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Reports Solid Results for Fourth Quarter of 2023 By: Farmers National Banc Corp. via Business Wire January 24, 2024 at 08:00 AM EST Earnings per diluted share of $0.39 ($0.41 excluding certain items, non-GAAP) for the fourth quarter of 2023 164 consecutive quarters of profitability Recorded a $915,000 gain during the quarter by selling $5.8 million of nonaccrual/troubled commercial loans Loan growth of $29.6 million, or 3.7% annualized, for the fourth quarter of 2023 Excluding impact of commercial loan sale - loan growth of $37.7 million, or 4.8% annualized, for fourth quarter 2023 Continued strong asset quality with non-performing assets to total assets of 0.30% as of December 31, 2023 Return on average assets of 1.17% for the fourth quarter of 2023 ROAE and ROATE (non-GAAP) of 18.0% and 43.8%, respectively, for the fourth quarter of 2023 Farmers National Banc Corp. (“Farmers” or the “Company”) (NASDAQ: FMNB) today announced net income of $14.6 million, or $0.39 per diluted share, for the three months ended December 31, 2023, compared to $13.4 million, or $0.39 per diluted share, for the three months ended December 31, 2022. Net income for the fourth quarter of 2023 included pretax items of $452,000 for acquisition related costs, a gain of $915,000 on the sale of commercial loans, $1.0 million in expense for severance/contract payouts for staff resignations, and combined net losses of $217,000 on the sale of securities and the sale of other assets. Excluding these items (non-GAAP), net income for the fourth quarter of 2023 increased 7.8% to $15.2 million from $14.1 million for the same period last year. Net income per diluted share excluding these items (non-GAAP), was $0.41 for the fourth quarter of 2023, compared to $0.42 per diluted share for the fourth quarter of 2022. Kevin J. Helmick, President and CEO, stated “Our solid fourth quarter results demonstrate our success enhancing profitability throughout an extremely challenging operating environment. This is a testament to our team’s focus on supporting our customers, maintaining excellent asset quality, and controlling operating costs. We expect the economic environment will remain fluid in 2024, but we believe Farmers is well positioned to navigate this period as a result of the value our team members provide our Ohio and Pennsylvania communities, as well as our continued focus on maintaining strong asset quality and profitability.” Balance Sheet The Company’s total assets were $5.08 billion at December 31, 2023, compared to $4.97 billion at September 30, 2023 and $4.08 billion at December 31, 2022. The increase from December was primarily due to the acquisition of Emclaire Financial Corp. (“Emclaire”) which added $977.6 million in assets in the first quarter of 2023. Loans have increased by $793.4 million since December 31, 2022 and $29.6 million, or 3.7% annualized, since September 30, 2023. Emclaire was responsible for $740.7 million of the increase in loans since December 31, 2022. Growth in the fourth quarter of 2023 was concentrated in commercial real estate. The Company had securities available for sale of $1.30 billion at December 31, 2023, compared to $1.21 billion at September 30, 2023, and $1.27 billion at December 31, 2022. The increase since December is due to the acquisition of Emclaire which added $127.0 million in available for sale securities and a decrease in the amount of gross unrealized losses on the portfolio which totaled $266.5 million at December 31, 2022, compared to a gross unrealized loss of $217.1 million at December 31, 2023. The Company also had sales and runoff from the portfolio during the twelve months ended December 31, 2023. Bond market volatility was extreme in 2023 and this volatility may remain in 2024. The Company expects that it will continue to allow the size of the securities portfolio to shrink via runoff to optimize profitability and provide liquidity for future loan growth. At December 31, 2023, deposits totaled $4.18 billion compared to $4.26 billion at September 30, 2023 and $4.51 billion at December 31, 2022. During the fourth quarter of 2023, the Company allowed $254.3 million in brokered time deposits to mature and replaced the funding with less expensive short term borrowings. In addition, public fund seasonality resulted in $95.3 million in shrinkage during the quarter offset by $15.3 million in growth in other deposit categories. The increase from December 31, 2022, was driven by $875.8 million in deposits assumed in the acquisition of Emclaire offset by a decline in brokered time deposits of $138.1 million and runoff in other deposit categories. Total stockholders’ equity increased to $404.4 million at December 31, 2023, from $316.0 million at September 30, 2023, and $292.3 million at December 31, 2022. The year-over-year increase was primarily due to the acquisition of Emclaire and an increase in retained earnings and a decrease in the unrealized loss from accumulated other comprehensive income. The increase in total stockholders’ equity since September 30, 2023, was primarily due to a decline in the accumulated other comprehensive loss which decreased $79.7 million as market rates dropped rapidly during the fourth quarter of 2023. Credit Quality As of December 31, 2023, the Company’s non-performing loans totaled $15.1 million compared to $18.4 million at September 30, 2023, and $14.8 million at December 31, 2022. The year-over-year increase was primarily due to the addition of Emclaire while the decrease since September 30 was due to the sale of non-performing loans. The non-performing loans to total loans ratio was 0.47% at December 31, 2023, 0.58% at September 30, 2023, and 0.62% at December 31, 2022. Non-performing assets to total assets was 0.30% at December 31, 2023, 0.37% at September 30, 2023, and 0.36% at December 31, 2022. The Company also continues to experience low levels of early-stage delinquencies, defined as loans 30-89 days delinquent. At December 31, 2023, these early-stage delinquencies totaled $16.7 million, or 0.52% of total loans compared to $13.3 million, or 0.42% of total loans at September 30, 2023, and $9.6 million, or 0.40% of total loans, at December 31, 2022. The Company recorded provision for credit losses and unfunded commitments of $286,000 for the fourth quarter of 2023 compared to $243,000 for the third quarter of 2023 and $416,000 for the fourth quarter of 2022. Annualized net charge-offs as a percentage of average loans were 0.10% for the three months ended December 31, 2023, compared to 0.10% for the same period in 2022. For the year ended December 31, 2023, net charge-offs as a percentage of average loans were 0.07% compared to 0.11% for last year. The allowance for credit losses to total loans was 1.08% at December 31, 2023, compared to 1.10% at September 30, 2023, and 1.12% at December 31, 2022. Net Interest Income Net interest income for the three months ended December 31, 2023, totaled $32.8 million in the fourth quarter of 2023 compared to $33.8 million in the third quarter of 2023 and $29.4 million for the fourth quarter of 2022. Earning assets were greater in the fourth quarter of 2023 compared to the fourth quarter of 2022 due to the acquisition of Emclaire but this was partially offset by a decline of 21 basis point in the net interest margin. The net interest margin was 2.78% for the quarter ending December 31, 2023, compared to 2.86% in the third quarter of 2023 and 2.99% for the fourth quarter of 2022. Excluding the impact of acquisition marks and related accretion and PPP interest and fees, the net interest margin (non-GAAP) for the fourth quarter of 2023 was 2.58% compared to 2.61% for the third quarter of 2023 and 2.97% for the fourth quarter of 2022. The decline in net interest margin between the fourth quarter of 2023 and the fourth quarter of 2022 was due to increases in funding costs outstripping the increase in yields on earning assets. This increase in funding costs has been due to the rapid increase in deposit rates due to intense competition for deposits, the Federal Reserve’s rate hiking cycle, and runoff of deposit balances which are being replaced with more costly wholesale funding. Noninterest Income The Company recorded $12.2 million in noninterest income during the fourth quarter of 2023 compared to $8.2 million during the fourth quarter of 2022. Service charges on deposit accounts increased to $1.7 million in the fourth quarter of 2023 compared to $1.2 million for the same period in 2022 primarily due to the acquisition of Emclaire. Bank owned life insurance income, other mortgage banking fee income and debit card income have also increased in the fourth quarter of 2023 compared to the fourth quarter of 2022 due to the Emclaire acquisition. Trust fees increased by $283,000 in the fourth quarter of 2023 compared to the fourth quarter of 2022 as growth in this line of business continued. Insurance agency commissions also exhibited outstanding growth as insurance commissions increased by $407,000 for the quarter ending December 31, 2023 compared to same quarter a year ago. Growth for the year in this business has been solid as pricing in the insurance business has been very strong and increased annuity sales have bolstered results. Investment commissions are up slightly for the quarter ended December 31, 2023 compared to the quarter ended December 31, 2022, as markets have been resilient in 2023 and the Company begins to expand into Pennsylvania. Net gains on the sale of loans have increased by over $1.0 million between the fourth quarter of 2022 and the fourth quarter of 2023. Of this increase, $915,000 was driven by the sale of commercial loans discussed previously. Traditional gains on the sale of mortgage loans remain sluggish due to high interest rates. Other noninterest income increased $910,000 in the fourth quarter of 2023 compared to the prior year’s fourth quarter. This increase was primarily driven by higher income associated with the Company’s investments in SBIC funds. The earnings on these funds can be volatile from period to period. Noninterest Expense The Company reported noninterest expense of $27.0 million for the three months ended December 31, 2023, compared to $21.1 million for the three months ended December 31, 2022. The increase in expense is primarily due to the acquisition of Emclaire along with the $1.0 million in severance expense associated with staff resignations. Salaries and employee benefits increased $3.5 million to $14.9 million in the fourth quarter of 2023 compared to $11.4 million during the same period in 2022. The acquisition of Emclaire, normal raise activity and the severance were the primary reasons for the increase. Occupancy and equipment expense increased $1.1 million primarily due to the acquisition. FDIC and state and local taxes increased $474,000 due to the acquisition and the increase in the rate paid for FDIC insurance in 2023. Core processing charges increased due to the acquisition. Merger related costs were $452,000 for the fourth quarter of 2023 compared to $584,000 in the fourth quarter of 2022. Other noninterest expense increased due to the acquisition. Liquidity At December 31, 2023, the Company’s loan to deposit ratio was 76.6% and the Company’s average deposit balance per account (excluding collateralized deposits) was $23,678. The Company has access to an additional $819.5 million of FHLB borrowing capacity at December 31, 2023 along with $214.3 million of available for sale securities that are not pledged. With a deep and diverse deposit base and access to a large amount of additional funding capacity, the Company is well positioned to navigate the current banking landscape. About Farmers National Banc Corp. Founded in 1887, Farmers National Banc Corp. is a diversified financial services company headquartered in Canfield, Ohio, with $5.1 billion in banking 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 64 banking locations in Mahoning, Trumbull, Columbiana, Portage, Stark, Wayne, Medina, Geauga and Cuyahoga Counties in Ohio and Beaver, Butler, Allegheny, Jefferson, Clarion, Venango, Clearfield, Mercer, Elk and Crawford Counties in Pennsylvania, and Farmers Trust Company, which operates five trust offices and offers services in the same geographic markets. Total wealth management assets under care at December 31, 2023 are $3.5 billion. 