Business Wire | Jul 29, 2020 08:00AM EDT

Farmers National Banc Corp. Announces 2020 Second Quarter Financial Results

Jul. 29, 2020

CANFIELD, Ohio--(BUSINESS WIRE)--Jul. 29, 2020--Farmers National Banc Corp. (Farmers) (NASDAQ: FMNB) today reported financial results for the three months ended June 30, 2020.

Net income for the three months ended June 30, 2020 was $11.0 million, or $0.39 per diluted share, which compares to $8.5 million, or $0.31 per diluted share, for the three months ended June 30, 2019 and $8.6 million or $0.30 per diluted share for the linked quarter. Net income excluding acquisition costs (non-GAAP) for the quarter ended June 30, 2020 was $11.1 million or $0.39 per share, compared to $8.5 million or $0.31 per share for the same quarter in 2019 and $9.7 million or $0.34 per share for the most recent prior quarter.

Annualized return on average assets and annualized return on average equity were 1.56% and 14.02%, respectively, for the three month period ending June 30, 2020, compared to 1.45% and 12.34% for the same three month period in 2019, and 1.32% and 11.53% for the linked quarter. Farmers' annualized return on average tangible equity (non-GAAP) was 16.69% for the quarter ended June 30, 2020 compared to 14.59% for the same quarter in 2019 and 13.81% for the linked quarter.

Net income for the six months ended June 30, 2020 was $19.7 million, or $0.69 per diluted share, compared to $16.9 million or $0.61 per diluted share for the same six month period in 2019. Return on average assets and return on average equity were 1.44% and 12.81%, respectively, for the six months ended June 30, 2020, compared to 1.45% and 12.54% for the same period in 2019.

Kevin J. Helmick, President and CEO, stated, "For over 133 years, our success has been driven by supporting our local communities and doing what's right for our customers. This win-win spirit is more important than ever as our communities face significant uncertainties brought on by the COVID-19 pandemic. Farmers is uniquely prepared to address the current economic environment as we benefit from diverse sources of income, proactive risk management, and a proven and motivated management team. As a result, Farmers ended the quarter with record quarterly noninterest income, regulatory capital well in excess of required minimums, a tangible common equity ratio at a solid 9.86% (non-GAAP), and a second quarter dividend payout ratio of 28.15%."

In response to the rapidly evolving COVID-19 pandemic, the Company focused first on the well-being of its people, customers and communities. Preventative health measures were put in place including elimination of business related travel requirements, work from home requirements for all employees able to do so and social distancing precautions for all employees in the office. At the beginning of the pandemic, the Company restricted access to branch lobbies to appointment only, but has now re-opened the lobbies using personal protective equipment and maintaining social distancing guidelines and continues to conduct preventative cleaning at all offices and branches. The Company also focused on business continuity measures, including forming a COVID-19 task force, monitoring potential business interruptions, making improvements to our remote working technology, and conducting regular discussions with our technology vendors.

Farmers is offering special financial assistance to support customers who are experiencing financial hardships related to the COVID-19 pandemic. The following table reports the number and amount of payment deferrals by loan type as of dates listed:

March 31, 2020 June 30, 2020 July 24, 2020

Outstanding Number Outstanding Number Outstanding Number of of of Balance Balance Balance Loans Loans Loans

Commercial $75,809 78 $43,954 44 $27,717 17real estate

Commercial 11,839 81 8515 69 5,848 36

Agricultural 1,492 11 8340 22 2,505 12

Residential 5,506 41 3785 37 1,397 15real estate

Consumer 2,840 127 1,858 100 539 36

Total $97,486 338 $66,452 272 $38,006 116

The Company offered three month deferrals upon request by the borrowers. The deferral requests began in the middle of March, 2020 and concluded at the end of the three month deferral period. The decline in deferred loans and balances was due to the ending of the deferment period and that not all borrowers requested additional deferment. The Company has granted a second three month deferral period to $23.8 million in commercial real estate loans and $5.7 million in commercial loans, which are included in the amounts detailed above. The second deferral period was offered to a select group of customers within specific industry codes that may have a higher credit risk. The Company anticipates that there will be a limited number of business customers with a total of a six month deferral period.

