Farmers National Banc Corp. Announces Earnings for First Quarter of 2023

Rhea-AI Summary

Farmers National Banc Corp (FMNB) reported earnings of $0.19 per diluted share for Q1 2023, down from $0.47 per share in Q1 2022. Net income of $7.1 million reflects a decline from $15.8 million year-over-year. Excluding acquisition-related charges, earnings would have been $0.44 per share. The company successfully integrated Emclaire Financial Corp with total assets increasing to $5.11 billion. Farmers repurchased 850,799 shares, representing 2.2% of outstanding stock. The efficiency ratio was 53.5%, while return on average assets was 1.30%. The increase in customer deposits to $4.31 billion was driven by the Emlenton acquisition and organic growth. However, the company faces heightened competition and rising funding costs amidst a volatile interest rate environment.

Positive

• Successful acquisition of Emclaire Financial Corp, adding $1.05 billion in assets.
• Repurchased 850,799 shares, or 2.2% of shares outstanding.
• Return on average assets (non-GAAP) of 1.30%.
• Increased customer deposits to $4.31 billion.
• Net interest income rose to $36.6 million from $31.2 million year-over-year.

Negative

• Net income decreased to $7.1 million from $15.8 million year-over-year.
• Earnings per share dropped to $0.19 from $0.47 in Q1 2022.
• Noninterest income fell to $10.4 million, down from $17.7 million in Q1 2022.
• Rising funding costs due to intense competition for deposits.

• Earnings per diluted share of $0.19 ($0.44 excluding certain items, non-GAAP) for the first quarter of 2023
• Completed the acquisition and systems integration of Emclaire Financial Corp.
• 161 consecutive quarters of profitability
• Repurchased 850,799 shares of FMNB common stock during the quarter, or 2.2% of shares outstanding
• Additional FHLB borrowing capacity of $656.1 million as of March 31, 2023
• Uninsured deposits are approximately 19.2% of customer deposit base
• Available for sale securities not pledged totaled $539.9 million at March 31, 2023
• Efficiency ratio, (excluding certain items, non-GAAP), of 53.5% for the first quarter of 2023
• Return on average assets, (excluding certain items, non-GAAP), was 1.30% for the first quarter of 2023
• ROAE and ROATE (excluding certain items, non-GAAP) 18.0% and 38.1%, respectively, for first quarter of 2023

CANFIELD, Ohio--(BUSINESS WIRE)-- Farmers National Banc Corp. (“Farmers” or the “Company”) (NASDAQ: FMNB) today announced net income of $7.1 million for the three months ended March 31, 2023 compared to $15.8 million for the three months ended March 31, 2022. Diluted earnings per share were $0.19 for the first quarter of 2023 compared to $0.47 for the first quarter of 2022. The results for the first quarter of 2023 included pretax items for acquisition related provision for credit loss expense of $7.7 million, $4.3 million for acquisition related costs and combined net gains of $91,000 on the sale of securities and the sale of other assets. Excluding these items (non-GAAP), net income for the first quarter of 2023 would have been $16.5 million, or $0.44 per diluted share.

Kevin J. Helmick, President and CEO, commented, “For over 136 years, Farmers has been dedicated to serving its local communities, while adhering to safe and sound banking principals. This has driven our legacy of financial success, allowing us to continually support our customers during both good and bad economic periods. As volatility within the macro-economic environment has increased, we have remained focused on serving our retail, commercial and wealth customers, controlling expenses, and managing capital levels. In addition, we continue to allocate capital to support our dividend policy and share repurchase program.”

“We remain well positioned to navigate the current challenges in the banking industry and interest rate environment, as a result of our experienced leadership team, diverse revenue streams, enhanced scale, and legendary customer service. I am proud of our team’s performance during the first quarter, and encouraged by the direction Farmers is headed,” concluded Mr. Helmick.

As previously announced, Farmers entered into an agreement and plan of merger with Emclaire Financial Corp. (formerly NASDAQ: EMCF), a Pennsylvania corporation (“Emclaire”), and the parent company of The Farmers National Bank of Emlenton (“Emlenton”) on March 23, 2022, the transaction was approved by Emclaire’s shareholders on July 20, 2022, received final regulatory approvals on December 2, 2022, and closed on January 1, 2023.

