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): August 10, 2015
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 | 44406-05555 | |
(Address of principal executive offices) | (Zip Code) |
(330) 533-3341
(Registrants telephone number, including area code)
(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:
x | Written communications 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 communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 2.02 | Results of Operations and Financial Condition. |
On August 10, 2015, Farmers National Banc Corp. (the Company) announced earnings for the quarter ended June 30, 2015. A copy of the press release and certain financial information for this period is attached as Exhibit 99.1 hereto and incorporated by reference herein. In addition, on August 10, 2015, the Company first mailed a letter to shareholders regarding its second quarter results, a copy of which is attached hereto as Exhibit 99.2. The shareholder letter also included an update on the Companys Agreement and Plan of Merger (the Merger Agreement) with Tri-State 1st Banc, Inc. (Tri-State), which provides for, among other things, the merger of Tri-State with and into a newly-formed, wholly-owned subsidiary of the Company (the Merger).
Pursuant to General Instruction B.2 of Current Report on Form 8-K, the information in this Item 2.02 is being furnished 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 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 8.01 | Other Events. |
On August 10, 2015, the Company first mailed a letter to shareholders regarding its second quarter results, a copy of which is attached hereto as Exhibit 99.2. The shareholder letter also included an update on the Merger Agreement with Tri-State, which provides for, among other things, the Merger.
The shareholder letter is furnished herein, as part of this Item 8.01, as Exhibit 99.2. Pursuant to General Instruction B.2 of Current Report on Form 8-K, the information in this Item 8.01 and Exhibit 99.2 shall not be deemed to be filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. Furthermore, the information in this Item 8.01 and Exhibit 99.2 shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act, or the Exchange Act, except as may be expressly set forth by specific reference in such filing.
Important Additional Information About the Merger.
In connection with the proposed Merger, the Company has filed with the Securities and Exchange Commission (the SEC) a Registration Statement on Form S-4 includes a Tri-State proxy statement and a Company prospectus, as well as other relevant documents concerning the proposed transaction.
SHAREHOLDERS OF TRI-STATE AND OTHER INVESTORS ARE URGED TO CAREFULLY READ THE PROXY STATEMENT/PROSPECTUS TO BE INCLUDED IN THE FINAL EFFECTIVE REGISTRATION STATEMENT ON FORM S-4, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY, TRI-STATE, THE PROPOSED MERGER, THE PERSONS SOLICITING PROXIES WITH RESPECT TO THE PROPOSED MERGER AND THEIR INTERESTS IN THE PROPOSED MERGER AND RELATED MATTERS.
The respective directors and executive officers of the Company and Tri-State and other persons may be deemed to be participants in the solicitation of proxies from shareholders of Tri-State with respect to the proposed Merger. Information regarding the directors and executive officers of the Company is available in its proxy statement filed with the SEC on March 13, 2015. Information regarding directors and executive officers of Tri-State is available on its website at http://www.1stncb.com/InvestorRelations.htm. Other information regarding the participants in the solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus to be included in the Registration Statement on Form S-4 and other relevant materials filed with the SEC when they become available.
Investors and security holders will be able to obtain free copies of the registration statement and other documents filed with the SEC by Farmers through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with the SEC by Farmers will be available free of charge on Farmers website at https://www.farmersbankgroup.com.
This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities nor shall there be any sale of securities in any jurisdiction in which the offer, solicitation or sale is unlawful before registration or qualification of the securities under the securities laws of the jurisdiction. No offer of securities shall be made except by means of a prospectus satisfying the requirements of Section 10 of the Securities Act.
Forward Looking Statements.
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not historical facts, but rather statements based on the Companys current expectations regarding its business strategies and its intended results and future performance. 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.
Forward-looking statements are not guarantees of future performance. Numerous risks and uncertainties could cause or contribute to the Companys actual results, performance, and achievements to be materially different from those expressed or implied by the forward-looking statements. Factors that may cause or contribute to these differences include, without limitation, the Companys failure to integrate Tri-State and its subsidiary in accordance with expectations; deviations from performance expectations related to Tri-State and its subsidiary; general economic conditions, including changes in market interest rates and changes in monetary and fiscal policies of the federal government; legislative and regulatory changes; competitive conditions in the banking markets served by the Companys subsidiaries; the adequacy of the allowance for losses on loans and the level of future provisions for losses on loans; and other factors disclosed periodically in the Companys filings with the SEC.