Farmers is also a preferred SBA lender and dedicated significant additional staff and other resources to help our customers complete and submit their applications and supporting documentation for loans offered under the new Paycheck Protection Program (PPP) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, so they could obtain SBA approval and receive funding as quickly as possible. At June 30, 2020, the Company had facilitated PPP assistance to 1,675 business customers totaling $199.1 million.

On January 7, 2020, Farmers announced it completed the merger of Maple Leaf Financial ("Maple Leaf"), the holding company for Geauga Savings Bank, with branches located in Cuyahoga and Geauga Counties in Ohio. The transaction increased Farmers' market share in Cuyahoga and Geauga Counties and enables Farmers to continue building local scale throughout Northeast Ohio. As of January 7, 2020, Maple Leaf had total assets of $277.0 million, which included gross loans of $182.1 million, deposits of $183.1 million and equity of $32.1 million.

2020 Second Quarter Financial Highlights

* Loans Total loans were $2.15 billion at June 30, 2020, compared to $1.78 billion at June 30, 2019, representing an increase of 20.7%. Excluding the $182.1 million of loans added from the Maple Leaf acquisition, loan growth was 10.5%. The increase in loans was 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 primarily in the PPP category, with $199.1 million in outstanding balances. Loans now comprise 79.6% of the Bank's average earning assets for the quarter ended June 30, 2020, unchanged compared to the same period in 2019. The growth in loans has resulted in a 10.8% increase in tax equated loan interest income, including fees, in the second quarter of 2020 compared to the same quarter in 2019. A summary of loans summarized by industries that have particular vulnerability to the effects of COVID-19 and their outstanding balance as a percentage of total loans is shown in the following table:

Outstanding % of total Balance loans

Restaurants and Catering Facilities $52,134,168 2.43%

Hotels 42,655,026 1.98%

Golf Courses 7,665,569 0.36%

Energy 1,073,850 0.05%

Total $103,528,612 4.82%

* Deposits and Liquidity Farmers maintains, in the opinion of management, liquidity sufficient to satisfy depositors' requirements and meet the credit needs of its customers. The Company's non-brokered deposits increased 28% from $1.9 billion at June 30, 2019 to $2.4 billion at June 30, 2020. The loan to deposit ratio at June 30, 2020 stands at 88.12%, a slight improvement compared to 89.0% one year ago. The Company has additional borrowing capacity at the Federal Home Loan Bank of Cincinnati and approved lines of credit at two domestic banks.

* Loan quality Non-performing assets to total assets remain at a low level, currently at 0.43%, but increased from the 0.30% reported one year ago. Early stage delinquencies were $10.3 million, or 0.48% of total loans, at June 30, 2020, compared to $19.1 million, or 0.96% of total loans, for the quarter ended March 31, 2020. Net charge-offs for the current quarter were $392 thousand, compared to $305 thousand in the same quarter in 2019, and total net charge-offs as a percentage of average net loans outstanding is 0.08% for the quarter ended June 30, 2020, compared to 0.13% for the most recent quarter. The Company increased its provision for loan losses to $2.4 million, an increase of $1.3 million compared to the $1.1 million provision recorded in the most recent quarter. This additional provision is the amount determined to be required as a result of the impact of increased negative economic factors that exist in the current business environment. As an overall percentage of loans, the allowance for loan losses increased to 0.79% during the current quarter compared to 0.76% during the quarter ended March 31, 2020. Excluding the PPP loans, this allowance for loan losses to gross loans ratio increases to 0.87%. The ratio of the allowance for loan losses to gross loans, excluding PPP loans and acquired loans is 0.96%. It is also important to note that the average FICO score of our indirect lending portfolio stands at a healthy 771 and our consumer loan portfolio average FICO score is currently 766. In accordance with the accounting relief provisions of the CARES Act, the Bank has postponed adoption of the current expected credit losses ("CECL") accounting standards, primarily due to the impact the COVID-19 pandemic is having on the economy and the lack of reasonable and supportable economic forecasts.