At the closing of the merger, Farmers issued 4.2 million shares of its common stock along with cash of $33.4 million, which represents a transaction value of approximately $92.6 million based on Farmers closing price of $14.12 on December 31, 2022. The transaction value has been allocated to assets acquired and liabilities assumed, including $741.7 million in gross loans, $216.2 million in other tangible assets, $875.8 million in deposits, $75.0 million in FHLB advances, $7.1 million in other liabilities and $92.6 million in goodwill and other intangible assets. Prior to closing, Emlenton incurred $4.6 million of merger-related costs.

Balance Sheet

The Company’s total assets increased to $5.11 billion at March 31, 2023 compared to $4.08 billion at December 31, 2022. The increase was primarily due to the acquisition of Emlenton which added $1.05 billion in assets to the balance sheet. Gross loans (excluding loans held for sale) increased by $747.6 million in the first quarter of 2023. This figure included $741.7 million in gross loans added from Emlenton and $5.9 million in organic loan growth.

Securities available for sale increased to $1.36 billion at March 31, 2023 from $1.27 billion at December 31, 2022. This increase was due to the addition of $127.0 million in available for sale securities from Emlenton and a reduction in the gross amount of unrealized losses which totaled $266.5 million at December 31, 2022 compared to a gross unrealized loss of $223.7 million at March 31, 2023. Offsetting these increases, the Company also had sales and runoff from the portfolio that totaled approximately $82.4 million in the first three months of 2023. The Company will continue to look to opportunistically shrink the size of the securities portfolio to increase liquidity and optimize profitability. The volatility in the bond market, however, is expected to continue in 2023, which may result in increased volatility in the fair value of the Company’s available for sale securities.

During the first quarter of 2023, total customer deposits (excluding brokered time deposits) increased to $4.31 billion from $3.42 billion at December 31, 2022. The increase was driven by the $875.8 million in deposits assumed in the acquisition of Emlenton along with $14.5 million in organic growth during the quarter. The Company continues to experience heightened competition from other banks, money market funds and the treasury market itself. In addition, it appears that some customers are utilizing deposit balances to counter the higher cost of living or running a business brought on by the higher inflationary environment. The Company expects competition for deposits to remain highly elevated for the foreseeable future which will continue to place pressure on funding costs.

Total stockholders’ equity increased from $292.3 million at December 31, 2022 to $374.6 million at March 31, 2023. The increase was primarily driven by the acquisition of Emlenton along with a decrease in the loss from accumulated other comprehensive income offset by increased treasury stock activity. The Company repurchased 850,799 shares of its common stock during the quarter. The accumulated other comprehensive loss declined $33.8 million between December 31, 2022 and March 31, 2023 as rates on U.S. treasury securities declined during the first quarter of 2023 and pricing on available for sale securities improved. The Company’s tangible book value per share (non-GAAP) was $4.84 at March 31, 2023 compared to $5.60 at December 31, 2022.

Liquidity

With the turmoil that the banking industry experienced in the first quarter of 2023, the Company has continued to monitor its deposit base and balance sheet composition as well as its access to other sources of liquidity. The Company continues to run a modest loan to customer deposit ratio of approximately 73.1% and the Company’s average deposit balance per account is only $28,918. In addition, the Company’s ratio of uninsured deposits is approximately 19.2% which is low compared to the banking institutions that experienced difficulty in the first quarter.

The Company also has access to an additional $656.1 million of FHLB borrowing capacity at March 31, 2023 along with $539.9 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 handle any future liquidity stress.

Credit Quality

During the first quarter of 2023, the Company recorded a provision for credit losses and unfunded commitments of $8.6 million. Of this figure, $7.7 million was due to the Emlenton acquisition. In connection with the acquisition, the Company recorded a provision for credit losses related to non-purchased credit deteriorated loans of $7.5 million along with a provision for unfunded commitments of $235,000. The Company also experienced net charge-offs of $271,000 during the first quarter of 2023. Net charge-offs as a percentage of average loans was 3 basis points for the quarter ended March 31, 2023.

The allowance for credit losses to total loans increased to 1.14% at March 31, 2023 compared to 1.12% at December 31, 2022. The Company recorded $1.0 million in the allowance for credit losses for Emlenton’s purchase credit deteriorated loans.