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, return on average tangible assets, return on average tangible equity, net income excluding costs related to acquisition activities and certain items, return on average assets excluding merger costs and certain items, return on average equity excluding merger costs and certain items, net interest margin excluding acquisition marks and related accretion and PPP interest and fees and efficiency ratio less certain items, 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 to their GAAP equivalents are included in the tables following Consolidated Financial Highlights below. Cautionary Statements Regarding Forward-Looking Statements We make statements in this news release and our related investor conference call, and we may from time to time make other statements, that are 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 certain forward-looking statements include significant changes in near-term local, regional, and U.S. economic conditions including those resulting from continued high rates of inflation, tightening monetary policy of the Board of Governors of the Federal Reserve, and possibility of a recession; Farmers’ failure to integrate Emclaire with Farmers in accordance with expectations; deviations from performance expectations related to Emclaire; continuing impacts from the length and extent of the economic impacts of the COVID-19 pandemic; and the other factors contained in Farmers’ Annual Report on Form 10-K for the year ended December 31, 2022 and subsequent Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (SEC) and 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 For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, Percent 2023 2023 2023 2023 2022 2023 2022 Change Total interest income $ 55,069 $ 54,229 $ 52,804 $ 51,233 $ 38,111 $ 213,335 $ 142,086 50.1 % Total interest expense 22,239 20,461 18,226 14,623 8,679 75,549 17,920 321.6 % Net interest income 32,830 33,768 34,578 36,610 29,432 137,786 124,166 11.0 % Provision (credit) for credit losses 286 243 25 8,599 416 9,153 1,122 715.8 % Noninterest income 12,156 9,831 9,449 10,425 8,200 41,861 44,202 -5.3 % Acquisition related costs 452 268 442 4,313 584 5,475 4,070 34.5 % Other expense 26,520 27,448 25,944 26,409 20,511 106,321 90,341 17.7 % Income before income taxes 17,728 15,640 17,616 7,714 16,121 58,698 72,835 -19.4 % Income taxes 3,151 2,326 2,650 639 2,765 8,766 12,238 -28.4 % Net income $ 14,577 $ 13,314 $ 14,966 $ 7,075 $ 13,356 $ 49,932 $ 60,597 -17.6 % Average diluted shares outstanding 37,426 37,379 37,320 37,933 33,962 37,498 33,929 Basic earnings per share 0.39 0.36 0.40 0.19 0.39 1.34 1.79 Diluted earnings per share 0.39 0.36 0.40 0.19 0.39 1.33 1.79 Cash dividends per share 0.17 0.17 0.17 0.17 0.17 0.68 0.65 Performance Ratios Net Interest Margin (Annualized) 2.78 % 2.86 % 2.92 % 3.07 % 2.99 % 2.91 % 3.18 % Efficiency Ratio (Tax equivalent basis) 57.84 % 60.11 % 56.28 % 62.53 % 52.59 % 59.24 % 53.68 % Return on Average Assets (Annualized) 1.17 % 1.06 % 1.18 % 0.56 % 1.31 % 0.99 % 1.46 % Return on Average Equity (Annualized) 17.98 % 14.49 % 16.12 % 7.71 % 20.16 % 13.97 % 17.24 % Dividends to Net Income 43.68 % 47.82 % 42.54 % 90.50 % 43.10 % 25.64 % 36.31 % Other Performance Ratios (Non-GAAP) Return on Average Tangible Assets 1.22 % 1.09 % 1.23 % 0.58 % 1.34 % 1.03 % 1.50 % Return on Average Tangible Equity 43.77 % 30.29 % 33.55 % 16.31 % 32.81 % 30.23 % 24.31 % Consolidated Statements of Financial Condition Dec. 31, Sept. 30, June 30, March 31, Dec. 31, 2023 2023 2023 2023 2022 Assets Cash and cash equivalents $ 103,658 $ 93,923 $ 116,063 $ 128,001 $ 75,551 Debt securities available for sale 1,299,701 1,210,736 1,316,878 1,355,449 1,268,025 Other investments 35,311 35,342 44,975 39,670 33,444 Loans held for sale 3,711 1,910 2,197 1,703 858 Loans 3,198,127 3,168,554 3,155,200 3,152,339 2,404,750 Less allowance for credit losses 34,440 34,753 34,957 36,011 26,978 Net Loans 3,163,687 3,133,801 3,120,243 3,116,328 2,377,772 Other assets 472,282 495,451 473,098 468,735 326,550 Total Assets $ 5,078,350 $ 4,971,163 $ 5,073,454 $ 5,109,886 $ 4,082,200 Liabilities and Stockholders' Equity Deposits Noninterest-bearing $ 1,026,630 $ 1,039,524 $ 1,084,232 $ 1,106,870 $ 896,957 Interest-bearing 3,150,756 3,217,869 3,165,381 3,207,121 2,526,760 Brokered time deposits 0 254,257 21,135 82,169 138,051 Total deposits 4,177,386 4,511,650 4,270,748 4,396,160 3,561,768 Other interest-bearing liabilities 443,663 88,550 388,437 292,324 183,211 Other liabilities 52,886 54,981 47,278 46,760 44,926 Total liabilities 4,673,935 4,655,181 4,706,463 4,735,244 3,789,905 Stockholders' Equity 404,415 315,982 366,991 374,642 292,295 Total Liabilities and Stockholders' Equity $ 5,078,350 $ 4,971,163 $ 5,073,454 $ 5,109,886 $ 4,082,200 Period-end shares outstanding 37,503 37,489 37,457 37,439 34,055 Book value per share $ 10.78 $ 8.43 $ 9.80 $ 10.01 $ 8.58 Tangible book value per share (Non-GAAP)* 5.71 3.33 4.67 4.84 5.60 * Tangible book value per share is calculated by dividing tangible common equity by outstanding shares For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, Capital and Liquidity 2023 2023 2023 2023 2022 2023 2022 Common Equity Tier 1 Capital Ratio (a) 10.63 % 10.37 % 10.25 % 10.04 % 13.71 % Total Risk Based Capital Ratio (a) 14.08 % 13.83 % 13.76 % 13.60 % 17.79 % Tier 1 Risk Based Capital Ratio (a) 11.11 % 10.86 % 10.74 % 10.54 % 14.32 % Tier 1 Leverage Ratio (a) 8.02 % 7.84 % 7.68 % 7.43 % 9.84 % Equity to Asset Ratio 7.96 % 6.36 % 7.23 % 7.33 % 7.16 % Tangible Common Equity Ratio (b) 4.38 % 2.61 % 3.58 % 3.69 % 4.79 % Net Loans to Assets 62.30 % 63.04 % 61.50 % 60.99 % 58.25 % Loans to Deposits 76.56 % 70.23 % 73.88 % 71.71 % 67.52 % Asset Quality Non-performing loans $ 15,063 $ 18,368 $ 17,956 $ 17,959 $ 14,803 Non-performing assets 15,321 18,522 18,167 18,053 14,876 Loans 30 - 89 days delinquent 16,705 13,314 12,321 10,219 9,605 Charged-off loans 972 525 971 469 754 2,937 3,304 Recoveries 172 139 172 198 184 681 646 Net Charge-offs 800 386 799 271 570 2,256 2,658 Annualized Net Charge-offs to Average Net Loans 0.10 % 0.05 % 0.10 % 0.03 % 0.10 % 0.07 % 0.11 % Allowance for Credit Losses to Total Loans 1.08 % 1.10 % 1.11 % 1.14 % 1.12 % Non-performing Loans to Total Loans 0.47 % 0.58 % 0.57 % 0.57 % 0.62 % Loans 30 - 89 Days Delinquent to Total Loans 0.52 % 0.42 % 0.39 % 0.32 % 0.40 % Allowance to Non-performing Loans 228.64 % 189.20 % 194.68 % 200.52 % 182.25 % Non-performing Assets to Total Assets 0.30 % 0.37 % 0.36 % 0.35 % 0.36 % (a) December 31, 2023 ratio is estimated (b) This is a non-GAAP financial measure. A reconciliation to GAAP is shown below For the Three Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, End of Period Loan Balances 2023 2023 2023 2023 2022 Commercial real estate $ 1,335,806 $ 1,295,847 $ 1,284,974 $ 1,286,830 $ 1,028,050 Commercial 346,354 357,691 362,664 361,845 293,643 Residential real estate 843,697 842,729 849,533 853,074 475,791 HELOC 142,441 140,772 138,535 137,319 132,179 Consumer 259,784 261,136 260,326 260,596 221,260 Agricultural loans 261,288 261,738 250,807 244,938 246,937 Total, excluding net deferred loan costs $ 3,189,370 $ 3,159,913 $ 3,146,839 $ 3,144,602 $ 2,397,860 For the Three Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, End of Period Customer Deposit Balances 2023 2023 2023 2023 2022 Noninterest-bearing demand $ 1,026,630 $ 1,039,524 $ 1,084,232 $ 1,106,870 $ 896,957 Interest-bearing demand 1,362,609 1,426,349 1,383,326 1,473,001 1,224,884 Money market 593,975 588,043 610,051 599,037 435,369 Savings 468,890 488,991 511,642 535,321 441,978 Certificate of deposit 720,259 714,486 660,362 599,762 424,529 Total customer deposits $ 4,172,363 $ 4,257,393 $ 4,249,613 $ 4,313,991 $ 3,423,717 For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, Noninterest Income 2023 2023 2023 2023 2022 2023 2022 Service charges on deposit accounts $ 1,677 $ 1,712 $ 1,501 $ 1,432 $ 1,203 $ 6,322 $ 4,716 Bank owned life insurance income, including death benefits 617 694 584 547 590 2,442 1,810 Trust fees 2,656 2,617 2,248 2,587 2,373 10,108 9,638 Insurance agency commissions 1,540 1,116 1,332 1,456 1,133 5,444 4,402 Security gains (losses), including fair value changes for equity securities 19 (624 ) 13 121 (366 ) (471 ) (454 ) Retirement plan consulting fees 357 360 382 307 337 1,406 1,389 Investment commissions 589 520 476 393 508 1,978 2,183 Net gains on sale of loans 1,280 395 406 310 242 2,391 2,062 Other mortgage banking fee income (loss), net 139 185 234 153 98 711 291 Debit card and EFT fees 1,697 1,763 1,810 1,789 1,407 7,059 5,814 Other noninterest income 1,585 1,093 463 1,330 675 4,471 12,351 Total Noninterest Income $ 12,156 $ 9,831 $ 9,449 $ 10,425 $ 8,200 $ 41,861 $ 44,202 For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, Noninterest Expense 2023 2023 2023 2023 2022 2023 2022 Salaries and employee benefits $ 14,871 $ 14,233 $ 13,625 $ 14,645 $ 11,385 $ 57,374 $ 45,013 Occupancy and equipment 3,896 3,810 3,859 3,869 2,753 15,434 11,379 FDIC insurance and state and local taxes 1,484 1,648 1,494 1,222 1,010 5,848 3,951 Professional fees 1,004 1,043 1,190 1,114 938 4,351 6,114 Merger related costs 452 268 442 4,313 584 5,475 4,070 Advertising 414 492 478 409 472 1,793 1,947 Intangible amortization 578 725 1,222 909 702 3,434 1,973 Core processing charges 1,057 1,274 1,144 1,164 742 4,639 3,348 Other noninterest expenses 3,216 4,223 2,932 3,077 2,509 13,448 16,616 Total Noninterest Expense $ 26,972 $ 27,716 $ 26,386 $ 30,722 $ 21,095 $ 111,796 $ 94,411 Business Combination Consideration Cash $ 33,440 Stock 59,202 Fair value of total consideration transferred $ 92,642 Fair value of assets acquired Cash and cash equivalents $ 20,265 Securities available for sale 126,970 Other investments 7,795 Loans, net 740,659 Premises and equipment 14,808 Bank owned life insurance 22,485 Core deposit intangible 19,249 Current and deferred taxes 17,708 Other assets 7,682 Total assets acquired 977,621 Fair value of liabilities assumed Deposits 875,813 Short-term borrowings 75,000 Accrued interest payable and other liabilities 7,104 Total liabilities 957,917 Net assets acquired $ 19,704 Goodwill created 72,938 Total net assets acquired $ 92,642 Average Balance Sheets and Related Yields and Rates (Dollar Amounts in Thousands) Three Months Ended Three Months Ended December 31, 2023 December 31, 2022 AVERAGE YIELD/ AVERAGE YIELD/ BALANCE INTEREST (1) RATE (1) BALANCE INTEREST (1) RATE (1) EARNING ASSETS Loans (2) $ 3,188,581 $ 44,868 5.63 % $ 2,394,872 $ 29,092 4.86 % Taxable securities 1,113,107 6,536 2.35 1,105,545 5,556 2.01 Tax-exempt securities (2) 411,860 3,235 3.14 453,917 3,580 3.15 Other investments 37,625 529 5.62 33,901 326 3.85 Federal funds sold and other 65,236 564 3.46 59,108 336 2.27 Total earning assets 4,816,409 55,732 4.63 4,047,343 38,890 3.84 Nonearning assets 163,905 33,154 Total assets $ 4,980,314 $ 4,080,497 