- Earnings per diluted share increased
to $0.21 for the quarter ended March 31, 2017 compared to $0.18 for
same quarter in 2016
- Exceeded $2 billion in total assets
at March 31, 2017
- 137 consecutive quarters of
profitability
- Annualized return on average assets
was 1.17% and annualized return on average equity 10.87% for the
quarter ended March 31, 2017
- Noninterest income increased 19%
compared to same quarter in 2016
- Non-performing assets to total
assets remain at low levels, 0.34% at March 31, 2017
Farmers National Banc Corp. (Farmers) (NASDAQ: FMNB) today
reported financial results for the three months ended March 31,
2017.
Net income for the three months ended March 31, 2017 was $5.8
million, or $0.21 per diluted share, which compares to $4.8
million, or $0.18 per diluted share, for the three months ended
March 31, 2016 and $5.4 million or $0.20 per diluted share for the
linked quarter. Annualized return on average assets and return on
average equity were 1.17% and 10.87%, respectively, for the three
month period ending March 31, 2017, compared to 1.03% and 9.41% for
the same three month period in 2016, and 1.08% and 9.74% for the
linked quarter. Farmers’ return on average tangible equity
(Non-GAAP) also improved to 13.54% for the quarter ended March 31,
2017 compared to 11.83% for the same quarter in 2016 and 12.34% for
the linked quarter.
On March 13, 2017, Farmers entered into an agreement and plan of
merger with Monitor Bancorp, Inc. (Monitor), the holding company
for The Monitor Bank, located in Holmes County in Ohio. This
transaction is expected to close during the third quarter of 2017.
This transaction will serve as an entrance into the attractive
Holmes County market for Farmers. Monitor has an excellent core
deposit base and has been a solid earner with strong asset quality.
This transaction will help Farmers continue to grow its market
share, balance sheet and earnings. As of December 31, 2016, Monitor
had total assets of $43.3 million, which included net loans of
$22.3 million and deposits of $37.2 million. For the year ended
December 31, 2016, Monitor’s return on average assets and return on
average equity were 0.74% and 5.44%, respectively.
Kevin J. Helmick, President and CEO, stated, “We are excited to
announce our fourth acquisition in the past two years, which
further enhances Farmers’ brand and delivers long-term value for
our shareholders. We have stayed focused on our strategic growth
plan which has paved the way for the company to reach over $2
billion in assets at the end of the first quarter. This growth
enhances profitability by creating significant economies of scale
and improved operational efficiencies. We are also pleased to
report that our earnings have increased through the successful
integration of our previous mergers and we continue to be
encouraged by our organic loan growth, which has increased 11%
during the past twelve months, and improvements in our level of
noninterest income.”
2017 First Quarter Financial Highlights
- Loan growthTotal loans were
$1.46 billion at March 31, 2017, compared to $1.32 billion at March
31, 2016, representing an increase of 11.1%. The 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. The increase in loans has occurred across
each of the major loan categories. Loans now comprise 77.9% of the
Bank's average earning assets for the quarter ended March 31, 2017,
an improvement compared to 75.3% for the same period in 2016. This
improvement, along with the growth in earning assets, has resulted
in an 8% increase in tax equated loan income in the first quarter
of 2017 compared to the same quarter in 2016.
- Loan qualityNon-performing
assets to total assets remain at a low level, currently at 0.34%.
Early stage delinquencies also continue to remain at low levels, at
$8.3 million, or 0.57% of total loans, at March 31, 2017. Net
charge-offs for the current quarter were $583 thousand, compared to
$368 thousand in the same quarter in 2016; however, total net
charge-offs as a percentage of average net loans outstanding is
only 0.16% for the quarter ended March 31, 2017. Lending to the
energy sector is insignificant and less than 1% of the loan
portfolio.
