-----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, JoHahMtgx0lTpbSx96Dc3cKJO2f7Hl5PcMMRlBz6M2ms7vcyns1qR5OD/Jq1s6Q8 SJXuPTOE7MttLeZmbLeEaA== 0000950152-00-003757.txt : 20000510 0000950152-00-003757.hdr.sgml : 20000510 ACCESSION NUMBER: 0000950152-00-003757 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000509 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: SEC FILE NUMBER: 000-12055 FILM NUMBER: 622781 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 FARMERS NATIONAL BANC CORP. 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 March 31, 2000 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) (330) 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, as of the latest practicable date. Class Outstanding at March 31, 2000 ----- ----------------------------- Common Stock, No Par Value 7,642,959 shares 2 PART I - FINANCIAL INFORMATION - ------------------------------ PAGE ---- ITEM 1. FINANCIAL STATEMENTS Included in Part I of this report: Farmers National Banc Corp. and Subsidiary Consolidated Balance Sheets 1 Consolidated Statements of Income and Comprehensive Income 2 Consolidated Statements of Cash Flows 3 Notes to Consolidated Financial Statements 4 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 5-10 PART II - OTHER INFORMATION - --------------------------- Other Information and Signatures 10-12 3 CONSOLIDATED BALANCE SHEETS FARMERS NATIONAL BANC CORP. AND SUBSIDIARY
(In Thousands of Dollars) MARCH 31, DECEMBER 31, 2000 1999 ----------------------------------- ASSETS Cash and due from banks $14,523 $19,846 Federal funds sold 8,843 3,821 ----------------------------------- TOTAL CASH AND CASH EQUIVALENTS 23,366 23,667 ----------------------------------- Securities available for sale 76,169 73,659 Other securities 2,617 2,618 Loans 325,864 322,635 Less allowance for credit losses 4,262 4,128 ----------------------------------- NET LOANS 321,602 318,507 ----------------------------------- Premises and equipment, net 8,015 8,103 Other assets 5,141 4,576 ----------------------------------- $436,910 $431,130 =================================== LIABILITIES AND STOCKHOLDERS EQUITY Deposits (all domestic): Noninterest-bearing $27,632 $29,343 Interest-bearing 305,254 302,120 ----------------------------------- TOTAL DEPOSITS 332,886 331,463 ----------------------------------- U. S. Treasury interest-bearing demand note 334 800 Securities sold under repurchase agreements 32,801 28,011 Federal Home Loan Bank advances 15,631 15,936 Other liabilities and deferred credits 3,296 3,026 ----------------------------------- TOTAL LIABILITIES 384,948 379,236 ----------------------------------- Stockholders Equity: Common Stock - Authorized 12,500,000 shares; issued and outstanding 7,642,959 in 2000 and 3,678,343 in 1999 38,071 37,294 Retained earnings 15,991 15,584 Accumulated other comprehensive loss (1,013) (892) Treasury stock, at cost; 77,812 shares in 2000 and 4,976 in 1999 (1,087) (92) ----------------------------------- TOTAL STOCKHOLDERS EQUITY 51,962 51,894 ----------------------------------- $436,910 $431,130 ===================================
1 4 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FARMERS NATIONAL BANC CORP. AND SUBSIDIARY
(In Thousands except Per Share Data) FOR THE THREE MONTHS ENDED MARCH 31, MARCH 31, 2000 1999 ------------------------------------ INTEREST INCOME Interest and fees on loans $6,760 $6,064 Interest and dividends on securities: Taxable interest 895 973 Nontaxable interest 188 156 Dividends 44 41 Interest on federal funds sold 131 65 ------------------------------------ TOTAL INTEREST INCOME 8,018 7,299 ------------------------------------ INTEREST EXPENSE Deposits 2,883 2,683 Borrowings 630 350 ------------------------------------ TOTAL INTEREST EXPENSE 3,513 3,033 ------------------------------------ NET INTEREST INCOME 4,505 4,266 Provision for credit losses 210 210 ------------------------------------ NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 4,295 4,056 ------------------------------------ OTHER INCOME Service charges on deposit accounts 277 280 Investment security gains 0 3 Other operating income 129 117 ------------------------------------ TOTAL OTHER INCOME 406 400 ------------------------------------ OTHER EXPENSES Salaries and employee benefits 1,508 1,376 Net occupancy expense of premises 155 144 Furniture and equipment expense, including depreciation 173 153 Intangible and other taxes 154 148 Other operating expenses 795 789 ------------------------------------ TOTAL OTHER EXPENSES 2,785 2,610 ------------------------------------ INCOME BEFORE FEDERAL INCOME TAXES 1,916 1,846 FEDERAL INCOME TAXES 595 586 ------------------------------------ NET INCOME $1,321 $1,260 OTHER COMPREHENSIVE INCOME, NET OF TAX: Unrealized losses on securities (121) (210) ------------------------------------ COMPREHENSIVE INCOME $1,200 $1,050 ==================================== * NET INCOME PER SHARE $0.17 $0.17 ====================================
* Adjusted to reflect weighted average shares outstanding, 2-for-1 stock split and 2% stock dividend, without audit and before adjustments. 2 5 CONSOLIDATED STATEMENTS OF CASH FLOWS FARMERS NATIONAL BANC CORP. AND SUBSIDIARY
