UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): July 29, 2020

 

 

Farmers National Banc Corp.

(Exact name of registrant as specified in its charter)

 

 

 

Ohio   001-35296   34-1371693

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

20 South Broad Street, P.O. Box 555, Canfield, Ohio   44406-0555
(Address of principal executive offices)   (Zip Code)

(Registrant’s telephone number, including area code) (330) 533-3341

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol

 

Name of each exchange

on which registered

Common Stock, No Par Value   FMNB   The NASDAQ Stock Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 2.02 Results of Operations and Financial Condition.

On July 29, 2020, Farmers National Banc Corp. (the “Company”) announced earnings for the quarter ended June 30, 2020. A copy of the press release and certain financial information for this period is attached as Exhibit 99.1 hereto, which is incorporated herein by reference.

Pursuant to General Instruction B.2 of Current Report on Form 8-K, the information in this Item 2.02 and Exhibit 99.1 is being furnished under Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section. Furthermore, the information in this Item 2.02 and Exhibit 99.1 shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as may be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit
Number

  

Description

99.1    Press Release – Quarterly Financial Results, dated July 29, 2020


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Farmers National Banc Corp.

By:  

/s/ Kevin J. Helmick

 

Kevin J. Helmick

 

President and Chief Executive Officer

Date: July 29, 2020

EX-99.1

Exhibit 99.1

July 29, 2020

Press Release

 

  Source:

Farmers National Banc Corp.

    

Kevin J. Helmick, President and CEO

    

20 South Broad Street, P.O. Box 555

    

Canfield, OH 44406

    

330.533.3341

    

Email: exec@farmersbankgroup.com

FARMERS NATIONAL BANC CORP. ANNOUNCES

2020 SECOND QUARTER FINANCIAL RESULTS

 

   

Dedicated to assisting associates, customers and communities during the COVID-19 crisis

 

   

Net income of $11 million for the quarter is 29% higher than same quarter in 2019, despite a $1.7 million increase in the second quarter provision for loan losses

 

   

Net interest income increased 16.7% for the quarter compared to the same period a year ago as a result of higher interest income and lower interest expense

 

   

Significant mortgage loan activity drives a 28.2% year-over-year increase in noninterest income

 

   

150 consecutive quarters of profitability

 

   

Return on average assets, annualized was 1.56% for the second quarter

 

   

28% growth in customer non-brokered deposits in the quarter compared to June 30, 2019

CANFIELD, Ohio (July 29, 2020) – Farmers National Banc Corp. (Farmers) (NASDAQ: FMNB) today reported financial results for the three months ended June 30, 2020.

Net income for the three months ended June 30, 2020 was $11.0 million, or $0.39 per diluted share, which compares to $8.5 million, or $0.31 per diluted share, for the three months ended June 30, 2019 and $8.6 million or $0.30 per diluted share for the linked quarter. Net income excluding acquisition costs (non-GAAP) for the quarter ended June 30, 2020 was $11.1 million or $0.39 per share, compared to $8.5 million or $0.31 per share for the same quarter in 2019 and $9.7 million or $0.34 per share for the most recent prior quarter.

Annualized return on average assets and annualized return on average equity were 1.56% and 14.02%, respectively, for the three month period ending June 30, 2020, compared to 1.45% and 12.34% for the same three month period in 2019, and 1.32% and 11.53% for the linked quarter. Farmers’ annualized return on average tangible equity (non-GAAP) was 16.69% for the quarter ended June 30, 2020 compared to 14.59% for the same quarter in 2019 and 13.81% for the linked quarter.

Net income for the six months ended June 30, 2020 was $19.7 million, or $0.69 per diluted share, compared to $16.9 million or $0.61 per diluted share for the same six month period in 2019. Return on average assets and return on average equity were 1.44% and 12.81%, respectively, for the six months ended June 30, 2020, compared to 1.45% and 12.54% for the same period in 2019.

Kevin J. Helmick, President and CEO, stated, “For over 133 years, our success has been driven by supporting our local communities and doing what’s right for our customers. This win-win spirit is more important than ever as our communities face significant uncertainties brought on by the COVID-19 pandemic. Farmers is uniquely prepared to address the current economic environment as we benefit from diverse sources of income, proactive risk management, and a proven and motivated management team. As a result, Farmers ended the quarter with record quarterly noninterest income, regulatory capital well in excess of required minimums, a tangible common equity ratio at a solid 9.86% (non-GAAP), and a second quarter dividend payout ratio of 28.15%.”