Non-performing loans (NPLs) were $18.0 million at March 31, 2023 compared to $14.8 million at December 31, 2022. This increase was primarily due to the addition of Emlenton. The NPL to loans ratio was 0.57% at March 31, 2023 compared to 0.62% at December 31, 2022. Non-performing assets to assets was 0.35% at March 31, 2023, down slightly from 0.36% at December 31, 2022. Early stage delinquencies, defined as 30-89 days delinquent, were $10.2 million, or 0.32% at March 31, 2023, compared to $9.6 million, or 0.40% of total loans, at December 31, 2022.

Net Interest Income

Net interest income totaled $36.6 million in the first quarter of 2023 compared to $31.2 million for the first quarter of 2022. A larger earning asset base due to the acquisition of Emlenton was the primary driver of this increase offset by a 20 basis point decline in the net interest margin. The net interest margin was 3.07% in the first quarter of 2023 compared to 2.99% in the fourth quarter of 2022 and 3.27% for the first quarter of 2022. The increase in net interest margin during the first quarter of 2023 compared to the prior quarter was due to the acquisition of Emlenton. The decline in net interest margin between the first quarter of 2023 and the first 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 continued Federal Reserve rate hiking cycle and runoff of deposit balances which are being replaced by much costlier wholesale funding. Excluding the impact of acquisition marks and related accretion and PPP interest and fees, the net interest margin (non-GAAP) for the first quarter of 2023 was 2.86% compared to 2.97% for the fourth quarter of 2022 and 3.12% for the first quarter of 2022.

Noninterest Income

For the three months ended March 31, 2023, noninterest income totaled $10.4 million compared to $17.7 million for the first quarter of 2022. The primary reason for the decrease in 2023 was the recognition of $8.4 million in income in 2022 for a legal settlement. Several categories of noninterest income increased year over year due to growth including trust fees and insurance commissions while other categories grew due to growth and the acquisition of Emlenton. Categories that increased year over year due to both reasons included service charges on deposit accounts, bank owned life insurance income, debit card income and other noninterest income. Net gains on the sale of loans dropped from $1.1 million in the first quarter of 2022 to $310,000 for the first quarter of 2023. This drop was caused by lower mortgage production compared to the prior year due to the dramatic increase in interest rates in the last year. The Company also recognized $121,000 in gains on the sale of securities for the first three months of 2023 compared to a loss on the sale of securities of $11,000 for the first quarter of 2022.

Noninterest Expense

Noninterest expense increased from $30.5 million during the three months ended March 31, 2022, to $30.7 million for the same period in 2023. During the first quarter of 2022, the Company made a charitable contribution of $6.0 million to the Farmers Charitable Foundation and incurred $2.1 million in legal costs associated with the legal settlement discussed above. Excluding these two items in 2022, noninterest expense increased $8.3 million in the first quarter of 2023 compared to the first quarter of 2022.

Salaries and employee benefits increased $2.8 million to $14.7 million in the first quarter of 2023 compared to the same period in 2022. The acquisition of Emlenton along with normal raise activity was the primary reason for the increase. Occupancy and equipment, FDIC and state and local taxes, intangible amortization and core processing charges all saw increases year over year primarily as a result of the Emlenton acquisition. Merger related costs were $4.3 million in the first quarter of 2023 compared to $1.9 million in the first quarter of 2022. Professional fees were $2.0 million lower in the first quarter of 2023 compared to the first quarter of 2022 due to the legal costs discussed previously while other noninterest expense was down $5.3 million for the first three months of 2023 due primarily to the charitable contribution.

