EX-99.1 2 d569541dex991.htm EX-99.1

Exhibit 99.1

April 18, 2018

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

2018 FIRST QUARTER FINANCIAL RESULTS

| • |  | Record net income for the quarter of $7.7 million, 34% higher than the same quarter in 2017

| • |  | 141 consecutive quarters of profitability

| • |  | Annualized return on average assets was 1.45% and annualized return on average equity 13.03% for the quarter ended March 31, 2018

| • |  | 9.4% loan growth since March 31, 2017

| • |  | Non-performing assets to total assets remain at low levels, 0.37% at March 31, 2018

CANFIELD, Ohio (April 18, 2018) – Farmers National Banc Corp. (Farmers) (NASDAQ: FMNB) today reported financial results for the three months ended March 31, 2018.

Net income for the three months ended March 31, 2018 was $7.7 million, or $0.28 per diluted share, which compares to $5.8 million, or $0.21 per diluted share, for the three months ended March 31, 2017 and $5.2 million or $0.19 per diluted share for the linked quarter. Annualized return on average assets and return on average equity were 1.45% and 13.03%, respectively, for the three month period ending March 31, 2018, compared to 1.17% and 10.87% for the same three month period in 2017, and 0.96% and 8.60% for the linked quarter. Farmers’ return on average tangible equity (Non-GAAP) also improved to 15.84% for the quarter ended March 31, 2018 compared to 13.54% for the same quarter in 2017 and 10.69% for the linked quarter.

On December 22, 2017, H.R.1, known as the “Tax Cuts and Jobs Act,” was signed into law. H.R.1, among other things, reduced the corporate income tax rate to 21% effective January 1, 2018. As a result of passage of the new tax law, Farmers effective tax rate decreased from 25.43% for the quarter ended March 31, 2017 to 14.96% for the quarter ended March 31, 2018. It is important to note that also as a result of the new tax law, Farmers determined that its net deferred tax assets needed to be reduced in the fourth quarter of 2017 by approximately $1.8 million, representing an impact on earnings per share of approximately $0.06 per diluted share for that fourth quarter, based on that quarter’s weighted average diluted shares outstanding of approximately 27.5 million.

Kevin J. Helmick, President and CEO, stated, “We are pleased to report record earnings which are a result of the successful integration of previous mergers, continued strong loan growth, higher levels of noninterest income and a lower effective income tax rate.”

2018 First Quarter Financial Highlights

| • |  | Loan growth

Total loans were $1.60 billion at March 31, 2018, compared to $1.46 billion at March 31, 2017, representing an increase of 9.4%. 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 and commercial real estate, residential real estate and agricultural loan portfolios. Loans now comprise 78.1% of the Bank’s average earning assets for the quarter ended March 31, 2018, an improvement compared to 77.9% for the same period in 2017. This improvement, along with the growth in earning assets, has resulted in an 11% increase in tax equated loan income in the first quarter of 2018 compared to the same quarter in 2017.

| • |  | Loan quality

Non-performing assets to total assets remain at a low level, currently at 0.37%. Early stage delinquencies also continue to remain at low levels, at $7.0 million, or 0.44% of total loans, at March 31, 2018. Net charge-offs for the current quarter were $540 thousand, compared to $583 thousand in the same quarter in 2017 and total net charge-offs as a percentage of average net loans outstanding is only 0.14% for the quarter ended March 31, 2018. Lending to the energy sector is insignificant and less than 1% of the loan portfolio.

| • |  | Net interest margin

The net interest margin for the three months ended March 31, 2018 was 3.92%, a 9 basis points decrease from the quarter ended March 31, 2017. In comparing the first quarter of 2018 to the same period in 2017, asset yields increased 10 basis points, while the cost of interest-bearing liabilities increased 25 basis points. Most of this increase was the result of higher rates paid on short-term borrowings and time deposits, consistent with increases in the federal funds sold rate. The net inter 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 and 5 basis points for the quarters ended March 31, 2018 and 2017, respectively.

| • |  | Noninterest income

Noninterest income increased 2.1% to $6.0 million for the quarter ended March 31, 2018 compared to $5.9 million in 2017. Debit card interchange fees increased $153 thousand or 23.4% and trust fees increased $129 thousand or 7.7% in comparing the first quarter of 2018 to the same quarter in 2017. These increases were offset by a drop in retirement plan consulting fees of $134 thousand or 26.1% and gains on the sale of mortgage loans of $120 thousand or 19.8%.