* Net interest margin The net interest margin for the three months ended June 30, 2020 was 3.74%, a 10 basis points decrease from the quarter ended June 30, 2019, but only 1 basis point less than the 3.75% reported for the linked quarter. In comparing the second quarter of 2020 to the same period in 2019, asset yields decreased 37 basis points, while the cost of interest-bearing liabilities decreased a similar 36 basis points. Most of the decrease in the asset yields was the result of lower rates earned on loans, declining from 5.14% to 4.75% due to the decrease in the prime lending rate and the addition of the lower yielding PPP loans. The cost of interest bearing liabilities decreased as the Federal Funds target rate was lowered to a target of 0-0.25% at the start of the COVID-19 pandemic in the United States. Each of the major interest-bearing liability categories experienced cost decreases compared to one year ago. 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 5 basis points for the quarter ended June 30, 2020 and 5 basis points for the quarter ended June 30, 2019.

* Noninterest income Noninterest income increased 28.15% to $9.1 million for the quarter ended June 30, 2020 compared to $7.1 million in the same quarter in 2019. Gains on the sales of mortgage loans increased $2.6 million or 246.73%, as lower interest rates prompted an increase in mortgage loan refinancing and new home purchases. Debit card interchange fees increased $80 thousand or 9.02%, but that increase was offset by $42 thousand or 9.33% less in retirement plan consulting fees and reduced income from SBIC Funds which impacted other operating income. The Company also experienced a $340 thousand decrease in deposit account service charge income due to a change in consumer behavior and the waiver of some overdraft fees during the COVID-19 pandemic.

* Noninterest expenses Farmers has remained committed to managing the level of noninterest expenses. Total noninterest expenses for the second quarter of 2020 increased 5.35% to $17.7 million compared to $16.8 million in the same quarter in 2019, primarily as a result of increases in salaries and employee benefits of $447 thousand or 4.82%, FDIC insurance premiums of $140 thousand or 164.71% and core processing charges and telephone and data costs of $131 thousand each. Other operating expenses increased $29 thousand or 1.07%, of which approximately $407 thousand was the result of an adjustment to mortgage servicing rights resulting from higher than expected mortgage loan payoffs. This increase was offset by a $505 thousand drop in litigation settlement expense. Annualized noninterest expenses excluding acquisition costs (non-GAAP) measured as a percentage of quarterly average assets decreased from 2.83% in the second quarter of 2019 to 2.50% in the second quarter of 2020.

* Efficiency ratio The efficiency ratio for the quarter ended June 30, 2020 decreased to 50.75% compared to 58.28% for the same quarter in 2019. The improvement in mortgage banking income and net interest income, accompanied with careful management of noninterest expenses were the main drivers of the improvement.

Mr. Helmick concluded, "I want to extend my sincere thanks to all of our associates for their dedication and hard work during these unprecedented times. We remain committed to doing the right thing for our communities. On behalf of everyone at Farmers, we are proud to help our local business and individual customers alike."

Founded in 1887, Farmers National Banc Corp. is a diversified financial services company headquartered in Canfield, Ohio, with $2.9 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 42 banking locations in Mahoning, Trumbull, Columbiana, Stark, Wayne, Medina, Geauga and Cuyahoga Counties in Ohio and Beaver County in Pennsylvania, and Farmers Trust Company, which operates five trust offices and offers services in the same geographic markets. Total wealth management assets under care at June 30, 2020 are $2.4 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 include impacts from COVID-19 on local, national and global economic conditions; higher default rates on loans made to our customers related to COVID-19 and its impact on our customers' operations and financial condition; unexpected changes in interest rates or disruptions in the mortgage markets related to COVID-19 or other responses to the health crisis; and the other factors contained in Farmers' Annual Report on Form 10-K for the year ended December 31, 2019, and subsequent Quarterly Reports on Form 10-Q, filed with the Securities and Exchange Commission (SEC) and 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, exceptper share results) Unaudited



ConsolidatedStatements For the Three Months Ended For the Six Months Endedof Income