- Net interest marginThe net
interest margin for the three months ended March 31, 2017 was
4.01%, a 6 basis points decrease from the quarter ended March 31,
2016. In comparing the first quarter of 2017 to the same period in
2016, asset yields decreased 1 basis point, while the cost of
interest-bearing liabilities increased 8 basis points. The net
interest margin is impacted by the additional accretion as a result
of the discounted loan portfolios acquired in the NBOH and
Tri-State mergers, which increased the net interest margin by 5 and
9 basis points for the quarters ended March 31, 2017 and 2016,
respectively.
- Noninterest incomeNoninterest
income increased 19% to $5.9 million for the quarter ended March
31, 2017 compared to $4.9 million in 2016. Gains on the sale of
mortgage loans increased $205 thousand, or 51% in the current
year’s quarter compared to the same quarter in 2016. Insurance
agency commissions increased $535 thousand in comparing the same
two quarters due mainly to the acquisition of the Bowers Group.
Trust fees increased $182 thousand or 12.2% in comparing the first
quarter of 2017 to the same quarter in 2016.
- Noninterest expensesFarmers has
remained committed to managing the level of noninterest expenses.
Total noninterest expenses for the first quarter of 2017 increased
slightly to $14.6 million compared to $14.4 million in the same
quarter in 2016, primarily as a result of an increase in salaries
and employee benefits of $733 thousand, offset by a $423 thousand
decrease in other operating expenses. It is important to note that
annualized noninterest expenses measured as a percentage of
quarterly average assets decreased from 3.07% in the first quarter
of 2016 to 2.92% in the first quarter of 2017.
- Efficiency ratioThe efficiency
ratio for the quarter ended March 31, 2017 improved to 58.79%
compared to 62.65% for the same quarter in 2016. The main factors
leading to this improvement were the increase in net interest
income and noninterest income, the decrease in merger related
costs, along with the stabilized level of noninterest expenses
relative to average assets as explained in the preceding
paragraphs.
2017 Outlook
Mr. Helmick added, “We are encouraged by the promising start to
2017 in our financial results. We will focus our energy on the
seamless integration of our newly acquired bank and customers and
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 $2
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 and Bowers Insurance Agency, Inc., wholly-owned
subsidiaries of The Farmers National Bank of Canfield, offer a
variety of insurance products.
Non-GAAP Disclosure
This press release includes disclosures of Farmers’ tangible
common equity ratio, return on average tangible assets, return on
average tangible equity and net income excluding costs related to
acquisition activities, 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, 2016, 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, 2017 2016 2016 2016 2016
Total interest income $ 18,850 $ 18,469 $ 18,332 $ 17,950 $ 17,747
Total interest expense 1,319 1,178 1,139
1,061 1,000
Net interest income 17,531 17,291
17,193 16,889 16,747 Provision for loan losses 1,050 990 1,110 990
780 Other income 5,887 6,076 6,485 5,737 4,946 Merger related costs
62 19 31 224 289 Other expense 14,551 14,981
15,194 14,559 14,155
Income before income
taxes 7,755 7,377 7,343 6,853 6,469 Income taxes 1,972
2,014 1,967 1,833 1,671
Net
income $ 5,783 $ 5,363 $ 5,376 $ 5,020 $ 4,798 Average
shares outstanding 27,054 27,048 27,048 26,965 26,937 Basic and
diluted earnings per share 0.21 0.20 0.20 0.19 0.18 Cash dividends
1,353 1,082 1,082 1,083 1,077 Cash dividends per share 0.05 0.04
0.04 0.04 0.04
Performance Ratios Net Interest Margin
(Annualized) 4.01 % 3.95 % 3.97 % 4.06 % 4.07 % Efficiency Ratio
(Tax equivalent basis) 58.79 % 60.37 % 60.85 % 62.60 % 62.65 %
