Farmers National Banc Corp. Announces 2019 Third Quarter Financial Results

• Record net income of $9.2 million for the quarter is 13% higher than same quarter in 2018
• 147 consecutive quarters of profitability
• Annualized return on average assets was 1.51% and annualized return on average equity 12.49% for the quarter ended September 30, 2019
• 5.5% loan growth since September 30, 2018
• Non-performing assets to total assets remain at low levels, 0.28% at September 30, 2019

Farmers National Banc Corp. (Farmers) FMNB today reported financial results for the three months ended September 30, 2019.

Net income for the three months ended September 30, 2019 was $9.2 million, or $0.33 per diluted share, which compares to $8.1 million, or $0.29 per diluted share, for the three months ended September 30, 2018 and $8.5 million or $0.31 per diluted share for the linked quarter. Annualized return on average assets and return on average equity were 1.51% and 12.49%, respectively, for the three month period ending September 30, 2019, compared to 1.42% and 12.80% for the same three month period in 2018, and 1.45% and 12.34% for the linked quarter. Farmers' return on average tangible equity (Non-GAAP) was 14.80% for the quarter ended September 30, 2019 compared to 15.70% for the same quarter in 2018 and 14.59% for the linked quarter.

Net income for the nine months ended September 30, 2019 was $26.1 million, or $0.94 per diluted share, compared to $23.9 million or $0.85 per diluted share for the same nine month period in 2018. Return on average assets and return on average equity were 1.47% and 12.52%, respectively, for the nine months ended September 30, 2019, compared to 1.45% and 13.00% for the same period in 2018.

On August 30, 2019, Farmers entered into an agreement and plan of merger with Maple Leaf Financial ("Maple Leaf"), the holding company for Geauga Savings Bank, with branches located in Cuyahoga and Geauga Counties in Ohio. This transaction is subject to receipt of Maple Leaf shareholder approval and customary regulatory approvals and is expected to close during the first quarter of 2020. The transaction increases Farmers' market share in Cuyahoga and Geauga Counties and enables Farmers to continue building local scale throughout Northeast Ohio. As of June 30, 2019, Maple Leaf had total assets of $277.8 million, which included gross loans of $186.4 million, deposits of $191.0 million and equity of $32.9 million.

Kevin J. Helmick, President and CEO, stated, "As a result of solid loan growth over the past twelve months, 15% increase in noninterest income, careful management of our noninterest expenses and continued strong asset quality, we are pleased to report a 13% increase in net income compared to the same quarter one year ago. We are also pleased to report a 25% increase in cash dividends paid to our shareholders, from $0.08 per share paid in the third quarter of 2018 to $0.10 paid for the same quarter in 2019."

2019 Third Quarter Financial Highlights

• Loan growth
  Total loans were $1.78 billion at September 30, 2019, compared to $1.69 billion at September 30, 2018, representing an increase of 5.5%. The increase in loans is a direct result of Farmers' focus on loan growth utilizing 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 September 30, 2019, an improvement compared to 78.8% for the same period in 2018. This improvement, along with the growth in earning assets, has resulted in a 10.5% increase in tax equated loan income in the third 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 0.28%. Early stage delinquencies also continue to remain at low levels, at $9.1 million, or 0.51% of total loans, at September 30, 2019. Net charge-offs for the current quarter were $511 thousand, compared to $337 thousand in the same quarter in 2018 and total net charge-offs as a percentage of average net loans outstanding is only 0.12% for the quarter ended September 30, 2019.

• Net interest margin
  The net interest margin for the three months ended September 30, 2019 was 3.79%, a 7 basis points decrease from the quarter ended September 30, 2018, and compares to 3.84% for the linked quarter. In comparing the third quarter of 2019 to the same period in 2018, asset yields increased 16 basis points, while the cost of interest-bearing liabilities increased 30 basis points. Most of this increase in the cost of funds was the result of higher rates paid on interest-bearing checking accounts and time deposits. 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 the quarters ended September 30, 2019 and 2018.

• Noninterest income
  Noninterest income increased 14.9% to $7.4 million for the quarter ended September 30, 2019 compared to $6.5 million in the same quarter in 2018. Gains on the sales of mortgage loans increased $339 thousand or 42%, other operating income increased $234 thousand or 60%, insurance agency commissions grew $114 thousand or 20%, investment commissions increased $111 thousand or 41% and trust fees increased $78 thousand or 4% in comparing the third quarter of 2019 to the same quarter in 2018. These increases were offset by a decrease of retirement plan consulting fees of $132 thousand or 28%.

• Noninterest expenses
  Farmers has remained committed to managing the level of noninterest expenses. Total noninterest expenses for the third quarter of 2019 increased 1.5% to $16.4 million compared to $16.2 million in the same quarter in 2018, primarily as a result of an increase in salaries and employee benefits of $456 thousand, offset by a $138 thousand decrease in FDIC insurance expense and a $145 thousand decrease in other operating expenses. Annualized noninterest expenses measured as a percentage of quarterly average assets decreased from 2.85% in the third quarter of 2018 to 2.70% in the third quarter of 2019.

• Efficiency ratio
  The efficiency ratio for the quarter ended September 30, 2019 decreased to 55.90% compared to 58.70% for the same quarter in 2018. The improvement in net interest income and noninterest income in the third quarter of 2019 was offset by a slightly higher level of noninterest expenses as explained in the preceding paragraphs.

2019 Outlook

Mr. Helmick added, "With the announcement of our acquisition of Geauga Savings Bank and our continued strong financial performance during the first three quarters of the year, we look forward to the last three months of 2019 and to finalizing the acquisition at the beginning of 2020. We remain 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 September 30, 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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