Because of the risks and uncertainties inherent in forward-looking statements, readers are cautioned not to place undue reliance on them, whether included in this report or made elsewhere from time to time by the Company or on the Companys behalf. The Company assumes no obligation to update any forward-looking statements.
ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS. |
(d) | Exhibits. |
Exhibit |
Description | |
99.1 | Press ReleaseQuarterly Financial Results, dated August 10, 2015 (filed herewith). | |
99.2 | Letter to Shareholders, dated August 10, 2015 (filed herewith). |
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: August 10, 2015
Exhibit 99.1
August 10, 2015
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
2015 SECOND QUARTER FINANCIAL RESULTS
| 130 consecutive quarters of profitability |
| Completed merger with National Bancshares on June 19, 2015 |
| Announced proposed merger with Tri-State 1st Banc, Inc. on June 24, 2015 |
| Net income for quarter ended June 30, 2015 was $812 thousand compared to $2.2 million for most recent quarter |
| Costs related to acquisitions were $1.9 million pre-tax for the second quarter |
| Noninterest income increased 16.1% compared to same quarter in 2014 |
| Non-performing assets to total assets remain at low levels, 0.54% at June 30, 2015 |
CANFIELD, Ohio (August 10, 2015) Farmers National Banc Corp. (Farmers) (NASDAQ: FMNB) today reported financial results for the three and six months ended June 30, 2015.
Net income for the three months ended June 30, 2015 was $812 thousand, or $0.04 per diluted share, which compares to $2.4 million, or $0.13 per diluted share for the second quarter ended June 30, 2014. Excluding one-time expenses related to acquisition activities, net income would have been $2.4 million or $0.12 per share. In comparing the second quarters results to the most recent previous quarter, net income excluding acquisition activities increased $140 thousand or 6%.
Annualized return on average assets and return on average equity were 0.27% and 2.74% for the three month period ending June 30, 2015. Excluding the expenses related to acquisition activities, the annualized return on average assets and the annualized return on average equity would have been 0.82% and 8.33%, respectively.
Net income for the six months ended June 30, 2015 was $3.0 million or $0.16 per share, compared to $4.5 million or $0.24 per share for the same period in 2014. Excluding expenses related to acquisition activities, net income would have been $4.7 million or $0.25 per share.
Kevin J. Helmick, President and CEO, stated, We are pleased to have closed our merger with National Bancshares Corporation (NBOH), and to have announced our proposed merger with Tri-State 1st Banc, Inc. (Tri-State) during the second quarter. We are also delighted to report that organic loan growth has increased 10% over the past twelve months, and that our level of noninterest income continues to improve.
On June 19, 2015, Farmers announced that it had completed the merger of NBOH, the holding company for the First National Bank of Orrville. Immediately following the merger, First National Bank was merged into Farmers National Bank of Canfield (Farmers National Bank). This transaction resulted in the addition of $540 million in assets and 14 branch locations in Wayne, Medina and Stark counties in Ohio.
On June 23, 2015, Farmers entered into a merger agreement with Tri-State that calls for Tri-State to merge into a merger subsidiary of Farmers, and for Tri-States wholly-owned bank subsidiary, First National Community Bank, which operates 5 banking locations in Columbiana County in Ohio and Western Pennsylvania, to merge into Farmers National Bank. This transaction is expected to close during the fourth quarter of 2015, subject to the satisfaction of customary closing conditions, including regulatory approvals and the approval of the shareholders of Tri-State. At March 31, 2015, Tri-State had approximately $139 million in assets, which included $54.3 million of demand deposits with an overall cost of deposits of 0.19%. Under the terms of the agreement, shareholders of Tri-State will elect to receive either 1.747 shares of Farmers common stock or $14.20 per share in cash, subject to an overall limitation of 75% of the shares being exchanged for Farmers shares and 25% for cash.