INTEREST-BEARING LIABILITIES Time deposits $ 712,485 $ 6,291 3.53 % $ 370,914 $ 1,261 1.36 % Brokered time deposits 96,634 1,315 5.44 115,021 1,034 3.60 Savings deposits 1,068,465 2,918 1.09 871,584 879 0.40 Demand deposits - interest bearing 1,393,252 7,922 2.27 1,301,475 3,805 1.17 Short term borrowings 206,826 2,749 5.32 85,641 777 3.63 Long term borrowings 88,609 1,043 4.71 88,138 922 4.18 Total interest-bearing liabilities $ 3,566,271 22,238 2.49 $ 2,832,773 8,678 1.23 NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS' EQUITY Demand deposits - noninterest bearing 1,035,405 938,881 Other liabilities 54,306 43,904 Stockholders' equity 324,332 264,939 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,980,314 $ 4,080,497 Net interest income and interest rate spread $ 33,494 2.14 % $ 30,212 2.61 % Net interest margin 2.78 % 2.99 % (1) Interest and yields are calculated on a tax-equivalent basis where applicable. (2) For 2023, adjustments of $86 thousand and $577 thousand, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2022, adjustments of $72 thousand and $707 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 21%, less disallowances. Twelve Months Ended Twelve Months Ended December 31, 2023 December 31, 2022 AVERAGE YIELD/ AVERAGE YIELD/ BALANCE INTEREST (1) RATE (1) BALANCE INTEREST (1) RATE (1) EARNING ASSETS Loans (2) $ 3,155,858 $ 172,161 5.46 % $ 2,358,724 $ 108,100 4.58 % Taxable securities 1,143,547 26,231 2.29 1,081,966 20,843 1.93 Tax-exempt securities (2) 419,557 13,283 3.17 465,855 14,952 3.21 Other investments 39,559 1,986 5.02 33,153 871 2.63 Federal funds sold and other 74,950 2,476 3.30 76,253 684 0.90 Total earning assets 4,833,471 216,137 4.47 4,015,951 145,450 3.62 Nonearning assets 205,683 128,757 Total assets $ 5,039,154 $ 4,144,708 INTEREST-BEARING LIABILITIES Time deposits $ 654,717 $ 19,462 2.97 % $ 360,687 $ 3,044 0.84 % Brokered time deposits 132,895 6,204 4.67 56,965 1,240 2.18 Savings deposits 1,113,561 9,899 0.89 846,418 1,352 0.16 Demand deposits - interest bearing 1,415,425 27,541 1.95 1,392,058 7,449 0.54 Short term borrowings 160,964 8,357 5.19 55,668 1,408 2.53 Long term borrowings 88,439 4,086 4.62 87,972 3,427 3.90 Total interest-bearing liabilities $ 3,566,001 75,549 2.12 $ 2,799,768 17,920 0.64 NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS' EQUITY Demand deposits - noninterest bearing $ 1,065,389 $ 959,294 Other liabilities 50,302 34,180 Stockholders' equity 357,462 351,466 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,039,154 $ 4,144,708 Net interest income and interest rate spread $ 140,588 2.35 % $ 127,530 2.98 % Net interest margin 2.91 % 3.18 % (1) Interest and yields are calculated on a tax-equivalent basis where applicable. (2) For 2023, adjustments of $353 thousand and $2.4 million, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2022, adjustments of $310 thousand and $3.1 million, 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 21%, less disallowances. Reconciliation of Total Assets to Tangible Assets For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, 2023 2023 2023 2023 2022 2023 2022 Total Assets $ 5,078,350 $ 4,971,163 $ 5,073,454 $ 5,109,886 $ 4,082,200 $ 5,078,350 $ 4,082,200 Less Goodwill and other intangibles 190,288 191,326 192,052 193,273 101,666 190,288 101,666 Tangible Assets $ 4,888,062 $ 4,779,837 $ 4,881,402 $ 4,916,613 $ 3,980,534 $ 4,888,062 $ 3,980,534 Average Assets 4,980,314 5,058,969 5,070,444 5,085,009 4,080,497 5,039,154 4,144,708 Less average Goodwill and other intangibles 191,108 191,804 192,972 193,368 102,126 192,306 102,151 Average Tangible Assets $ 4,789,206 $ 4,867,165 $ 4,877,472 $ 4,891,641 $ 3,978,371 $ 4,846,848 $ 4,042,557 Reconciliation of Common Stockholders' Equity to Tangible Common Equity For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, 2023 2023 2023 2023 2022 2023 2022 Stockholders' Equity $ 404,415 $ 315,982 $ 366,991 $ 374,642 $ 292,295 $ 404,415 $ 292,295 Less Goodwill and other intangibles 190,288 191,326 192,052 193,273 101,666 190,288 101,666 Tangible Common Equity $ 214,127 $ 124,656 $ 174,939 $ 181,369 $ 190,629 $ 214,127 $ 190,629 Average Stockholders' Equity 324,332 367,600 371,421 366,851 264,939 357,462 351,466 Less average Goodwill and other intangibles 191,108 191,804 192,972 193,368 102,126 192,306 102,151 Average Tangible Common Equity $ 133,224 $ 175,796 $ 178,449 $ 173,483 $ 162,813 $ 165,156 $ 249,315 Reconciliation of Net Income, Less Merger and Certain Items For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, 2023 2023 2023 2023 2022 2023 2022 Net income $ 14,577 $ 13,314 $ 14,966 $ 7,075 $ 13,356 $ 49,932 $ 60,597 Acquisition related costs - after tax 358 234 354 3,449 475 4,395 3,290 Acquisition related provision - after tax 0 0 0 6,077 0 6,077 0 Employee severence - after tax 798 0 0 0 0 798 0 Lawsuit settlement income - after tax 0 0 0 0 0 0 (6,616 ) Lawsuit settlement contingent legal expense - after tax 0 0 0 0 0 0 1,639 Lawsuit settlement expense - after tax 0 620 0 0 0 620 0 Charitable donation - after tax 0 0 0 0 0 0 4,740 Net (gain) on loan sale - after tax (723 ) 0 0 0 0 (723 ) 0 Net loss (gain) on asset/security sales - after tax 171 604 (5 ) (72 ) 268 698 344 Net income - Adjusted $ 15,181 $ 14,772 $ 15,315 $ 16,529 $ 14,099 $ 61,797 $ 63,994 Diluted EPS excluding merger and certain items $ 0.41 $ 0.40 $ 0.41 $ 0.44 $ 0.42 $ 1.65 $ 1.89 Return on Average Assets excluding merger and certain items (Annualized) 1.22 % 1.17 % 1.21 % 1.30 % 1.36 % 1.23 % 1.54 % Return on Average Equity excluding merger and certain items (Annualized) 18.72 % 16.07 % 16.49 % 18.02 % 21.29 % 17.29 % 18.21 % Return on Average Tangible Equity excluding acquisition costs and certain items (Annualized) 45.58 % 33.61 % 34.33 % 38.11 % 34.64 % 37.42 % 25.67 % Efficiency ratio excluding certain items For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, 2023 2023 2023 2023 2022 2023 2022 Net interest income, tax equated $ 33,494 $ 34,448 $ 35,273 $ 37,374 $ 30,212 $ 140,588 $ 127,530 Noninterest income 12,156 9,831 9,449 10,425 8,200 41,861 44,202 Legal settlement income 0 0 0 0 0 0 (8,375 ) Net (gain) on loan sale (915 ) 0 0 0 0 (915 ) 0 Net loss (gain) on asset/security sales 217 764 (6 ) (91 ) 338 883 435 Net interest income and noninterest income adjusted 44,952 45,043 44,716 47,708 38,750 182,417 163,792 Noninterest expense less intangible amortization 26,394 26,991 25,163 29,813 20,393 108,361 92,438 Charitable donation 0 0 0 0 0 0 6,000 Legal settlement expense 0 785 0 0 0 785 0 Contingent legal settlement expense 0 0 0 0 0 0 2,075 Employee severence 1,010 0 0 0 0 1,010 0 Acquisition related costs 452 268 442 4,313 584 5,475 4,070 Noninterest expense adjusted 24,932 25,938 24,721 25,500 19,809 101,091 80,293 Efficiency ratio excluding certain items 55.46 % 57.58 % 55.28 % 53.45 % 51.12 % 55.42 % 49.02 % Net interest margin excluding acquisition marks and PPP interest and fees For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, 2023 2023 2023 2023 2022 2023 2022 Net interest income, tax equated $ 33,494 $ 34,448 $ 35,273 $ 37,374 $ 30,212 $ 140,588 $ 127,530 Acquisition marks 2,475 2,959 2,884 2,628 174 10,946 1,793 PPP interest and fees 1 1 3 0 10 5 1,392 Adjusted and annualized net interest income 124,072 125,952 129,544 138,984 120,112 129,637 124,345 Average earning assets 4,816,409 4,820,888 4,830,910 4,866,263 4,047,343 4,833,471 4,015,951 Less PPP average balances 229 247 277 310 485 254 11,914 Adjusted average earning assets 4,816,180 4,820,641 4,830,633 4,865,953 4,046,858 4,833,217 4,004,037 Net interest margin excluding marks and PPP interest and fees 2.58 % 2.61 % 2.68 % 2.86 % 2.97 % 2.68 % 3.11 % View source version on businesswire.com: https://www.businesswire.com/news/home/20240123953680/en/Contacts Kevin J. Helmick, President and CEO 330.533.3341 Email: exec@farmersbankgroup.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
Farmers National Banc Corp. Reports Solid Results for Fourth Quarter of 2023 By: Farmers National Banc Corp. via Business Wire January 24, 2024 at 08:00 AM EST Earnings per diluted share of $0.39 ($0.41 excluding certain items, non-GAAP) for the fourth quarter of 2023 164 consecutive quarters of profitability Recorded a $915,000 gain during the quarter by selling $5.8 million of nonaccrual/troubled commercial loans Loan growth of $29.6 million, or 3.7% annualized, for the fourth quarter of 2023 Excluding impact of commercial loan sale - loan growth of $37.7 million, or 4.8% annualized, for fourth quarter 2023 Continued strong asset quality with non-performing assets to total assets of 0.30% as of December 31, 2023 Return on average assets of 1.17% for the fourth quarter of 2023 ROAE and ROATE (non-GAAP) of 18.0% and 43.8%, respectively, for the fourth quarter of 2023 Farmers National Banc Corp. (“Farmers” or the “Company”) (NASDAQ: FMNB) today announced net income of $14.6 million, or $0.39 per diluted share, for the three months ended December 31, 2023, compared to $13.4 million, or $0.39 per diluted share, for the three months ended December 31, 2022. Net income for the fourth quarter of 2023 included pretax items of $452,000 for acquisition related costs, a gain of $915,000 on the sale of commercial loans, $1.0 million in expense for severance/contract payouts for staff resignations, and combined net losses of $217,000 on the sale of securities and the sale of other assets. Excluding these items (non-GAAP), net income for the fourth quarter of 2023 increased 7.8% to $15.2 million from $14.1 million for the same period last year. Net income per diluted share excluding these items (non-GAAP), was $0.41 for the fourth quarter of 2023, compared to $0.42 per diluted share for the fourth quarter of 2022. Kevin J. Helmick, President and CEO, stated “Our solid fourth quarter results demonstrate our success enhancing profitability throughout an extremely challenging operating environment. This is a testament to our team’s focus on supporting our customers, maintaining excellent asset quality, and controlling operating costs. We expect the economic environment will remain fluid in 2024, but we believe Farmers is well positioned to navigate this period as a result of the value our team members provide our Ohio and Pennsylvania communities, as well as our continued focus on maintaining strong asset quality and profitability.” Balance Sheet The Company’s total assets were $5.08 billion at December 31, 2023, compared to $4.97 billion at September 30, 2023 and $4.08 billion at December 31, 2022. The increase from December was primarily due to the acquisition of Emclaire Financial Corp. (“Emclaire”) which added $977.6 million in assets in the first quarter of 2023. Loans have increased by $793.4 million since December 31, 2022 and $29.6 million, or 3.7% annualized, since September 30, 2023. Emclaire was responsible for $740.7 million of the increase in loans since December 31, 2022. Growth in the fourth quarter of 2023 was concentrated in commercial real estate. The Company had securities available for sale of $1.30 billion at December 31, 2023, compared to $1.21 billion at September 30, 2023, and $1.27 billion at December 31, 2022. The increase since December is due to the acquisition of Emclaire which added $127.0 million in available for sale securities and a decrease in the amount of gross unrealized losses on the portfolio which totaled $266.5 million at December 31, 2022, compared to a gross unrealized loss of $217.1 million at December 31, 2023. The Company also had sales and runoff from the portfolio during the twelve months ended December 31, 2023. Bond market volatility was extreme in 2023 and this volatility may