-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BUMw83zJeNzaofzy2ZtJqh3nsXI2SFyGTDveQRw8IvGO6TXjdkTGIgtVM8rhkcAZ yJF0fFcQsX4cfjOMFyvG5w== 0000709337-95-000004.txt : 19951119 0000709337-95-000004.hdr.sgml : 19951119 ACCESSION NUMBER: 0000709337-95-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FARMERS NATIONAL BANC CORP /OH/ CENTRAL INDEX KEY: 0000709337 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 341371693 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12055 FILM NUMBER: 95589207 BUSINESS ADDRESS: STREET 1: 20 S BROAD STREET STREET 2: P O BOX 555 CITY: CANFIELD STATE: OH ZIP: 44406 BUSINESS PHONE: 2165333341 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter ended September 30, 1995 Commission file number 2-80339 FARMERS NATIONAL BANC CORP. (Exact name of registrant as specified in its charter) OHIO 34-1371693 (State or other jurisdiction of (I.R.S. Employer Identification No) incorporation or organization) 20 South Broad Street Canfield, OH 44406 44406 (Address of principal executive offices) (Zip Code) (216) 533-3341 (Registrant's telephone number, including area code) Not applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ Indicate the number of shares outstanding of each of the issuer's classes of common stock. Class Outstanding at September 30, 1995 Common Stock, $2.50 Par Value 1,597,850 shares PART I - FINANCIAL INFORMATION Item 1. Financial Statements Page Included in Part I of this report: Farmers National Banc Corp. and Subsidiary Consolidated Balance Sheets 1 Consolidated Statements of Income 2 Consolidated Statements of Cash Flows 3 Notes to Consolidated Financial Statements 4-5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6-10 PART II - OTHER INFORMATION Other Information and Signatures 11-13 CONSOLIDATED BALANCE SHEETS FARMERS NATIONAL BANC CORP. AND SUBSIDIARY Sept. 30, Dec. 31, 1995 1994 ASSETS Cash and due from banks $ 12,197,694 $ 11,525,724 Federal funds sold 16,847,000 2,983,000 TOTAL CASH & CASH EQUIVALENTS 29,044,694 14,508,724 Investment Securities: Securities available for sale 35,364,553 38,513,343 Securities held to maturity 10,178,784 9,493,005 TOTAL INVESTMENT SECURITIES 45,543,337 48,006,348 Total Loans 226,787,065 217,734,346 Less allowance for possible loan losses 2,973,851 2,746,420 NET LOANS 223,813,214 214,987,926 Premises and equipment, net 5,010,093 4,121,382 Other assets 2,613,419 2,820,447 $306,024,757 $284,444,827 LIABILITIES AND STOCKHOLDERS EQUITY Deposits (all domestic): Noninterest-bearing $ 21,610,053 $ 24,598,424 Interest bearing 238,909,129 219,703,940 TOTAL DEPOSITS 260,519,182 244,302,364 Short-term borrowings: U.S. Treasury interest-bearing demand note 766,142 792,011 Securities sold under repurchase agreements 11,109,535 9,211,919 TOTAL SHORT-TERM BORROWINGS 11,875,677 10,003,930 Other liabilities & deferred credits 1,127,157 1,223,266 TOTAL LIABILITIES 273,522,016 255,529,560 Stockholders equity: Common stock-Authorized 2,400,000 shares issued & outstanding 1,597,850 in Sept. 1995 & 1,556,992 in December 1994 3,994,625 3,892,480 Additional paid-in capital 14,534,924 13,300,977 Retained earnings 13,979,518 12,385,429 Unrealized Apprec. (Deprec.) on debt securities (6,326) (663,619) TOTAL STOCKHOLDERS EQUITY 32,502,741 28,915,267 $306,024,757 $284,444,827 1 CONSOLIDATED STATEMENTS OF INCOME FARMERS NATIONAL BANC CORP. AND SUBSIDIARY
Three months ended Nine months ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, 1995 1994 1995 1994 INTEREST INCOME Interest & fees on loans $ 4,751,850 $ 4,283,661 $13,648,570 $12,522,110 Interest & dividends on investment sec.: Taxable interest 537,932 564,272 1,599,803 1,602,052 Interest exempt from fed. income taxes 104,520 103,409 328,105 304,242 Dividends 5,556 5,839 17,010 15,331 Interest on federal funds sold 237,334 47,551 466,636 177,451 TOTAL INTEREST INCOME 5,637,192 5,004,732 16,060,124 14,621,186 INTEREST EXPENSE Deposits 2,414,498 1,887,596 6,698,579 5,754,790 Short-term borrowing 129,868 