Return on Average Assets (Annualized) 1.17 % 1.08 % 1.10 % 1.06 %
1.03 % Return on Average Equity (Annualized) 10.87 % 9.74 % 9.97 %
9.69 % 9.41 % Dividends to Net Income 23.40 % 20.18 % 20.13 % 21.57
% 22.45 %
Other Performance Ratios (Non-GAAP) Return on
Average Tangible Assets 1.18 % 1.11 % 1.13 % 1.08 % 1.04 % Return
on Average Tangible Equity 13.54 % 12.34 % 12.73 % 12.22 % 11.83 %
Consolidated Statements of Financial Condition
March 31, Dec. 31, Sept. 30, June 30,
March 31, 2017 2016 2016 2016
2016 Assets Cash and cash equivalents $ 61,251 $
41,778 $ 67,372 $ 62,184 $ 34,619 Securities available for sale
377,072 369,995 368,729 378,432 387,093 Loans held for sale
1,098 355 2,148 1,737 488 Loans 1,461,461 1,427,635 1,395,620
1,358,484 1,315,501 Less allowance for loan losses 11,319
10,852 10,518 9,720 9,390 Net Loans
1,450,142 1,416,783 1,385,102 1,348,764
1,306,111 Other assets 136,924 137,202
137,657 134,002 131,996
Total Assets $
2,026,487 $ 1,966,113 $ 1,961,008 $ 1,925,119 $ 1,860,307
Liabilities and Stockholders' Equity Deposits
Noninterest-bearing $ 374,399 $ 366,870 $ 352,441 $ 339,364 $
334,391 Interest-bearing 1,165,821 1,157,886
1,139,724 1,108,078 1,111,491 Total deposits
1,540,220 1,524,756 1,492,165 1,447,442 1,445,882 Other
interest-bearing liabilities 245,069 213,496 235,757 247,934
192,078 Other liabilities 23,136 14,645 17,649
17,252 18,365 Total liabilities 1,808,425 1,752,897
1,745,571 1,712,628 1,656,325 Stockholders' Equity 218,062
213,216 215,437 212,491 203,982
Total Liabilities and Stockholders'
Equity
$ 2,026,487 $ 1,966,113 $ 1,961,008 $ 1,925,119 $ 1,860,307
Period-end shares outstanding 27,067 27,048 27,048 27,048 26,924
Book value per share $ 8.06 $ 7.88 $ 7.96 $ 7.86 $ 7.58 Tangible
book value per share (Non-GAAP) * 6.40 6.21 6.29 6.17 5.99 *
Tangible book value per share is calculated by dividing tangible
common equity by average outstanding shares
Capital and
Liquidity Common Equity Tier 1 Capital Ratio (a) 11.79 % 11.69
% 11.67 % 11.61 % 11.82 % Total Risk Based Capital Ratio (a) 12.51
% 12.53 % 12.51 % 12.41 % 12.63 % Tier 1 Risk Based Capital Ratio
(a) 11.79 % 11.83 % 11.81 % 11.75 % 11.97 % Tier 1 Leverage Ratio
(a) 9.37 % 9.41 % 9.35 % 9.37 % 9.34 % Equity to Asset Ratio 10.76
% 10.84 % 10.99 % 11.04 % 10.96 % Tangible Common Equity Ratio 8.74
% 8.75 % 8.88 % 8.87 % 8.88 % Net Loans to Assets 71.56 % 72.06 %
70.63 % 70.06 % 70.21 % Loans to Deposits 94.89 % 93.63 % 93.53 %
93.85 % 90.98 %
Asset Quality Non-performing loans $ 6,553 $
8,170 $ 8,003 $ 8,360 $ 9,710 Other Real Estate Owned 318 482 506
572 555 Non-performing assets 6,871 8,652 8,509 8,932 10,265 Loans
30 - 89 days delinquent 8,258 12,747 10,986 11,371 10,072
Charged-off loans 943 841 562 820 578 Recoveries 360 185 250 160
210 Net Charge-offs 583 656 312 660 368 Annualized Net Charge-offs
to Average Net Loans Outstanding 0.16 % 0.20 % 0.09 % 0.20 % 0.11 %
Allowance for Loan Losses to Total Loans 0.77 % 0.76 % 0.75 % 0.72
% 0.71 % Non-performing Loans to Total Loans 0.45 % 0.57 % 0.57 %
0.62 % 0.74 % Allowance to Non-performing Loans 172.73 % 132.83 %
131.43 % 116.27 % 96.70 % Non-performing Assets to Total Assets
0.34 % 0.44 % 0.43 % 0.46 % 0.55 %
(a) March 31, 2017 ratio is estimated
Reconciliation of Common Stockholders' Equity to Tangible Common
Equity March 31, Dec. 31, Sept. 30,
June 30, March 31, 2017 2016
2016 2016 2016 Stockholders' Equity $ 218,062
$ 213,216 $ 215,437 $ 212,491 $ 203,982 Less Goodwill and Other
Intangibles 44,789 45,154 45,299 45,718
42,574 Tangible Common Equity $ 173,273 $ 168,062 $ 170,138
$ 166,773 $ 161,408 Average Stockholders' Equity 215,819 219,028
214,484 207,776 204,986 Less Average Goodwill and Other Intangibles
45,028 45,173 45,575 43,475
42,796 Average Tangible Common Equity $ 170,791 $ 173,855 $ 168,909
$ 164,301 $ 162,190
Reconciliation of Total Assets to
Tangible Assets March 31, Dec. 31, Sept.