remain in 2024. The Company expects that it will continue to allow the size of the securities portfolio to shrink via runoff to optimize profitability and provide liquidity for future loan growth. At December 31, 2023, deposits totaled $4.18 billion compared to $4.26 billion at September 30, 2023 and $4.51 billion at December 31, 2022. During the fourth quarter of 2023, the Company allowed $254.3 million in brokered time deposits to mature and replaced the funding with less expensive short term borrowings. In addition, public fund seasonality resulted in $95.3 million in shrinkage during the quarter offset by $15.3 million in growth in other deposit categories. The increase from December 31, 2022, was driven by $875.8 million in deposits assumed in the acquisition of Emclaire offset by a decline in brokered time deposits of $138.1 million and runoff in other deposit categories. Total stockholders’ equity increased to $404.4 million at December 31, 2023, from $316.0 million at September 30, 2023, and $292.3 million at December 31, 2022. The year-over-year increase was primarily due to the acquisition of Emclaire and an increase in retained earnings and a decrease in the unrealized loss from accumulated other comprehensive income. The increase in total stockholders’ equity since September 30, 2023, was primarily due to a decline in the accumulated other comprehensive loss which decreased $79.7 million as market rates dropped rapidly during the fourth quarter of 2023. Credit Quality As of December 31, 2023, the Company’s non-performing loans totaled $15.1 million compared to $18.4 million at September 30, 2023, and $14.8 million at December 31, 2022. The year-over-year increase was primarily due to the addition of Emclaire while the decrease since September 30 was due to the sale of non-performing loans. The non-performing loans to total loans ratio was 0.47% at December 31, 2023, 0.58% at September 30, 2023, and 0.62% at December 31, 2022. Non-performing assets to total assets was 0.30% at December 31, 2023, 0.37% at September 30, 2023, and 0.36% at December 31, 2022. The Company also continues to experience low levels of early-stage delinquencies, defined as loans 30-89 days delinquent. At December 31, 2023, these early-stage delinquencies totaled $16.7 million, or 0.52% of total loans compared to $13.3 million, or 0.42% of total loans at September 30, 2023, and $9.6 million, or 0.40% of total loans, at December 31, 2022. The Company recorded provision for credit losses and unfunded commitments of $286,000 for the fourth quarter of 2023 compared to $243,000 for the third quarter of 2023 and $416,000 for the fourth quarter of 2022. Annualized net charge-offs as a percentage of average loans were 0.10% for the three months ended December 31, 2023, compared to 0.10% for the same period in 2022. For the year ended December 31, 2023, net charge-offs as a percentage of average loans were 0.07% compared to 0.11% for last year. The allowance for credit losses to total loans was 1.08% at December 31, 2023, compared to 1.10% at September 30, 2023, and 1.12% at December 31, 2022. Net Interest Income Net interest income for the three months ended December 31, 2023, totaled $32.8 million in the fourth quarter of 2023 compared to $33.8 million in the third quarter of 2023 and $29.4 million for the fourth quarter of 2022. Earning assets were greater in the fourth quarter of 2023 compared to the fourth quarter of 2022 due to the acquisition of Emclaire but this was partially offset by a decline of 21 basis point in the net interest margin. The net interest margin was 2.78% for the quarter ending December 31, 2023, compared to 2.86% in the third quarter of 2023 and 2.99% for the fourth quarter of 2022. Excluding the impact of acquisition marks and related accretion and PPP interest and fees, the net interest margin (non-GAAP) for the fourth quarter of 2023 was 2.58% compared to 2.61% for the third quarter of 2023 and 2.97% for the fourth quarter of 2022. The decline in net interest margin between the fourth quarter of 2023 and the fourth quarter of 2022 was due to increases in funding costs outstripping the increase in yields on earning assets. This increase in funding costs has been due to the rapid increase in deposit rates due to intense competition for deposits, the Federal Reserve’s rate hiking cycle, and runoff of deposit balances which are being replaced with more costly wholesale funding. Noninterest Income The Company recorded $12.2 million in noninterest income during the fourth quarter of 2023 compared to $8.2 million during the fourth quarter of 2022. Service charges on deposit accounts increased to $1.7 million in the fourth quarter of 2023 compared to $1.2 million for the same period in 2022 primarily due to the acquisition of Emclaire. Bank owned life insurance income, other mortgage banking fee income and debit card income have also increased in the fourth quarter of 2023 compared to the fourth quarter of 2022 due to the Emclaire acquisition. Trust fees increased by $283,000 in the fourth quarter of 2023 compared to the fourth quarter of 2022 as growth in this line of business continued. Insurance agency commissions also exhibited outstanding growth as insurance commissions increased by $407,000 for the quarter ending December 31, 2023 compared to same quarter a year ago. Growth for the year in this business has been solid as pricing in the insurance business has been very strong and increased annuity sales have bolstered results. Investment commissions are up slightly for the quarter ended December 31, 2023 compared to the quarter ended December 31, 2022, as markets have been resilient in 2023 and the Company begins to expand into Pennsylvania. Net gains on the sale of loans have increased by over $1.0 million between the fourth quarter of 2022 and the fourth quarter of 2023. Of this increase, $915,000 was driven by the sale of commercial loans discussed previously. Traditional gains on the sale of mortgage loans remain sluggish due to high interest rates. Other noninterest income increased $910,000 in the fourth quarter of 2023 compared to the prior year’s fourth quarter. This increase was primarily driven by higher income associated with the Company’s investments in SBIC funds. The earnings on these funds can be volatile from period to period. Noninterest Expense The Company reported noninterest expense of $27.0 million for the three months ended December 31, 2023, compared to $21.1 million for the three months ended December 31, 2022. The increase in expense is primarily due to the acquisition of Emclaire along with the $1.0 million in severance expense associated with staff resignations. Salaries and employee benefits increased $3.5 million to $14.9 million in the fourth quarter of 2023 compared to $11.4 million during the same period in 2022. The acquisition of Emclaire, normal raise activity and the severance were the primary reasons for the increase. Occupancy and equipment expense increased $1.1 million primarily due to the acquisition. FDIC and state and local taxes increased $474,000 due to the acquisition and the increase in the rate paid for FDIC insurance in 2023. Core processing charges increased due to the acquisition. Merger related costs were $452,000 for the fourth quarter of 2023 compared to $584,000 in the fourth quarter of 2022. Other noninterest expense increased due to the acquisition. Liquidity At December 31, 2023, the Company’s loan to deposit ratio was 76.6% and the Company’s average deposit balance per account (excluding collateralized deposits) was $23,678. The Company has access to an additional $819.5 million of FHLB borrowing capacity at December 31, 2023 along with $214.3 million of available for sale securities that are not pledged. With a deep and diverse deposit base and access to a large amount of additional funding capacity, the Company is well positioned to navigate the current banking landscape. About Farmers National Banc Corp. Founded in 1887, Farmers National Banc Corp. is a diversified financial services company headquartered in Canfield, Ohio, with $5.1 billion in banking 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 64 banking locations in Mahoning, Trumbull, Columbiana, Portage, Stark, Wayne, Medina, Geauga and Cuyahoga Counties in Ohio and Beaver, Butler, Allegheny, Jefferson, Clarion, Venango, Clearfield, Mercer, Elk and Crawford Counties in Pennsylvania, and Farmers Trust Company, which operates five trust offices and offers services in the same geographic markets. Total wealth management assets under care at December 31, 2023 are $3.5 billion. 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, return on average tangible assets, return on average tangible equity, net income excluding costs related to acquisition activities and certain items, return on average assets excluding merger costs and certain items, return on average equity excluding merger costs and certain items, net interest margin excluding acquisition marks and related accretion and PPP interest and fees and efficiency ratio less certain items, 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 to their GAAP equivalents are included in the tables following Consolidated Financial Highlights below. Cautionary Statements Regarding Forward-Looking Statements We make statements in this news release and our related investor conference call, and we may from time to time make other statements, that are 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 certain forward-looking statements include significant changes in near-term local, regional, and U.S. economic conditions including those resulting from continued high rates of inflation, tightening monetary policy of the Board of Governors of the Federal Reserve, and possibility of a recession; Farmers’ failure to integrate Emclaire with Farmers in accordance with expectations; deviations from performance expectations related to Emclaire; continuing impacts from the length and extent of the economic impacts of the COVID-19 pandemic; and the other factors contained in Farmers’ Annual Report on Form 10-K for the year ended December 31, 2022 and subsequent Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (SEC) and 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 For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, Percent 2023 2023 2023 2023 2022 2023 2022 Change Total interest income $ 55,069 $ 54,229 $ 52,804 $ 51,233 $ 38,111 $ 213,335 $ 142,086 50.1 % Total interest expense 22,239 20,461 18,226 14,623 8,679 75,549 17,920 321.6 % Net interest income 32,830 33,768 34,578 36,610 29,432 137,786 124,166 11.0 % Provision (credit) for credit losses 286 243 25 8,599 416 9,153 1,122 715.8 % Noninterest income 12,156 9,831 9,449 10,425 8,200 41,861 44,202 -5.3 % Acquisition related costs 452 268 442 4,313 584 5,475 4,070 34.5 % Other expense 26,520 27,448 25,944 26,409 20,511 106,321 90,341 17.7 % Income before income taxes 17,728 15,640 17,616 7,714 16,121 58,698 72,835 -19.4 % Income taxes 3,151 2,326 2,650 639 2,765 8,766 12,238 -28.4 % Net income $ 14,577 $ 13,314 $ 14,966 $ 7,075 $ 13,356 $ 49,932 $ 60,597 -17.6 % Average diluted shares outstanding 37,426 37,379 37,320 37,933 33,962 37,498 33,929 Basic earnings per share 0.39 0.36 0.40 0.19 0.39 1.34 1.79 Diluted earnings per share 0.39 0.36 0.40 0.19 0.39 1.33 1.79 Cash dividends per share 0.17 0.17 0.17 0.17 0.17 0.68 0.65 Performance Ratios Net Interest Margin (Annualized) 2.78 % 2.86 % 2.92 % 3.07 % 2.99 % 2.91 % 3.18 % Efficiency Ratio (Tax equivalent basis) 57.84 % 60.11 % 56.28 % 62.53 % 52.59 % 59.24 % 53.68 % Return on Average Assets (Annualized) 1.17 % 1.06 % 1.18 % 0.56 % 1.31 % 0.99 % 1.46 % Return on Average Equity (Annualized) 17.98 % 14.49 % 16.12 % 7.71 % 20.16 % 13.97 % 17.24 % Dividends to Net Income 43.68 % 47.82 % 42.54 % 90.50 % 43.10 % 25.64 % 36.31 % Other Performance Ratios (Non-GAAP) Return on Average Tangible Assets 1.22 % 1.09 % 1.23 % 0.58 % 1.34 % 1.03 % 1.50 % Return on Average Tangible Equity 43.77 % 30.29 % 33.55 % 16.31 % 32.81 % 30.23 % 24.31 % Consolidated Statements of Financial Condition Dec. 31, Sept. 30, June 30, March 31, Dec. 31, 2023 2023 2023 2023 2022 Assets Cash and cash equivalents $ 103,658 $ 93,923 $ 116,063 $ 128,001 $ 75,551 Debt securities available for sale 1,299,701 1,210,736 1,316,878 1,355,449 1,268,025 Other investments 35,311 35,342 44,975 39,670 33,444 Loans held for sale 3,711 1,910 2,197 1,703 858 Loans 3,198,127 3,168,554 3,155,200 3,152,339 2,404,750 Less allowance for credit losses 34,440 34,753 34,957 36,011 26,978 Net Loans 3,163,687 3,133,801 3,120,243 3,116,328 2,377,772 Other assets 472,282 495,451 473,098 468,735 326,550 Total Assets $ 5,078,350 $ 4,971,163 $ 5,073,454 $ 5,109,886 $ 4,082,200 Liabilities and Stockholders' Equity Deposits Noninterest-bearing $ 1,026,630 $ 1,039,524 $ 1,084,232 $ 1,106,870 $ 896,957 Interest-bearing 3,150,756 3,217,869 3,165,381 3,207,121 2,526,760 Brokered time deposits 0 254,257 21,135 82,169 138,051 Total deposits 4,177,386 4,511,650 4,270,748 4,396,160 3,561,768 Other interest-bearing liabilities 443,663 88,550 388,437 292,324 183,211 Other liabilities 52,886 54,981 47,278 46,760 44,926 Total liabilities 4,673,935 4,655,181 4,706,463 4,735,244 3,789,905 Stockholders' Equity 404,415 315,982 366,991 374,642 292,295 Total Liabilities and Stockholders' Equity $ 5,078,350 $ 4,971,163 $ 5,073,454 $ 5,109,886 $ 4,082,200 Period-end shares outstanding 37,503 37,489 37,457 37,439 34,055 Book value per share $ 10.78 $ 8.43 $ 9.80 $ 10.01 $ 8.58 Tangible book value per share (Non-GAAP)* 5.71 3.33 4.67 4.84 5.60 * Tangible book value per share is calculated by dividing tangible common equity by outstanding shares For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, Capital and Liquidity 2023 2023 2023 2023 2022 2023 2022 Common Equity Tier 1 Capital Ratio (a) 10.63 % 10.37 % 10.25 % 10.04 % 13.71 % Total Risk Based Capital Ratio (a) 14.08 % 13.83 % 13.76 % 13.60 % 17.79 % Tier 1 Risk Based Capital Ratio (a) 11.11 % 10.86 % 10.74 % 10.54 % 14.32 % Tier 1 Leverage Ratio (a) 8.02 % 7.84 % 7.68 % 7.43 % 9.84 % Equity to Asset Ratio 7.96 % 6.36 % 7.23 % 7.33 % 7.16 % Tangible Common Equity Ratio (b) 4.38 % 2.61 % 3.58 % 3.69 % 4.79 % Net Loans to Assets 62.30 % 63.04 % 61.50 % 60.99 % 58.25 % Loans to Deposits 76.56 % 70.23 % 73.88 % 71.71 % 67.52 % Asset Quality Non-performing loans $ 15,063 $ 18,368 $ 17,956 $ 17,959 $ 14,803 Non-performing assets 15,321 18,522 18,167 18,053 14,876 Loans 30 - 89 days delinquent 16,705 13,314 12,321 10,219 9,605 Charged-off loans 972 525 971 469 754 2,937 3,304 Recoveries 172 139 172 198 184 681 646 Net Charge-offs 800 386 799 271 570 2,256 2,658 Annualized Net Charge-offs to Average Net Loans 0.10 % 0.05 % 0.10 % 0.03 % 0.10 % 0.07 % 0.11 % Allowance for Credit Losses to Total Loans 1.08 % 1.10 % 1.11 % 1.14 % 1.12 % Non-performing Loans to Total Loans 0.47 % 0.58 % 0.57 % 0.57 % 0.62 % Loans 30 - 89 Days Delinquent to Total Loans 0.52 % 0.42 % 0.39 % 0.32 % 0.40 % Allowance to Non-performing Loans 228.64 % 189.20 % 194.68 % 200.52 % 182.25 % Non-performing Assets to Total Assets 0.30 % 0.37 % 0.36 % 0.35 % 0.36 % (a) December 31, 2023 ratio is estimated (b) This is a non-GAAP financial measure. A reconciliation to GAAP is shown below For the Three Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, End of Period Loan Balances 2023 2023 2023 2023 2022 Commercial real estate $ 1,335,806 $ 1,295,847 $ 1,284,974 $ 1,286,830 $ 1,028,050 Commercial 346,354 357,691 362,664 361,845 293,643 Residential real estate 843,697 842,729 849,533 853,074 475,791 HELOC 142,441 140,772 138,535 137,319 132,179 Consumer 259,784 261,136 260,326 260,596 221,260 Agricultural loans 261,288 261,738 250,807 244,938 246,937 Total, excluding net deferred loan costs $ 3,189,370 $ 3,159,913 $ 3,146,839 $ 3,144,602 $ 2,397,860 For the Three Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, End of Period Customer Deposit Balances 2023 2023 2023 2023 2022 Noninterest-bearing demand $ 1,026,630 $ 1,039,524 $ 1,084,232 $ 1,106,870 $ 896,957 Interest-bearing demand 1,362,609 1,426,349 1,383,326 1,473,001 1,224,884 Money market 593,975 588,043 610,051 599,037 435,369 Savings 468,890 488,991 511,642 535,321 441,978 Certificate of deposit 720,259 714,486 660,362 599,762 424,529 Total customer deposits $ 4,172,363 $ 4,257,393 $ 4,249,613 $ 4,313,991 $ 3,423,717 For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, Noninterest Income 2023 2023 2023 2023 2022 2023 2022 Service charges on deposit accounts $ 1,677 $ 1,712 $ 1,501 $ 1,432 $ 1,203 $ 6,322 $ 4,716 Bank owned life insurance income, including death benefits 617 694 584 547 590 2,442 1,810 Trust fees 2,656 2,617 2,248 2,587 2,373 10,108 9,638 Insurance agency commissions 1,540 1,116 1,332 1,456 1,133 5,444 4,402 Security gains (losses), including fair value changes for equity securities 19 (624 ) 13 121 (366 ) (471 ) (454 ) Retirement plan consulting fees 357 360 382 307 337 1,406 1,389 Investment commissions 589 520 476 393 508 1,978 2,183 Net gains on sale of loans 1,280 395 406 310 242 2,391 2,062 Other mortgage banking fee income (loss), net 139 185 234 153 98 711 291 Debit card and EFT fees 1,697 1,763 1,810 1,789 1,407 7,059 5,814 Other noninterest income 1,585 1,093 463 1,330 675 4,471 12,351 Total Noninterest Income $ 12,156 $ 9,831 $ 9,449 $ 10,425 $ 8,200 $ 41,861 $ 44,202 For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, Noninterest Expense 2023 2023 2023 2023 2022 2023 2022 Salaries and employee benefits $ 14,871 $ 14,233 $ 13,625 $ 14,645 $ 11,385 $ 57,374 $ 45,013 Occupancy and equipment 3,896 3,810 3,859 3,869 2,753 15,434 11,379 FDIC insurance and state and local taxes 1,484 1,648 1,494 1,222 1,010 5,848 3,951 Professional fees 1,004 1,043 1,190 1,114 938 4,351 6,114 Merger related costs 452 268 442 4,313 584 5,475 4,070 Advertising 414 492 478 409 472 1,793 1,947 Intangible amortization 578 725 1,222 909 702 3,434 1,973 Core processing charges 1,057 1,274 1,144 1,164 742 4,639 3,348 Other noninterest expenses 3,216 4,223 2,932 3,077 2,509 13,448 16,616 Total Noninterest Expense $ 26,972 $ 27,716 $ 26,386 $ 30,722 $ 21,095 $ 111,796 $ 94,411 Business Combination Consideration Cash $ 33,440 Stock 59,202 Fair value of total consideration transferred $ 92,642 Fair value of assets acquired Cash and cash equivalents $ 20,265 Securities available for sale 126,970 Other investments 7,795 Loans, net 740,659 Premises and equipment 14,808 Bank owned life insurance 22,485 Core deposit intangible 19,249 Current and deferred taxes 17,708 Other assets 7,682 Total assets acquired 977,621 Fair value of liabilities assumed Deposits 875,813 Short-term borrowings 75,000 Accrued interest payable and other liabilities 7,104 Total liabilities 957,917 Net assets acquired $ 19,704 Goodwill created 72,938 Total net assets acquired $ 92,642 Average Balance Sheets and Related Yields and Rates (Dollar Amounts in Thousands) Three Months Ended Three Months Ended December 31, 2023 December 31, 2022 AVERAGE YIELD/ AVERAGE YIELD/ BALANCE INTEREST (1) RATE (1) BALANCE INTEREST (1) RATE (1) EARNING ASSETS Loans (2) $ 3,188,581 $ 44,868 5.63 % $ 2,394,872 $ 29,092 4.86 % Taxable securities 1,113,107 6,536 2.35 1,105,545 5,556 2.01 Tax-exempt securities (2) 411,860 3,235 3.14 453,917 3,580 3.15 Other investments 37,625 529 5.62 33,901 326 3.85 Federal funds sold and other 65,236 564 3.46 59,108 336 2.27 Total earning assets 4,816,409 55,732 4.63 4,047,343 38,890 3.84 Nonearning assets 163,905 33,154 Total assets $ 4,980,314 $ 4,080,497 INTEREST-BEARING LIABILITIES Time deposits $ 712,485 $ 6,291 3.53 % $ 370,914 $ 1,261 1.36 % Brokered time deposits 96,634 1,315 5.44 115,021 1,034 3.60 Savings deposits 1,068,465 2,918 1.09 871,584 879 0.40 Demand deposits - interest bearing 1,393,252 7,922 2.27 1,301,475 3,805 1.17 Short term borrowings 206,826 2,749 5.32 85,641 777 3.63 Long term borrowings 88,609 1,043 4.71 88,138 922 4.18 Total interest-bearing liabilities $ 3,566,271 22,238 2.49 $ 2,832,773 8,678 1.23 NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS' EQUITY Demand deposits - noninterest bearing 1,035,405 938,881 Other liabilities 54,306 43,904 Stockholders' equity 324,332 264,939 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,980,314 $ 4,080,497 Net interest income and interest rate spread $ 33,494 2.14 % $ 30,212 2.61 % Net interest margin 2.78 % 2.99 % (1) Interest and yields are calculated on a tax-equivalent basis where applicable. (2) For 2023, adjustments of $86 thousand and $577 thousand, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2022, adjustments of $72 thousand and $707 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 21%, less disallowances. Twelve Months Ended Twelve Months Ended December 31, 2023 December 31, 2022 AVERAGE YIELD/ AVERAGE YIELD/ BALANCE INTEREST (1) RATE (1) BALANCE INTEREST (1) RATE (1) EARNING ASSETS Loans (2) $ 3,155,858 $ 172,161 5.46 % $ 2,358,724 $ 108,100 4.58 % Taxable securities 1,143,547 26,231 2.29 1,081,966 20,843 1.93 Tax-exempt securities (2) 419,557 13,283 3.17 465,855 14,952 3.21 Other investments 39,559 1,986 5.02 33,153 871 2.63 Federal funds sold and other 74,950 2,476 3.30 76,253 684 0.90 Total earning assets 4,833,471 216,137 4.47 4,015,951 145,450 3.62 Nonearning assets 205,683 128,757 Total assets $ 5,039,154 $ 4,144,708 INTEREST-BEARING LIABILITIES Time deposits $ 654,717 $ 19,462 2.97 % $ 360,687 $ 3,044 0.84 % Brokered time deposits 132,895 6,204 4.67 56,965 1,240 2.18 Savings deposits 1,113,561 9,899 0.89 846,418 1,352 0.16 Demand deposits - interest bearing 1,415,425 27,541 1.95 1,392,058 7,449 0.54 Short term borrowings 160,964 8,357 5.19 55,668 1,408 2.53 Long term borrowings 88,439 4,086 4.62 87,972 3,427 3.90 Total interest-bearing liabilities $ 3,566,001 75,549 2.12 $ 2,799,768 17,920 0.64 NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS' EQUITY Demand deposits - noninterest bearing $ 1,065,389 $ 959,294 Other liabilities 50,302 34,180 Stockholders' equity 357,462 351,466 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,039,154 $ 4,144,708 Net interest income and interest rate spread $ 140,588 2.35 % $ 127,530 2.98 % Net interest margin 2.91 % 3.18 % (1) Interest and yields are calculated on a tax-equivalent basis where applicable. (2) For 2023, adjustments of $353 thousand and $2.4 million, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2022, adjustments of $310 thousand and $3.1 million, 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 21%, less disallowances. Reconciliation of Total Assets to Tangible Assets For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, 2023 2023 2023 2023 2022 2023 2022 Total Assets $ 5,078,350 $ 4,971,163 $ 5,073,454 $ 5,109,886 $ 4,082,200 $ 5,078,350 $ 4,082,200 Less Goodwill and other intangibles 190,288 191,326 192,052 193,273 101,666 190,288 101,666 Tangible Assets $ 4,888,062 $ 4,779,837 $ 4,881,402 $ 4,916,613 $ 3,980,534 $ 4,888,062 $ 3,980,534 Average Assets 4,980,314 5,058,969 5,070,444 5,085,009 4,080,497 5,039,154 4,144,708 Less average Goodwill and other intangibles 191,108 191,804 192,972 193,368 102,126 192,306 102,151 Average Tangible Assets $ 4,789,206 $ 4,867,165 $ 4,877,472 $ 4,891,641 $ 3,978,371 $ 4,846,848 $ 4,042,557 Reconciliation of Common Stockholders' Equity to Tangible Common Equity