In response to the rapidly evolving COVID-19 pandemic, the Company focused first on the well-being of its people, customers and communities. Preventative health measures were put in place including elimination of business related travel requirements, work from home requirements for all employees able to do so and social distancing precautions for all employees in the office. At the beginning of the pandemic, the Company restricted access to branch lobbies to appointment only, but has now re-opened the lobbies using personal protective equipment and maintaining social distancing guidelines and continues to conduct preventative cleaning at all offices and branches. The Company also focused on business continuity measures, including forming a COVID-19 task force, monitoring potential business interruptions, making improvements to our remote working technology, and conducting regular discussions with our technology vendors.


Farmers is offering special financial assistance to support customers who are experiencing financial hardships related to the COVID-19 pandemic. The following table reports the number and amount of payment deferrals by loan type as of dates listed:

 

     March 31, 2020      June 30, 2020      July 24, 2020  
     Outstanding
Balance
     Number of
Loans
     Outstanding
Balance
     Number of
Loans
     Outstanding
Balance
     Number of
Loans
 

Commercial real estate

   $ 75,809        78      $ 43,954        44      $ 27,717        17  

Commercial

     11,839        81        8515        69        5,848        36  

Agricultural

     1,492        11        8340        22        2,505        12  

Residential real estate

     5,506        41        3785        37        1,397        15  

Consumer

     2,840        127        1,858        100        539        36  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 97,486        338      $ 66,452        272      $ 38,006        116  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The Company offered three month deferrals upon request by the borrowers. The deferral requests began in the middle of March, 2020 and concluded at the end of the three month deferral period. The decline in deferred loans and balances was due to the ending of the deferment period and that not all borrowers requested additional deferment. The Company has granted a second three month deferral period to $23.8 million in commercial real estate loans and $5.7 million in commercial loans, which are included in the amounts detailed above. The second deferral period was offered to a select group of customers within specific industry codes that may have a higher credit risk. The Company anticipates that there will be a limited number of business customers with a total of a six month deferral period.

Farmers is also a preferred SBA lender and dedicated significant additional staff and other resources to help our customers complete and submit their applications and supporting documentation for loans offered under the new Paycheck Protection Program (PPP) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, so they could obtain SBA approval and receive funding as quickly as possible. At June 30, 2020, the Company had facilitated PPP assistance to 1,675 business customers totaling $199.1 million.

On January 7, 2020, Farmers announced it completed the merger of Maple Leaf Financial (“Maple Leaf”), the holding company for Geauga Savings Bank, with branches located in Cuyahoga and Geauga Counties in Ohio. The transaction increased Farmers’ market share in Cuyahoga and Geauga Counties and enables Farmers to continue building local scale throughout Northeast Ohio. As of January 7, 2020, Maple Leaf had total assets of $277.0 million, which included gross loans of $182.1 million, deposits of $183.1 million and equity of $32.1 million.

2020 Second Quarter Financial Highlights

 

   

Loans

Total loans were $2.15 billion at June 30, 2020, compared to $1.78 billion at June 30, 2019, representing an increase of 20.7%. Excluding the $182.1 million of loans added from the Maple Leaf acquisition, loan growth was 10.5%. The increase in loans was a direct result of Farmers’ focus on loan growth utilizing a talented lending and credit team, while adhering to a sound underwriting discipline. The increase in loans has occurred primarily in the PPP category, with $199.1 million in outstanding balances. Loans now comprise 79.6% of the Bank’s average earning assets for the quarter ended June 30, 2020, unchanged compared to the same period in 2019. The growth in loans has resulted in a 10.8% increase in tax equated loan interest income, including fees, in the second quarter of 2020 compared to the same quarter in 2019. A summary of loans summarized by industries that have particular vulnerability to the effects of COVID-19 and their outstanding balance as a percentage of total loans is shown in the following table:

 