| • |  | Noninterest expenses

Farmers has remained committed to managing the level of noninterest expenses. Total noninterest expenses for the first quarter of 2018 increased 3.3% to $15.1 million compared to $14.6 million in the same quarter in 2017, primarily as a result of an increase in salaries and employee benefits of $451 thousand and occupancy and equipment expense of $117 thousand, offset by a $128 thousand decrease in other operating expenses and a $49 thousand decrease in professional fees. It is important to note that annualized noninterest expenses measured as a percentage of quarterly average assets decreased from 2.92% in the first quarter of 2017 to 2.83% in the first quarter of 2018.

| • |  | Efficiency ratio

The efficiency ratio for the quarter ended March 31, 2018 improved to 57.98% compared to 58.79% for the same quarter in 2017. 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.

2018 Outlook

Mr. Helmick added, “We are encouraged by the promising start to 2018 in our financial results. We will focus our energy on the seamless execution of our strategic plan as we remain committed to the businesses and families we serve and 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 $2.2 billion in banking assets and over $1 billion in trust 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. 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, 2017, 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, 2018 |  |  | Dec. 31, 2017 |  |  | Sept. 30, 2017 |  |  | June 30, 2017 |  |  | March 31, 2017 |
Total interest income |  | $ | 21,282 |  |  | $ | 21,084 |  |  | $ | 20,551 |  |  | $ | 20,042 |  |  | $ | 18,850 |
Total interest expense |  |  | 2,336 |  |  |  | 2,017 |  |  |  | 1,876 |  |  |  | 1,669 |  |  |  | 1,319 |
Net interest income |  |  | 18,946 |  |  |  | 19,067 |  |  |  | 18,675 |  |  |  | 18,373 |  |  |  | 17,531 |
Provision for loan losses |  |  | 775 |  |  |  | 400 |  |  |  | 950 |  |  |  | 950 |  |  |  | 1,050 |
Noninterest income |  |  | 6,010 |  |  |  | 6,051 |  |  |  | 6,058 |  |  |  | 6,055 |  |  |  | 5,887 |
Acquisition related costs |  |  | 25 |  |  |  | 88 |  |  |  | 270 |  |  |  | 104 |  |  |  | 62 |
Other expense |  |  | 15,071 |  |  |  | 15,311 |  |  |  | 15,521 |  |  |  | 15,660 |  |  |  | 14,551 |
Income before income taxes |  |  | 9,085 |  |  |  | 9,319 |  |  |  | 7,992 |  |  |  | 7,714 |  |  |  | 7,755 |
Income taxes |  |  | 1,359 |  |  |  | 4,084 |  |  |  | 2,009 |  |  |  | 2,004 |  |  |  | 1,972 |
Net income |  | $ | 7,726 |  |  | $ | 5,235 |  |  | $ | 5,983 |  |  | $ | 5,710 |  |  | $ | 5,783 |
Average shares outstanding |  |  | 27,718 |  |  |  | 27,941 |  |  |  | 27,654 |  |  |  | 27,337 |  |  |  | 27,278 |
Basic and diluted earnings per share |  |  | 0.28 |  |  |  | 0.19 |  |  |  | 0.22 |  |  |  | 0.21 |  |  |  | 0.21 |
Cash dividends |  |  | 1,935 |  |  |  | 1,653 |  |  |  | 1,653 |  |  |  | 1,353 |  |  |  | 1,353 |
Cash dividends per share |  |  | 0.07 |  |  |  | 0.06 |  |  |  | 0.06 |  |  |  | 0.05 |  |  |  | 0.05 |
Performance Ratios |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net Interest Margin (Annualized) |  |  | 3.92 | % |  |  | 3.98 | % |  |  | 3.96 | % |  |  | 4.05 | % |  |  | 4.01 | %
Efficiency Ratio (Tax equivalent basis) |  |  | 57.98 | % |  |  | 59.13 | % |  |  | 59.93 | % |  |  | 60.79 | % |  |  | 58.79 | %
Return on Average Assets (Annualized) |  |  | 1.45 | % |  |  | 0.96 | % |  |  | 1.12 | % |  |  | 1.11 | % |  |  | 1.17 | %
Return on Average Equity (Annualized) |  |  | 13.03 | % |  |  | 8.60 | % |  |  | 10.15 | % |  |  | 10.25 | % |  |  | 10.87 | %
Dividends to Net Income |  |  | 25.05 | % |  |  | 31.58 | % |  |  | 27.63 | % |  |  | 23.70 | % |  |  | 23.40 | %
Other Performance Ratios (Non-GAAP) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Return on Average Tangible Assets |  |  | 1.46 | % |  |  | 0.99 | % |  |  | 1.15 | % |  |  | 1.14 | % |  |  | 1.18 | %
Return on Average Tangible Equity |  |  | 15.84 | % |  |  | 10.69 | % |  |  | 12.69 | % |  |  | 12.77 | % |  |  | 13.54 | %
Return on Average Tangible Equity excluding acquisition costs and deferred tax asset adjustments |  |  | 15.88 | % |  |  | 14.25 | % |  |  | 13.09 | % |  |  | 12.98 | % |  |  | 13.65 | %