June March Dec. Sept. June June June Percent 30, 31, 31, 30, 30, 30, 30,

2020 2020 2019 2019 2019 2020 2019 Change

Totalinterest $28,142 $27,717 $25,847 $25,931 $25,529 $55,859 $50,208 11.3%income

Totalinterest 4,221 5,415 4,682 5,174 5,038 9,636 9,752 -1.2%expense

Net interest 23,921 22,302 21,165 20,757 20,491 46,223 40,456 14.3%income

Provisionfor loan 2,400 1,100 600 550 750 3,500 1,300 169.2%losses

Noninterest 9,136 7,870 7,814 7,576 7,129 17,006 13,772 23.5%income

Acquisitionrelated 48 1,319 104 112 (19) 1,367 (19) -7294%costs(income)

Other 17,692 17,418 16,414 16,446 16,858 35,110 32,958 6.5%expense

Incomebefore 12,917 10,335 11,861 11,225 10,031 23,252 19,989 16.3%income taxes

Income taxes 1,906 1,696 2,186 2,071 1,488 3,602 3,058 17.8%

Net income $11,011 $8,639 $9,675 $9,154 $8,543 $19,650 $16,931 16.1%



Averagediluted 28,280 28,710 27,829 27,819 27,931 28,492 27,950sharesoutstanding

Basicearnings per 0.39 0.30 0.35 0.33 0.31 0.69 0.61share

Dilutedearnings per 0.39 0.30 0.35 0.33 0.31 0.69 0.61share

Cash 3,100 3,104 2,767 2,767 2,504 6,204 5,004dividends

Cashdividends 0.11 0.11 0.10 0.10 0.09 0.22 0.18per share



PerformanceRatios

Net InterestMargin 3.74% 3.75% 3.84% 3.79% 3.84% 3.74% 3.83%(Annualized)

EfficiencyRatio (Tax 50.75% 59.72% 54.51% 55.90% 58.28% 55.04% 58.06%equivalentbasis)

Return onAverage 1.56% 1.32% 1.58% 1.51% 1.45% 1.44% 1.45%Assets(Annualized)

Return onAverage 14.02% 11.53% 12.78% 12.49% 12.34% 12.81% 12.54%Equity(Annualized)

Dividends to 28.15% 35.93% 28.60% 30.23% 29.31% 31.57% 29.56%Net Income



OtherPerformanceRatios(Non-GAAP)

Return onAverage 1.58% 1.33% 1.62% 1.55% 1.47% 1.46% 1.47%TangibleAssets

Return onAverage 16.69% 13.81% 15.03% 14.80% 14.59% 15.03% 14.82%TangibleEquity

Return onAverageTangibleEquity 16.75% 15.50% 15.17% 14.95% 14.55% 15.88% 14.80%excludingacquisitioncosts