     Outstanding
Balance
     % of total
loans
 

Restaurants and Catering Facilities

   $ 52,134,168        2.43

Hotels

     42,655,026        1.98

Golf Courses

     7,665,569        0.36

Energy

     1,073,850        0.05
  

 

 

    

Total

   $ 103,528,612        4.82
  

 

 

    


   

Deposits and Liquidity

Farmers maintains, in the opinion of management, liquidity sufficient to satisfy depositors’ requirements and meet the credit needs of its customers. The Company’s non-brokered deposits increased 28% from $1.9 billion at June 30, 2019 to $2.4 billion at June 30, 2020. The loan to deposit ratio at June 30, 2020 stands at 88.12%, a slight improvement compared to 89.0% one year ago. The Company has additional borrowing capacity at the Federal Home Loan Bank of Cincinnati and approved lines of credit at two domestic banks.

 

   

Loan quality

Non-performing assets to total assets remain at a low level, currently at 0.43%, but increased from the 0.30% reported one year ago. Early stage delinquencies were $10.3 million, or 0.48% of total loans, at June 30, 2020, compared to $19.1 million, or 0.96% of total loans, for the quarter ended March 31, 2020. Net charge-offs for the current quarter were $392 thousand, compared to $305 thousand in the same quarter in 2019, and total net charge-offs as a percentage of average net loans outstanding is 0.08% for the quarter ended June 30, 2020, compared to 0.13% for the most recent quarter. The Company increased its provision for loan losses to $2.4 million, an increase of $1.3 million compared to the $1.1 million provision recorded in the most recent quarter. This additional provision is the amount determined to be required as a result of the impact of increased negative economic factors that exist in the current business environment. As an overall percentage of loans, the allowance for loan losses increased to 0.79% during the current quarter compared to 0.76% during the quarter ended March 31, 2020. Excluding the PPP loans, this allowance for loan losses to gross loans ratio increases to 0.87%. The ratio of the allowance for loan losses to gross loans, excluding PPP loans and acquired loans is 0.96%. It is also important to note that the average FICO score of our indirect lending portfolio stands at a healthy 771 and our consumer loan portfolio average FICO score is currently 766.

In accordance with the accounting relief provisions of the CARES Act, the Bank has postponed adoption of the current expected credit losses (“CECL”) accounting standards, primarily due to the impact the COVID-19 pandemic is having on the economy and the lack of reasonable and supportable economic forecasts.

 

   

Net interest margin

The net interest margin for the three months ended June 30, 2020 was 3.74%, a 10 basis points decrease from the quarter ended June 30, 2019, but only 1 basis point less than the 3.75% reported for the linked quarter. In comparing the second quarter of 2020 to the same period in 2019, asset yields decreased 37 basis points, while the cost of interest-bearing liabilities decreased a similar 36 basis points. Most of the decrease in the asset yields was the result of lower rates earned on loans, declining from 5.14% to 4.75% due to the decrease in the prime lending rate and the addition of the lower yielding PPP loans. The cost of interest bearing liabilities decreased as the Federal Funds target rate was lowered to a target of 0-0.25% at the start of the COVID-19 pandemic in the United States. Each of the major interest-bearing liability categories experienced cost decreases compared to one year ago. The net interest margin is impacted by the additional accretion as a result of the discounted loan portfolios acquired in the previous mergers, which increased the net interest margin by 5 basis points for the quarter ended June 30, 2020 and 5 basis points for the quarter ended June 30, 2019.

 

   

Noninterest income

Noninterest income increased 28.15% to $9.1 million for the quarter ended June 30, 2020 compared to $7.1 million in the same quarter in 2019. Gains on the sales of mortgage loans increased $2.6 million or 246.73%, as lower interest rates prompted an increase in mortgage loan refinancing and new home purchases. Debit card interchange fees increased $80 thousand or 9.02%, but that increase was offset by $42 thousand or 9.33% less in retirement plan consulting fees and reduced income from SBIC Funds which impacted other operating income. The Company also experienced a $340 thousand decrease in deposit account service charge income due to a change in consumer behavior and the waiver of some overdraft fees during the COVID-19 pandemic.