86,138 350,943 217,659 TOTAL INTEREST EXPENSE 2,544,366 1,973,734 7,049,522 5,972,449 NET INTEREST INCOME 3,092,826 3,030,998 9,010,602 8,648,737 Provision for possible loan losses 60,000 60,000 240,000 270,000 NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE LOAN LOSSES 3,032,826 2,970,998 8,770,602 8,378,737 OTHER INCOME Service charges on deposit accounts 243,615 244,726 721,956 709,182 Net investment security gains/(losses) -0- 17,675 ( 197) 88,327 Other operating income 94,119 86,726 283,143 243,178 TOTAL OTHER INCOME 337,734 349,127 1,004,902 1,040,687 OTHER EXPENSES Salaries and employee benefits 1,048,431 926,956 3,068,104 2,761,509 Net occupancy expense of premises 126,206 111,832 378,314 353,366 Furniture and equipment expense, including depreciation 124,913 119,991 376,422 400,704 Intangible and other assets 107,958 95,287 331,959 293,334 Federal deposit insurance 5,306 133,558 283,868 409,558 Other operating expenses 573,453 503,711 1,643,811 1,492,470 TOTAL OTHER EXPENSES 1,986,267 1,891,335 6,082,478 5,710,941 INCOME BEFORE FEDERAL INCOME TAXES 1,384,293 1,428,790 3,693,026 3,708,483 FEDERAL INCOME TAXES 440,109 454,746 1,156,732 1,170,116 NET INCOME $ 944,184 $ 974,044 $ 2,536,294 $ 2,538,367 *Net income per share $ .60 $ .65 $ 1.61 $ 1.68 *Adjusted to reflect weighted average shares outstanding, without audit and before adjustments.
2 CONSOLIDATED STATEMENTS OF CASH FLOWS FARMERS NATIONAL BANC CORP. AND SUBSIDIARY
Sept. 30, Sept. 30, 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES Interest received $ 16,469,349 $ 15,229,748 Fees and commissions received 1,005,099 952,360 Interest paid ( 6,816,764) ( 6,006,479) Cash paid to suppliers and employees ( 5,918,423) ( 5,593,933) Income taxes paid ( 1,145,000) ( 1,270,135) NET CASH PROVIDED BY OPERATING ACTIVITIES 3,594,261 3,311,561 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturity of investments available for sale 12,000,000 12,123,630 Proceeds from maturity of investments held to maturity 1,655,981 4,780,321 Proceeds from sale of securities held to maturity -0- 522,675 Proceeds from sale of investments available for sale 1,999,687 4,081,530 Purchase of investment securities held to maturity ( 2,347,685) ( 3,932,614) Purchase of investment securities available for sale ( 10,052,705) ( 17,418,502) Net increase in loans made to customers ( 10,416,456) ( 11,152,381) Purchase of premises and equipment ( 1,185,021) ( 246,807) Purchase of other real estate -0- ( 164,433) Proceeds from sale of other real estate 252,291 -0- NET CASH USED IN INVESTING ACTIVITIES ( 8,093,908) ( 11,406,581) CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in demand deposits, NOW accounts and savings accounts ( 7,396,953) 4,103,422 Net increase (decrease) in time deposits 26,115,942 1,845,804 Dividends paid ( 888,637) ( 720,527) Proceeds from sale of common stock 1,336,052 1,101,724 Other ( 130,787) -0- NET CASH PROVIDED FROM FINANCING ACTIVITIES 19,035,617 6,330,423 NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS 14,535,970 ( 1,764,597) CASH AND CASH EQUIVALENTS Beginning of period 14,508,724 16,825,874 End of period $ 29,044,694 $ 15,061,277 RECONCILATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net Income $ 2,536,294 $ 2,538,367 Add (deduct) items not affecting cash: Depreciation 296,310 284,620 Amortization and accretion 706,702 728,792 Provision for credit losses 240,000 270,000 Increase in interest & fees receivable ( 295,849) ( 120,230) Increase (Decrease) in interest payable 232,758 ( 34,030) Decrease in accrued expenses ( 17,845) ( 161,587) (Gain) Loss on sale of investment securities 197 ( 88,327) Other ( 104,306) ( 106,044) NET CASH PROVIDED BY OPERATING ACTIVITIES $ 3,594,261 $ 3,311,561
