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

Farmers National Banc Corp. (Farmers) 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.

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