 

   

Noninterest expenses

Farmers has remained committed to managing the level of noninterest expenses. Total noninterest expenses for the second quarter of 2020 increased 5.35% to $17.7 million compared to $16.8 million in the same quarter in 2019, primarily as a result of increases in salaries and employee benefits of $447 thousand or 4.82%, FDIC insurance premiums of $140 thousand or 164.71% and core processing charges and telephone and data costs of $131 thousand each. Other operating expenses increased $29 thousand or 1.07%, of which approximately $407 thousand was the result of an adjustment to mortgage servicing rights resulting from higher than expected mortgage loan payoffs. This increase was offset by a $505 thousand drop in litigation settlement expense. Annualized noninterest expenses excluding acquisition costs (non-GAAP) measured as a percentage of quarterly average assets decreased from 2.83% in the second quarter of 2019 to 2.50% in the second quarter of 2020.


   

Efficiency ratio

The efficiency ratio for the quarter ended June 30, 2020 decreased to 50.75% compared to 58.28% for the same quarter in 2019. The improvement in mortgage banking income and net interest income, accompanied with careful management of noninterest expenses were the main drivers of the improvement.    

Mr. Helmick concluded, “I want to extend my sincere thanks to all of our associates for their dedication and hard work during these unprecedented times. We remain committed to doing the right thing for our communities. On behalf of everyone at Farmers, we are proud to help our local business and individual customers alike.”

Founded in 1887, Farmers National Banc Corp. is a diversified financial services company headquartered in Canfield, Ohio, with $2.9 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 42 banking locations in Mahoning, Trumbull, Columbiana, Stark, Wayne, Medina, Geauga and Cuyahoga Counties in Ohio and Beaver County 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 June 30, 2020 are $2.4 billion. Farmers National Insurance, LLC and Bowers Insurance Agency, Inc., wholly-owned subsidiaries of The Farmers National Bank of Canfield, offer a variety of insurance products.

Non-GAAP Disclosure

This press release includes disclosures of Farmers’ tangible common equity ratio, return on average tangible assets, return on average tangible equity and net income excluding costs related to acquisition activities, which are financial measures not prepared in accordance with generally accepted accounting principles in the United States (GAAP). A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed by GAAP. Farmers believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and Farmers’ marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with GAAP. The reconciliations of non-GAAP financial measures are included in the tables following Consolidated Financial Highlights below.

Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Farmers’ financial condition, results of operations, asset quality trends and profitability. Forward-looking statements are not historical facts but instead represent only management’s current expectations and forecasts regarding future events, many of which, by their nature, are inherently uncertain and outside of Farmers’ control. Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions, as well as any statements related to future expectations of performance or conditional verbs, such as “will,” “would,” “should,” “could” or “may.” Farmers’ actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Factors that could cause Farmers’ actual results to differ materially from those described in the forward-looking statements include impacts from COVID-19 on local, national and global economic conditions; higher default rates on loans made to our customers related to COVID-19 and its impact on our customers’ operations and financial condition; unexpected changes in interest rates or disruptions in the mortgage markets related to COVID-19 or other responses to the health crisis; and the other factors contained in Farmers’ Annual Report on Form 10-K for the year ended December 31, 2019, 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 Six Months Ended  
     June 30,     March 31,     Dec. 31,     Sept. 30,     June 30,     June 30,     June 30,     Percent  
     2020     2020     2019     2019     2019     2020     2019     Change  

Total interest income

   $ 28,142     $ 27,717     $ 25,847     $ 25,931     $ 25,529     $ 55,859     $ 50,208       11.3

Total interest expense

     4,221       5,415       4,682       5,174       5,038       9,636       9,752       -1.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     23,921       22,302       21,165       20,757       20,491       46,223       40,456       14.3

Provision for loan losses

     2,400       1,100       600       550       750       3,500       1,300       169.2

Noninterest income

     9,136       7,870       7,814       7,576       7,129       17,006       13,772       23.5

Acquisition related costs (income)

     48       1,319       104       112       (19     1,367       (19     -7294

Other expense

     17,692       17,418       16,414       16,446       16,858       35,110       32,958       6.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     12,917       10,335       11,861       11,225       10,031       23,252       19,989       16.3

Income taxes

     1,906       1,696       2,186       2,071       1,488       3,602       3,058       17.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 11,011     $ 8,639     $ 9,675     $ 9,154     $ 8,543     $ 19,650     $ 16,931       16.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average diluted shares outstanding