3 FARMERS NATIONAL BANC CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Management Representation: The financial statements for September 30, 1995 and 1994 have been prepared by management without audit and, therefore, have not been certified by our Independent Certified Public Accountants. In the opinion of the management of the registrant, the accompanying consolidated financial statements for the nine month period ending September 30, 1995 and 1994 include all adjustments, consisting of only normal recurring adjustments necessary for a fair statement of the results for the periods. Notes: Nine Months Ended Sept. 30, Sept. 30, 1995 1994 (1) Federal Income Tax Income before Federal Income Tax $3,693,026 $3,708,483 Less nontaxable interest and dividends 328,105 304,242 Taxable Income 3,364,921 3,404,241 Federal Income Tax $1,156,732 $1,170,116 4 (2) Stockholders Equity:
For the nine months ended Sept. 30, 1995 Common Stock Balance 1/1/95 $ 3,892,480 Dividend Reinvestment 102,145 Balance 9/30/95 $ 3,994,625 Additional Paid In Capital Balance 1/1/95 $13,300,977 Dividend Reinvestment 1,233,947 Balance 9/30/95 $14,534,924 Retained Earnings Balance 1/1/95 $12,385,429 Net Income 2,536,294 Dividends Declared: $.60 Cash Dividends on Common Stock 942,205 Balance 9/30/95 $13,979,518 Unrealized Appreciation (Depreciation) on Debt Securities Balance 1/1/95 $ (663,619) Net Change in Unrealized Appreciation on Debt Sec. 657,293 Balance 9/30/95 $ ( 6,326) TOTAL STOCKHOLDERS EQUITY AT 9/30/95 $32,502,741
(3) Effect of New Financial Accounting Standards: Effective January 1, 1995, the company adopted Financial Accounting Standards Board Statement 114, "Accounting by creditors for impairment of loans". Under the new standard, the 1995 reserve for loan losses related to loans that are considered impaired would be based on discounted cash flows using the loan's initial effective interest rate and the fair value of the collateral for certain collateral dependent loans. At the present time, management did not have any loans it considered to be impaired. 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The Corporation's net income for the third quarter of 1995 was $944,184 or $.60 per share, which is a 3.07% decrease compared with the $974,044 or $.65 earned during the same period last year. Return on average assets and return on average equity for the third quarter of 1995 were 1.26% and 11.93% respectively, compared to 1.39% and 14.20% for the same period in 1994. Net income for the first nine months of 1995 was $2,536,294 or $1.61 per share, which results in a slight .01% decrease compared to the $2,538,367 or $1.68 per share for the first nine months of 1994. Return on average assets and return on average equity for the nine months ended September 30, 1995 were 1.16% and 11.06% respectively, compared to 1.21% and 12.65% for the same period last year. The decrease in net income for the third quarter was mainly attributable to a 5.02% increase in other expenses. This increase is primarily due to an increase in staff and facilities to support growth in assets and the opening of the Columbiana, Ohio office in December, 1994. The increase in other expenses was partially offset by a $128,252 decrease in federal deposit insurance expense. The Corporation's net interest income increased 2.04% from $3,030,998 for 1994 to $3,092,826 for the same quarter of 1995. This increase resulted from an increase in loan balances of 5.83% over the past twelve months, as well as from the overall rise in interest rates. Additionally, the substantial growth in the balance of Federal funds sold has resulted in an increase in federal funds sold income of $189,783 for the quarter. This growth in federal funds sold is fueled by a 6.91% increase in deposits in the past twelve months. Liquidity Liquidity is defined as the ability to meet all financial obligations when due. The central role of liquidity management is to insure that the 6 Liquidity (cont'd) corporation has ready access to sufficient liquid funds to meet normal transaction requirements such as customer loan requirements, to take advantage of market opportunities which require flexibility and speed to provide a cushion against unforeseeable needs. As of September 30, 1995, the