(In Thousands of Dollars) THREE MONTHS ENDED MARCH 31, MARCH 31, 2000 1999 ----------------------------- CASH FLOW FROM OPERATING ACTIVITIES Interest received $8,245 $7,442 Fees and commissions received 401 392 Interest paid (3,535) (3,081) Cash paid to suppliers and employees (2,824) (2,716) Income taxes paid (76) (84) ----------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 2,211 1,953 ----------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturities of investment securities available for sale 4,628 5,508 Proceeds from sales of investment securities available for sale 0 138 Purchases of other securities and securities available for sale (7,496) (6,682) Net increase in loans made to customers (3,468) (5,270) Purchases of premises and equipment (49) (399) ----------------------------- NET CASH USED IN INVESTING ACTIVITIES (6,385) (6,705) ----------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase in demand deposits, NOW accounts and savings accounts 3,808 137 Net increase (decrease) in time deposits and repurchase agreements 1,343 (3,212) Net increase (decrease) in Federal Home Loan Bank borrowings (305) 2,204 Purchase of Treasury Stock (995) 0 Dividends paid (755) (898) Proceeds from sale of common stock 777 884 ----------------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 3,873 (885) ----------------------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (301) (5,637) CASH AND CASH EQUIVALENTS Beginning of period 23,667 22,680 ----------------------------- End of period $23,366 $17,043 ============================= RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATIONS Net income $1,321 $1,260 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 125 122 Amortization and accretion 476 358 Provision for credit losses 210 210 Gain on sale of investment securities 0 (3) Increase in prepaid expenses (352) (222) Other 431 228 ----------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $2,211 $1,953 =============================
3 6 FARMERS NATIONAL BANC CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Management Representation: The financial statements for March 31, 2000 and 1999 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 three month period ending March 31, 2000 and 1999 include all adjustments, consisting of only normal recurring adjustments necessary for a fair statement of the results for the periods.
(In Thousands of Dollars) Stockholders Equity Three Months Ended March 31, 2000 -------------- COMMON STOCK Balance 1/1/00 37,294 56,940 shares sold 777 --------- Balance 3/31/00 38,071 --------- RETAINED EARNINGS Balance 1/1/00 15,584 Net Income 1,321 Dividends Declared: $.12 Cash dividends on common stock (914) --------- Balance 3/31/00 15,991 --------- ACCUMULATED OTHER COMPREHENSIVE LOSS Balance 1/1/00 (892) Net change in unrealized depreciation on debt securities, net of income taxes (121) --------- Balance 3/31/00 (1,013) --------- TREASURY STOCK, AT COST Balance 1/1/00 (92) Shares Purchased (995) --------- Balance 3/31/00 (1,087) --------- TOTAL STOCKHOLDERS EQUITY AT 3/31/00 51,962 =========
4 7 Item 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations --------------------- The following financial review presents an analysis of the assets and liability structure of the Corporation and a discussion of the results of operations for each of the periods presented in this quarterly report, liquidity, capital and credit quality. Certain statements in this report that relate to Farmers National Banc Corp.'s plans, objectives, or future performance may be deemed to be forward-looking statements within the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations. Actual strategies and results in future periods may differ materially from those currently expected because of various risks and uncertainties. Results of Operations - --------------------- The Corporation's net income for the first quarter of 2000 was $1.321 million, or $.17 per share, which is a 4.84% increase compared with the $1.260 million, or $.17 per share earned during the same period last year. Return on average assets and return on average equity for the first three months of 2000 were 1.23% and 10.28% respectively, compared to 1.28% and 10.69% for the same period in 1999. The increase in net income for the first quarter of 2000 was primarily the result of an increase in net interest income. The Corporation's net interest income increased $239 thousand, or 5.60% from $4.266 million for 1999 to $4.505 million for the same period in 2000. Interest income on loans and investment securities is up 9.85% compared to the first quarter of last year. Most of this increase is a result of the growth in loans outstanding. Increasing demand in all of the Corporation's loan types has increased average balances in the total loan portfolio by 12.88% over the past twelve months. This growth has contributed to the increase in loan income of $696 thousand or 11.48%. Although the Corporation's average balance of federal funds sold and investment securities has decreased 3.65% from March, 1999 to March, 2000, investment income increased 1.86% during the same time period. This increase in income is due to the increase in the rates paid on federal funds sold and investment securities. Interest expense on deposits and borrowings is 15.83% higher for the first quarter of 2000 compared to the first quarter of 1999. This is primarily the result of an increase of $280 thousand in interest expense on borrowings, as well as an increase in the rates paid on time deposits. Other income increased 1.50% from $400 thousand in 1999 to $406 thousand 2000. The Corporation's total other expenses for the first quarter of 2000 increased 6.70% from $2.610 million in 1999 to $2.785 million in 2000. The increase in other operating expenses is due primarily to asset growth and the increased volume of the operations of the bank. Management will continue to closely monitor and keep the increases in noninterest expenses to a minimum. 