8-K

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): April 24, 2019

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

(Registrant’s 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:

☐ 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))

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 April 24, 2019, Farmers National Banc Corp. (the “Company”) announced earnings for the quarter ended March 31, 2019. A copy of the press release and certain financial information for this period is attached as Exhibit 99.1 hereto and 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 April 24, 2019.

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: April 24, 2019

EX-99.1

Exhibit 99.1

April 24, 2019

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

2019 FIRST QUARTER FINANCIAL RESULTS

• Net income is 9% higher than same quarter in 2018

• 145 consecutive quarters of profitability

• Annualized return on average assets was 1.45% and annualized return on average equity 12.71% for the quarter ended March 31, 2019

• 9% loan growth since March 31, 2018

• Non-performing assets to total assets remain at low levels, 0.33% at March 31, 2019

CANFIELD, Ohio (April 24, 2019) – Farmers National Banc Corp. (Farmers) (NASDAQ: FMNB) today reported financial results for the three months ended March 31, 2019.

Net income for the three months ended March 31, 2019 was $8.4 million, or $0.30 per diluted share, which compares to $7.7 million, or $0.28 per diluted share, for the three months ended March 31, 2018 and $8.7 million or $0.31 per diluted share for the linked quarter. Annualized return on average assets and return on average equity were 1.45% and 12.71%, respectively, for the three month period ending March 31, 2019, compared to 1.45% and 13.03% for the same three month period in 2018, and 1.50% and 13.65% for the linked quarter. Farmers’ return on average tangible equity (Non-GAAP) was 14.99% for the quarter ended March 31, 2019 compared to 15.84% for the same quarter in 2018 and 16.68% for the linked quarter.

Kevin J. Helmick, President and CEO, stated, “As a result of 9% loan growth, 8.5% increase in noninterest income, careful management of our noninterest expenses and continued strong asset quality, we are pleased to report a 9% increase in net income compared to the same quarter one year ago. We are also pleased to report a 29% increase in cash dividends paid to our shareholders, from $0.07 per share paid in the first quarter of 2018 to $0.09 paid for the same quarter in 2019.”

2019 First Quarter Financial Highlights

• Loan growth

Total loans were $1.74 billion at March 31, 2019, compared to $1.60 billion at March 31, 2018, representing an increase of 9%. The 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. The increase in loans has occurred in the commercial, commercial real estate, residential real estate and agricultural loan portfolios. Loans now comprise 79.3% of the Bank’s average earning assets for the quarter ended March 31, 2019, an improvement compared to 78.1% for the same period in 2018. This improvement, along with the growth in earning assets, has resulted in a 16.5% increase in tax equated loan income in the first quarter of 2019 compared to the same quarter in 2018.

• Loan quality

Non-performing assets to total assets remain at a low level, currently at 0.33%. Early stage delinquencies also continue to remain at low levels, at $9.1 million, or 0.52% of total loans, at March 31, 2019. Net charge-offs for the current quarter were $365 thousand, compared to $540 thousand in the same quarter in 2018 and total net charge-offs as a percentage of average net loans outstanding is only 0.08% for the quarter ended March 31, 2019.

• Net interest margin

The net interest margin for the three months ended March 31, 2019 was 3.81%, an 11 basis points decrease from the quarter ended March 31, 2018, but a 1 basis point increase from the linked quarter. In comparing the first quarter of 2019 to the same period in 2018, asset yields increased 29 basis points, while the cost of interest-bearing liabilities increased 54 basis points. Most of this increase was the result of higher rates paid on interest-bearing checking accounts and time deposits, consistent with increases in the federal funds sold rate. 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 4 basis points for both quarters ended March 31, 2019 and 2018.

• Noninterest income

Noninterest income increased 8.49% to $6.5 million for the quarter ended March 31, 2019 compared to $6.0 million in the same quarter in 2018. Gains on the sales of mortgage loans increased $184 thousand or 38%, other operating income increased $169 thousand or 51% and insurance agency commissions also increased $104 thousand or 15% in comparing the first quarter of 2019 to the same quarter in 2018. These increases were offset by a drop in debit card interchange income of $28 thousand or 3.5% and retirement plan consulting fees of $21 thousand or 5.5%.

• Noninterest expenses

Farmers has remained committed to managing the level of noninterest expenses. Total noninterest expenses for the first quarter of 2019 increased 5.8% to $16.0 million compared to $15.1 million in the same quarter in 2018, primarily as a result of an increase in salaries and employee benefits of $618 thousand and other operating expense of $280 thousand, offset by a $135 thousand decrease in FDIC insurance expense. It is important to note that annualized noninterest expenses measured as a percentage of quarterly average assets decreased from 2.83% in the first quarter of 2018 to 2.77% in the first quarter of 2019.