Consolidated Statements ofFinancial Condition

June 30, March 31, Dec. 31, Sept. 30, June 30,

2020 2020 2019 2019 2019

Assets

Cash and cash $103,954 $83,107 $70,760 $85,675 $64,007equivalents

Securities 475,614 448,043 432,233 423,193 424,252available for sale

Equity securities 8,375 8,080 7,909 7,856 7,222

Loans held for sale 3,395 3,272 2,600 2,079 1,093

Loans 2,149,690 1,976,582 1,811,539 1,784,125 1,780,504

Less allowance for 16,960 14,952 14,487 14,261 14,222loan losses

Net Loans 2,132,730 1,961,630 1,797,052 1,769,864 1,766,282

Other assets 161,612 164,256 138,604 144,543 143,093

Total Assets $2,885,680 $2,668,388 $2,449,158 $2,433,210 $2,405,949

Liabilities andStockholders' Equity

Deposits

Noninterest-bearing $593,162 $449,952 $434,126 $432,609 $415,935

Interest-bearing 1,846,323 1,796,325 1,574,838 1,608,043 1,584,700

Total deposits 2,439,485 2,246,277 2,008,964 2,040,652 2,000,635

Otherinterest-bearing 80,115 96,852 122,197 76,324 96,978liabilities

Other liabilities 34,728 21,523 18,688 23,011 23,511

Total liabilities 2,554,328 2,364,652 2,149,849 2,139,987 2,121,124

Stockholders' 331,352 303,736 299,309 293,223 284,825Equity

Total Liabilities

and Stockholders' $2,885,680 $2,668,388 $2,449,158 $2,433,210 $2,405,949Equity

Period-end shares 28,180 28,127 27,671 27,669 27,768outstanding

Book value per $11.76 $10.80 $10.82 $10.60 $10.26share

Tangible book valueper share 9.92 8.94 9.28 9.04 8.70(Non-GAAP)*

* Tangible book value per share is calculated by dividing tangible commonequity by average outstanding shares

Capital andLiquidity

Common Equity Tier 12.56% 12.26% 12.94% 12.70% 12.47%1 Capital Ratio (a)

Total Risk Based 13.38% 13.43% 13.82% 13.58% 13.34%Capital Ratio (a)

Tier 1 Risk Based 12.66% 12.70% 13.03% 12.83% 12.59%Capital Ratio (a)

Tier 1 Leverage 9.37% 10.18% 10.69% 10.42% 10.27%Ratio (a)

Equity to Asset 11.48% 11.38% 12.22% 12.05% 11.84%Ratio

Tangible Common 9.86% 9.61% 10.67% 10.47% 10.22%Equity Ratio (b)

Net Loans to Assets 73.91% 73.51% 73.37% 72.74% 73.41%

Loans to Deposits 88.12% 87.99% 90.17% 87.43% 89.00%

Asset Quality

Non-performing $12,225 $11,845 $6,345 $6,749 $7,252loans

Other Real Estate 41 131 19 74 74Owned

Non-performing 12,266 11,976 6,364 6,823 7,326assets

Loans 30 - 89 days 10,336 19,067 11,893 9,076 10,203delinquent

Charged-off loans 524 749 519 674 588

Recoveries 132 114 145 163 283

Net Charge-offs 392 635 374 511 305

Annualized NetCharge-offs to

Average Net Loans 0.08% 0.13% 0.09% 0.12% 0.07%Outstanding

Allowance for LoanLosses to Total 0.79% 0.76% 0.80% 0.80% 0.80%Loans

Non-performingLoans to Total 0.57% 0.60% 0.35% 0.38% 0.41%Loans

Allowance toNon-performing 138.73% 126.23% 228.32% 211.31% 196.11%Loans

Non-performingAssets to Total 0.43% 0.45% 0.26% 0.28% 0.30%Assets



(a) June 30, 2020 ratio is estimated

(b) This is a non-GAAP financial measure. A reconciliationto GAAP is shown below

Reconciliation of Total For the Six MonthsAssets to Tangible Assets Ended

June 30, March 31, Dec. 31, Sept. 30, June 30, June 30, June 30,

2020 2020 2019 2019 2019 2020 2019

Total Assets $2,885,680 $2,668,388 $2,449,158 $2,433,210 $2,405,949 $2,885,680 $2,405,949

Less Goodwilland other 51,866 52,337 42,645 42,973 43,298 51,866 43,298intangibles

Tangible $2,833,814 $2,616,051 $2,406,513 $2,390,237 $2,362,651 $2,833,814 $2,362,651Assets

Average 2,842,730 2,641,597 2,424,574 2,409,010 2,369,388 2,741,903 2,354,112Assets

Less averageGoodwill and 52,052 51,103 42,859 43,187 43,508 47,088 43,674other intangibles

AverageTangible $2,790,678 $2,590,494 $2,381,715 $2,365,823 $2,325,880 $2,694,815 $2,310,438Assets



Reconciliation of Common Stockholders' Equity to For the Six MonthsTangible Common Equity Ended

June 30, March 31, Dec. 31, Sept. 30, June 30, June 30, June 30,

2020 2020 2019 2019 2019 2020 2019

Stockholders' $331,352 $303,736 $299,309 $293,223 $284,825 $331,352 $284,825Equity

Less Goodwilland other 51,866 52,337 42,645 42,973 43,298 51,866 43,298intangibles