Consolidated Statements of Financial Condition

|  | March 31, 2018 |  |  | Dec. 31, 2017 |  |  | Sept. 30, 2017 |  |  | June 30, 2017 |  |  | March 31, 2017 |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 52,149 |  |  | $ | 57,614 |  |  | $ | 84,006 |  |  | $ | 64,640 |  |  | $ | 61,251 |
Securities available for sale |  |  | 384,812 |  |  |  | 393,331 |  |  |  | 395,235 |  |  |  | 391,628 |  |  |  | 377,072 |
Loans held for sale |  |  | 399 |  |  |  | 272 |  |  |  | 502 |  |  |  | 583 |  |  |  | 1,098 |
Loans |  |  | 1,599,339 |  |  |  | 1,577,381 |  |  |  | 1,551,437 |  |  |  | 1,505,273 |  |  |  | 1,461,461 |
Less allowance for loan losses |  |  | 12,550 |  |  |  | 12,315 |  |  |  | 12,104 |  |  |  | 11,746 |  |  |  | 11,319 |
Net Loans |  |  | 1,586,789 |  |  |  | 1,565,066 |  |  |  | 1,539,333 |  |  |  | 1,493,527 |  |  |  | 1,450,142 |
Other assets |  |  | 143,368 |  |  |  | 142,786 |  |  |  | 142,949 |  |  |  | 135,286 |  |  |  | 136,924 |
Total Assets |  | $ | 2,167,517 |  |  | $ | 2,159,069 |  |  | $ | 2,162,025 |  |  | $ | 2,085,664 |  |  | $ | 2,026,487 |
Liabilities and Stockholders’ Equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Noninterest-bearing |  | $ | 402,499 |  |  | $ | 412,346 |  |  | $ | 413,991 |  |  | $ | 387,596 |  |  | $ | 374,399 |
Interest-bearing |  |  | 1,234,660 |  |  |  | 1,192,373 |  |  |  | 1,195,533 |  |  |  | 1,153,407 |  |  |  | 1,165,821 |
Total deposits |  |  | 1,637,159 |  |  |  | 1,604,719 |  |  |  | 1,609,524 |  |  |  | 1,541,003 |  |  |  | 1,540,220 |
Other interest-bearing liabilities |  |  | 274,816 |  |  |  | 296,559 |  |  |  | 295,270 |  |  |  | 298,827 |  |  |  | 245,069 |
Other liabilities |  |  | 14,302 |  |  |  | 15,717 |  |  |  | 19,348 |  |  |  | 19,147 |  |  |  | 23,136 |
Total liabilities |  |  | 1,926,277 |  |  |  | 1,916,995 |  |  |  | 1,924,142 |  |  |  | 1,858,977 |  |  |  | 1,808,425 |
Stockholders’ Equity |  |  | 241,240 |  |  |  | 242,074 |  |  |  | 237,883 |  |  |  | 226,687 |  |  |  | 218,062 |
Total Liabilities and Stockholders’ Equity |  | $ | 2,167,517 |  |  | $ | 2,159,069 |  |  | $ | 2,162,025 |  |  | $ | 2,085,664 |  |  | $ | 2,026,487 |
Period-end shares outstanding |  |  | 27,641 |  |  |  | 27,544 |  |  |  | 27,544 |  |  |  | 27,067 |  |  |  | 27,067 |
Book value per share |  | $ | 8.73 |  |  | $ | 8.79 |  |  | $ | 8.64 |  |  | $ | 8.38 |  |  | $ | 8.06 |
Tangible book value per share (Non-GAAP)* |  |  | 7.10 |  |  |  | 7.14 |  |  |  | 6.98 |  |  |  | 6.73 |  |  |  | 6.40 |
* Tangible book value per share is calculated by dividing tangible common equity by average outstanding shares |
