Farmers National Banc Corp. Announces 2021 Second Quarter Financial Results

Farmers National Banc Corp. (Farmers) (NASDAQ: FMNB) today reported financial results for the three months ended June 30, 2021.

Net income for the three months ended June 30, 2021 was $15.6 million, or $0.55 per diluted share, which compares to $11.0 million, or $0.39 per diluted share, for the three months ended June 30, 2020 and $14.6 million or $0.51 per diluted share for the linked quarter. Net income excluding acquisition costs (non-GAAP) for the quarter ended June 30, 2021 was $15.7 million or $0.55 per share, compared to $11.1 million or $0.39 per share for the same quarter in 2020 and $14.6 million or $0.51 per share for the most recent prior quarter.

Annualized return on average assets and annualized return on average equity were 1.90% and 17.17%, respectively, for the three month period ended June 30, 2021, compared to 1.56% and 14.02% for the same three month period in 2020, and 1.87% and 16.81% for the linked quarter. Farmers’ annualized return on average tangible equity excluding acquisition costs (non-GAAP) was 19.91% for the quarter ended June 30, 2021 compared to 16.75% for the same quarter in 2020 and 19.31% for the linked quarter.

On June 22, 2021, Farmers entered into an agreement and plan of merger with Cortland Bancorp Inc. (“Cortland”), the parent company of Cortland Savings and Banking Company (“Cortland Bank”). This transaction is subject to receipt of Cortland shareholder approval and customary regulatory approvals and is expected to close during the fourth quarter of 2021. Farmers expects that the transaction will increase Farmers’ market share in Trumbull, Mahoning and Cuyahoga Counties and enables Farmers to continue building local scale throughout Northeast Ohio. As of March 31, 2021, Cortland had total assets of $791.7 million, which included gross loans of $518.6 million, deposits of $680.3 million and equity of $81.1 million.

Kevin J. Helmick, President and CEO, stated, “Our record year-to-date financial results demonstrates Farmers strong position to grow earnings, despite the current low interest rate and loan environment. This success is a direct result of our win-win culture and providing business and retail customers with local, personal, and diversified financial services.”

“As a high performing financial institution, we believe we have significant opportunities to create value for shareholders. The recently announced acquisition of Cortland Bank immediately enhances economies of scale and our ability to expand Farmers’ diversified product offerings to Cortland Bank’s customer base.

“Our customer-first culture and the hard work of all our team members continues to drive our success. I want to thank everyone at Farmers for their dedication and look forward to welcoming Cortland Bank’s team to our corporate family,” concluded Mr. Helmick.

Farmers offered special financial assistance to support customers who were 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 the dates listed:

		June 30, 2021					March 31, 2021					Dec. 31, 2020					Sept. 30, 2020					June 30, 2020
(dollars in thousands)		Balance			Number of Loans		Balance			Number of Loans		Balance			Number of Loans		Balance			Number of Loans		Balance			Number of Loans
Commercial real estate		$	8,716		2		$	16,584		5		$	19,027		6		$	155		1		$	43,954		44
Commercial			0		0			0		0			1,424		2			0		0			8,515		69
Agriculture			0		0			0		0			0		0			469		2			8,340		22
Residential real estate			0		0			0		0			0		0			222		1			3,785		37
Consumer			0		0			0		0			2		1			2		1			1,858		100
Total		$	8,716		2		$	16,584		5		$	20,453		9		$	848		5		$	66,452		272

The Company offered three month deferrals upon request by the borrowers, beginning in the middle of March, 2020 and concluding at the end of the three month deferral period. For those borrowers in industries that were greatly impacted by COVID-19, additional deferrals were considered and granted beyond the initial three month period. The range of deferred months for subsequent requests were three to nine months. The decline in deferred loans and balances was due to borrowers not requesting additional deferments and beginning to restart payments under the original terms of their loan.