Tangible $279,486 $251,399 $256,664 $250,250 $241,527 $279,486 $241,527Common Equity

AverageStockholders' 315,988 301,408 300,355 290,673 277,746 308,524 272,218Equity

Less averageGoodwill and 52,052 51,103 42,859 43,187 43,508 47,088 43,674other intangibles

AverageTangible $263,936 $250,305 $257,496 $247,486 $234,238 $261,436 $228,544Common Equity

Reconciliation of Net Income, Excluding AcquisitionRelated Costs

For the Three Months Ended For the Six Months Ended

June 30, March 31, Dec. 31, Sept. 30, June 30, June 30, June 30,

2020 2020 2019 2019 2019 2020 2019

Net income $11,011 $8,639 $9,675 $9,154 $8,543 $19,650 $16,931

Acquisitionrelated costs 41 1,063 90 97 (20) 1,104 (20)(income) - tax equated

Net income - $11,052 $9,702 $9,765 $9,251 $8,523 $20,754 $16,911Adjusted

Diluted EPSexcluding $0.39 $0.34 $0.35 $0.33 $0.31 $0.73 $0.61acquisition costs

June 30, March 31, Dec. 31, Sept. 30, June 30,

End of Period 2020 2020 2019 2019 2019Loan Balances

Commercial $715,342 $714,477 $616,778 $602,580 $614,452real estate

Commercial 472,012 283,033 255,823 251,613 256,657

Residential 528,853 541,534 500,024 499,996 493,529real estate

Consumer 208,374 210,173 209,271 207,319 207,417

Agricultural 221,556 223,977 226,333 219,487 205,544loans

Total,excluding net $2,146,137 $1,973,194 $1,808,229 $1,780,995 $1,777,599deferred loan costs

For the Three Months Ended

June 30, March 31, Dec. 31, Sept. 30, June 30,

Noninterest 2020 2020 2019 2019 2019Income

Servicecharges on $753 $1,095 $1,139 $1,208 $1,093deposit accounts

Bank ownedlife insurance 204 208 192 204 208income

Trust fees 1,852 1,857 1,891 1,905 1,821

Insuranceagency 681 883 696 681 739commissions

Security gains (26) 157 28 22 (18)(losses)

Retirementplan 408 380 343 338 450consulting fees

Investment 304 423 435 384 327commissions

Net gains on 3,658 1,366 1,517 1,143 1,055sale of loans

Debit card and 967 851 922 935 887EFT fees

Otheroperating 335 650 651 756 567income

TotalNoninterest $9,136 $7,870 $7,814 $7,576 $7,129Income

For the Three Months Ended

June 30, March 31, Dec. 31, Sept. 30, June 30,

Noninterest 2020 2020 2019 2019 2019Expense

Salaries andemployee $9,713 $10,231 $9,128 $9,422 $9,266benefits

Occupancy and 1,675 1,800 1,667 1,615 1,650equipment

State and 583 464 416 468 472local taxes

Professional 823 816 787 654 887fees

Merger related 48 1,319 104 112 (19)costs (income)

Advertising 322 271 607 437 442

FDIC insurance 225 225 79 80 85

Intangible 331 332 326 326 327amortization

Coreprocessing 934 861 876 900 803charges

Telephone and 348 203 235 236 217data

Otheroperating 2,738 2,215 2,293 2,308 2,709expenses

TotalNoninterest $17,740 $18,737 $16,518 $16,558 $16,839Expense

Average Balance Sheets and Related Yields and Rates

(Dollar Amounts in Thousands)

Three Months Ended Three Months Ended

June 30, 2020 June 30, 2019

AVERAGE AVERAGE INTEREST INTEREST BALANCE (1) RATE BALANCE (1) RATE (1) (1)