30, June 30, March 31, 2017 2016
2016 2016 2016 Total Assets $ 2,026,487 $
1,966,113 $ 1,961,008 $ 1,925,119 $ 1,860,307 Less Goodwill and
Other Intangibles 44,789 45,154 45,299
45,718 42,574 Tangible Assets $ 1,981,698 $ 1,920,959 $
1,915,709 $ 1,879,401 $ 1,817,733 Average Assets 2,001,084
1,977,589 1,949,204 1,897,068 1,881,458 Less average Goodwill and
Other Intangibles 45,028 45,173 45,575
43,475 42,796 Average Tangible Assets $ 1,956,056 $
1,932,416 $ 1,903,629 $ 1,853,593 $ 1,838,662
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, 2017 2016 2016 2016
2016 Income before income taxes - Reported $ 7,755 $ 7,377 $
7,343 $ 6,853 $ 6,469 Acquisition Costs 62 19
31 224 289 Income before income taxes - Adjusted
7,817 7,396 7,374 7,077 6,758 Income tax expense (b) 1,987
2,018 1,973 1,899 1,746 Net income -
Adjusted $ 5,830 $ 5,378 $ 5,401 $ 5,178 $ 5,012 Average shares
outstanding 27,054 27,048 27,048 26,965 26,937 EPS excluding
acquisition costs $ 0.22 $ 0.20 $ 0.20 $ 0.19 $ 0.19 (b) The
income tax expense change from actual income tax expense relates to
the deductibility of certain acquisition costs.
Reconciliation of Return on Average Assets and Average Equity,
Excluding Acquisition Costs For the Three Months Ended
March 31, Dec. 31, Sept. 30, June 30,
March 31, 2017 2016 2016 2016
2016 ROA excluding acquisition costs (c) 1.17 % 1.09 % 1.11
% 1.09 % 1.07 % ROE excluding acquisition costs (d) 10.81 % 9.82 %
10.07 % 9.97 % 9.78 % (c) Net income -adjusted divided by
average assets (d) Net income - adjusted divided by average equity
For the Three Months Ended March 31, Dec.