     28,280       28,710       27,829       27,819       27,931       28,492       27,950    

Basic earnings per share

     0.39       0.30       0.35       0.33       0.31       0.69       0.61    

Diluted earnings per share

     0.39       0.30       0.35       0.33       0.31       0.69       0.61    

Cash dividends

     3,100       3,104       2,767       2,767       2,504       6,204       5,004    

Cash dividends per share

     0.11       0.11       0.10       0.10       0.09       0.22       0.18    

Performance Ratios

                

Net Interest Margin (Annualized)

     3.74     3.75     3.84     3.79     3.84     3.74     3.83  

Efficiency Ratio (Tax equivalent basis)

     50.75     59.72     54.51     55.90     58.28     55.04     58.06  

Return on Average Assets (Annualized)

     1.56     1.32     1.58     1.51     1.45     1.44     1.45  

Return on Average Equity (Annualized)

     14.02     11.53     12.78     12.49     12.34     12.81     12.54  

Dividends to Net Income

     28.15     35.93     28.60     30.23     29.31     31.57     29.56  

Other Performance Ratios (Non-GAAP)

                

Return on Average Tangible Assets

     1.58     1.33     1.62     1.55     1.47     1.46     1.47  

Return on Average Tangible Equity

     16.69     13.81     15.03     14.80     14.59     15.03     14.82  

Return on Average Tangible Equity excluding acquisition costs

     16.75     15.50     15.17     14.95     14.55     15.88     14.80  

Consolidated Statements of Financial Condition

 

                                                                
     June 30,      March 31,      Dec. 31,      Sept. 30,      June 30,  
     2020      2020      2019      2019      2019  

Assets

              

Cash and cash equivalents

   $ 103,954      $ 83,107      $ 70,760      $ 85,675      $ 64,007  

Securities available for sale

     475,614        448,043        432,233        423,193        424,252  

Equity securities

     8,375        8,080        7,909        7,856        7,222  

Loans held for sale

     3,395        3,272        2,600        2,079        1,093  

Loans

     2,149,690        1,976,582        1,811,539        1,784,125        1,780,504  

Less allowance for loan losses

     16,960        14,952        14,487        14,261        14,222  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net Loans

     2,132,730        1,961,630        1,797,052        1,769,864        1,766,282  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other assets

     161,612        164,256        138,604        144,543        143,093  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Assets

   $ 2,885,680      $ 2,668,388      $ 2,449,158      $ 2,433,210      $ 2,405,949  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 


                                                                

Liabilities and Stockholders’ Equity

              

Deposits

              

Noninterest-bearing

   $ 593,162      $ 449,952      $ 434,126      $ 432,609      $ 415,935  

Interest-bearing

     1,846,323        1,796,325        1,574,838        1,608,043        1,584,700  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total deposits

     2,439,485        2,246,277        2,008,964        2,040,652        2,000,635  

Other interest-bearing liabilities

     80,115        96,852        122,197        76,324        96,978  

Other liabilities

     34,728        21,523        18,688        23,011        23,511  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     2,554,328        2,364,652        2,149,849        2,139,987        2,121,124  

Stockholders’ Equity

     331,352        303,736        299,309        293,223        284,825  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 2,885,680      $ 2,668,388      $ 2,449,158      $ 2,433,210      $ 2,405,949  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Period-end shares outstanding

     28,180        28,127        27,671        27,669        27,768  

Book value per share

   $ 11.76      $ 10.80      $ 10.82      $ 10.60      $ 10.26  

Tangible book value per share (Non-GAAP)*

     9.92        8.94        9.28        9.04        8.70  

 

*

Tangible book value per share is calculated by dividing tangible common equity by average outstanding shares

 

Capital and Liquidity

          

Common Equity Tier 1 Capital Ratio (a)

     12.56 %     12.26     12.94     12.70     12.47

Total Risk Based Capital Ratio (a)

     13.38 %     13.43     13.82     13.58     13.34

Tier 1 Risk Based Capital Ratio (a)

     12.66 %     12.70     13.03     12.83     12.59

Tier 1 Leverage Ratio (a)