Corporation's formula for measuring liquidity stood at 6.05%, with 3.0% considered adequate to meet funding needs. This calculation compares favorably to 3.86% at the same time last year. The corporation has just recently become a member of the Federal Home Loan Bank. The Corporation plans to utilize the bank's services as an additional source of funding. Capital Resources The capital management function is a continuous process which consists of providing capital for both the current financial position and the anticipated future growth of the Corporation. As of September 30, 1995, the corporation's total risk-based capital ratio stood at 16.41%, and the Tier I risk-based capital ratio and Tier I leverage ratio were at 15.16% and 10.70%, respectively. Regulations established by the Federal Deposit Insurance Corporation Improvement Act require that for a bank to be considered well capitalized, it must have a total risk-based capital ratio of 10%, a Tier I risk-based capital ratio of 6% and a Tier I leverage ratio of 5%. Loan Portfolio The following shows the composition of loans at the dates indicated: Sept. 30, Dec. 31, 1995 1994 Commercial, financial and agricultural $ 22,626,785 $ 24,477,302 Real estate - mortgage 94,738,167 92,773,065 Installment loans to individuals 109,422,113 100,483,979 Total Loans $226,787,065 $217,734,346 7 Risk Elements The following table sets forth aggregate loans in each of the following categories for the dates indicated: Sept. 30, Dec. 31, 1995 1994 Loans accounted for on a nonaccrual basis $ 111,688 $ 301,520 Loans contractually past due 90 days or more as to interest or principal payments (not included in nonaccruals loans above) 1,670,077 1,474,642 Loans considered troubled debt re- structurings (not included in non- accrual or contracturally past due above) -0- -0- Management knows of no loans not included in the table above where serious doubt exists as to the ability of the borrower to comply with the current loan repayment terms. The following shows the amounts of contracted interest income and interest income reflected in income on loans accounted for on a nonaccrual basis and loans considered troubled debt restructuring for the periods indicated: Sept. 30, Dec. 31, 1995 1994 Gross interest income that would have been recorded if the loans had been current in accordance with their original terms $ 4,137 $ 21,785 Interest income included in income on the loans -0- -0- A loan is placed on a nonaccrual basis whenever sufficient information is received to question the collectibility of the loan. Once a loan is placed on a nonaccrual basis, interest that may be accrued and not collected on the loan is charged against earnings. As of September 30, 1995, there were no concentrations of loans exceeding 10% of total loans which are not disclosed as a category of loans. As of that date also, there are no other interest-earning assets that are either nonaccrual, past due or restructured. 8 Summary of Credit Loss Experience The following is an analysis of the Allowance for Loan and Lease Losses for the periods indicated: Nine Months Ended Year Ended Sept. 30, Dec. 31, 1995 1994 Balance at beginning of period $2,746,420 $2,620,741 Loan losses: Commercial, financial & agricultural ( 1,500) (185,426) Real estate - mortgage -0- -0- Installment loans to individuals (160,698) (201,909) (162,198) (387,335) Recoveries on previous loan losses: Commercial, financial & agricultural 43,665 38,995 Real estate - mortgage -0- -0- Installment loans to individuals 105,964 144,019 149,629 183,014 Net loan losses ( 12,569) (204,321) Provision charged to operations (1) 240,000 330,000 Balance at end of period $2,973,851 $2,746,420 Ratio of net loan and lease losses to average net loans and leases outstanding .01% .10% (1) The provision for possible credit losses charged to operating expense is based on management's judgement after taking into consideration all factors connected with the collectibility of the existing loan