Farmers is also a preferred SBA lender and we dedicated significant additional staff and other resources to help our customers complete and submit their applications and supporting documentation for loans offered under the 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. During the initial 2020 period of the PPP program, the Company facilitated PPP assistance to 1,714 business customers totaling $199.8 million. The Company, on behalf of its customers, began processing borrower applications for PPP forgiveness at the beginning of September 2020. The SBA has up to ninety days to review an application for PPP forgiveness and provide a decision at the end of that review. Once forgiveness of the PPP loans has been communicated and payment is received from the SBA, the Company will record the cash received from the SBA, pay-off the loans based on the amount of forgiveness provided and accelerate the amount of net deferred loan fees/costs recognized for the portion of the PPP loans that are forgiven. During the period ended June 30, 2021, the Company has received life to date payments from the SBA for forgiveness of loans totaling $181.6 million, or approximately 90.8% of the PPP loans originated in 2020. The Company has processed $83.9 million in new loans for PPP loan funding during the six month period ended June 30, 2021. The Company has also received payments from the SBA for forgiveness of loans totaling $5.2 million, or approximately 6.2% of PPP loans originated in 2021.

2021 Second Quarter Financial Highlights

• Loans

Total loans were $1.96 billion at June 30, 2021, compared to $2.15 billion at June 30, 2020, representing a decrease of 8.8%. The decrease in loans has occurred primarily in the PPP category, with $92.1 million, net of deferred fees, in outstanding balances at June 30, 2021 compared to $193.0 million at June 30, 2020 representing a decrease of $101 million or 52%. Average loans now comprise 64.7% of the Bank's average earning assets for the quarter ended June 30, 2021, compared to 79.6% for the same period in 2020. A summary of loans summarized by industries that may have particular vulnerability to the effects of COVID-19 and their outstanding balance as a percentage of total loans, as of June 30, 2021, is shown in the following table:

(dollars in thousands)		Outstanding Balance		% of total loans
Restaurants and Catering Facilities		$38,819		1.98%
Hotels		40,957		2.09%
Golf Courses		7,095		0.36%
Energy		1,256		0.07%
Total		$88,127		4.65%

• 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 17% from $2.4 billion at June 30, 2020 to $2.8 billion at June 30, 2021. As a result of the large increase in deposits, the loan to deposit ratio at June 30, 2021 stands at 70.5%, a significant decrease compared to 88.1% 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 remains at a low level, currently at 0.43% which is the same ratio reported one year ago. Early stage delinquencies, defined as 30-89 days past due, were $7.6 million, or 0.39% of total loans, at June 30, 2021, compared to $10.3 million, or 0.43% of total loans, for the quarter ended June 30, 2020. Net charge-offs for the current quarter were $179 thousand, compared to $392 thousand in the same quarter in 2020. Total net charge-offs as a percentage of average net loans outstanding is 0.04% for the quarter ended June 30, 2021, down 0.04% compared to the same quarter in 2020.

As a result of improved factors that exist in the current economic environment as well as the decrease in the loan portfolio when compared to prior quarters, the Company was able to decrease its provision for credit losses to $50 thousand for the quarter ended June 30, 2021, compared to the $425 thousand recorded in the first quarter of this year. As an overall percentage of loans, the allowance for credit losses increased to 1.27% for the current quarter compared to 1.22% for the quarter ended March 31, 2021. Excluding the PPP loans, this allowance for credit losses to gross loans ratio increased to 1.33% (non-GAAP) as of June 30, 2021, and the ratio of the allowance for credit losses to gross loans, excluding PPP loans and acquired loans is 1.52% (non-GAAP).

• Net interest margin

The net interest margin for the three months ended June 30, 2021 was 3.54%, a 20 basis points decrease from the quarter ended June 30, 2020, and 4 basis points less than the 3.58% reported for the linked quarter. In comparing the second quarter of 2021 to the same period in 2020, asset yields decreased 56 basis points, while the cost of interest-bearing liabilities decreased 49 basis points. Most of the decrease in the asset yields was the result of lower rates earned on taxable and tax-exempt securities. Each of the major interest-bearing liability categories experienced cost decreases compared to one year ago. The net interest margin for the quarter ended June 30, 2021 excluding interest and fees from PPP loans would decrease the margin by 12 basis points (non-GAAP). The net interest margin is also impacted by the additional accretion as a result of the discounted loan portfolios acquired in previous mergers, which increased the net interest margin by 4 basis points for the quarter ended June 30, 2021 and 5 basis points for the quarter ended June 30, 2020.