2015 Second Quarter Financial Highlights
| Loan growth |
Total loans were $1.13 billion at June 30, 2015, compared to $637.8 million at June 30, 2014. Organic loan growth supplemented the increase from the NBOH acquisition, which amounted to $430 million. The organic increase in loans is a direct result of Farmers focus on loan growth utilizing a talented lending and credit team, while adhering to a sound underwriting discipline. Most of the increase in loans has occurred in the commercial real estate, commercial and industrial and residential real estate loan portfolios. Loans now comprise 64.2% of the Banks average earning assets in 2015, an improvement compared to 58.5% in 2014. This improvement has resulted in a 13.8% increase in tax equated loan income from the second quarter of 2014 to the same quarter in 2015.
| Loan quality |
Non-performing assets to total assets remain at a safe level, currently at 0.54%. Early stage delinquencies also continue to remain at low levels, at $7.1 million or 0.63% of total loans at June 30, 2015. The allowance to non-performing loans ratio improved from 90.4% at June 30, 2014 to 91.3% at June 30, 2015.
| Net interest margin |
The net interest margin for the quarter ended June 30, 2015 was 3.66%, a 12 basis points increase from the quarter ended June 30, 2014. In comparing the second quarter of 2015 to the same quarter in 2014, asset yields increased 4 basis points, while the cost of interest-bearing liabilities decreased 10 basis points.
| Noninterest income |
Noninterest income increased 16.1% to $4.4 million for the quarter ended June 30, 2015 compared to $3.8 million in 2014. Retirement plan consulting fees increased $506 thousand or 186% in the current years quarter compared to the same quarter in 2014. Gains on the sale of mortgage loans increased $85 thousand or 120% and deposit account income also increased $58 thousand or 9.5% in comparing the same two quarters.
| Noninterest expenses |
The Company has remained committed to managing the level of noninterest expenses. Total noninterest expenses for the second quarter of 2015 were $12.1 million. Excluding one-time expenses related to acquisition activities of $1.9 million, noninterest expenses were $10.2 million, representing an 8.5% increase over the prior year. Salaries and employee benefits increased $567 thousand, mainly from increases in health insurance costs and increased salaries and occupancy expenses increased $104 thousand as a result of an increase in the number of banking locations.
2015 Outlook
Mr. Helmick added, We are excited about our recently announced merger with Tri-State. We believe that the combination of our Company with Tri-State, a strong community bank headquartered in East Liverpool, Ohio, will enhance our presence in Ohio and will serve as an entrance into the Pennsylvania market for Farmers. This transaction is an important step in the long-term strategy to expand our footprint and enhance profitability.
Important Additional Information About the Merger.
In connection with the proposed merger, Farmers has filed with the Securities and Exchange Commission (the SEC) a Registration Statement on Form S-4 that includes a proxy statement and a prospectus, as well as other relevant documents concerning the proposed transaction.
SHAREHOLDERS OF TRI-STATE AND OTHER INVESTORS ARE URGED TO CAREFULLY READ THE PROXY STATEMENT/PROSPECTUS TO BE INCLUDED IN THE REGISTRATION STATEMENT ON FORM S-4, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT FARMERS, TRI-STATE, THE PROPOSED MERGER, THE PERSONS SOLICITING PROXIES WITH RESPECT TO THE PROPOSED MERGER AND THEIR INTERESTS IN THE PROPOSED MERGER AND RELATED MATTERS.
The respective directors and executive officers of Farmers and Tri-State and other persons may be deemed to be participants in the solicitation of proxies from shareholders of Tri-State with respect to the proposed merger. Information regarding the directors and executive officers of Farmers is available in its proxy statement filed with the SEC on March 13, 2015. Information regarding directors and executive officers of Tri-State is available on its website at http://www.1stncb.com/. Other information regarding the participants in the solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus to be included in the Registration Statement on Form S-4 and other relevant materials filed with the SEC when they become available.
Investors and security holders will be able to obtain free copies of the registration statement and other documents filed with the SEC by Farmers through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with the SEC by Farmers will be available free of charge on Farmers website at https://www.farmersbankgroup.com.
This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities nor shall there be any sale of securities in any jurisdiction in which the offer, solicitation or sale is unlawful before registration or qualification of the securities under the securities laws of the jurisdiction. No offer of securities shall be made except by means of a prospectus satisfying the requirements of Section 10 of the Securities Act.
Founded in 1887, Farmers National Banc Corp. is a diversified financial services company headquartered in Canfield, Ohio, with more than $1.6 billion in banking assets and $1 billion in trust assets. Farmers National Banc Corp.s wholly-owned subsidiaries are comprised of The Farmers National Bank of Canfield, a full-service national bank engaged in commercial and retail banking with 33 banking locations in Mahoning, Trumbull, Columbiana, Stark, Wayne, Medina and Cuyahoga Counties in Ohio, Farmers Trust Company, which operates two trust offices and offers services in the same geographic markets and National Associates, Inc. Farmers National Insurance, LLC, a wholly-owned subsidiary of The Farmers National Bank of Canfield, offers a variety of insurance products.