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 65 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 March 31, 2023 are $3.1 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, efficiency ratio less one-time expenses, and allowance for credit losses to gross loans, excluding PPP loans and acquired loans, 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 and Emlenton with Farmers in accordance with expectations; deviations from performance expectations related to Emclaire and Emlenton; 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
	March 31,		Dec. 31,		Sept. 30,		June 30,		March 31,
	2023		2022		2022		2022		2022
Total interest income	$51,233		$38,111		$36,410		$34,286		$33,279
Total interest expense	14,623		8,679		4,629		2,575		2,037
Net interest income	36,610		29,432		31,781		31,711		31,242
Provision (credit) for credit losses	8,599		416		448		616		(358)
Noninterest income	10,425		8,200		8,827		9,477		17,698
Acquisition related costs	4,313		584		872		674		1,940
Other expense	26,409		20,511		20,527		20,787		28,516
Income before income taxes	7,714		16,121		18,761		19,111		18,842
Income taxes	639		2,765		3,315		3,160		2,998
Net income	$7,075		$13,356		$15,446		$15,951		$15,844
Average diluted shares outstanding	37,933		33,962		33,932		33,923		33,937
Basic earnings per share	0.19		0.39		0.46		0.47		0.47
Diluted earnings per share	0.19		0.39		0.46		0.47		0.47
Cash dividends per share	0.17		0.17		0.16		0.16		0.16
Performance Ratios
Net Interest Margin (Annualized)	3.07%		2.99%		3.21%		3.25%		3.27%
Efficiency Ratio (Tax equivalent basis)	62.53%		52.59%		50.55%		49.95%		61.36%
Return on Average Assets (Annualized)	0.56%		1.31%		1.48%		1.54%		1.52%
Return on Average Equity (Annualized)	7.71%		20.16%		18.71%		17.97%		13.89%
Dividends to Net Income	90.50%		43.10%		35.06%		33.95%		34.18%
Other Performance Ratios (Non-GAAP)
Return on Average Tangible Assets	0.58%		1.34%		1.52%		1.57%		1.55%
Return on Average Tangible Equity	16.31%		32.81%		27.06%		25.23%		17.92%

Consolidated Statements of Financial Condition
	March 31,		Dec. 31,		Sept. 30,		June 30,		March 31,
	2023		2022		2022		2022		2022
Assets
Cash and cash equivalents	$128,001		$75,551		$79,981		$65,458		$137,627
Securities available for sale	1,355,449		1,268,025		1,295,133		1,361,682		1,463,626
Other investments	39,670		33,444		34,399		34,451		34,019
Loans held for sale	1,703		858		2,142		2,714		1,904
Loans	3,152,339		2,404,750		2,399,981		2,374,485		2,304,971
Less allowance for credit losses	36,011		26,978		27,282		27,454		27,015
Net Loans	3,116,328		2,377,772		2,372,699		2,347,031		2,277,956
Other assets	468,735		326,550		335,668		303,028		290,723
Total Assets	$5,109,886		$4,082,200		$4,120,022		$4,114,364		$4,205,855
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing	$1,106,870		$896,957		$934,638		$983,713		$963,143
Interest-bearing	3,207,121		2,526,760		2,590,054		2,586,829		2,690,668
Brokered time deposits	82,169		138,051		42,459		54,996		40,000
Total deposits	4,396,160		3,561,768		3,567,151		3,625,538		3,693,811
Other interest-bearing liabilities	292,324		183,211		243,098		137,985		87,872
Other liabilities	46,760		44,926		44,154		29,392		30,286
Total liabilities	4,735,244		3,789,905		3,854,403		3,792,915		3,811,969
Stockholders' Equity	374,642		292,295		265,619		321,449		393,886
Total Liabilities
and Stockholders' Equity	$5,109,886		$4,082,200		$4,120,022		$4,114,364		$4,205,855
Period-end shares outstanding	37,439		34,055		34,060		34,032		34,008
Book value per share	$10.01		$8.58		$7.80		$9.45		$11.58
Tangible book value per share (Non-GAAP)*	4.84		5.60		4.79		6.46		8.58
* Tangible book value per share is calculated by dividing tangible common equity by outstanding shares
Capital and Liquidity
Common Equity Tier 1 Capital Ratio (a)	10.19%		13.71%		13.36%		13.30%		13.31%
Total Risk Based Capital Ratio (a)	13.80%		17.79%		17.44%		17.46%		17.59%
Tier 1 Risk Based Capital Ratio (a)	10.70%		14.32%		13.97%		13.92%		13.95%
Tier 1 Leverage Ratio (a)	7.38%		9.84%		10.24%		9.56%		9.56%
Equity to Asset Ratio	7.33%		7.16%		6.45%		7.81%		9.37%
Tangible Common Equity Ratio (b)	3.69%		4.79%		4.06%		5.47%		7.11%
Net Loans to Assets	60.99%		58.25%		57.59%		57.04%		54.16%
Loans to Deposits	71.71%		67.52%		67.28%		65.49%		62.40%
Asset Quality
Non-performing loans	$17,959		$14,803		$12,976		$14,107		$14,046
Non-performing assets	18,053		14,876		13,042		14,107		14,046
Loans 30 - 89 days delinquent	10,219		9,605		6,659		8,716		7,304
Charged-off loans	469		754		783		177		1,590
Recoveries	198		184		178		135		149
Net Charge-offs	271		570		605		42		1,441
Annualized Net Charge-offs to Average Net Loans	0.03%		0.10%		0.10%		0.01%		0.25%
Allowance for Credit Losses to Total Loans	1.14%		1.12%		1.14%		1.16%		1.17%
Non-performing Loans to Total Loans	0.57%		0.62%		0.54%		0.59%		0.61%
Allowance to Non-performing Loans	200.52%		182.25%		210.25%		194.61%		192.33%
Non-performing Assets to Total Assets	0.35%		0.36%		0.32%		0.34%		0.33%
(a) March 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
		March 31,		Dec. 31,		Sept. 30,		June 30,		March 31,
End of Period Loan Balances		2023		2022		2022		2022		2022
Commercial real estate		$1,286,830		$1,028,050		$1,028,484		$1,040,243		$1,000,972
Commercial		361,845		293,643		296,932		285,981		298,903
Residential real estate		853,074		475,791		474,014		464,489		455,501
HELOC		137,319		132,179		132,267		129,392		128,221
Consumer		260,596		221,260		222,706		218,219		192,586
Agricultural loans		244,938		246,937		239,081		230,477		224,845
Total, excluding net deferred loan costs		$3,144,602		$2,397,860		$2,393,484		$2,368,801		$2,301,028
		For the Three Months Ended
		March 31,		Dec. 31,		Sept. 30,		June 30,		March 31,
End of Period Customer Deposit Balances		2023		2022		2022		2022		2022
Noninterest-bearing demand		$1,106,870		$896,957		$934,638		$983,713		$963,143
Interest-bearing demand		1,473,001		1,224,884		1,399,227		1,416,129		1,476,092
Money market		599,037		435,369		393,005		372,723		389,375
Savings		535,321		441,978		460,709		455,555		455,353
Certificate of deposit		599,762		424,529		337,113		342,422		369,848
Total customer deposits		$4,313,991		$3,423,717		$3,524,692		$3,570,542		$3,653,811