• Noninterest income

Noninterest income increased 8.1% to $9.9 million for the quarter ended June 30, 2021 compared to $9.1 million in the same quarter in 2020. The Company’s wealth management businesses led the improvement as trust fee income increased $506 thousand, or 27.32%, insurance agency commissions increased $267 thousand, or 39.2% and investment commissions increased $219 thousand, or 72%. Other improvements noted include debit card interchange fees increasing $259 thousand, or 26.78%, and other operating income increasing $471 thousand, or 141%. Those increases were offset by a $1.2 million, or 31.66%, decrease in gain on sale of mortgage loan income resulting from a slowdown in the level of mortgage loan refinancing.

• Noninterest expenses

Farmers has remained committed to managing the level of noninterest expenses. Total noninterest expenses for the second quarter of 2021 decreased 1.72% to $17.4 million compared to $17.7 million in the same quarter in 2020. This was primarily a result of decreases in telephone and data communication costs of $209 thousand, or 60.06%, core processing charges of $103 thousand, or 11.03%, advertising expense of $126 thousand, or 39.13%, and FDIC insurance of $105 thousand, or 46.67%. These decreases were offset by increases of $215 thousand, or 12.84%, in occupancy and equipment expense and $153 thousand, or 1.58%, in salaries and employee benefits. Annualized noninterest expenses excluding acquisition costs (non-GAAP) measured as a percentage of quarterly average assets improved from 2.50% in the second quarter of 2020 to 2.12% in the second quarter of 2021.

• Efficiency ratio

The efficiency ratio for the quarter ended June 30, 2021 improved to 46.14% compared to 50.75% for the same quarter in 2020. The increases in several categories of noninterest income and net interest income, accompanied with lower noninterest expenses were the main drivers of the improvement.

Founded in 1887, Farmers National Banc Corp. is a diversified financial services company headquartered in Canfield, Ohio, with $3.3 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, 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, 2021 are $3.1 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, net income excluding costs related to acquisition activities and allowance for credit losses to gross loans, excluding PPP loans and acquired loans, 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 to their GAAP equivalents 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 the COVID-19 pandemic, including further resurgence in the spread of 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; impacts of the upcoming U.S. elections on the regulatory landscape, capital markets, and response to and management of the COVID-19 pandemic including further economic stimulus from the federal government; Farmers’ failure to integrate Cortland and Cortland Bank with Farmers in accordance with expectations; deviations from performance expectations related to Cortland and Cortland Bank; and the other factors contained in Farmers’ Annual Report on Form 10-K for the year ended December 31, 2020 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.

IMPORTANT ADDITIONAL INFORMATION

In connection with the proposed merger with Cortland, Farmers will file with the SEC a Registration Statement on Form S-4 that will include a proxy statement of Cortland and a prospectus of Farmers, as well as other relevant documents concerning the proposed transaction.

SHAREHOLDERS OF CORTLAND AND OTHER INVESTORS ARE URGED TO CAREFULLY READ THE PROXY STATEMENT/PROSPECTUS TO BE INCLUDED IN THE REGISTRATION STATEMENT ON FORM S-4, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT FARMERS, CORTLAND, THE PROPOSED MERGER, THE PERSONS SOLICITING PROXIES WITH RESPECT TO THE PROPOSED MERGER AND THEIR INTERESTS IN THE PROPOSED MERGER AND RELATED MATTERS.

Investors and security holders will be able to obtain free copies of the Registration Statement on Form S-4 (when available) and other documents filed with the SEC by Farmers through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with the SEC by Farmers will be available free of charge on Farmers’ website at https://www.farmersbankgroup.com or may be obtained from Farmers by written request to Farmers National Banc Corp., 20 South Broad Street, Canfield, Ohio 44406, Attention: Investor Relations.

This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities nor shall there be any sale of securities in any jurisdiction in which the offer, solicitation or sale is unlawful before registration or qualification of the securities under the securities laws of the jurisdiction. No offer of securities shall be made except by means of a prospectus satisfying the requirements of Section 10 of the Securities Act.

The respective directors and executive officers of Farmers and Cortland and other persons may be deemed to be participants in the solicitation of proxies from Cortland shareholders with respect to the merger. Information regarding the directors and executive officers of Farmers is available in its proxy statement filed with the SEC on March 12, 2021 in connection with its 2021 Annual Meeting of Shareholders. Information regarding directors and executive officers of Cortland is available on its website at www.cortlandbank.com. Other information regarding the participants in the solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement and prospectus to be included in the Registration Statement on Form S-4 and other relevant materials to be filed with the SEC when they become available.