Non-GAAP Disclosure
This press release includes disclosures of Farmers tangible common equity ratio and pre-tax, pre-provision income, which are financial measures not prepared in accordance with generally accepted accounting principles in the United States (GAAP). A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed by GAAP. Farmers believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and Farmers marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with GAAP. The reconciliations of non-GAAP financial measures are included in the tables following Consolidated Financial Highlights below.
Forward-Looking Statements
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Farmers financial condition, results of operations, asset quality trends and profitability. Forward-looking statements are not historical facts but instead represent only managements current expectations and forecasts regarding future events, many of which, by their nature, are inherently uncertain and outside of Farmers control. Forward-looking statements are preceded by terms such as expects, believes, anticipates, intends and similar expressions, as well as any statements related to future expectations of performance or conditional verbs, such as will, would, should, could or may. Farmers actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Factors that could cause Farmers actual results to differ materially from those described in the forward-looking statements can be found in Farmers Annual Report on Form 10-K for the year ended December 31, 2014, as amended, which has been filed with the Securities and Exchange Commission and is available on Farmers website (www.farmersbankgroup.com) and on the Securities and Exchange Commissions website (www.sec.gov). Factors that may cause or contribute to these differences may also include, without limitation, the Companys failure to integrate Tri-State and its subsidiary in accordance with expectations, and deviations from performance expectations related to Tri-State and its subsidiary. Forward-looking statements are not guarantees of future performance and should not be relied upon as representing managements 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 | |||||||||||||||||||||||||
2015 | 2015 | 2014 | 2014 | 2014 | 2015 | 2014 | Change | |||||||||||||||||||||||||
Total interest income |
$ | 10,753 | $ | 9,999 | $ | 10,321 | $ | 10,413 | $ | 10,118 | $ | 20,752 | $ | 20,181 | 2.8 | % | ||||||||||||||||
Total interest expense |
1,004 | 1,007 | 1,078 | 1,128 | 1,166 | 2,011 | 2,373 | -15.3 | % | |||||||||||||||||||||||
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Net interest income |
9,749 | 8,992 | 9,243 | 9,285 | 8,952 | 18,741 | 17,808 | 5.2 | % | |||||||||||||||||||||||
Provision for loan losses |
850 | 450 | 825 | 425 | 300 | 1,300 | 630 | 106.3 | % | |||||||||||||||||||||||
Other income |
4,409 | 4,037 | 4,193 | 3,880 | 3,797 | 8,446 | 7,230 | 16.8 | % | |||||||||||||||||||||||
Other expense |
12,087 | 9,751 | 9,867 | 9,776 | 9,378 | 21,838 | 18,519 | 17.9 | % | |||||||||||||||||||||||
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Income before income taxes |
1,221 | 2,828 | 2,744 | 2,964 | 3,071 | 4,049 | 5,889 | -31.2 | % | |||||||||||||||||||||||
Income taxes |
409 | 617 | 597 | 688 | 720 | 1,026 | 1,347 | -23.8 | % | |||||||||||||||||||||||
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Net income |
$ | 812 | $ | 2,211 | $ | 2,147 | $ | 2,276 | $ | 2,351 | $ | 3,023 | $ | 4,542 | -33.4 | % | ||||||||||||||||
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Average shares outstanding |
19,366 | 18,409 | 18,436 | 18,706 | 18,781 | 18,890 | 18,780 | |||||||||||||||||||||||||
Pre-tax pre-provision income |
$ | 2,071 | $ | 3,278 | $ | 3,569 | $ | 3,389 | $ | 3,371 | $ | 5,349 | $ | 6,519 | ||||||||||||||||||
Basic and diluted earnings per share |