• Efficiency ratio

The efficiency ratio for the quarter ended March 31, 2019 improved slightly to 57.83% compared to 57.98% for the same quarter in 2018. The main factors leading to this improvement were the increase in net interest income and noninterest income and the stabilized level of noninterest expenses relative to average assets as explained in the preceding paragraphs.

2019 Outlook

Mr. Helmick added, “Coming off an historic 2018, this is an encouraging start to 2019. We are extremely proud of our committed employees that continue to deliver strong results for our stakeholders and remain committed to our community banking approach and culture.”

Founded in 1887, Farmers National Banc Corp. is a diversified financial services company headquartered in Canfield, Ohio, with $2.4 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 41 banking locations in Mahoning, Trumbull, Columbiana, Stark, Wayne, Medina and Cuyahoga Counties in Ohio and Beaver County in Pennsylvania, Farmers Trust Company, which operates four trust offices and offers services in the same geographic markets, and National Associates, Inc. Total wealth management assets under care at March 31, 2019 are $2.5 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 can be found in Farmers’ Annual

Report on Form 10-K for the year ended December 31, 2018, which has been filed with the Securities and Exchange Commission (SEC) and is available on Farmers’ website (www.farmersbankgroup.com) and on the SEC’s website (www.sec.gov). Forward-looking statements are not guarantees of future performance and should not be relied upon as representing management’s views as of any subsequent date. Farmers does not undertake any obligation to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.

Farmers National Banc Corp. and Subsidiaries

Consolidated Financial Highlights

(Amounts in thousands, except per share results) Unaudited

Consolidated Statements of Income	For the Three Months Ended
	March 31,		Dec. 31,			Sept. 30,		June 30,		March 31,
	2019		2018			2018		2018		2018
Total interest income	$	24,679	$	24,447		$	23,563	$	22,474	$	21,282
Total interest expense		4,714		4,373			3,644		2,912		2,336
Net interest income		19,965		20,074			19,919		19,562		18,946
Provision for loan losses		550		525			950		750		775
Noninterest income		6,520		6,705			6,478		6,306		6,010
Acquisition related costs		0		(180	)		0		0		25
Other expense		15,977		16,163			16,180		15,458		15,071
Income before income taxes		9,958		10,271			9,267		9,660		9,085
Income taxes		1,570		1,585			1,183		1,587		1,359
Net income	$	8,388	$	8,686		$	8,084	$	8,073	$	7,726
Average diluted shares outstanding		27,983		27,781			27,695		27,641		27,918
Basic and diluted earnings per share		0.30		0.31			0.29		0.29		0.28
Cash dividends		2,500		2,223			2,222		1,935		1,935
Cash dividends per share		0.09		0.08			0.08		0.07		0.07
Performance Ratios
Net Interest Margin (Annualized)		3.81%		3.80%			3.86%		3.93%		3.92%
Efficiency Ratio (Tax equivalent basis)		57.83%		57.73%			58.70%		57.31%		57.98%
Return on Average Assets (Annualized)		1.45%		1.50%			1.42%		1.47%		1.45%
Return on Average Equity (Annualized)		12.71%		13.65%			12.80%		13.28%		13.03%
Dividends to Net Income		29.80%		25.59%			27.49%		23.97%		25.05%
Other Performance Ratios (Non-GAAP)
Return on Average Tangible Assets		1.46%		1.54%			1.46%		1.50%		1.46%
Return on Average Tangible Equity		14.99%		16.68%			15.70%		16.24%		15.84%
Return on Average Tangible Equity excluding acquisition costs and deferred tax asset adjustments		14.99%		16.34%			15.70%		16.24%		15.88%