EARNING ASSETS

Loans (2) $2,101,500 $24,842 4.75% $1,749,828 $22,431 5.14%

Taxable securities 197,906 1,278 2.60 195,934 1,238 2.53

Tax-exempt securities (2) 252,818 2,459 3.91 211,533 2,065 3.92

Equity securities 17,687 137 3.12 12,055 171 5.69

Federal funds sold and 70,279 30 0.17 29,205 158 2.17other

Total earning assets 2,640,190 28,746 4.38 2,198,555 26,063 4.75

Nonearning assets 202,540 170,833

Total assets $2,842,730 $2,369,388

INTEREST-BEARINGLIABILITIES

Time deposits $493,048 $2,181 1.78% $401,005 $1,984 1.98%

Brokered time deposits 84,198 319 1.52 94,463 559 2.35

Savings deposits 457,188 267 0.23 416,024 340 0.33

Demand deposits 823,058 1,093 0.53 631,436 1,476 0.94

Short term borrowings 12,613 18 0.57 100,199 631 2.53

Long term borrowings 76,751 343 1.80 5,724 48 3.36

Total interest-bearing $1,946,856 4,221 0.87 $1,648,851 5,038 1.23liabilities

NONINTEREST-BEARINGLIABILITIES

AND STOCKHOLDERS' EQUITY

Demand deposits 556,649 425,672

Other liabilities 23,237 17,119

Stockholders' equity 315,988 277,746

TOTAL LIABILITIES AND

STOCKHOLDERS' EQUITY $2,842,730 $2,369,388

Net interest income and $24,525 3.51% $21,025 3.52%interest rate spread

Net interest margin 3.74% 3.84%

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

(2) For 2020, adjustments of $98 thousand and $506 thousand, respectively, weremade to tax equate income on tax exempt loans and tax exempt securities. For2019, adjustments of $107 thousand and $427 thousand, respectively, were madeto tax equate income on tax exempt loans and tax exempt securities. Theseadjustments were based on a marginal federal income tax rate of 21%, lessdisallowances.

Six Months Ended Six Months Ended

June 30, 2020 June 30, 2019

AVERAGE AVERAGE INTEREST INTEREST BALANCE (1) RATE BALANCE (1) RATE (1) (1)

EARNING ASSETS

Loans (2) $2,014,678 $49,039 4.89% $1,738,953 $44,002 5.10%

Taxable securities 209,139 2,825 2.72 195,871 2,482 2.56

Tax-exempt securities 242,016 4,702 3.91 209,586 4,076 3.92

Equity securities (2) 16,996 277 3.28 12,058 346 5.79

Federal funds sold and 64,090 179 0.56 31,712 354 2.25other

Total earning assets 2,546,919 57,022 4.50 2,188,180 51,260 4.72

Nonearning assets 194,984 165,932

Total assets $2,741,903 $2,354,112

INTEREST-BEARINGLIABILITIES

Time deposits $494,385 $4,623 1.88% $384,643 $3,642 1.91%

Brokered time deposits 94,846 802 1.69 70,793 825 2.33

Savings deposits 441,232 588 0.27 418,306 648 0.31

Demand deposits 756,882 2,486 0.66 610,631 2,679 0.88

Short term borrowings 37,544 338 1.81 148,723 1,862 2.52

Long term borrowings 88,491 799 1.82 5,815 96 3.33

Total interest-bearing $1,913,380 9,636 1.01 $1,638,911 9,752 1.20liabilities

NONINTEREST-BEARINGLIABILITIES

AND STOCKHOLDERS' EQUITY

Demand deposits $502,710 $427,039

Other liabilities 17,289 15,944

Stockholders' equity 308,524 272,218

TOTAL LIABILITIES AND

STOCKHOLDERS' EQUITY $2,741,903 $2,354,112

Net interest income and $47,386 3.49% $41,508 3.52%interest rate spread

Net interest margin 3.74% 3.83%

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

(2) For 2020, adjustments of $196 thousand and $967 thousand, respectively,were made to tax equate income on tax exempt loans and tax exempt securities.For 2019, adjustments of $209 thousand and $843 thousand, respectively, weremade to tax equate income on tax exempt loans and tax exempt securities. Theseadjustments were based on a marginal federal income tax rate of 21%, lessdisallowances.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200729005148/en/

CONTACT: Kevin J. Helmick, President and CEO 20 South Broad Street, P.O. Box 555 Canfield, OH 44406 330.533.3341 Email: exec@farmersbankgroup.com