0.04 | 0.12 | 0.12 | 0.12 | 0.13 | 0.16 | 0.24 | |||||||||||||||||||||||||
Cash dividends |
552 | 552 | 552 | 559 | 563 | 1,104 | 1,127 | |||||||||||||||||||||||||
Cash dividends per share |
0.03 | 0.03 | 0.03 | 0.03 | 0.03 | 0.06 | 0.06 | |||||||||||||||||||||||||
Performance Ratios |
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Net Interest Margin (Annualized) |
3.66 | % | 3.64 | % | 3.63 | % | 3.58 | % | 3.54 | % | 3.65 | % | 3.55 | % | ||||||||||||||||||
Efficiency Ratio (Tax equivalent basis) |
81.03 | % | 70.71 | % | 71.20 | % | 70.17 | % | 69.68 | % | 76.08 | % | 69.77 | % | ||||||||||||||||||
Return on Average Assets (Annualized) |
0.27 | % | 0.79 | % | 0.75 | % | 0.79 | % | 0.83 | % | 0.52 | % | 0.80 | % | ||||||||||||||||||
Return on Average Equity (Annualized) |
2.74 | % | 7.14 | % | 6.91 | % | 7.37 | % | 7.85 | % | 4.53 | % | 7.74 | % | ||||||||||||||||||
Dividends to Net Income |
67.98 | % | 24.97 | % | 25.71 | % | 24.56 | % | 23.95 | % | 36.55 | % | 24.81 | % |
Consolidated Statements of Financial Condition
June 30, | March 31, | Dec. 31, | Sept. 30, | June 30, | ||||||||||||||||
2015 | 2015 | 2014 | 2014 | 2014 | ||||||||||||||||
Assets |
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Cash and cash equivalents |
$ | 37,028 | $ | 26,929 | $ | 27,428 | $ | 28,294 | $ | 28,070 | ||||||||||
Securities available for sale |
386,319 | 369,919 | 389,829 | 404,895 | 409,285 | |||||||||||||||
Loans held for sale |
399 | 146 | 511 | 895 | 275 | |||||||||||||||
Loans |
1,134,838 | 673,784 | 663,852 | 646,981 | 637,774 | |||||||||||||||
Less allowance for loan losses |
7,286 | 7,723 | 7,632 | 7,333 | 7,356 | |||||||||||||||
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Net Loans |
1,127,552 | 666,061 | 656,220 | 639,648 | 630,418 | |||||||||||||||
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Other assets |
121,105 | 70,596 | 62,979 | 66,007 | 65,238 | |||||||||||||||
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Total Assets |
$ | 1,672,403 | $ | 1,133,651 | $ | 1,136,967 | $ | 1,139,739 | $ | 1,133,286 | ||||||||||
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Liabilities and Stockholders Equity |
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Deposits |
$ | 1,320,569 | $ | 909,408 | $ | 915,703 | $ | 913,000 | $ | 907,443 | ||||||||||
Other interest-bearing liabilities |
155,591 | 80,338 | 87,517 | 90,649 | 93,807 | |||||||||||||||
Other liabilities |
13,668 | 17,134 | 10,187 | 14,689 | 11,016 | |||||||||||||||
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Total liabilities |
1,489,828 | 1,006,880 | 1,013,407 | 1,018,338 | 1,012,266 | |||||||||||||||
Stockholders Equity |
182,575 | 126,771 | 123,560 | 121,401 | 121,020 | |||||||||||||||
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Total Liabilities and Stockholders Equity |
$ | 1,672,403 | $ | 1,133,651 | $ | 1,136,967 | $ | 1,139,739 | $ | 1,133,286 | ||||||||||
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Period-end shares outstanding |
25,672 | 18,409 | 18,409 | 18,559 | 18,781 | |||||||||||||||
Book value per share |
$ | 7.11 | $ | 6.89 | $ | 6.71 | $ | 6.54 | $ | 6.44 | ||||||||||
Tangible book value per share |
5.57 | 6.42 | 6.23 | 6.02 | 5.91 | |||||||||||||||
Capital and Liquidity |
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Common Equity Tier 1 Capital Ratio (a) |
12.61 | % | 15.03 | % | N/A | N/A | N/A | |||||||||||||
Total Risk Based Capital Ratio (a) |
13.20 | % | 16.02 | % | 16.48 | % | 16.54 | % | 16.60 | % | ||||||||||
Tier 1 Risk Based Capital Ratio (a) |
12.61 | % | 15.03 | % | 15.43 | % | 15.52 | % | 15.57 | % | ||||||||||
Tier 1 Leverage Ratio (a) |
9.27 | % | 10.44 | % | 10.03 | % | 9.89 | % | 9.87 | % | ||||||||||
Equity to Asset Ratio |
10.92 | % | 11.18 | % | 10.87 | % | 10.65 | % | 10.68 | % | ||||||||||
Tangible Common Equity Ratio |