	For the Three Months Ended
	March 31,		Dec. 31,		Sept. 30,		June 30,		March 31,
Noninterest Income	2023		2022		2022		2022		2022
Service charges on deposit accounts	$1,432		$1,203		$1,229		$1,139		$1,145
Bank owned life insurance income, including death benefits	547		590		406		405		409
Trust fees	2,587		2,373		2,370		2,376		2,519
Insurance agency commissions	1,456		1,133		1,136		1,086		1,047
Security gains (losses), including fair value changes for equity securities	121		(366)		(17)		(60)		(11)
Retirement plan consulting fees	307		337		332		323		397
Investment commissions	393		508		424		557		694
Net gains on sale of loans	310		242		326		365		1,129
Other mortgage banking fee income (loss), net	153		98		94		39		60
Debit card and EFT fees	1,789		1,407		1,463		1,528		1,416
Other noninterest income	1,330		675		1,064		1,719		8,893
Total Noninterest Income	$10,425		$8,200		$8,827		$9,477		$17,698
	For the Three Months Ended
	March 31,		Dec. 31,		Sept. 30,		June 30,		March 31,
Noninterest Expense	2023		2022		2022		2022		2022
Salaries and employee benefits	$14,645		$11,385		$10,724		$11,073		$11,831
Occupancy and equipment	3,869		2,753		3,028		2,918		2,680
FDIC insurance and state and local taxes	1,222		1,010		1,017		979		945
Professional fees	1,114		938		985		1,056		3,135
Merger related costs	4,313		584		872		674		1,940
Advertising	409		472		596		487		392
Intangible amortization	909		702		432		419		420
Core processing charges	1,164		742		738		1,123		745
Other noninterest expenses	3,077		2,509		3,007		2,732		8,368
Total Noninterest Expense	$30,722		$21,095		$21,399		$21,461		$30,456