5 8 Liquidity - --------- The Corporation maintains, in the opinion of management, liquidity sufficient to satisfy depositors' requirements and meet the credit needs of customers. The Corporation depends on its ability to maintain its market share of deposits as well as acquiring new funds. The Corporation's ability to attract deposits and borrow funds depends in large measure on its profitability, capitalization and overall financial condition. Principal sources of liquidity for the Corporation include assets considered relatively liquid such as short-term investment securities, federal funds sold and cash and due from banks. Cash flows generated from operating activities increased to $2.211 million compared to $1.953 million for the same period in 1999. This increase of $258 thousand is primarily the result of an increase in interest received. Net cash flows used in investing activities amounted to $6.385 million. Most of these funds were used to fund loans made to customers, which increased $3.468 million since December 31, 1999. Net cash flows provided by financing activities were $3.873 million in 2000 compared to $885 thousand used in financing activities in 1999. In 2000, $5.151 million of these funds were generated from increases in customer deposits and repurchase agreements compared to $3.075 used for decreases in customer deposits and repurchase agreements for the same time period in 1999. During the first quarter of 2000, $995 thousand was used to purchase treasury stock. 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 March 31, 2000, the corporation's total risk-based capital ratio stood at 18.50%, and the Tier I risk-based capital ratio and Tier I leverage ratio were at 17.25% and 12.15%, 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%. 6 9 Loan Portfolio - -------------- The following shows the composition of loans at the dates indicated:
(In Thousands of Dollars) March 31, Dec. 31, 2,000 1999 -------------------------- Commercial, financial and agricultural 12,431 11,650 Real Estate - mortgage 176,079 172,926 Installment loans to individuals 137,354 138,059 -------------------------- Total loans 325,864 322,635 ==========================
The following table sets forth aggregate loans in each of the following categories for the dates indicated:
(In Thousands of Dollars) March 31, Dec. 31, 2000 1999 --------------------------- Loans accounted for on a nonaccrual basis 349 310 Loans contractually past due 90 days or more as to interest or principal payments (not included in nonaccrual loans above) 540 439 Loans considered troubled debt restructurings (not included in nonaccrual or contractually 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:
(In Thousands of Dollars) March 31, Dec. 31, 2000 1999 ------------------------- Gross interest that would have been recorded if the loans had been current in accordance with their original terms 7 13 Interest income included in income on the loans 4 3
7 10 Risk Elements (Continued) - ------------------------- A loan is placed on a nonaccrual basis whenever sufficient information is received to question the collectibility of the loan. Generally, 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 March 31, 2000, 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. Summary of Credit Loss Experience - --------------------------------- The following is an analysis of the allowance for credit losses for the periods indicated:
(In Thousands of Dollars) Three Months Year Ended Ended March 31, Dec. 31, 2000 1999 ----------------------------- Balance at beginning of period 4,128 3,689 Loan losses: Commercial, financial & agricultural 0 (27) Real estate - mortgage 0 (75) Installment loans to individuals (142) (614) ----------------------------- (142) (716) Recoveries on previous loan losses: Commercial, financial & agricultural 0 12 Real estate - mortgage 2 32 Installment loans to individuals 64 271 ----------------------------- 66 315 ----------------------------- Net loan losses (76) (401) Provision charged to operations (1) 210 840 ----------------------------- Balance at end of period 4,262 4,128 ============================= Ratio of net credit losses to average net loans outstanding .09% .13%
8 11 Summary of Credit Loss Experience (cont'd) - ------------------------------------------ (1) The provision for possible credit losses charged to operating expense is based on management's judgment 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. The allowance for possible credit 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.