Capital and Liquidity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common Equity Tier 1 Capital Ratio (a) |  |  | 12.04 | % |  |  | 11.86 | % |  |  | 12.00 | % |  |  | 11.80 | % |  |  | 11.75 | %
Total Risk Based Capital Ratio (a) |  |  | 12.78 | % |  |  | 12.73 | % |  |  | 12.86 | % |  |  | 12.67 | % |  |  | 12.61 | %
Tier 1 Risk Based Capital Ratio (a) |  |  | 12.04 | % |  |  | 11.99 | % |  |  | 12.13 | % |  |  | 11.93 | % |  |  | 11.89 | %
Tier 1 Leverage Ratio (a) |  |  | 9.50 | % |  |  | 9.50 | % |  |  | 9.70 | % |  |  | 9.47 | % |  |  | 9.47 | %
Equity to Asset Ratio |  |  | 11.13 | % |  |  | 11.21 | % |  |  | 11.00 | % |  |  | 10.87 | % |  |  | 10.76 | %
Tangible Common Equity Ratio |  |  | 9.24 | % |  |  | 9.31 | % |  |  | 9.08 | % |  |  | 8.93 | % |  |  | 8.74 | %
Net Loans to Assets |  |  | 73.21 | % |  |  | 72.49 | % |  |  | 71.20 | % |  |  | 71.61 | % |  |  | 71.56 | %
Loans to Deposits |  |  | 97.69 | % |  |  | 98.30 | % |  |  | 96.39 | % |  |  | 97.68 | % |  |  | 94.89 | %
Asset Quality |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-performing loans |  | $ | 7,893 |  |  | $ | 7,695 |  |  | $ | 6,900 |  |  | $ | 6,355 |  |  | $ | 6,553 |
Other Real Estate Owned |  |  | 59 |  |  |  | 171 |  |  |  | 219 |  |  |  | 236 |  |  |  | 318 |
Non-performing assets |  |  | 7,952 |  |  |  | 7,866 |  |  |  | 7,119 |  |  |  | 6,591 |  |  |  | 6,871 |
Loans 30—89 days delinquent |  |  | 6,973 |  |  |  | 10,191 |  |  |  | 8,680 |  |  |  | 7,052 |  |  |  | 8,258 |
Charged-off loans |  |  | 782 |  |  |  | 809 |  |  |  | 809 |  |  |  | 725 |  |  |  | 943 |
Recoveries |  |  | 242 |  |  |  | 620 |  |  |  | 217 |  |  |  | 202 |  |  |  | 360 |
Net Charge-offs |  |  | 540 |  |  |  | 189 |  |  |  | 592 |  |  |  | 523 |  |  |  | 583 |
Annualized Net Charge-offs to |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Average Net Loans Outstanding |  |  | 0.14 | % |  |  | 0.05 | % |  |  | 0.16 | % |  |  | 0.14 | % |  |  | 0.16 | %
Allowance for Loan Losses to Total Loans |  |  | 0.78 | % |  |  | 0.78 | % |  |  | 0.78 | % |  |  | 0.78 | % |  |  | 0.77 | %
Non-performing Loans to Total Loans |  |  | 0.49 | % |  |  | 0.49 | % |  |  | 0.44 | % |  |  | 0.42 | % |  |  | 0.45 | %
Allowance to Non-performing Loans |  |  | 159.00 | % |  |  | 160.04 | % |  |  | 175.42 | % |  |  | 184.83 | % |  |  | 172.73 | %
Non-performing Assets to Total Assets |  |  | 0.37 | % |  |  | 0.36 | % |  |  | 0.33 | % |  |  | 0.32 | % |  |  | 0.34 | %
(a) March 31, 2018 ratio is estimated |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