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			16,103
Bank owned life insurance			22,485
Core deposit intangible			19,249
Current and deferred taxes			17,246
Other assets			6,387
Total assets acquired			977,159
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		$	19,242
Goodwill created			73,400
Total net assets acquired		$	92,642

Average Balance Sheets and Related Yields and Rates
(Dollar Amounts in Thousands)
	Three Months Ended				Three Months Ended
	March 31, 2023				March 31, 2022
	AVERAGE		YIELD/		AVERAGE		YIELD/
	BALANCE	INTEREST (1)	RATE (1)		BALANCE	INTEREST (1)	RATE (1)
EARNING ASSETS
Loans (2)	$3,136,494	$40,942	5.22%		$2,312,712	$25,646	4.44%
Taxable securities	1,171,596	6,550	2.24		1,007,963	4,587	1.82
Tax-exempt securities (2)	438,614	3,519	3.21		461,793	3,726	3.23
Other investments	36,564	376	4.11		31,122	130	1.67
Federal funds sold and other	82,995	610	2.94		117,916	48	0.16
Total earning assets	4,866,263	51,997	4.27		3,931,506	34,137	3.47
Nonearning assets	218,746				247,112
Total assets	$5,085,009				$4,178,618
INTEREST-BEARING LIABILITIES
Time deposits	$590,412	$3,339	2.26%		$378,675	$643	0.68%
Brokered time deposits	231,040	2,321	4.02		15,555	15	0.39
Savings deposits	1,153,588	1,954	0.68		843,371	167	0.08
Demand deposits - interest bearing	1,417,955	5,093	1.44		1,412,291	418	0.12
Short term borrowings	80,589	921	4.57		2,222	1	0.18
Long term borrowings	88,269	995	4.51		87,798	793	3.61
Total interest-bearing liabilities	$3,561,853	14,623	1.64		$2,739,912	2,037	0.30
NONINTEREST-BEARING LIABILITIES
AND STOCKHOLDERS' EQUITY
Demand deposits - noninterest bearing	1,107,422				956,499
Other liabilities	48,883				26,001
Stockholders' equity	366,851				456,206
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$5,085,009				$4,178,618
Net interest income and interest rate spread		$37,374	2.63%			$32,100	3.17%
Net interest margin			3.07%				3.27%
(1) Interest and yields are calculated on a tax-equivalent basis where applicable.
(2) For 2023, adjustments of $86 thousand and $678 thousand, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2022, adjustments of $84 thousand and $774 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.