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										For the Six Months Ended
		June 30,		March 31,		Dec. 31,		Sept. 30,		June 30,		June 30,		June 30,		Percent
		2021		2021		2020		2020		2020		2021		2020		Change
Total interest income		$28,609		$27,790		$28,833		$27,635		$28,142		$56,399		$55,859		1.0%
Total interest expense		2,119		2,523		3,030		3,470		4,221		4,642		9,636		-51.8%
Net interest income		26,490		25,267		25,803		24,165		23,921		51,757		46,223		12.0%
Provision for loan losses		50		425		3,000		2,600		2,400		475		3,500		-86.4%
Noninterest income		9,872		10,583		10,682		9,467		9,136		20,455		17,006		20.3%
Acquisition related costs		104		12		1,798		58		48		116		1,367		-91.5%
Other expense		17,330		17,756		17,979		17,662		17,692		35,086		35,110		-0.1%
Income before income taxes		18,878		17,657		13,708		13,312		12,917		36,535		23,252		57.1%
Income taxes		3,303		3,101		2,351		2,443		1,906		6,404		3,602		77.8%
Net income		$15,575		$14,556		$11,357		$10,869		$11,011		$30,131		$19,650		53.3%
Average diluted shares outstanding		28,353		28,336		28,322		28,291		28,280		28,336		28,492
Basic earnings per share		0.55		0.52		0.40		0.39		0.39		1.07		0.69
Diluted earnings per share		0.55		0.51		0.40		0.38		0.39		1.06		0.69
Cash dividends		3,107		3,107		3,100		3,101		3,100		6,214		6,204
Cash dividends per share		0.11		0.11		0.11		0.11		0.11		0.22		0.22
Performance Ratios
Net Interest Margin (Annualized)		3.54%		3.58%		3.73%		3.59%		3.74%		3.56%		3.74%
Efficiency Ratio (Tax equivalent basis)		46.14%		48.24%		50.25%		50.66%		50.75%		47.17%		55.04%
Return on Average Assets (Annualized)		1.90%		1.87%		1.49%		1.46%		1.56%		1.89%		1.44%
Return on Average Equity (Annualized)		17.17%		16.81%		13.10%		12.87%		14.02%		17.15%		12.81%
Dividends to Net Income		19.95%		21.35%		27.30%		28.53%		28.15%		20.62%		31.57%
Other Performance Ratios (Non-GAAP)
Return on Average Tangible Assets		1.93%		1.87%		1.52%		1.50%		1.58%		1.90%		1.46%
Return on Average Tangible Equity		19.81%		19.30%		15.48%		15.30%		16.69%		19.76%		15.03%
Return on Average Tangible Equity excluding acquisition costs		19.91%		19.31%		17.43%		15.37%		16.75%		19.82%		15.88%