portfolio. Management evaluates the loan portfolio in light of economic conditions, changes in the nature and volume of the loan portfolio, industry standards and other relevant factors. Specific factors considered by management in determining the amounts charged to operating expenses include previous credit loss experience, the status of past due interest and principal payments, the quality of financial information supplied by loan customers and the general condition of the industries in the community to which loans have been made. 9 Summary of Credit Loss Experience (cont'd) The allowance for possible loan and lease losses has been allocated according to the amount deemed to be reasonably necessary to provide for the possibility of losses being incurred within the following categories of loans as of the dates indicated. Sept. 30, Dec. 31, 1995 1994 Types of Loans Commercial, financial & agricultural $1,843,787 $1,702,781 Real estate - mortgage 208,169 192,249 Installment 921,895 851,390 $2,973,851 $2,746,420 The allocation of the allowance as shown above should not be interpreted as an indication that charge-offs in 1995 will occur in the same proportions or that the allocation indicates future charge-off trends. Furthermore, the portion allocated to each loan category is not the total amount available for future losses that might occur within such categories since the total allowance is a general allowance applicable to the entire portfolio. The percentage of loans in each category to total loans is summarized as follows: Sept. 30, Dec. 31, 1995 1994 Types of Loans Commercial, financial & agricultural 9.98% 11.20% Real estate - mortgage 41.77 42.60 Installment loans to individuals 48.25 46.20 Total 100.00% 100.00% Other Matters The Farmers National Banc Corp.'s subsidiary, the Farmers National Bank of Canfield purchased the deposits, premises and equipment of the Leetonia, Ohio office of Banc One Corp. on September 11, 1995. This transaction increased the Corporation's deposits by approximately $6,700,000. 10 PART II - OTHER INFORMATION Item 1. Legal Proceedings There are no material pending legal proceedings to which the registrant or its subsidiary is a party, or of which any of their property is the subject, except proceedings which arise in the ordinary course of business. In the opinion of management, pending legal proceedings will not have a material effect on the consolidated financial position of the registrant and its subsidiary. Item 2. Changes in Securities Not applicable. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Item 5. Other Information Not applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 2.1. Not applicable. 4.1. The rights of holders of equity securities are defined in portions of the Articles of Incorporation and By-laws. The Articles of Incorporation are incorporated by reference to Exhibit 3.1. of the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994. The By-laws are incorporated by reference to Exhibit 3.2. of the registrant's Annual Report on Form 10-K for the fiscal year ended De- cember 31, 1994. The registrant agrees to furnish to the Commission upon request copies of all instruments not filed herewith defining the rights of holders of long-term debt of the registrant and its subsidiary. 11 Item 6. (a) - Continued 11.1. Not applicable. 15.1. Not applicable. 18.1. Not applicable. 19.1. Not applicable. 20.1. Not applicable. 23.1. Not applicable. 24.1. Not applicable. 25.1. Not applicable. 28.1. Not applicable. (b) - Reports on Form 8-K No reports on Form 8-K were filed for the nine months ended September 30, 1995. 12 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 thereunto duly authorized. FARMERS NATIONAL BANC CORP. Dated: ___________________ ______________________________________ William D. Stewart President and Secretary Dated: ___________________ ______________________________________ Gene A. Dean Comptroller, Farmers National Banc Corp. 13 -----END PRIVACY-ENHANCED MESSAGE-----