Consolidated Statements of Financial Condition

	March 31,		Dec. 31,		Sept. 30,		June 30,		March 31,
	2019		2018		2018		2018		2018
Assets
Cash and cash equivalents	$	69,672	$	57,926	$	75,635	$	76,623	$	52,149
Securities available for sale		403,770		402,190		389,996		388,890		384,396
Equity securities		7,460		7,130		6,892		6,344		6,009
Loans held for sale		2,360		1,237		1,428		1,987		399
Loans		1,743,651		1,735,840		1,691,532		1,639,191		1,599,339
Less allowance for loan losses		13,777		13,592		13,377		12,764		12,550
Net Loans		1,729,874		1,722,248		1,678,155		1,626,427		1,586,789
Other assets		142,938		137,999		140,572		137,668		137,775
Total Assets	$	2,356,074	$	2,328,730	$	2,292,678	$	2,237,939	$	2,167,517
Liabilities and Stockholders’ Equity
Deposits
Noninterest-bearing	$	415,131	$	421,950	$	426,689	$	420,991	$	402,499
Interest-bearing		1,539,202		1,377,770		1,332,022		1,229,346		1,234,660
Total deposits		1,954,333		1,799,720		1,758,711		1,650,337		1,637,159
Other interest-bearing liabilities		109,348		250,792		270,273		322,565		274,816
Other liabilities		19,442		15,898		14,905		17,527		14,302
Total liabilities		2,083,123		2,066,410		2,043,889		1,990,429		1,926,277
Stockholders’ Equity		272,951		262,320		248,789		247,510		241,240
Total Liabilities and Stockholders’ Equity	$	2,356,074	$	2,328,730	$	2,292,678	$	2,237,939	$	2,167,517
Period-end shares outstanding		27,777		27,792		27,777		27,641		27,641
Book value per share	$	9.83	$	9.44	$	8.96	$	8.95	$	8.73
Tangible book value per share (Non-GAAP)*		8.26		7.86		7.36		7.34		7.10
*  Tangible book value per share is calculated by dividing tangible common equity by period-end shares outstanding
Capital and Liquidity
Common Equity Tier 1 Capital Ratio (a)		12.39%		12.16%		12.13%		12.11%		12.06%
Total Risk Based Capital Ratio (a)		13.13%		13.03%		13.00%		12.97%		12.94%
Tier 1 Risk Based Capital Ratio (a)		12.49%		12.28%		12.26%		12.24%		12.19%
Tier 1 Leverage Ratio (a)		9.92%		9.91%		9.87%		9.81%		9.68%
Equity to Asset Ratio		11.58%		11.26%		10.85%		11.06%		11.13%
Tangible Common Equity Ratio (b)		9.92%		9.56%		9.09%		9.25%		9.24%
Net Loans to Assets		73.42%		73.96%		73.20%		72.68%		73.21%
Loans to Deposits		89.22%		96.45%		96.18%		99.32%		97.69%
Asset Quality
Non-performing loans	$	7,578	$	7,731	$	9,222	$	8,406	$	7,893
Other Real Estate Owned		208		0		0		0		59
Non-performing assets		7,786		7,731		9,222		8,406		7,952
Loans 30 - 89 days delinquent		9,082		8,877		10,626		10,636		6,973
Charged-off loans		566		753		544		777		782
Recoveries		201		443		207		241		242
Net Charge-offs		365		310		337		536		540
Annualized Net Charge-offs to
Average Net Loans Outstanding		0.08%		0.07%		0.08%		0.13%		0.14%
Allowance for Loan Losses to Total Loans		0.79%		0.78%		0.79%		0.78%		0.78%
Non-performing Loans to Total Loans		0.43%		0.45%		0.55%		0.51%		0.49%
Allowance to Non-performing Loans		181.80%		175.81%		145.06%		151.84%		159.00%
Non-performing Assets to Total Assets		0.33%		0.33%		0.40%		0.38%		0.37%

(a) March 31, 2019 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

	March 31,		Dec. 31,		Sept. 30,		June 30,		March 31,
	2019		2018		2018		2018		2018
Total Assets	$	2,356,074	$	2,328,730	$	2,292,678	$	2,237,939	$	2,167,517
Less Goodwill and other intangibles		43,625		43,952		44,305		44,661		45,015
Tangible Assets	$	2,312,449	$	2,284,778	$	2,248,373	$	2,193,278	$	2,122,502
Average Assets		2,338,792		2,301,847		2,255,049		2,199,960		2,162,706
Less average Goodwill and other intangibles		43,840		44,185		44,541		44,893		45,248
Average Tangible Assets	$	2,294,952	$	2,257,662	$	2,210,508	$	2,155,067	$	2,117,458

Reconciliation of Common Stockholders’ Equity to Tangible Common Equity

	March 31,		Dec. 31,		Sept. 30,		June 30,		March 31,
	2019		2018		2018		2018		2018
Stockholders’ Equity	$	272,951	$	262,320	$	248,789	$	247,510	$	241,240
Less Goodwill and other intangibles		43,625		43,952		44,305		44,661		45,015
Tangible Common Equity	$	229,326	$	218,368	$	204,484	$	202,849	$	196,225
Average Stockholders’ Equity		267,736		252,449		250,503		243,792		240,387
Less Average Goodwill and other intangibles		43,840		44,185		44,541		44,893		45,248
Average Tangible Common Equity	$	223,896	$	208,264	$	205,962	$	198,899	$	195,139