     9.37 %     10.18     10.69     10.42     10.27

Equity to Asset Ratio

     11.48     11.38     12.22     12.05     11.84

Tangible Common Equity Ratio (b)

     9.86     9.61     10.67     10.47     10.22

Net Loans to Assets

     73.91     73.51     73.37     72.74     73.41

Loans to Deposits

     88.12     87.99     90.17     87.43     89.00

Asset Quality

          

Non-performing loans

   $ 12,225     $ 11,845     $ 6,345     $ 6,749     $ 7,252  

Other Real Estate Owned

     41       131       19       74       74  

Non-performing assets

     12,266       11,976       6,364       6,823       7,326  

Loans 30—89 days delinquent

     10,336       19,067       11,893       9,076       10,203  

Charged-off loans

     524       749       519       674       588  

Recoveries

     132       114       145       163       283  

Net Charge-offs

     392       635       374       511       305  

Annualized Net Charge-offs to

          

Average Net Loans Outstanding

     0.08     0.13     0.09     0.12     0.07

Allowance for Loan Losses to Total Loans

     0.79     0.76     0.80     0.80     0.80

Non-performing Loans to Total Loans

     0.57     0.60     0.35     0.38     0.41

Allowance to Non-performing Loans

     138.73     126.23     228.32     211.31     196.11

Non-performing Assets to Total Assets

     0.43     0.45     0.26     0.28     0.30

 

(a)

June 30, 2020 ratio is estimated

(b)

This is a non-GAAP financial measure. A reconciliation to GAAP is shown below

Reconciliation of Total Assets to Tangible Assets

 

                                                                                          
                                   For the Six Months Ended  
     June 30,      March 31,      Dec. 31,      Sept. 30,      June 30,      June 30,      June 30,  
     2020      2020      2019      2019      2019      2020      2019  

Total Assets

   $ 2,885,680      $ 2,668,388      $ 2,449,158      $ 2,433,210      $ 2,405,949      $ 2,885,680      $ 2,405,949  

Less Goodwill and other intangibles

     51,866        52,337        42,645        42,973        43,298        51,866        43,298  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Tangible Assets

   $ 2,833,814      $ 2,616,051      $ 2,406,513      $ 2,390,237      $ 2,362,651      $ 2,833,814      $ 2,362,651  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Average Assets

     2,842,730        2,641,597        2,424,574        2,409,010        2,369,388        2,741,903        2,354,112  

Less average Goodwill and other intangibles

     52,052        51,103        42,859        43,187        43,508        47,088        43,674  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Average Tangible Assets

   $ 2,790,678      $ 2,590,494      $ 2,381,715      $ 2,365,823      $ 2,325,880      $ 2,694,815      $ 2,310,438  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 


Reconciliation of Common Stockholders’ Equity to Tangible Common Equity

 

                                                                                          
       For the Six Months Ended  
     June 30,      March 31,      Dec. 31,      Sept. 30,      June 30,      June 30,      June 30,  
     2020      2020      2019      2019      2019      2020      2019  

Stockholders’ Equity

   $ 331,352      $ 303,736      $ 299,309      $ 293,223      $ 284,825      $ 331,352      $ 284,825  

Less Goodwill and other intangibles

     51,866        52,337        42,645        42,973        43,298        51,866        43,298  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Tangible Common Equity

   $ 279,486      $ 251,399      $ 256,664      $ 250,250      $ 241,527      $ 279,486      $ 241,527  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Average Stockholders’ Equity

     315,988        301,408        300,355        290,673        277,746        308,524        272,218  

Less average Goodwill and other intangibles

     52,052        51,103        42,859        43,187        43,508        47,088        43,674  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Average Tangible Common Equity

   $ 263,936      $ 250,305      $ 257,496      $ 247,486      $ 234,238      $ 261,436      $ 228,544  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Reconciliation of Net Income, Excluding Acquisition Related Costs

 

                                                                                          
   
     For the Three Months Ended     For the Six Months Ended  
     June 30,      March 31,      Dec. 31,      Sept. 30,      June 30,     June 30,      June 30,  
     2020      2020      2019      2019      2019     2020      2019  

Net income

   $ 11,011      $ 8,639      $ 9,675      $ 9,154      $ 8,543     $ 19,650      $ 16,931  