(In Thousands of Dollars) March 31, Dec. 31, Types of Loans 2000 1999 - -------------- ------------------------- Commercial, financial & agricultural 950 875 Real estate - mortgage 1,219 1,179 Installment 2,093 2,074 ------------------------- Total 4,262 4,128 =========================
The allocation of the allowance as shown above should not be interpreted as an indication that charge-offs in 2000 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:
March 31, Dec. 31, Types of Loans 2000 1999 - -------------- -------------------------- Commercial, financial & agricultural 3.8% 3.6% Real Estate - mortgage 54.0% 53.6% Installment loans to individuals 42.2% 42.8% -------------------------- 100.0% 100.0% =+========================
9 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk ---------------------------------------------------------- There are no material changes from the end of the preceding fiscal year that would cause additional disclosure of the bank's exposure to market risk. 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 --------------------------------------------------- (a) Farmers National Banc Corp's annual meeting of shareholders was held on March 30, 2000. (b & c) Proxies were solicited by Farmers National Banc Corp's management pursuant to Regulation 14 under the Securities Exchange Act of 1934. Elected to serve as director until the year 2001 annual meeting of shareholders were management's nominees Benjamin R. Brown (5,644,634 votes), Richard L. Calvin (5,372,274 votes), Joseph D. Lane (5,643,132 votes), David C. Myers (5,634,115 votes), Edward A. Ort (5,644,350 votes), Frank L. Paden (5,388,109 votes), William D. Stewart (5,366,333 votes) and Ronald V. Wertz (5,644,449 votes). A proposal to approve and adopt the First Amended and Restated Articles of Incorporation was not approved with the following results: For the proposal: 4,603,780; Against: 489,440; Abstain: 64,749. Out of the total shares issued and outstanding, 75% approval was required to pass the proposal. 60.11% voted for the proposal. A proposal to approve and adopt the First Amended and Restated Code of Regulations was not approved with the following results: For the proposal: 4,629,684; Against: 458,171; Abstain: 70,114. Out of the total shares issued and outstanding, 66 2/3% approval was required to pass the proposal. 60.45% voted for the proposal. Item 5. Other Information ----------------- Not applicable. 10 13 Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) The following exhibits are filed or incorporated by references as part of this report: 2. Not applicable. 3(i). Not applicable. 3(ii). Not applicable. 4. 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 subsidiaries. 10. Not applicable. 11. Not applicable. 15. Not applicable. 18. Not applicable. 19. Not applicable. 22. Not applicable. 23. Not applicable. 24. Not applicable. 27. Financial Data Schedule (filed herewith) 99. Not applicable. (b) - Reports on Form 8-K ------------------- A Form 8-K was filed by the Corporation on January 6, 2000. The item reported was classified as Item 5, Other Events, and read as follows: On January 6, 2000, the Corporation announced that its board of directors has adopted a stock repurchase program. Under the stock repurchase program, the Registrant will be authorized to repurchase shares of its outstanding common stock in the open market or in privately negotiated transactions at appropriate times to allow it to enhance the value of its stock for shareholders and to manage its capital. The Board's action will allow management to make repurchases, without further board approval, when stock purchases are deemed prudent. The Stock Repurchase Program contemplates that stock repurchases will be made in accordance with Rule 10b-18 of the regulations issued under the Securities Exchange Act of 1934. 11 14 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: 5/5/00 ------------- /s/ Frank L. Paden - --------------------------------------------- Frank L. Paden President and Secretary Dated: 5/5/00 /s/ Carl D. Culp - --------------------------------------------- Carl D. Culp Executive Vice President and Treasurer 12 EX-27 2 EXHIBIT 27
9 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 14,523 0 8,843 0 78,186 0 0 325,864 4,262 436,910 332,886 34,747 2,526 14,789 0 0 38,071 13,891 436,910 6,760 1,258 0 8,018 2,883 3,513 4,505 210 0 2,785 1,916 1,916 0 0 1,321 .17 .17 4.36 349 540 0 0 4,128 142 66 4,262 4,262 0 0
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