For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, 2023 2023 2023 2023 2022 2023 2022 Stockholders' Equity $ 404,415 $ 315,982 $ 366,991 $ 374,642 $ 292,295 $ 404,415 $ 292,295 Less Goodwill and other intangibles 190,288 191,326 192,052 193,273 101,666 190,288 101,666 Tangible Common Equity $ 214,127 $ 124,656 $ 174,939 $ 181,369 $ 190,629 $ 214,127 $ 190,629 Average Stockholders' Equity 324,332 367,600 371,421 366,851 264,939 357,462 351,466 Less average Goodwill and other intangibles 191,108 191,804 192,972 193,368 102,126 192,306 102,151 Average Tangible Common Equity $ 133,224 $ 175,796 $ 178,449 $ 173,483 $ 162,813 $ 165,156 $ 249,315 Reconciliation of Net Income, Less Merger and Certain Items For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, 2023 2023 2023 2023 2022 2023 2022 Net income $ 14,577 $ 13,314 $ 14,966 $ 7,075 $ 13,356 $ 49,932 $ 60,597 Acquisition related costs - after tax 358 234 354 3,449 475 4,395 3,290 Acquisition related provision - after tax 0 0 0 6,077 0 6,077 0 Employee severence - after tax 798 0 0 0 0 798 0 Lawsuit settlement income - after tax 0 0 0 0 0 0 (6,616 ) Lawsuit settlement contingent legal expense - after tax 0 0 0 0 0 0 1,639 Lawsuit settlement expense - after tax 0 620 0 0 0 620 0 Charitable donation - after tax 0 0 0 0 0 0 4,740 Net (gain) on loan sale - after tax (723 ) 0 0 0 0 (723 ) 0 Net loss (gain) on asset/security sales - after tax 171 604 (5 ) (72 ) 268 698 344 Net income - Adjusted $ 15,181 $ 14,772 $ 15,315 $ 16,529 $ 14,099 $ 61,797 $ 63,994 Diluted EPS excluding merger and certain items $ 0.41 $ 0.40 $ 0.41 $ 0.44 $ 0.42 $ 1.65 $ 1.89 Return on Average Assets excluding merger and certain items (Annualized) 1.22 % 1.17 % 1.21 % 1.30 % 1.36 % 1.23 % 1.54 % Return on Average Equity excluding merger and certain items (Annualized) 18.72 % 16.07 % 16.49 % 18.02 % 21.29 % 17.29 % 18.21 % Return on Average Tangible Equity excluding acquisition costs and certain items (Annualized) 45.58 % 33.61 % 34.33 % 38.11 % 34.64 % 37.42 % 25.67 % Efficiency ratio excluding certain items For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, 2023 2023 2023 2023 2022 2023 2022 Net interest income, tax equated $ 33,494 $ 34,448 $ 35,273 $ 37,374 $ 30,212 $ 140,588 $ 127,530 Noninterest income 12,156 9,831 9,449 10,425 8,200 41,861 44,202 Legal settlement income 0 0 0 0 0 0 (8,375 ) Net (gain) on loan sale (915 ) 0 0 0 0 (915 ) 0 Net loss (gain) on asset/security sales 217 764 (6 ) (91 ) 338 883 435 Net interest income and noninterest income adjusted 44,952 45,043 44,716 47,708 38,750 182,417 163,792 Noninterest expense less intangible amortization 26,394 26,991 25,163 29,813 20,393 108,361 92,438 Charitable donation 0 0 0 0 0 0 6,000 Legal settlement expense 0 785 0 0 0 785 0 Contingent legal settlement expense 0 0 0 0 0 0 2,075 Employee severence 1,010 0 0 0 0 1,010 0 Acquisition related costs 452 268 442 4,313 584 5,475 4,070 Noninterest expense adjusted 24,932 25,938 24,721 25,500 19,809 101,091 80,293 Efficiency ratio excluding certain items 55.46 % 57.58 % 55.28 % 53.45 % 51.12 % 55.42 % 49.02 % Net interest margin excluding acquisition marks and PPP interest and fees For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, 2023 2023 2023 2023 2022 2023 2022 Net interest income, tax equated $ 33,494 $ 34,448 $ 35,273 $ 37,374 $ 30,212 $ 140,588 $ 127,530 Acquisition marks 2,475 2,959 2,884 2,628 174 10,946 1,793 PPP interest and fees 1 1 3 0 10 5 1,392 Adjusted and annualized net interest income 124,072 125,952 129,544 138,984 120,112 129,637 124,345 Average earning assets 4,816,409 4,820,888 4,830,910 4,866,263 4,047,343 4,833,471 4,015,951 Less PPP average balances 229 247 277 310 485 254 11,914 Adjusted average earning assets 4,816,180 4,820,641 4,830,633 4,865,953 4,046,858 4,833,217 4,004,037 Net interest margin excluding marks and PPP interest and fees 2.58 % 2.61 % 2.68 % 2.86 % 2.97 % 2.68 % 3.11 % View source version on businesswire.com: https://www.businesswire.com/news/home/20240123953680/en/Contacts Kevin J. Helmick, President and CEO 330.533.3341 Email: exec@farmersbankgroup.com
Earnings per diluted share of $0.39 ($0.41 excluding certain items, non-GAAP) for the fourth quarter of 2023 164 consecutive quarters of profitability Recorded a $915,000 gain during the quarter by selling $5.8 million of nonaccrual/troubled commercial loans Loan growth of $29.6 million, or 3.7% annualized, for the fourth quarter of 2023 Excluding impact of commercial loan sale - loan growth of $37.7 million, or 4.8% annualized, for fourth quarter 2023 Continued strong asset quality with non-performing assets to total assets of 0.30% as of December 31, 2023 Return on average assets of 1.17% for the fourth quarter of 2023 ROAE and ROATE (non-GAAP) of 18.0% and 43.8%, respectively, for the fourth quarter of 2023
Farmers National Banc Corp. (“Farmers” or the “Company”) (NASDAQ: FMNB) today announced net income of $14.6 million, or $0.39 per diluted share, for the three months ended December 31, 2023, compared to $13.4 million, or $0.39 per diluted share, for the three months ended December 31, 2022. Net income for the fourth quarter of 2023 included pretax items of $452,000 for acquisition related costs, a gain of $915,000 on the sale of commercial loans, $1.0 million in expense for severance/contract payouts for staff resignations, and combined net losses of $217,000 on the sale of securities and the sale of other assets. Excluding these items (non-GAAP), net income for the fourth quarter of 2023 increased 7.8% to $15.2 million from $14.1 million for the same period last year. Net income per diluted share excluding these items (non-GAAP), was $0.41 for the fourth quarter of 2023, compared to $0.42 per diluted share for the fourth quarter of 2022. Kevin J. Helmick, President and CEO, stated “Our solid fourth quarter results demonstrate our success enhancing profitability throughout an extremely challenging operating environment. This is a testament to our team’s focus on supporting our customers, maintaining excellent asset quality, and controlling operating costs. We expect the economic environment will remain fluid in 2024, but we believe Farmers is well positioned to navigate this period as a result of the value our team members provide our Ohio and Pennsylvania communities, as well as our continued focus on maintaining strong asset quality and profitability.” Balance Sheet The Company’s total assets were $5.08 billion at December 31, 2023, compared to $4.97 billion at September 30, 2023 and $4.08 billion at December 31, 2022. The increase from December was primarily due to the acquisition of Emclaire Financial Corp. (“Emclaire”) which added $977.6 million in assets in the first quarter of 2023. Loans have increased by $793.4 million since December 31, 2022 and $29.6 million, or 3.7% annualized, since September 30, 2023. Emclaire was responsible for $740.7 million of the increase in loans since December 31, 2022. Growth in the fourth quarter of 2023 was concentrated in commercial real estate. The Company had securities available for sale of $1.30 billion at December 31, 2023, compared to $1.21 billion at September 30, 2023, and $1.27 billion at December 31, 2022. The increase since December is due to the acquisition of Emclaire which added $127.0 million in available for sale securities and a decrease in the amount of gross unrealized losses on the portfolio which totaled $266.5 million at December 31, 2022, compared to a gross unrealized loss of $217.1 million at December 31, 2023. The Company also had sales and runoff from the portfolio during the twelve months ended December 31, 2023. Bond market volatility was extreme in 2023 and this volatility may remain in 2024. The Company expects that it will continue to allow the size of the securities portfolio to shrink via runoff to optimize profitability and provide liquidity for future loan growth. At December 31, 2023, deposits totaled $4.18 billion compared to $4.26 billion at September 30, 2023 and $4.51 billion at December 31, 2022. During the fourth quarter of 2023, the Company allowed $254.3 million in brokered time deposits to mature and replaced the funding with less expensive short term borrowings. In addition, public fund seasonality resulted in $95.3 million in shrinkage during the quarter offset by $15.3 million in growth in other deposit categories. The increase from December 31, 2022, was driven by $875.8 million in deposits assumed in the acquisition of Emclaire offset by a decline in brokered time deposits of $138.1 million and runoff in other deposit categories. Total stockholders’ equity increased to $404.4 million at December 31, 2023, from $316.0 million at September 30, 2023, and $292.3 million at December 31, 2022. The year-over-year increase was primarily due to the acquisition of Emclaire and an increase in retained earnings and a decrease in the unrealized loss from accumulated other comprehensive income. The increase in total stockholders’ equity since September 30, 2023, was primarily due to a decline in the accumulated other comprehensive loss which decreased $79.7 million as market rates dropped rapidly during the fourth quarter of 2023. Credit Quality As of December 31, 2023, the Company’s non-performing loans totaled $15.1 million compared to $18.4 million at September 30, 2023, and $14.8 million at December 31, 2022. The year-over-year increase was primarily due to the addition of Emclaire while the decrease since September 30 was due to the sale of non-performing loans. The non-performing loans to total loans ratio was 0.47% at December 31, 2023, 0.58% at September 30, 2023, and 0.62% at December 31, 2022. Non-performing assets to total assets was 0.30% at December 31, 2023, 0.37% at September 30, 2023, and 0.36% at December 31, 2022. The Company also continues to experience low levels of early-stage delinquencies, defined as loans 30-89 days delinquent. At December 31, 2023, these early-stage delinquencies totaled $16.7 million, or 0.52% of total loans compared to $13.3 million, or 0.42% of total loans at September 30, 2023, and $9.6 million, or 0.40% of total loans, at December 31, 2022. The Company recorded provision for credit losses and unfunded commitments of $286,000 for the fourth quarter of 2023 compared to $243,000 for the third quarter of 2023 and $416,000 for the fourth quarter of 2022. Annualized net charge-offs as a percentage of average loans were 0.10% for the three months ended December 31, 2023, compared to 0.10% for the same period in 2022. For the year ended December 31, 2023, net charge-offs as a percentage of average loans were 0.07% compared to 0.11% for last year. The allowance for credit losses to total loans was 1.08% at December 31, 2023, compared to 1.10% at September 30, 2023, and 1.12% at December 31, 2022. Net Interest Income Net interest income for the three months ended December 31, 2023, totaled $32.8 million in the fourth quarter of 2023 compared to $33.8 million in the third quarter of 2023 and $29.4 million for the fourth quarter of 2022. Earning assets were greater in the fourth quarter of 2023 compared to the fourth quarter of 2022 due to the acquisition of Emclaire but this was partially offset by a decline of 21 basis point in the net interest margin. The net interest margin was 2.78% for the quarter ending December 31, 2023, compared to 2.86% in the third quarter of 2023 and 2.99% for the fourth quarter of 2022. Excluding the impact of acquisition marks and related accretion and PPP interest and fees, the net interest margin (non-GAAP) for the fourth quarter of 2023 was 2.58% compared to 2.61% for the third quarter of 2023 and 2.97% for the fourth quarter of 2022. The decline