1,007         0.50   
  

 

 

         

 

 

       

Net interest income and interest rate spread

  

   $ 17,374         4.01      $ 9,451         3.52
     

 

 

    

 

 

      

 

 

    

 

 

 

Net interest margin

           4.07           3.64
        

 

 

         

 

 

 

 

(1) Interest and yields are calculated on a tax-equivalent basis where applicable.
(2) For 2016, adjustments of $160 thousand and $467 thousand, respectively, are made to tax equate income on tax exempt loans and tax exempt securities. For 2015, adjustments of $135 thousand and $324 thousand, respectively, are made to tax equate income on tax exempt loans and tax exempt securities. These adjustments are based on a marginal federal income tax rate of 35%, less disallowances.