31, Sept. 30, June 30, March 31, End of
Period Loan Balances
2,017
2016 2016 2016 2016 Commercial real
estate $ 456,917 $ 446,975 $ 426,657 $ 418,269 $ 414,119 Commercial
208,913 204,771 207,228 201,796 197,708 Residential real estate
441,593 430,674 423,009 418,693 405,560 Consumer 216,648 212,836
205,466 192,232 180,791 Agricultural loans 133,868
128,981 129,959 124,551 114,625 Total,
excluding net deferred loan costs $ 1,457,939 $ 1,424,237 $
1,392,319 $ 1,355,541 $ 1,312,803
For the Three Months
Ended March 31, Dec. 31, Sept. 30, June
30, March 31, Noninterest Income 2017
2016 2016 2016 2016 Service charges on
deposit accounts $ 951 $ 1,031 $ 1,057 $ 987 $ 935 Bank owned life
insurance income 201 208 194 201 212 Trust fees 1,678 1,482 1,693
1,564 1,496 Insurance agency commissions 674 559 569 293 139
Security gains 13 1 31 41 0 Retirement plan consulting fees 513 444
561 496 489 Investment commissions 222 310 308 356 236 Net gains on
sale of loans 607 838 1,063 540 402 Debit card and EFT fees 653 722
656 657 626 Other operating income 375 481 353
602 411 Total Noninterest Income $ 5,887 $ 6,076 $
6,485 $ 5,737 $ 4,946
For the Three Months Ended
March 31, Dec. 31, Sept. 30, June 30,
March 31, Noninterest Expense 2017 2016
2016 2016 2016 Salaries and employee benefits
$ 8,287 $ 8,248 $ 8,366 $ 7,740 $ 7,554 Occupancy and equipment
1,587 1,748 1,587 1,616 1,664 State and local taxes 417 363 394 394
393 Professional fees 747 803 671 754 529 Merger related costs 62
19 31 224 289 Advertising 244 241 383 363 345 FDIC insurance 235
199 287 286 283 Intangible amortization 365 368 421 335 337 Core
processing charges 655 743 738 580 638 Telephone and data 241 275
206 233 216 Other operating expenses 1,773 1,993
2,141 2,258 2,196 Total Noninterest Expense $
14,613 $ 15,000 $ 15,225 $ 14,783 $ 14,444
Average
Balance Sheets and Related Yields and Rates (Dollar Amounts in
Thousands)
Three Months Ended Three Months Ended March 31,
2017 March 31, 2016 AVERAGE AVERAGE BALANCE INTEREST (1)
RATE (1) BALANCE INTEREST (1) RATE (1) EARNING ASSETS Loans (2) $
1,436,494 $ 16,638 4.70 % $ 1,292,415 $ 15,430 4.80 % Taxable
securities 211,711 1,118 2.14 260,677 1,437 2.22 Tax-exempt
securities (2) 152,913 1,639 4.35 128,527 1,356 4.24 Equity
securities 9,924 115 4.70 9,559 113 4.75 Federal funds sold and
other 34,234 63 0.75 24,957 38 0.61 Total earning
assets 1,845,276 19,573 4.30 1,716,135 18,374 4.31 Nonearning
assets 155,808 165,323 Total assets $ 2,001,084 $
1,881,458 INTEREST-BEARING LIABILITIES Time deposits $ 235,153 $
500 0.86 % $ 243,511 $ 409 0.68 % Savings deposits 520,081 170 0.13
529,921 151 0.11 Demand deposits 384,602 244 0.26 317,513 147 0.19
Short term borrowings 249,505 327 0.53 215,477 175 0.33 Long term
borrowings 12,291 78 2.57 22,021 118 2.16 Total
interest-bearing liabilities $ 1,401,632 1,319 0.38 $ 1,328,443
1,000 0.30
NONINTEREST-BEARING LIABILITIES AND
STOCKHOLDERS' EQUITY
Demand deposits 369,477 334,919 Other liabilities 14,156 13,110
Stockholders' equity 215,819 204,986
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
$ 2,001,084 $ 1,881,458 Net interest
income and interest rate spread $ 18,254 3.92 % $ 17,374
4.01 % Net interest margin 4.01 % 4.07 %
(1) Interest and yields are calculated on a tax-equivalent
basis where applicable. (2) For 2017, adjustments of $155 thousand
and $568 thousand, respectively, were made to tax equate income on
tax exempt loans and tax exempt securities. For 2016, adjustments
of $160 thousand and $467 thousand, respectively, were made to tax
equate income on tax exempt loans and tax exempt securities. These
adjustments were based on a marginal federal income tax rate of
35%, less disallowances.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170419005996/en/
Farmers National Banc Corp.Kevin J. Helmick, President and CEO,
330-533-3341exec@farmersbankgroup.com
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