Reconciliation of Total Assets to Tangible Assets

|  | March 31, 2018 |  |  | Dec. 31, 2017 |  |  | Sept. 30, 2017 |  |  | June 30, 2017 |  |  | March 31, 2017 |
Total Assets |  | $ | 2,167,517 |  |  | $ | 2,159,069 |  |  | $ | 2,162,025 |  |  | $ | 2,085,664 |  |  | $ | 2,026,487 |
Less Goodwill and other intangibles |  |  | 45,015 |  |  |  | 45,369 |  |  |  | 45,755 |  |  |  | 44,425 |  |  |  | 44,789 |
Tangible Assets |  | $ | 2,122,502 |  |  | $ | 2,113,700 |  |  | $ | 2,116,270 |  |  | $ | 2,041,239 |  |  | $ | 1,981,698 |
Average Assets |  |  | 2,162,706 |  |  |  | 2,158,895 |  |  |  | 2,118,170 |  |  |  | 2,055,758 |  |  |  | 2,001,084 |
Less average Goodwill and other intangibles |  |  | 45,248 |  |  |  | 45,622 |  |  |  | 45,263 |  |  |  | 44,665 |  |  |  | 45,028 |
Average Tangible Assets |  | $ | 2,117,458 |  |  | $ | 2,113,273 |  |  | $ | 2,072,907 |  |  | $ | 2,011,093 |  |  | $ | 1,956,056 |
Reconciliation of Common Stockholders’ Equity to Tangible Common Equity |
|  | March 31, 2018 |  |  | Dec. 31, 2017 |  |  | Sept. 30, 2017 |  |  | June 30, 2017 |  |  | March 31, 2017 |
Stockholders’ Equity |  | $ | 241,240 |  |  | $ | 242,074 |  |  | $ | 237,883 |  |  | $ | 226,687 |  |  | $ | 218,062 |
Less Goodwill and other intangibles |  |  | 45,015 |  |  |  | 45,369 |  |  |  | 45,755 |  |  |  | 44,425 |  |  |  | 44,789 |
Tangible Common Equity |  | $ | 196,225 |  |  | $ | 196,705 |  |  | $ | 192,128 |  |  | $ | 182,262 |  |  | $ | 173,273 |
Average Stockholders’ Equity |  |  | 240,387 |  |  |  | 241,554 |  |  |  | 233,843 |  |  |  | 223,544 |  |  |  | 215,819 |
Less Average Goodwill and other intangibles |  |  | 45,248 |  |  |  | 45,622 |  |  |  | 45,263 |  |  |  | 44,665 |  |  |  | 45,028 |
Average Tangible Common Equity |  | $ | 195,139 |  |  | $ | 195,932 |  |  | $ | 188,580 |  |  | $ | 178,879 |  |  | $ | 170,791 |
Reconciliation of Net Income, Excluding Acquisition Related Costs and Deferred Tax Asset Adjustments |
|  | For the Three Months Ended |
|  | March 31, 2018 |  |  | Dec. 31, 2017 |  |  | Sept. 30, 2017 |  |  | June 30, 2017 |  |  | March 31, 2017 |
Net income |  | $ | 7,726 |  |  | $ | 5,235 |  |  | $ | 5,983 |  |  | $ | 5,710 |  |  | $ | 5,783 |
Acquisition related costs—tax equated |  |  | 22 |  |  |  | (48 | ) |  |  | 190 |  |  |  | 94 |  |  |  | 47 |
Deferred tax asset adjustments |  |  | 0 |  |  |  | 1,793 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Net income—Adjusted |  | $ | 7,748 |  |  | $ | 6,980 |  |  | $ | 6,173 |  |  | $ | 5,804 |  |  | $ | 5,830 |
Average shares outstanding |  |  | 27,718 |  |  |  | 27,941 |  |  |  | 27,654 |  |  |  | 27,337 |  |  |  | 27,278 |
EPS excluding acquisition costs and deferred tax asset adjustments |  | $ | 0.28 |  |  | $ | 0.25 |  |  | $ | 0.22 |  |  | $ | 0.21 |  |  | $ | 0.21 |
End of Period Loan Balances |  | March 31, 2018 |  |  | Dec. 31, 2017 |  |  | Sept. 30, 2017 |  |  | June 30, 2017 |  |  | March 31, 2017 |
Commercial real estate |  | $ | 511,629 |  |  | $ | 513,708 |  |  | $ | 500,426 |  |  | $ | 476,844 |  |  | $ | 456,917 |
Commercial |  |  | 231,498 |  |  |  | 220,440 |  |  |  | 218,946 |  |  |  | 215,676 |  |  |  | 208,913 |
Residential real estate |  |  | 472,350 |  |  |  | 469,442 |  |  |  | 459,702 |  |  |  | 445,991 |  |  |  | 441,593 |
Consumer |  |  | 210,088 |  |  |  | 207,851 |  |  |  | 213,918 |  |  |  | 220,454 |  |  |  | 216,648 |
Agricultural loans |  |  | 170,725 |  |  |  | 163,081 |  |  |  | 155,336 |  |  |  | 142,687 |  |  |  | 133,868 |
Total, excluding net deferred loan costs |  | $ | 1,596,290 |  |  | $ | 1,574,522 |  |  | $ | 1,548,328 |  |  | $ | 1,501,652 |  |  | $ | 1,457,939 |