Acquisition related costs (income) - tax equated

     41        1,063        90        97        (20     1,104        (20
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Net income - Adjusted

   $ 11,052      $ 9,702      $ 9,765      $ 9,251      $ 8,523     $ 20,754      $ 16,911  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Diluted EPS excluding acquisition costs

   $ 0.39      $ 0.34      $ 0.35      $ 0.33      $ 0.31     $ 0.73      $ 0.61  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

                                                                
     June 30,     March 31,      Dec. 31,      Sept. 30,      June 30,  
End of Period Loan Balances    2020     2020      2019      2019      2019  

Commercial real estate

   $ 715,342     $ 714,477      $ 616,778      $ 602,580      $ 614,452  

Commercial

     472,012       283,033        255,823        251,613        256,657  

Residential real estate

     528,853       541,534        500,024        499,996        493,529  

Consumer

     208,374       210,173        209,271        207,319        207,417  

Agricultural loans

     221,556       223,977        226,333        219,487        205,544  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total, excluding net deferred loan costs

   $ 2,146,137     $ 1,973,194      $ 1,808,229      $ 1,780,995      $ 1,777,599  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
     For the Three Months Ended  
     June 30,     March 31,      Dec. 31,      Sept. 30,      June 30,  
Noninterest Income    2020     2020      2019      2019      2019  

Service charges on deposit accounts

   $ 753     $ 1,095      $ 1,139      $ 1,208      $ 1,093  

Bank owned life insurance income

     204       208        192        204        208  

Trust fees

     1,852       1,857        1,891        1,905        1,821  

Insurance agency commissions

     681       883        696        681        739  

Security gains (losses)

     (26     157        28        22        (18

Retirement plan consulting fees

     408       380        343        338        450  

Investment commissions

     304       423        435        384        327  

Net gains on sale of loans

     3,658       1,366        1,517        1,143        1,055  

Debit card and EFT fees

     967       851        922        935        887  

Other operating income

     335       650        651        756        567  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total Noninterest Income

   $ 9,136     $ 7,870      $ 7,814      $ 7,576      $ 7,129  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 


                                                                
     For the Three Months Ended  
     June 30,      March 31,      Dec. 31,      Sept. 30,      June 30,  
Noninterest Expense    2020      2020      2019      2019      2019  

Salaries and employee benefits

   $ 9,713      $ 10,231      $ 9,128      $ 9,422      $ 9,266  

Occupancy and equipment

     1,675        1,800        1,667        1,615        1,650  

State and local taxes

     583        464        416        468        472  

Professional fees

     823        816        787        654        887  

Merger related costs (income)

     48        1,319        104        112        (19

Advertising

     322        271        607        437        442  

FDIC insurance

     225        225        79        80        85  

Intangible amortization

     331        332        326        326        327  

Core processing charges

     934        861        876        900        803  

Telephone and data

     348        203        235        236        217  

Other operating expenses

     2,738        2,215        2,293        2,308        2,709  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Noninterest Expense

   $ 17,740      $ 18,737      $ 16,518      $ 16,558      $ 16,839  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Average Balance Sheets and Related Yields and Rates

(Dollar Amounts in Thousands)

 

                                                                                               
     Three Months Ended     Three Months Ended  
     June 30, 2020     June 30, 2019  
     AVERAGE                   AVERAGE                
     BALANCE      INTEREST (1)      RATE (1)     BALANCE      INTEREST (1)      RATE (1)  

EARNING ASSETS

                

Loans (2)

   $ 2,101,500      $ 24,842        4.75   $ 1,749,828      $ 22,431        5.14

Taxable securities

     197,906        1,278        2.60       195,934        1,238        2.53  

Tax-exempt securities (2)

     252,818        2,459        3.91       211,533        2,065        3.92  

Equity securities

     17,687        137        3.12       12,055        171        5.69  

Federal funds sold and other

     70,279        30        0.17       29,205        158        2.17  
  

 

 

    

 

 

      

 

 

    

 

 

    

Total earning assets

     2,640,190        28,746        4.38       2,198,555        26,063        4.75  

Nonearning assets

     202,540             170,833        
  

 

 

         

 

 

       