8.76 | % | 10.50 | % | 10.17 | % | 9.88 | % | 9.89 | % | ||||||||||
Net Loans to Assets |
67.42 | % | 58.75 | % | 57.72 | % | 56.12 | % | 55.63 | % | ||||||||||
Loans to Deposits |
85.94 | % | 74.09 | % | 72.50 | % | 70.86 | % | 70.28 | % | ||||||||||
Asset Quality |
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Non-performing loans |
$ | 7,984 | $ | 7,939 | $ | 8,481 | $ | 7,219 | $ | 8,140 | ||||||||||
Other Real Estate Owned |
1,128 | 144 | 148 | 381 | 352 | |||||||||||||||
Non-performing assets |
9,112 | 8,083 | 8,629 | 7,600 | 8,492 | |||||||||||||||
Loans 30 - 89 days delinquent |
7,146 | 4,344 | 5,426 | 4,938 | 3,460 | |||||||||||||||
Charged-off loans |
1,496 | 618 | 891 | 756 | 650 | |||||||||||||||
Recoveries |
209 | 259 | 365 | 308 | 319 | |||||||||||||||
Net Charge-offs |
1,287 | 359 | 526 | 448 | 331 | |||||||||||||||
Annualized Net Charge-offs to |
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Average Net Loans Outstanding |
0.71 | % | 0.22 | % | 0.33 | % | 0.28 | % | 0.21 | % | ||||||||||
Allowance for Loan Losses to Total Loans |
0.64 | % | 1.15 | % | 1.15 | % | 1.13 | % | 1.15 | % | ||||||||||
Non-performing Loans to Total Loans |
0.70 | % | 1.18 | % | 1.28 | % | 1.12 | % | 1.28 | % | ||||||||||
Allowance to Non-performing Loans |
91.26 | % | 97.28 | % | 89.99 | % | 101.58 | % | 90.37 | % | ||||||||||
Non-performing Assets to Total Assets |
0.54 | % | 0.71 | % | 0.76 | % | 0.67 | % | 0.75 | % |
(a) | June 30, 2015 ratio is estimated |
Reconciliation of Common Stockholders Equity to Tangible Common Equity
June 30, | March 31, | Dec. 31, | Sept. 30, | June 30, | ||||||||||||||||
2015 | 2015 | 2014 | 2014 | 2014 | ||||||||||||||||
Stockholders Equity |
$ | 182,575 | $ | 126,771 | $ | 123,560 | $ | 121,401 | $ | 121,020 | ||||||||||
Less Goodwill and other intangibles |
39,569 | 8,646 | 8,813 | 9,768 | 9,960 | |||||||||||||||
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Tangible Common Equity |
$ | 143,006 | $ | 118,125 | $ | 114,747 | $ | 111,633 | $ | 111,060 | ||||||||||
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Reconciliation of Total Assets to Tangible Assets | ||||||||||||||||||||
June 30, | March 31, | Dec. 31, | Sept. 30, | June 30, | ||||||||||||||||
2015 | 2015 | 2014 | 2014 | 2014 | ||||||||||||||||
Total Assets |
$ | 1,672,403 | $ | 1,133,651 | $ | 1,136,967 | $ | 1,139,739 | $ | 1,133,286 | ||||||||||
Less Goodwill and other intangibles |
39,569 | 8,646 | 8,813 | 9,768 | 9,960 | |||||||||||||||
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Tangible Assets |
$ | 1,632,834 | $ | 1,125,005 | $ | 1,128,154 | $ | 1,129,971 | $ | 1,123,326 | ||||||||||
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Reconciliation of Income Before Taxes to Pre-Tax, Pre-Provision Income
For the Three Months Ended | For the Six Months Ended |
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June 30, | March 31, | Dec. 31, | Sept. 30, | June 30, | June 30, | June 30, | ||||||||||||||||||||||
2015 | 2015 | 2014 | 2014 | 2014 | 2015 | 2014 | ||||||||||||||||||||||
Income before income taxes |
$ | 1,221 | $ | 2,828 | $ | 2,744 | $ | 2,964 | $ | 3,071 | $ | 4,049 | $ | 5,889 | ||||||||||||||
Provision for loan losses |
850 | 450 | 825 | 425 | 300 | 1,300 | 630 | |||||||||||||||||||||
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Pre-tax, pre-provision income |
$ | 2,071 | $ | 3,278 | $ | 3,569 | $ | 3,389 | $ | 3,371 | $ | 5,349 | $ | 6,519 | ||||||||||||||
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Exhibit 99.2
August 10, 2015
Fellow Shareholders,
The necessity for businesses to adapt has always been important. Heraclitus, a philosopher from ancient Greece, was obsessed with the notion of ever-present change in the universe. He wrote prolifically on the subject, his most famous quote being: No man ever steps in the same river twice, for its not the same river and hes not the same man.