|  | For the Three Months Ended |
Noninterest Income |  | March 31, 2018 |  |  | Dec. 31, 2017 |  |  | Sept. 30, 2017 |  |  | June 30, 2017 |  |  | March 31, 2017 |
Service charges on deposit accounts |  | $ | 1,003 |  |  | $ | 1,060 |  |  | $ | 1,077 |  |  | $ | 989 |  |  | $ | 951 |
Bank owned life insurance income |  |  | 222 |  |  |  | 246 |  |  |  | 193 |  |  |  | 191 |  |  |  | 201 |
Trust fees |  |  | 1,807 |  |  |  | 1,622 |  |  |  | 1,608 |  |  |  | 1,523 |  |  |  | 1,678 |
Insurance agency commissions |  |  | 699 |  |  |  | 530 |  |  |  | 531 |  |  |  | 672 |  |  |  | 674 |
Security gains |  |  | 18 |  |  |  | 5 |  |  |  | 0 |  |  |  | (14 | ) |  |  | 13 |
Retirement plan consulting fees |  |  | 379 |  |  |  | 465 |  |  |  | 480 |  |  |  | 399 |  |  |  | 513 |
Investment commissions |  |  | 256 |  |  |  | 260 |  |  |  | 184 |  |  |  | 253 |  |  |  | 222 |
Net gains on sale of loans |  |  | 487 |  |  |  | 810 |  |  |  | 758 |  |  |  | 891 |  |  |  | 607 |
Debit card and EFT fees |  |  | 806 |  |  |  | 830 |  |  |  | 770 |  |  |  | 836 |  |  |  | 653 |
Other operating income |  |  | 333 |  |  |  | 223 |  |  |  | 457 |  |  |  | 315 |  |  |  | 375 |
Total Noninterest Income |  | $ | 6,010 |  |  | $ | 6,051 |  |  | $ | 6,058 |  |  | $ | 6,055 |  |  | $ | 5,887 |

|  | For the Three Months Ended |
Noninterest Expense |  | March 31, 2018 |  |  | Dec. 31, 2017 |  |  | Sept. 30, 2017 |  |  | June 30, 2017 |  |  | March 31, 2017 |
Salaries and employee benefits |  | $ | 8,738 |  |  | $ | 8,697 |  |  | $ | 8,922 |  |  | $ | 8,853 |  |  | $ | 8,287 |
Occupancy and equipment |  |  | 1,704 |  |  |  | 1,528 |  |  |  | 1,546 |  |  |  | 1,631 |  |  |  | 1,587 |
State and local taxes |  |  | 459 |  |  |  | 386 |  |  |  | 436 |  |  |  | 424 |  |  |  | 417 |
Professional fees |  |  | 698 |  |  |  | 643 |  |  |  | 726 |  |  |  | 775 |  |  |  | 747 |
Merger related costs |  |  | 25 |  |  |  | 88 |  |  |  | 270 |  |  |  | 104 |  |  |  | 62 |
Litigation settlement expense |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 155 |  |  |  | 0 |
Advertising |  |  | 275 |  |  |  | 561 |  |  |  | 405 |  |  |  | 317 |  |  |  | 244 |
FDIC insurance |  |  | 222 |  |  |  | 165 |  |  |  | 235 |  |  |  | 234 |  |  |  | 235 |
Intangible amortization |  |  | 354 |  |  |  | 386 |  |  |  | 379 |  |  |  | 364 |  |  |  | 365 |
Core processing charges |  |  | 739 |  |  |  | 806 |  |  |  | 702 |  |  |  | 717 |  |  |  | 655 |
Telephone and data |  |  | 237 |  |  |  | 241 |  |  |  | 249 |  |  |  | 242 |  |  |  | 241 |
Other operating expenses |  |  | 1,645 |  |  |  | 1,898 |  |  |  | 1,921 |  |  |  | 1,948 |  |  |  | 1,773 |
Total Noninterest Expense |  | $ | 15,096 |  |  | $ | 15,399 |  |  | $ | 15,791 |  |  | $ | 15,764 |  |  | $ | 14,613 |