Total assets

   $ 2,842,730           $ 2,369,388        
  

 

 

         

 

 

       

INTEREST-BEARING LIABILITIES

                

Time deposits

   $ 493,048      $ 2,181        1.78   $ 401,005      $ 1,984        1.98

Brokered time deposits

     84,198        319        1.52       94,463        559        2.35  

Savings deposits

     457,188        267        0.23       416,024        340        0.33  

Demand deposits

     823,058        1,093        0.53       631,436        1,476        0.94  

Short term borrowings

     12,613        18        0.57       100,199        631        2.53  

Long term borrowings

     76,751        343        1.80       5,724        48        3.36  
  

 

 

    

 

 

      

 

 

    

 

 

    

Total interest-bearing liabilities

   $ 1,946,856        4,221        0.87     $ 1,648,851        5,038        1.23  
          

 

 

       


                                                                                               

NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS’ EQUITY

                

Demand deposits

     556,649             425,672        

Other liabilities

     23,237             17,119        

Stockholders’ equity

     315,988             277,746        
  

 

 

         

 

 

       

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 2,842,730           $ 2,369,388        
  

 

 

         

 

 

       

Net interest income and interest rate spread

      $ 24,525        3.51      $ 21,025        3.52
     

 

 

    

 

 

      

 

 

    

 

 

 

Net interest margin

           3.74           3.84
        

 

 

         

 

 

 

 

(1)

Interest and yields are calculated on a tax-equivalent basis where applicable.

(2)

For 2020, adjustments of $98 thousand and $506 thousand, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2019, adjustments of $107 thousand and $427 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.

 

     Six Months Ended     Six Months Ended  
     June 30, 2020     June 30, 2019  
     AVERAGE                   AVERAGE                
     BALANCE      INTEREST (1)      RATE (1)     BALANCE      INTEREST (1)      RATE (1)  

EARNING ASSETS

                

Loans (2)

   $ 2,014,678      $ 49,039        4.89   $ 1,738,953      $ 44,002        5.10

Taxable securities

     209,139        2,825        2.72       195,871        2,482        2.56  

Tax-exempt securities

     242,016        4,702        3.91       209,586        4,076        3.92  

Equity securities (2)

     16,996        277        3.28       12,058        346        5.79  

Federal funds sold and other

     64,090        179        0.56       31,712        354        2.25  
  

 

 

    

 

 

      

 

 

    

 

 

    

Total earning assets

     2,546,919        57,022        4.50       2,188,180        51,260        4.72  

Nonearning assets

     194,984             165,932        
  

 

 

         

 

 

       

Total assets

   $ 2,741,903           $ 2,354,112        
  

 

 

         

 

 

       

INTEREST-BEARING LIABILITIES

                

Time deposits

   $ 494,385      $ 4,623        1.88   $ 384,643      $ 3,642        1.91

Brokered time deposits

     94,846        802        1.69       70,793        825        2.33  

Savings deposits

     441,232        588        0.27       418,306        648        0.31  

Demand deposits

     756,882        2,486        0.66       610,631        2,679        0.88  

Short term borrowings

     37,544        338        1.81       148,723        1,862        2.52  

Long term borrowings

     88,491        799        1.82       5,815        96        3.33  
  

 

 

    

 

 

      

 

 

    

 

 

    

Total interest-bearing liabilities

   $ 1,913,380        9,636        1.01     $ 1,638,911        9,752        1.20  

NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS’ EQUITY

                

Demand deposits

   $ 502,710           $ 427,039        

Other liabilities

     17,289             15,944        

Stockholders’ equity

     308,524             272,218        
  

 

 

         

 

 

       

TOTAL LIABILITIES AND

                

STOCKHOLDERS’ EQUITY

   $ 2,741,903           $ 2,354,112        
  

 

 

         

 

 

       

Net interest income and interest rate spread

      $ 47,386        3.49      $ 41,508        3.52
     

 

 

    

 

 

      

 

 

    

 

 

 

Net interest margin

           3.74           3.83
        

 

 

         

 

 

 

 

(1)

Interest and yields are calculated on a tax-equivalent basis where applicable.

(2)

For 2020, adjustments of $196 thousand and $967 thousand, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2019, adjustments of $209 thousand and $843 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.