in net interest margin between the fourth quarter of 2023 and the fourth quarter of 2022 was due to increases in funding costs outstripping the increase in yields on earning assets. This increase in funding costs has been due to the rapid increase in deposit rates due to intense competition for deposits, the Federal Reserve’s rate hiking cycle, and runoff of deposit balances which are being replaced with more costly wholesale funding. Noninterest Income The Company recorded $12.2 million in noninterest income during the fourth quarter of 2023 compared to $8.2 million during the fourth quarter of 2022. Service charges on deposit accounts increased to $1.7 million in the fourth quarter of 2023 compared to $1.2 million for the same period in 2022 primarily due to the acquisition of Emclaire. Bank owned life insurance income, other mortgage banking fee income and debit card income have also increased in the fourth quarter of 2023 compared to the fourth quarter of 2022 due to the Emclaire acquisition. Trust fees increased by $283,000 in the fourth quarter of 2023 compared to the fourth quarter of 2022 as growth in this line of business continued. Insurance agency commissions also exhibited outstanding growth as insurance commissions increased by $407,000 for the quarter ending December 31, 2023 compared to same quarter a year ago. Growth for the year in this business has been solid as pricing in the insurance business has been very strong and increased annuity sales have bolstered results. Investment commissions are up slightly for the quarter ended December 31, 2023 compared to the quarter ended December 31, 2022, as markets have been resilient in 2023 and the Company begins to expand into Pennsylvania. Net gains on the sale of loans have increased by over $1.0 million between the fourth quarter of 2022 and the fourth quarter of 2023. Of this increase, $915,000 was driven by the sale of commercial loans discussed previously. Traditional gains on the sale of mortgage loans remain sluggish due to high interest rates. Other noninterest income increased $910,000 in the fourth quarter of 2023 compared to the prior year’s fourth quarter. This increase was primarily driven by higher income associated with the Company’s investments in SBIC funds. The earnings on these funds can be volatile from period to period. Noninterest Expense The Company reported noninterest expense of $27.0 million for the three months ended December 31, 2023, compared to $21.1 million for the three months ended December 31, 2022. The increase in expense is primarily due to the acquisition of Emclaire along with the $1.0 million in severance expense associated with staff resignations. Salaries and employee benefits increased $3.5 million to $14.9 million in the fourth quarter of 2023 compared to $11.4 million during the same period in 2022. The acquisition of Emclaire, normal raise activity and the severance were the primary reasons for the increase. Occupancy and equipment expense increased $1.1 million primarily due to the acquisition. FDIC and state and local taxes increased $474,000 due to the acquisition and the increase in the rate paid for FDIC insurance in 2023. Core processing charges increased due to the acquisition. Merger related costs were $452,000 for the fourth quarter of 2023 compared to $584,000 in the fourth quarter of 2022. Other noninterest expense increased due to the acquisition. Liquidity At December 31, 2023, the Company’s loan to deposit ratio was 76.6% and the Company’s average deposit balance per account (excluding collateralized deposits) was $23,678. The Company has access to an additional $819.5 million of FHLB borrowing capacity at December 31, 2023 along with $214.3 million of available for sale securities that are not pledged. With a deep and diverse deposit base and access to a large amount of additional funding capacity, the Company is well positioned to navigate the current banking landscape. About Farmers National Banc Corp. Founded in 1887, Farmers National Banc Corp. is a diversified financial services company headquartered in Canfield, Ohio, with $5.1 billion in banking 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 64 banking locations in Mahoning, Trumbull, Columbiana, Portage, Stark, Wayne, Medina, Geauga and Cuyahoga Counties in Ohio and Beaver, Butler, Allegheny, Jefferson, Clarion, Venango, Clearfield, Mercer, Elk and Crawford Counties in Pennsylvania, and Farmers Trust Company, which operates five trust offices and offers services in the same geographic markets. Total wealth management assets under care at December 31, 2023 are $3.5 billion. 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, return on average tangible assets, return on average tangible equity, net income excluding costs related to acquisition activities and certain items, return on average assets excluding merger costs and certain items, return on average equity excluding merger costs and certain items, net interest margin excluding acquisition marks and related accretion and PPP interest and fees and efficiency ratio less certain items, 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 to their GAAP equivalents are included in the tables following Consolidated Financial Highlights below. Cautionary Statements Regarding Forward-Looking Statements We make statements in this news release and our related investor conference call, and we may from time to time make other statements, that are 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 certain forward-looking statements include significant changes in near-term local, regional, and U.S. economic conditions including those resulting from continued high rates of inflation, tightening monetary policy of the Board of Governors of the Federal Reserve, and possibility of a recession; Farmers’ failure to integrate Emclaire with Farmers in accordance with expectations; deviations from performance expectations related to Emclaire; continuing impacts from the length and extent of the economic impacts of the COVID-19 pandemic; and the other factors contained in Farmers’ Annual Report on Form 10-K for the year ended December 31, 2022 and subsequent Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (SEC) and 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 For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, Percent 2023 2023 2023 2023 2022 2023 2022 Change Total interest income $ 55,069 $ 54,229 $ 52,804 $ 51,233 $ 38,111 $ 213,335 $ 142,086 50.1 % Total interest expense 22,239 20,461 18,226 14,623 8,679 75,549 17,920 321.6 % Net interest income 32,830 33,768 34,578 36,610 29,432 137,786 124,166 11.0 % Provision (credit) for credit losses 286 243 25 8,599 416 9,153 1,122 715.8 % Noninterest income 12,156 9,831 9,449 10,425 8,200 41,861 44,202 -5.3 % Acquisition related costs 452 268 442 4,313 584 5,475 4,070 34.5 % Other expense 26,520 27,448 25,944 26,409 20,511 106,321 90,341 17.7 % Income before income taxes 17,728 15,640 17,616 7,714 16,121 58,698 72,835 -19.4 % Income taxes 3,151 2,326 2,650 639 2,765 8,766 12,238 -28.4 % Net income $ 14,577 $ 13,314 $ 14,966 $ 7,075 $ 13,356 $ 49,932 $ 60,597 -17.6 % Average diluted shares outstanding 37,426 37,379 37,320 37,933 33,962 37,498 33,929 Basic earnings per share 0.39 0.36 0.40 0.19 0.39 1.34 1.79 Diluted earnings per share 0.39 0.36 0.40 0.19 0.39 1.33 1.79 Cash dividends per share 0.17 0.17 0.17 0.17 0.17 0.68 0.65 Performance Ratios Net Interest Margin (Annualized) 2.78 % 2.86 % 2.92 % 3.07 % 2.99 % 2.91 % 3.18 % Efficiency Ratio (Tax equivalent basis) 57.84 % 60.11 % 56.28 % 62.53 % 52.59 % 59.24 % 53.68 % Return on Average Assets (Annualized) 1.17 % 1.06 % 1.18 % 0.56 % 1.31 % 0.99 % 1.46 % Return on Average Equity (Annualized) 17.98 % 14.49 % 16.12 % 7.71 % 20.16 % 13.97 % 17.24 % Dividends to Net Income 43.68 % 47.82 % 42.54 % 90.50 % 43.10 % 25.64 % 36.31 % Other Performance Ratios (Non-GAAP) Return on Average Tangible Assets 1.22 % 1.09 % 1.23 % 0.58 % 1.34 % 1.03 % 1.50 % Return on Average Tangible Equity 43.77 % 30.29 % 33.55 % 16.31 % 32.81 % 30.23 % 24.31 % Consolidated Statements of Financial Condition Dec. 31, Sept. 30, June 30, March 31, Dec. 31, 2023 2023 2023 2023 2022 Assets Cash and cash equivalents $ 103,658 $ 93,923 $ 116,063 $ 128,001 $ 75,551 Debt securities available for sale 1,299,701 1,210,736 1,316,878 1,355,449 1,268,025 Other investments 35,311 35,342 44,975 39,670 33,444 Loans held for sale 3,711 1,910 2,197 1,703 858 Loans 3,198,127 3,168,554 3,155,200 3,152,339 2,404,750 Less allowance for credit losses 34,440 34,753 34,957 36,011 26,978 Net Loans 3,163,687 3,133,801 3,120,243 3,116,328 2,377,772 Other assets 472,282 495,451 473,098 468,735 326,550 Total Assets $ 5,078,350 $ 4,971,163 $ 5,073,454 $ 5,109,886 $ 4,082,200 Liabilities and Stockholders' Equity Deposits Noninterest-bearing $ 1,026,630 $ 1,039,524 $ 1,084,232 $ 1,106,870 $ 896,957 Interest-bearing 3,150,756 3,217,869 3,165,381 3,207,121 2,526,760 Brokered time deposits 0 254,257 21,135 82,169 138,051 Total deposits 4,177,386 4,511,650 4,270,748 4,396,160 3,561,768 Other interest-bearing liabilities 443,663 88,550 388,437 292,324 183,211 Other liabilities 52,886 54,981 47,278 46,760 44,926 Total liabilities 4,673,935 4,655,181 4,706,463 4,735,244 3,789,905 Stockholders' Equity 404,415 315,982 366,991 374,642 292,295 Total Liabilities and Stockholders' Equity $ 5,078,350 $ 4,971,163 $ 5,073,454 $ 5,109,886 $ 4,082,200 Period-end shares outstanding 37,503 37,489 37,457 37,439 34,055 Book value per share $ 10.78 $ 8.43 $ 9.80 $ 10.01 $ 8.58 Tangible book value per share (Non-GAAP)* 5.71 3.33 4.67 4.84 5.60 * Tangible book value per share is calculated by dividing tangible common equity by outstanding shares For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, Capital and Liquidity 2023 2023 2023 2023 2022 2023 2022 Common Equity Tier 1 Capital Ratio (a) 10.63 % 10.37 % 10.25 % 10.04 % 13.71 % Total Risk Based Capital Ratio (a) 14.08 % 13.83 % 13.76 % 13.60 % 17.79 % Tier 1 Risk Based Capital Ratio (a) 11.11 % 10.86 % 10.74 % 10.54 % 14.32 % Tier 1 Leverage Ratio (a) 8.02 % 7.84 % 7.68 % 7.43 % 9.84 % Equity to Asset Ratio 7.96 % 6.36 % 7.23 % 7.33 % 7.16 % Tangible Common Equity Ratio (b) 4.38 % 2.61 % 3.58 % 3.69 % 4.79 % Net Loans to Assets 62.30 % 63.04 % 61.50 % 60.99 % 58.25 % Loans to Deposits 76.56 % 70.23 % 73.88 % 71.71 % 67.52 % Asset Quality Non-performing loans $ 15,063 $ 18,368 $ 17,956 $ 17,959 $ 14,803 Non-performing assets 15,321 18,522 18,167 18,053 14,876 Loans 30 - 89 days delinquent 16,705 13,314 12,321 10,219 9,605 Charged-off loans 972 525 971 469 754 2,937 3,304 Recoveries 172 139 172 198 184 681 646 Net Charge-offs 800 386 799 271 570 2,256 2,658 Annualized Net Charge-offs to Average Net Loans 0.10 % 0.05 % 0.10 % 0.03 % 0.10 % 0.07 % 0.11 % Allowance for Credit Losses to Total Loans 1.08 % 1.10 % 1.11 % 1.14 % 1.12 % Non-performing Loans to Total Loans 0.47 % 0.58 % 0.57 % 0.57 % 0.62 % Loans 30 - 89 Days Delinquent to Total Loans 0.52 % 0.42 % 0.39 % 0.32 % 0.40 % Allowance to Non-performing Loans 228.64 % 189.20 % 194.68 % 200.52 % 182.25 % Non-performing Assets to Total Assets 0.30 % 0.37 % 0.36 % 0.35 % 0.36 % (a) December 31, 2023 ratio is estimated (b) This is a non-GAAP financial measure. A reconciliation to GAAP is shown below For the Three Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, End of Period Loan Balances 2023 2023 2023 2023 2022 Commercial real estate $ 1,335,806 $ 1,295,847 $ 1,284,974 $ 1,286,830 $ 1,028,050 Commercial 346,354 357,691 362,664 361,845 293,643 Residential real estate 843,697 842,729 849,533 853,074 475,791 HELOC 142,441 140,772 138,535 137,319 132,179 Consumer 259,784 