Average Balance Sheets and Related Yields and Rates

(Dollar Amounts in Thousands)

|  | Three Months Ended March 31, 2018 |  |  | Three Months Ended March 31, 2017 |
|  | AVERAGE BALANCE |  |  | INTEREST (1) |  |  | RATE (1) |  |  | AVERAGE BALANCE |  |  | INTEREST (1) |  |  | RATE (1) |
EARNING ASSETS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans (2) |  | $ | 1,564,990 |  |  | $ | 18,509 |  |  |  | 4.80 | % |  | $ | 1,436,494 |  |  | $ | 16,638 |  |  |  | 4.70 | %
Taxable securities |  |  | 206,345 |  |  |  | 1,233 |  |  |  | 2.42 |  |  |  | 211,711 |  |  |  | 1,118 |  |  |  | 2.14 |
Tax-exempt securities (2) |  |  | 185,560 |  |  |  | 1,680 |  |  |  | 3.67 |  |  |  | 152,913 |  |  |  | 1,639 |  |  |  | 4.35 |
Equity securities |  |  | 10,887 |  |  |  | 146 |  |  |  | 5.44 |  |  |  | 9,924 |  |  |  | 115 |  |  |  | 4.70 |
Federal funds sold and other |  |  | 35,070 |  |  |  | 145 |  |  |  | 1.68 |  |  |  | 34,234 |  |  |  | 63 |  |  |  | 0.75 |
Total earning assets |  |  | 2,002,852 |  |  |  | 21,713 |  |  |  | 4.40 |  |  |  | 1,845,276 |  |  |  | 19,573 |  |  |  | 4.30 |
Nonearning assets |  |  | 159,854 |  |  |  |  |  |  |  |  |  |  |  | 155,808 |  |  |  |  |  |  |  |  |
Total assets |  | $ | 2,162,706 |  |  |  |  |  |  |  |  |  |  | $ | 2,001,084 |  |  |  |  |  |  |  |  |
INTEREST-BEARING LIABILITIES |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Time deposits |  | $ | 271,473 |  |  | $ | 813 |  |  |  | 1.21 | % |  | $ | 235,153 |  |  | $ | 500 |  |  |  | 0.86 | %
Savings deposits |  |  | 482,404 |  |  |  | 182 |  |  |  | 0.15 |  |  |  | 520,081 |  |  |  | 170 |  |  |  | 0.13 |
Demand deposits |  |  | 451,295 |  |  |  | 416 |  |  |  | 0.37 |  |  |  | 384,602 |  |  |  | 244 |  |  |  | 0.26 |
Short term borrowings |  |  | 282,408 |  |  |  | 881 |  |  |  | 1.27 |  |  |  | 249,505 |  |  |  | 327 |  |  |  | 0.53 |
Long term borrowings |  |  | 6,863 |  |  |  | 44 |  |  |  | 2.60 |  |  |  | 12,291 |  |  |  | 78 |  |  |  | 2.57 |
Total interest-bearing liabilities |  | $ | 1,494,443 |  |  |  | 2,336 |  |  |  | 0.63 |  |  | $ | 1,401,632 |  |  |  | 1,319 |  |  |  | 0.38 |
NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Demand deposits |  |  | 411,805 |  |  |  |  |  |  |  |  |  |  |  | 369,477 |  |  |  |  |  |  |  |  |
Other liabilities |  |  | 16,071 |  |  |  |  |  |  |  |  |  |  |  | 14,156 |  |  |  |  |  |  |  |  |
Stockholders’ equity |  |  | 240,387 |  |  |  |  |  |  |  |  |  |  |  | 215,819 |  |  |  |  |  |  |  |  |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |  | $ | 2,162,706 |  |  |  |  |  |  |  |  |  |  | $ | 2,001,084 |  |  |  |  |  |  |  |  |
Net interest income and interest rate spread |  |  |  |  |  | $ | 19,377 |  |  |  | 3.77 | % |  |  |  |  |  | $ | 18,254 |  |  |  | 3.92 | %
Net interest margin |  |  |  |  |  |  |  |  |  |  | 3.92 | % |  |  |  |  |  |  |  |  |  |  | 4.01 | %

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

(2) | For 2018, adjustments of $82 thousand and $349 thousand, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2017, adjustments of $155 thousand and $568 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% in 2018 and 35% in 2017, less disallowances.