Reconciliation of Total Assets to Tangible Assets
	For the Three Months Ended
	March 31,		Dec. 31,		Sept. 30,		June 30,		March 31,
	2023		2022		2022		2022		2022
Total Assets	$5,109,886		$4,082,200		$4,120,022		$4,114,364		$4,205,855
Less Goodwill and other intangibles	193,273		101,666		102,368		101,767		102,187
Tangible Assets	$4,916,613		$3,980,534		$4,017,654		$4,012,597		$4,103,668
Average Assets	5,085,009		4,080,497		4,164,855		4,155,719		4,178,618
Less average Goodwill and other intangibles	193,368		102,126		101,981		102,042		102,462
Average Tangible Assets	$4,891,641		$3,978,371		$4,062,874		$4,053,677		$4,076,156
Reconciliation of Common Stockholders' Equity to Tangible Common Equity
	For the Three Months Ended
	March 31,		Dec. 31,		Sept. 30,		June 30,		March 31,
	2023		2022		2022		2022		2022
Stockholders' Equity	$374,642		$292,295		$265,619		$321,449		$393,886
Less Goodwill and other intangibles	193,273		101,666		102,368		101,767		102,187
Tangible Common Equity	$181,369		$190,629		$163,251		$219,682		$291,699
Average Stockholders' Equity	366,851		264,939		330,300		354,981		456,206
Less average Goodwill and other intangibles	193,368		102,126		101,981		102,042		102,462
Average Tangible Common Equity	$173,483		$162,813		$228,319		$252,939		$353,744
Reconciliation of Net Income, Less Merger and Certain Items
	For the Three Months Ended
	March 31,		Dec. 31,		Sept. 30,		June 30,		March 31,
	2023		2022		2022		2022		2022
Net income	$7,075		$13,356		$15,446		$15,951		$15,844
Acquisition related costs - after tax	3,449		475		711		564		1,540
Acquisition related provision - after tax	6,077		0		0		0		0
Lawsuit settlement income - after tax	0		0		0		0		(6,616)
Lawsuit settlement contingent legal expense - after tax	0		0		0		0		1,639
Charitable donation - after tax	0		0		0		0		4,740
Net loss (gain) on asset/security sales - after tax	(72)		268		4		(25)		97
Net income - Adjusted	$16,529		$14,099		$16,161		$16,490		$17,244
Diluted EPS excluding merger and one-time items	$0.44		$0.42		$0.48		$0.49		$0.51
Return on Average Assets excluding merger and certain items (Annualized)	1.30%		1.36%		1.55%		1.59%		1.65%
Return on Average Equity excluding merger and certain items (Annualized)	18.02%		21.29%		19.57%		18.58%		15.12%
Return on Average Tangible Equity excluding acquisition costs and certain items (Annualized)	38.11%		34.64%		28.31%		26.08%		19.50%
Efficiency ratio excluding certain items
	For the Three Months Ended
	March 31,		Dec. 31,		Sept. 30,		June 30,		March 31,
	2023		2022		2022		2022		2022
Net interest income, tax equated	$37,374		$30,212		$32,636		$32,583		$32,100
Noninterest income	10,425		8,200		8,827		9,477		17,698
Legal settlement income	0		0		0		0		(8,375)
Net loss (gain) on asset/security sales	(91)		338		6		(32)		123
Net interest income and noninterest income adjusted	47,708		38,750		41,469		42,028		41,546
Noninterest expense less intangible amortization	29,813		20,393		20,967		21,042		30,036
Charitable donation	0		0		0		0		6,000
Contingent legal settlement expense	0		0		0		0		2,075
Acquisition related costs	4,313		584		872		674		1,940
Noninterest expense adjusted	25,500		19,809		20,095		20,368		20,021
Efficiency ratio excluding one-time items	53.45%		51.12%		48.46%		48.46%		48.19%
Net interest margin excluding acquisition marks and PPP interest and fees
	For the Three Months Ended
	March 31,		Dec. 31,		Sept. 30,		June 30,		March 31,
	2023		2022		2022		2022		2022
Net interest income, tax equated	$ 37,374		$ 30,212		$ 32,636		$ 32,583		$ 32,100
Acquisition marks	2,597		174		215		349		926
PPP interest and fees	0		10		62		634		686
Adjusted and annualized net interest income	139,108		120,112		129,436		126,400		121,828
Average earning assets	4,866,263		4,047,343		4,065,085		4,015,385		3,931,506
Less PPP average balances	310		485		1,586		16,019		30,003
Adjusted average earning assets	4,865,953		4,046,858		4,063,499		3,999,366		3,901,503
Net interest margin excluding marks and PPP interest and fees	2.86%		2.97%		3.19%		3.16%		3.12%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230425005855/en/

Kevin J. Helmick, President and CEO

330.533.3341

Email: exec@farmersbankgroup.com

Source: Farmers National Banc Corp.

FAQ

What were the earnings for Farmers National Banc Corp (FMNB) in Q1 2023?

Farmers National Banc Corp reported earnings of $0.19 per diluted share for Q1 2023.

How did the net income of FMNB change from Q1 2022 to Q1 2023?

Net income for FMNB decreased from $15.8 million in Q1 2022 to $7.1 million in Q1 2023.

What is the impact of the Emclaire Financial Corp acquisition on FMNB's financials?

The acquisition added $1.05 billion in assets and boosted customer deposits to $4.31 billion.

How much common stock did FMNB repurchase in Q1 2023?

FMNB repurchased 850,799 shares of its common stock, representing 2.2% of shares outstanding.

What challenges is Farmers National Banc Corp facing in the current market?

FMNB is experiencing heightened competition for deposits and rising funding costs amidst a volatile interest rate environment.