261,136 260,326 260,596 221,260 Agricultural loans 261,288 261,738 250,807 244,938 246,937 Total, excluding net deferred loan costs $ 3,189,370 $ 3,159,913 $ 3,146,839 $ 3,144,602 $ 2,397,860 For the Three Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, End of Period Customer Deposit Balances 2023 2023 2023 2023 2022 Noninterest-bearing demand $ 1,026,630 $ 1,039,524 $ 1,084,232 $ 1,106,870 $ 896,957 Interest-bearing demand 1,362,609 1,426,349 1,383,326 1,473,001 1,224,884 Money market 593,975 588,043 610,051 599,037 435,369 Savings 468,890 488,991 511,642 535,321 441,978 Certificate of deposit 720,259 714,486 660,362 599,762 424,529 Total customer deposits $ 4,172,363 $ 4,257,393 $ 4,249,613 $ 4,313,991 $ 3,423,717 For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, Noninterest Income 2023 2023 2023 2023 2022 2023 2022 Service charges on deposit accounts $ 1,677 $ 1,712 $ 1,501 $ 1,432 $ 1,203 $ 6,322 $ 4,716 Bank owned life insurance income, including death benefits 617 694 584 547 590 2,442 1,810 Trust fees 2,656 2,617 2,248 2,587 2,373 10,108 9,638 Insurance agency commissions 1,540 1,116 1,332 1,456 1,133 5,444 4,402 Security gains (losses), including fair value changes for equity securities 19 (624 ) 13 121 (366 ) (471 ) (454 ) Retirement plan consulting fees 357 360 382 307 337 1,406 1,389 Investment commissions 589 520 476 393 508 1,978 2,183 Net gains on sale of loans 1,280 395 406 310 242 2,391 2,062 Other mortgage banking fee income (loss), net 139 185 234 153 98 711 291 Debit card and EFT fees 1,697 1,763 1,810 1,789 1,407 7,059 5,814 Other noninterest income 1,585 1,093 463 1,330 675 4,471 12,351 Total Noninterest Income $ 12,156 $ 9,831 $ 9,449 $ 10,425 $ 8,200 $ 41,861 $ 44,202 For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, Noninterest Expense 2023 2023 2023 2023 2022 2023 2022 Salaries and employee benefits $ 14,871 $ 14,233 $ 13,625 $ 14,645 $ 11,385 $ 57,374 $ 45,013 Occupancy and equipment 3,896 3,810 3,859 3,869 2,753 15,434 11,379 FDIC insurance and state and local taxes 1,484 1,648 1,494 1,222 1,010 5,848 3,951 Professional fees 1,004 1,043 1,190 1,114 938 4,351 6,114 Merger related costs 452 268 442 4,313 584 5,475 4,070 Advertising 414 492 478 409 472 1,793 1,947 Intangible amortization 578 725 1,222 909 702 3,434 1,973 Core processing charges 1,057 1,274 1,144 1,164 742 4,639 3,348 Other noninterest expenses 3,216 4,223 2,932 3,077 2,509 13,448 16,616 Total Noninterest Expense $ 26,972 $ 27,716 $ 26,386 $ 30,722 $ 21,095 $ 111,796 $ 94,411 Business Combination Consideration Cash $ 33,440 Stock 59,202 Fair value of total consideration transferred $ 92,642 Fair value of assets acquired Cash and cash equivalents $ 20,265 Securities available for sale 126,970 Other investments 7,795 Loans, net 740,659 Premises and equipment 14,808 Bank owned life insurance 22,485 Core deposit intangible 19,249 Current and deferred taxes 17,708 Other assets 7,682 Total assets acquired 977,621 Fair value of liabilities assumed Deposits 875,813 Short-term borrowings 75,000 Accrued interest payable and other liabilities 7,104 Total liabilities 957,917 Net assets acquired $ 19,704 Goodwill created 72,938 Total net assets acquired $ 92,642 Average Balance Sheets and Related Yields and Rates (Dollar Amounts in Thousands) Three Months Ended Three Months Ended December 31, 2023 December 31, 2022 AVERAGE YIELD/ AVERAGE YIELD/ BALANCE INTEREST (1) RATE (1) BALANCE INTEREST (1) RATE (1) EARNING ASSETS Loans (2) $ 3,188,581 $ 44,868 5.63 % $ 2,394,872 $ 29,092 4.86 % Taxable securities 1,113,107 6,536 2.35 1,105,545 5,556 2.01 Tax-exempt securities (2) 411,860 3,235 3.14 453,917 3,580 3.15 Other investments 37,625 529 5.62 33,901 326 3.85 Federal funds sold and other 65,236 564 3.46 59,108 336 2.27 Total earning assets 4,816,409 55,732 4.63 4,047,343 38,890 3.84 Nonearning assets 163,905 33,154 Total assets $ 4,980,314 $ 4,080,497 INTEREST-BEARING LIABILITIES Time deposits $ 712,485 $ 6,291 3.53 % $ 370,914 $ 1,261 1.36 % Brokered time deposits 96,634 1,315 5.44 115,021 1,034 3.60 Savings deposits 1,068,465 2,918 1.09 871,584 879 0.40 Demand deposits - interest bearing 1,393,252 7,922 2.27 1,301,475 3,805 1.17 Short term borrowings 206,826 2,749 5.32 85,641 777 3.63 Long term borrowings 88,609 1,043 4.71 88,138 922 4.18 Total interest-bearing liabilities $ 3,566,271 22,238 2.49 $ 2,832,773 8,678 1.23 NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS' EQUITY Demand deposits - noninterest bearing 1,035,405 938,881 Other liabilities 54,306 43,904 Stockholders' equity 324,332 264,939 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,980,314 $ 4,080,497 Net interest income and interest rate spread $ 33,494 2.14 % $ 30,212 2.61 % Net interest margin 2.78 % 2.99 % (1) Interest and yields are calculated on a tax-equivalent basis where applicable. (2) For 2023, adjustments of $86 thousand and $577 thousand, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2022, adjustments of $72 thousand and $707 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 21%, less disallowances. Twelve Months Ended Twelve Months Ended December 31, 2023 December 31, 2022 AVERAGE YIELD/ AVERAGE YIELD/ BALANCE INTEREST (1) RATE (1) BALANCE INTEREST (1) RATE (1) EARNING ASSETS Loans (2) $ 3,155,858 $ 172,161 5.46 % $ 2,358,724 $ 108,100 4.58 % Taxable securities 1,143,547 26,231 2.29 1,081,966 20,843 1.93 Tax-exempt securities (2) 419,557 13,283 3.17 465,855 14,952 3.21 Other investments 39,559 1,986 5.02 33,153 871 2.63 Federal funds sold and other 74,950 2,476 3.30 76,253 684 0.90 Total earning assets 4,833,471 216,137 4.47 4,015,951 145,450 3.62 Nonearning assets 205,683 128,757 Total assets $ 5,039,154 $ 4,144,708 INTEREST-BEARING LIABILITIES Time deposits $ 654,717 $ 19,462 2.97 % $ 360,687 $ 3,044 0.84 % Brokered time deposits 132,895 6,204 4.67 56,965 1,240 2.18 Savings deposits 1,113,561 9,899 0.89 846,418 1,352 0.16 Demand deposits - interest bearing 1,415,425 27,541 1.95 1,392,058 7,449 0.54 Short term borrowings 160,964 8,357 5.19 55,668 1,408 2.53 Long term borrowings 88,439 4,086 4.62 87,972 3,427 3.90 Total interest-bearing liabilities $ 3,566,001 75,549 2.12 $ 2,799,768 17,920 0.64 NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS' EQUITY Demand deposits - noninterest bearing $ 1,065,389 $ 959,294 Other liabilities 50,302 34,180 Stockholders' equity 357,462 351,466 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,039,154 $ 4,144,708 Net interest income and interest rate spread $ 140,588 2.35 % $ 127,530 2.98 % Net interest margin 2.91 % 3.18 % (1) Interest and yields are calculated on a tax-equivalent basis where applicable. (2) For 2023, adjustments of $353 thousand and $2.4 million, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2022, adjustments of $310 thousand and $3.1 million, 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 21%, less disallowances. Reconciliation of Total Assets to Tangible Assets For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, 2023 2023 2023 2023 2022 2023 2022 Total Assets $ 5,078,350 $ 4,971,163 $ 5,073,454 $ 5,109,886 $ 4,082,200 $ 5,078,350 $ 4,082,200 Less Goodwill and other intangibles 190,288 191,326 192,052 193,273 101,666 190,288 101,666 Tangible Assets $ 4,888,062 $ 4,779,837 $ 4,881,402 $ 4,916,613 $ 3,980,534 $ 4,888,062 $ 3,980,534 Average Assets 4,980,314 5,058,969 5,070,444 5,085,009 4,080,497 5,039,154 4,144,708 Less average Goodwill and other intangibles 191,108 191,804 192,972 193,368 102,126 192,306 102,151 Average Tangible Assets $ 4,789,206 $ 4,867,165 $ 4,877,472 $ 4,891,641 $ 3,978,371 $ 4,846,848 $ 4,042,557 Reconciliation of Common Stockholders' Equity to Tangible Common Equity For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, 2023 2023 2023 2023 2022 2023 2022 Stockholders' Equity $ 404,415 $ 315,982 $ 366,991 $ 374,642 $ 292,295 $ 404,415 $ 292,295 Less Goodwill and other intangibles 190,288 191,326 192,052 193,273 101,666 190,288 101,666 Tangible Common Equity $ 214,127 $ 124,656 $ 174,939 $ 181,369 $ 190,629 $ 214,127 $ 190,629 Average Stockholders' Equity 324,332 367,600 371,421 366,851 264,939 357,462 351,466 Less average Goodwill and other intangibles 191,108 191,804 192,972 193,368 102,126 192,306 102,151 Average Tangible Common Equity $ 133,224 $ 175,796 $ 178,449 $ 173,483 $ 162,813 $ 165,156 $ 249,315 Reconciliation of Net Income, Less Merger and Certain Items For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, 2023 2023 2023 2023 2022 2023 2022 Net income $ 14,577 $ 13,314 $ 14,966 $ 7,075 $ 13,356 $ 49,932 $ 60,597 Acquisition related costs - after tax 358 234 354 3,449 475 4,395 3,290 Acquisition related provision - after tax 0 0 0 6,077 0 6,077 0 Employee severence - after tax 798 0 0 0 0 798 0 Lawsuit settlement income - after tax 0 0 0 0 0 0 (6,616 ) Lawsuit settlement contingent legal expense - after tax 0 0 0 0 0 0 1,639 Lawsuit settlement expense - after tax 0 620 0 0 0 620 0 Charitable donation - after tax 0 0 0 0 0 0 4,740 Net (gain) on loan sale - after tax (723 ) 0 0 0 0 (723 ) 0 Net loss (gain) on asset/security sales - after tax 171 604 (5 ) (72 ) 268 698 344 Net income - Adjusted $ 15,181 $ 14,772 $ 15,315 $ 16,529 $ 14,099 $ 61,797 $ 63,994 Diluted EPS excluding merger and certain items $ 0.41 $ 0.40 $ 0.41 $ 0.44 $ 0.42 $ 1.65 $ 1.89 Return on Average Assets excluding merger and certain items (Annualized) 1.22 % 1.17 % 1.21 % 1.30 % 1.36 % 1.23 % 1.54 % Return on Average Equity excluding merger and certain items (Annualized) 18.72 % 16.07 % 16.49 % 18.02 % 21.29 % 17.29 % 18.21 % Return on Average Tangible Equity excluding acquisition costs and certain items (Annualized) 45.58 % 33.61 % 34.33 % 38.11 % 34.64 % 37.42 % 25.67 % Efficiency ratio excluding certain items For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, 2023 2023 2023 2023 2022 2023 2022 Net interest income, tax equated $ 33,494 $ 34,448 $ 35,273 $ 37,374 $ 30,212 $ 140,588 $ 127,530 Noninterest income 12,156 9,831 9,449 10,425 8,200 41,861 44,202 Legal settlement income 0 0 0 0 0 0 (8,375 ) Net (gain) on loan sale (915 ) 0 0 0 0 (915 ) 0 Net loss (gain) on asset/security sales 217 764 (6 ) (91 ) 338 883 435 Net interest income and noninterest income adjusted 44,952 45,043 44,716 47,708 38,750 182,417 163,792 Noninterest expense less intangible amortization 26,394 26,991 25,163 29,813 20,393 108,361 92,438 Charitable donation 0 0 0 0 0 0 6,000 Legal settlement expense 0 785 0 0 0 785 0 Contingent legal settlement expense 0 0 0 0 0 0 2,075 Employee severence 1,010 0 0 0 0 1,010 0 Acquisition related costs 452 268 442 4,313 584 5,475 4,070 Noninterest expense adjusted 24,932 25,938 24,721 25,500 19,809 101,091 80,293 Efficiency ratio excluding certain items 55.46 % 57.58 % 55.28 % 53.45 % 51.12 % 55.42 % 49.02 % Net interest margin excluding acquisition marks and PPP interest and fees For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31, 2023 2023 2023 2023 2022 2023 2022 Net interest income, tax equated $ 33,494 $ 34,448 $ 35,273 $ 37,374 $ 30,212 $ 140,588 $ 127,530 Acquisition marks 2,475 2,959 2,884 2,628 174 10,946 1,793 PPP interest and fees 1 1 3 0 10 5 1,392 Adjusted and annualized net interest income 124,072 125,952 129,544 138,984 120,112 129,637 124,345 Average earning assets 4,816,409 4,820,888 4,830,910 4,866,263 4,047,343 4,833,471 4,015,951 Less PPP average balances 229 247 277 310 485 254 11,914 Adjusted average earning assets 4,816,180 4,820,641 4,830,633 4,865,953 4,046,858 4,833,217 4,004,037 Net interest margin excluding marks and PPP interest and fees 2.58 % 2.61 % 2.68 % 2.86 % 2.97 % 2.68 % 3.11 % View source version on businesswire.com: https://www.businesswire.com/news/home/20240123953680/en/