Consolidated Statements of Financial Condition
		June 30,		March 31,		Dec. 31,		Sept. 30,		June 30,
		2021		2021		2020		2020		2020
Assets
Cash and cash equivalents		$149,357		$326,385		$254,621		$199,575		$103,954
Securities available for sale		996,271		802,866		575,600		481,509		475,614
Equity securities		6,658		6,902		6,881		8,307		8,375
Loans held for sale		1,922		3,993		4,766		7,076		3,395
Loans		1,959,865		2,037,404		2,078,044		2,147,158		2,143,600
Less allowance for credit losses (a)		24,806		24,935		22,144		19,341		16,960
Net Loans		1,935,059		2,012,469		2,055,900		2,127,817		2,126,640
Other assets		170,791		171,909		173,380		164,895		161,611
Total Assets		$3,260,058		$3,324,524		$3,071,148		$2,989,179		$2,879,589
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing		$663,640		$675,045		$608,791		$577,334		$593,162
Interest-bearing		2,115,183		2,158,009		2,002,087		1,960,998		1,846,323
Total deposits		2,778,823		2,833,054		2,610,878		2,538,332		2,439,485
Other interest-bearing liabilities		78,369		79,683		78,906		81,690		80,115
Other liabilities		35,958		64,432		31,267		29,189		28,637
Total liabilities		2,893,150		2,977,169		2,721,051		2,649,211		2,548,237
Stockholders' Equity		366,908		347,355		350,097		339,968		331,352
Total Liabilities
and Stockholders' Equity		$3,260,058		$3,324,524		$3,071,148		$2,989,179		$2,879,589
Period-end shares outstanding		28,322		28,237		28,190		28,186		28,180
Book value per share		$12.95		$12.30		$12.42		$12.06		$11.76
Tangible book value per share (Non-GAAP)*		11.23		10.56		10.66		10.23		9.92
* 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 (b)		14.10%		13.49%		13.22%		12.98%		12.65%
Total Risk Based Capital Ratio (b)		15.70%		15.10%		14.72%		14.36%		13.92%
Tier 1 Risk Based Capital Ratio (b)		14.54%		13.93%		13.67%		13.43%		13.10%
Tier 1 Leverage Ratio (b)		9.70%		9.69%		9.77%		9.67%		9.71%
Equity to Asset Ratio		11.25%		10.45%		11.40%		11.37%		11.51%
Tangible Common Equity Ratio (c)		9.90%		9.10%		9.94%		9.82%		9.88%
Net Loans to Assets		59.36%		60.53%		66.94%		71.18%		73.85%
Loans to Deposits		70.53%		71.92%		79.59%		84.59%		87.87%
Asset Quality
Non-performing loans		$13,873		$11,640		$13,835		$11,841		$12,225
Other Real Estate Owned		30		30		0		73		41
Non-performing assets		13,903		11,670		13,835		11,914		12,266
Loans 30 - 89 days delinquent		7,606		7,183		9,297		10,134		10,336
Charged-off loans		502		284		387		393		524
Recoveries		323		200		190		174		132
Net Charge-offs		179		84		197		219		392
Annualized Net Charge-offs to
Average Net Loans Outstanding		0.04%		0.02%		0.04%		0.04%		0.08%
Allowance for Credit Losses to Total Loans (a)		1.27%		1.22%		1.07%		0.90%		0.79%
Non-performing Loans to Total Loans		0.71%		0.57%		0.67%		0.55%		0.57%
Allowance to Non-performing Loans (a)		178.81%		214.22%		160.06%		163.34%		138.73%
Non-performing Assets to Total Assets		0.43%		0.35%		0.45%		0.40%		0.43%

(a) CECL method used for the June 30 and March 31, 2021 quarters. Prior periods used the incurred loss methodology.

(b) June 30, 2021 ratio is estimated

(c) This is a non-GAAP financial measure. A reconciliation to GAAP is shown below

Reconciliation of Total Assets to Tangible Assets
		For the Three Months Ended										For the Six Months Ended
		June 30,		March 31,		Dec. 31,		Sept. 30,		June 30,		June 30,		June 30,
		2021		2021		2020		2020		2020		2021		2020
Total Assets		$3,260,058		$3,324,524		$3,071,148		$2,989,179		$2,879,589		$3,260,058		$2,879,589
Less Goodwill and other intangibles		48,985		49,301		49,617		51,608		51,866		48,985		51,866
Tangible Assets		$3,211,073		$3,275,223		$3,021,531		$2,937,571		$2,827,723		$3,211,073		$2,827,723
Average Assets		3,280,316		3,155,695		3,033,005		2,957,702		2,842,730		3,218,372		2,741,903
Less average Goodwill and other intangibles		49,193		49,509		51,476		51,754		52,052		49,350		47,088
Average Tangible Assets		$3,231,123		$3,106,186		$2,981,529		$2,905,948		$2,790,678		$3,169,022		$2,694,815
Reconciliation of Common Stockholders' Equity to Tangible Common Equity
		For the Three Months Ended										For the Six Months Ended
		June 30,		March 31,		Dec. 31,		Sept. 30,		June 30,		June 30,		June 30,
		2021		2021		2020		2020		2020		2021		2020
Stockholders' Equity		$366,908		$347,355		$350,097		$339,968		$331,352		$366,908		$331,352
Less Goodwill and other intangibles		48,985		49,301		49,617		51,608		51,866		48,985		51,866
Tangible Common Equity		$317,923		$298,054		$300,480		$288,360		$279,486		$317,923		$279,486
Average Stockholders' Equity		363,753		351,190		344,949		335,982		315,988		354,334		308,524
Less average Goodwill and other intangibles		49,193		49,509		51,476		51,754		52,052		49,350		47,088
Average Tangible Common Equity		$314,560		$301,681		$293,473		$284,228		$263,936		$304,984		$261,436
Reconciliation of Net Income, Excluding Acquisition Related 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,
		2021		2021		2020		2020		2020		2021		2020
Net income		$15,575		$14,556		$11,357		$10,869		$11,011		$30,131		$19,650
Acquisition related costs - tax equated		83		9		1,431		50		41		92		1,104
Net income - Adjusted		$15,658		$14,565		$12,788		$10,919		$11,052		$30,223		$20,754
Diluted EPS excluding acquisition costs		$0.55		$0.51		$0.45		$0.39		$0.39		$1.07		$0.73