Farmers is not exempt from change, and the last quarter represents our extraordinary evolution into a larger community bank. We closed our merger with National Bancshares Corporation and announced our acquisition of Tri-State 1st Banc., Inc. Farmers is not the same bank it was a few months ago. We are a much better organization adding talented managers, associates and board members who are contributing their talents to our future success.
While our business structure has changed and will continue to evolve, our companys market-leading customer first culture will always be a core operating value that will remain constant. One of the many reasons we were attracted to First National Bank of Orrville and 1st National Community Bank was that both companies had the same commitment to excellence in community banking and customer service as Farmers and our coming together is a welcomed change we can all support and celebrate.
Completion of Merger with National Bancshares Corporation
We announced the closing of the merger with National Bancshares Corporation, the holding company of First National Bank of Orrville, on June 19, 2015. I am pleased we were able to accomplish our goal of closing the acquisition before the end of the second quarter and I am encouraged by the steady pace of the integration.
The transition of First National Bank branches to Farmers National Bank will begin in late October/early November and will take place over a weekend for minimal interruption. Once converted, all customers will have access to the modern, state-of-the art mobile banking app that Farmers is proud to offer as a delivery channel to our customers.
I have stated since the early announcement of our partnership that our first priority is to make the transition to Farmers National Bank as easy as possible for both customers and shareholders. We are making sure that many things will not change such as our commitment to providing superb service, supporting our neighbors and communities, and conducting ourselves in a manner that earns your trust each and every day. We will be communicating with First National customers throughout the process and have launched a dedicated conversion website, www.farmersbankgroup.com/welcome-fnb.
20 South Broad Street v PO Box 555 v Canfield, OH 44406-0555
Toll Free: 1-888-988-3276 v Ph. (330) 533-3341 v Fax: (330) 533-0451 v Web Site: www.farmersbankgroup.com
Acquisition of Tri-State 1st Banc, Inc.
On June 24, 2015, Farmers National Banc Corp. and Tri-State 1st Banc, Inc. announced an agreement and plan of merger with Tri-State 1st Banc, Inc., the holding company for 1st National Community Bank headquartered in East Liverpool, Ohio. We are excited to announce our second acquisition in 2015, which will further enhance Farmers brand and deliver additional long-term value for our shareholders.
The acquisition will increase Farmers market share by 65% in Columbiana County, and we will now have the second highest deposit base in the county. In addition, this transaction will serve as an entrance into the Pennsylvania market for Farmers. Tri-State has an excellent low-cost deposit base with over $54 million in non-interest bearing deposits as of March 31, 2015 and an overall cost of funds of 0.22% for the three months ended March 31, 2015. This transaction helps Farmers continue to grow its market share, balance sheet and earnings.
Upon closing of the transaction, Farmers will have approximately $1.8 billion in assets and 38 banking locations throughout Ohio and western Pennsylvania. We expect the transaction to be accretive to earnings per share for the first full year of operation, excluding one-time merger costs, and expect any tangible book value dilution created in the transaction to be earned back in approximately two years. Following the close of the transaction, it is expected that Farmers will continue to exceed well-capitalized thresholds under all regulatory definitions.
Conclusion
Our strategic growth plan has positioned our bank for unprecedented levels of success. We have changed to fully embody our new tagline of bigger small banking in that we now have the size to protect our corporate interests while remaining nimble enough to continue serving our shareholders and customers, as a truly engaged community bank should.
As always, I am open to your calls, letters, and emails, so please do not hesitate to reach out to me if you have an idea or some insight you would like to share.
Very truly yours,
Kevin J. Helmick
President & CEO
20 South Broad Street v PO Box 555 v Canfield, OH 44406-0555
Toll Free: 1-888-988-3276 v Ph. (330) 533-3341 v Fax: (330) 533-0451 v Web Site: www.farmersbankgroup.com
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