Reconciliation of Net Income, Excluding Acquisition Related Costs

	For the Three Months Ended
	March 31,		Dec. 31,			Sept. 30,		June 30,		March 31,
	2019		2018			2018		2018		2018
Net income	$	8,388	$	8,686		$	8,084	$	8,073	$	7,726
Acquisition related costs - tax equated		0		(180	)		0		0		22
Net income - Adjusted	$	8,388	$	8,506		$	8,084	$	8,073	$	7,748
EPS excluding acquisition costs and deferred tax asset adjustments	$	0.30	$	0.31		$	0.29	$	0.29	$	0.28

End of Period Loan Balances

	March 31,		Dec. 31,		Sept. 30,		June 30,		March 31,
	2019		2018		2018		2018		2018
Commercial real estate	$	589,219	$	579,481	$	562,272	$	523,417	$	511,628
Commercial		254,957		245,172		233,188		232,672		231,498
Residential real estate		488,854		492,887		489,851		479,486		472,350
Consumer		209,541		216,284		220,826		219,138		210,088
Agricultural loans		198,210		199,013		182,038		181,173		170,725
Total, excluding net deferred loan costs	$	1,740,781	$	1,732,837	$	1,688,175	$	1,635,886	$	1,596,289

	For the Three Months Ended
Noninterest Income	March 31,		Dec. 31,			Sept. 30,			June 30,		March 31,
	2019		2018			2018			2018		2018
Service charges on deposit accounts	$	1,074	$	1,115		$	1,151		$	985	$	1,003
Bank owned life insurance income		214		221			219			219		222
Trust fees		1,858		1,752			1,827			1,740		1,807
Insurance agency commissions		803		642			567			713		699
Security gains		2		260			(34	)		27		18
Retirement plan consulting fees		358		370			470			465		379
Investment commissions		260		259			273			315		256
Net gains on sale of loans		671		832			804			606		487
Debit card and EFT fees		778		861			814			870		806
Other operating income		502		393			387			366		333
Total Noninterest Income	$	6,520	$	6,705		$	6,478		$	6,306	$	6,010
	For the Three Months Ended
Noninterest Expense	March 31,		Dec. 31,			Sept. 30,			June 30,		March 31,
	2019		2018			2018			2018		2018
Salaries and employee benefits	$	9,356	$	9,444		$	8,966		$	8,828	$	8,738
Occupancy and equipment		1,717		1,566			1,597			1,611		1,704
State and local taxes		470		474			475			479		459
Professional fees		794		734			687			737		698
Merger related costs		0		(180	)		0			0		25
Advertising		250		416			489			379		275
FDIC insurance		87		234			218			225		222
Intangible amortization		327		355			354			355		354
Core processing charges		791		762			778			794		739
Telephone and data		260		288			298			238		237
Other operating expenses		1,925		1,890			2,318			1,812		1,645
Total Noninterest Expense	$	15,977	$	15,983		$	16,180		$	15,458	$	15,096

Average Balance Sheets and Related Yields and Rates

(Dollar Amounts in Thousands)

	Three Months Ended							Three Months Ended
	March 31, 2019							March 31, 2018
	AVERAGE							AVERAGE
	BALANCE		INTEREST(1)		RATE(1)			BALANCE		INTEREST(1)		RATE(1)
EARNING ASSETS
Loans (2)	$	1,727,950	$	21,571		5.06	%	$	1,564,990	$	18,509		4.80	%
Taxable securities		196,062		1,244		2.57			206,345		1,233		2.42
Tax-exempt securities (2)		207,618		2,011		3.93			185,560		1,680		3.67
Equity securities		11,932		175		5.95			10,887		146		5.44
Federal funds sold and other		34,789		196		2.28			35,070		145		1.68
Total earning assets		2,178,351		25,197		4.69			2,002,852		21,713		4.40
Nonearning assets		160,441							159,854
Total assets	$	2,338,792						$	2,162,706
INTEREST-BEARING LIABILITIES
Time deposits	$	368,117	$	1,659		1.83	%	$	271,473	$	813		1.21	%
Brokered time deposits		46,861		266		2.27			0		0		0.00
Savings deposits		420,613		308		0.30			482,404		182		0.15
Demand deposits		589,595		1,202		0.83			451,295		416		0.37
Short term borrowings		197,787		1,231		2.52			282,408		881		1.27
Long term borrowings		5,907		48		3.30			6,863		44		2.60
Total interest-bearing liabilities	$	1,628,880		4,714		1.17		$	1,494,443		2,336		0.63
NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS’ EQUITY
Demand deposits		428,520							411,805
Other liabilities		13,656							16,071
Stockholders’ equity		267,736							240,387
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,338,792						$	2,162,706
Net interest income and interest rate spread			$	20,486		3.52	%			$	19,377		3.77	%
Net interest margin						3.81	%						3.92	%

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

(2) For 2019, adjustments of $102 thousand and $416 thousand, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2018, adjustments of $82 thousand and $349 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.