Reconciliation of Allowance for Credit Losses to Gross Loans, Excluding PPP Loans and Acquired Loans
		For the Three Months Ended
		June 30,		March 31,		Dec. 31,		Sept. 30,		June 30,
		2021		2021		2020		2020		2020
Gross Loans		$1,959,865		$2,037,404		$2,078,044		$2,147,158		$2,143,600
PPP Loans		92,073		136,826		125,396		194,490		192,969
Loans less PPP		1,867,792		1,900,578		1,952,648		1,952,668		1,950,631
Allowance for Credit Losses to Gross Loans Excluding PPP (a)		1.33%		1.31%		1.13%		0.99%		0.87%
Acquired Loans		233,772		251,616		272,150		294,712		320,184
Loans less PPP and Acquired		$1,634,020		$1,648,962		$1,680,498		$1,657,956		$1,630,447
Allowance for Credit Losses to Gross Loans Excluding PPP and Acquired (a)		1.52%		1.51%		1.32%		1.17%		1.04%
(a) CECL method used for the June 30 and March 31, 2021 quarters. Prior periods used the incurred loss methodology.
		For the Three Months Ended
		June 30,		March 31,		Dec. 31,		Sept. 30,		June 30,
End of Period Loan Balances		2021		2021		2020		2020		2020
Commercial real estate		$704,809		$702,556		$713,936		$710,730		$715,342
Commercial		351,261		406,064		404,492		481,593		472,012
Residential real estate		490,340		508,483		524,193		526,627		528,853
Consumer		190,064		193,295		203,061		209,883		208,374
Agricultural loans		223,427		227,073		232,129		219,896		221,556
Total, excluding net deferred loan costs		$1,959,901		$2,037,471		$2,077,811		$2,148,729		$2,146,137
		For the Three Months Ended
		June 30,		March 31,		Dec. 31,		Sept. 30,		June 30,
Noninterest Income		2021		2021		2020		2020		2020
Service charges on deposit accounts		$790		$808		$930		$904		$753
Bank owned life insurance income		300		284		187		196		204
Trust fees		2,358		2,236		1,950		1,973		1,852
Insurance agency commissions		948		1,001		776		784		681
Security gains (losses)		32		488		179		70		(26)
Retirement plan consulting fees		389		320		394		341		408
Investment commissions		523		504		450		353		304
Net gains on sale of loans		2,500		3,185		3,901		3,348		3,658
Debit card and EFT fees		1,226		1,084		1,061		1,048		967
Other operating income		806		673		854		450		335
Total Noninterest Income		$9,872		$10,583		$10,682		$9,467		$9,136
		For the Three Months Ended
		June 30,		March 31,		Dec. 31,		Sept. 30,		June 30,
Noninterest Expense		2021		2021		2020		2020		2020
Salaries and employee benefits		$9,866		$9,976		$9,638		$10,244		$9,713
Occupancy and equipment		1,890		2,275		2,060		1,719		1,675
State and local taxes		551		554		515		576		583
Professional fees		830		1,056		341		753		823
Merger related costs		104		12		1,798		58		48
Advertising		196		260		478		460		322
FDIC insurance		120		170		100		200		225
Intangible amortization		316		316		332		332		331
Core processing charges		831		627		831		925		934
Telephone and data		139		138		154		182		348
Other operating expenses		2,591		2,384		3,530		2,271		2,738
Total Noninterest Expense		$17,434		$17,768		$19,777		$17,720		$17,740

Average Balance Sheets and Related Yields and Rates
(Dollar Amounts in Thousands)
		Three Months Ended						Three Months Ended
		June 30, 2021						June 30, 2020
		AVERAGE						AVERAGE
		BALANCE		INTEREST (1)		RATE (1)		BALANCE		INTEREST (1)		RATE (1)
EARNING ASSETS
Loans (2)		$1,991,838		$23,669		4.77%		$2,101,500		$24,842		4.75%
Taxable securities		512,779		2,511		1.96		197,906		1,278		2.60
Tax-exempt securities (2)		340,539		2,952		3.48		252,818		2,459		3.91
Equity securities		14,666		121		3.31		17,687		137		3.12
Federal funds sold and other		218,093		58		0.11		70,279		30		0.17
Total earning assets		3,077,915		29,311		3.82		2,640,190		28,746		4.38
Nonearning assets		202,401						202,540
Total assets		$3,280,316						$2,842,730
INTEREST-BEARING LIABILITIES
Time deposits		$392,663		$1,008		1.03%		$493,048		$2,181		1.78%
Brokered time deposits		15,429		29		0.75		84,198		319		1.52
Savings deposits		516,428		165		0.13		457,188		267		0.23
Demand deposits		1,226,894		627		0.20		823,058		1,093		0.53
Short term borrowings		4,674		3		0.26		12,613		18		0.57
Long term borrowings		74,496		287		1.55		76,751		343		1.80
Total interest-bearing liabilities		$2,230,584		2,119		0.38		$1,946,856		4,221		0.87
NONINTEREST-BEARING LIABILITIES
AND STOCKHOLDERS' EQUITY
Demand deposits		666,053						556,649
Other liabilities		19,926						23,237
Stockholders' equity		363,753						315,988
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY		$3,280,316						$2,842,730
Net interest income and interest rate spread				$27,192		3.44%				$24,525		3.51%
Net interest margin						3.54%						3.74%
(1) Interest and yields are calculated on a tax-equivalent basis where applicable.
(2) For 2021, adjustments of $92 thousand and $610 thousand, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2020, adjustments of $98 thousand and $506 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.
		Six Months Ended						Six Months Ended
		June 30, 2021						June 30, 2020
		AVERAGE						AVERAGE
		BALANCE		INTEREST (1)		RATE (1)		BALANCE		INTEREST (1)		RATE (1)
EARNING ASSETS
Loans (2)		$2,016,223		$47,569		4.76%		$2,014,678		$49,039		4.89%
Taxable securities		421,847		4,230		2.02		209,139		2,825		2.72
Tax-exempt securities		311,453		5,565		3.60		242,016		4,702		3.91
Equity securities (2)		14,753		242		3.31		16,996		277		3.28
Federal funds sold and other		241,898		129		0.11		64,090		179		0.56
Total earning assets		3,006,174		57,735		3.87		2,546,919		57,022		4.50
Nonearning assets		212,198						194,984
Total assets		$3,218,372						$2,741,903
INTEREST-BEARING LIABILITIES
Time deposits		$416,429		$2,263		1.10%		$494,385		$4,623		1.88%
Brokered time deposits		23,669		75		0.64		94,846		802		1.69
Savings deposits		506,188		358		0.14		441,232		588		0.27
Demand deposits		1,155,642		1,359		0.24		756,882		2,486		0.66
Short term borrowings		3,735		7		0.38		37,544		338		1.81
Long term borrowings		75,248		580		1.55		88,491		799		1.82
Total interest-bearing liabilities		$2,180,911		4,642		0.43		$1,913,380		9,636		1.01
NONINTEREST-BEARING LIABILITIES
AND STOCKHOLDERS' EQUITY
Demand deposits		$661,550						$502,710
Other liabilities		21,577						17,289
Stockholders' equity		354,334						308,524
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY		$3,218,372						$2,741,903
Net interest income and interest rate spread				$53,093		3.44%				$47,386		3.49%
Net interest margin						3.56%						3.74%
(1) Interest and yields are calculated on a tax-equivalent basis where applicable.
(2) For 2021, adjustments of $187 thousand and $1.2 million, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2020, adjustments of $196 thousand and $967 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.

 

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