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Farmers National Banc Corp. Reports Results for Fourth Quarter 2022

  • Earnings per diluted share of $0.39 ($0.42 excluding certain items, non-GAAP) for the fourth quarter of 2022
  • Loan growth of $5.2 million for the quarter, excluding PPP loans
  • 160 consecutive quarters of profitability
  • Efficiency ratio, (excluding certain items, non-GAAP), of 51.1% for the fourth quarter of 2022
  • Return on average assets, (excluding certain items, non-GAAP), was 1.36% for the fourth quarter of 2022
  • ROAE and ROATE, (excluding certain items, non-GAAP), 21.3% and 34.6%, respectively, for fourth quarter of 2022

Farmers National Banc Corp. (“Farmers” or the “Company”) (NASDAQ: FMNB) reported today net income of $13.4 million for the three months ended December 31, 2022 compared to $5.7 million for the three months ended December 31, 2021. The Company reported diluted earnings per share of $0.39 for the fourth quarter of 2022 versus $0.18 for the same period in 2021. Results for the fourth quarter of 2022 included pretax items of $584,000 for merger related costs and combined net losses of $338,000 on the sale of securities and the sale of other assets. Excluding these items (non-GAAP), net income for the quarter ended December 31, 2022, would have been $14.1 million, or $0.42 per diluted share.

Net income for the twelve months ended December 31, 2022, totaled $60.6 million, or $1.79 per diluted share, compared to $51.8 million, or $1.77 per diluted share for the twelve months ended December 31, 2021. Results for the year ended December 31, 2022, included pre-tax items for acquisition costs of $4.1 million, security losses of $454,000, $8.4 million in other noninterest income for the proceeds of a legal settlement, a $6.0 million charitable contribution to the Farmers Charitable Foundation, $2.1 million in legal expenses associated with the legal settlement and gains of $19,000 on the sale of assets. Net income for the twelve months ended December 31, 2022, excluding these items (non-GAAP), was $64.0 million, or $1.89 per share.

Kevin J. Helmick, President and CEO, stated, “2022 was a strong year for Farmers as we produced record net income, which drove strong returns on assets, equity, and tangible equity. In addition, we successfully integrated the 2021 Cortland Bancorp acquisition, focused on completing the 2023 Emclaire Financial Corp. acquisition, and enhanced our leadership team and board. With the January 2023 completion of the Emclaire Financial Corp. acquisition, we have expanded our presence throughout Pennsylvania and significantly increased our scale with over $5.0 billion in bank assets and $3.0 billion in wealth assets. I believe Farmers is well positioned to navigate an increasingly difficult economic and interest rate environment as a result of our strong asset quality and capital levels, experienced leadership team, and dedication to provide our communities with exceptional financial products and services.”

On March 23, 2022, Farmers entered into an agreement and plan of merger (the “Merger Agreement”) with Emclaire Financial Corp. (formerly NASDAQ: EMCF), a Pennsylvania corporation (“Emclaire”), and the parent company of The Farmers National Bank of Emlenton (“Emlenton”). On July 20, 2022, the transaction received the approval of Emclaire’s shareholders and on December 2, 2022, the transaction received regulatory approval. The transaction closed on January 1, 2023. Emclaire operated 19 branches in ten counties throughout western Pennsylvania and as of December 31, 2022, had total assets of $1.02 billion, gross loans of $797.3 million and deposits of $874.6 million.

Balance Sheet

Total assets declined to $4.08 billion at December 31, 2022 compared to $4.12 billion at September 30, 2022. Gross loans (excluding loans held for sale and PPP loans) increased by $5.2 million to $2.40 billion at December 30, 2022 from the prior quarter.

Securities available for sale decreased $27.1 million to $1.27 billion at December 31, 2022 from $1.30 billion at September 30, 2022. The decrease was primarily driven by runoff and the sale of securities during the quarter offset by improvement in the gross unrealized loss. The gross unrealized loss at December 31, 2022 was $266.5 million compared to $290.1 million at September 30, 2022 and a gross unrealized gain of $11.7 million at December 31, 2021. With continued loan growth and the acquisition of Emclaire, the Company plans on allowing the securities portfolio to shrink and provide liquidity. The volatility in the bond market is expected to continue in 2023, which may result in increased volatility in the fair value of the Company’s available for sale securities.

Total customer deposits (excluding brokered time deposits) declined to $3.42 billion at December 31, 2022 from $3.52 billion at September 30, 2022. Customer deposit balances at December 31, 2021 were $3.55 billion. Intense competition from both other banks and the treasury market itself drove the decline in deposits. In addition, it appears that some customers are utilizing deposit balances to counter the higher cost of living brought on by the inflationary environment in 2022. The Company expects competition for deposits to remain highly elevated for the foreseeable future which will continue to increase funding costs.

Total stockholders’ equity increased to $292.3 million at December 31, 2022 from $265.6 million at September 30, 2022 but has declined from $472.4 million at December 31, 2021. The decrease in stockholders’ equity since December 31, 2021 has primarily been due to the decline in accumulated other comprehensive income associated with the rapid increase in U.S. treasury rates in 2022 which has had a negative effect on the value of the Company’s available for sale securities, and in turn, the dollar amount that flows through accumulated other comprehensive income. The Company’s tangible book value per share (non-GAAP) was $5.60 at December 31, 2022 compared to $4.79 at September 30, 2022, and $10.91 at December 31, 2021.

Credit Quality

Non-performing loans (NPLs) were $14.8 million at December 31, 2022 compared to $16.2 million at December 31, 2021. The NPL to loans ratio was 0.62% at December 31, 2022 compared to 0.69% at December 31, 2021. Non-performing assets to assets has also declined from 0.39% at December 31, 2021 to 0.36% at December 31, 2022. Early stage delinquencies, defined as 30-89 days delinquent, were $9.6 million, or 0.40% of total loans, at December 31, 2022 compared to $8.9 million, or 0.38% of total loans at December 31, 2021.

The Company recorded a provision for credit losses and unfunded commitments of $416,000 in the fourth quarter of 2022 compared to a provision for credit losses of $5.4 million in the fourth quarter of 2021. During the fourth quarter of 2021, the Company completed the acquisition of Cortland Bancorp and recorded a $4.9 million provision for credit losses related to the acquisition which accounts for the majority of the difference in provision costs between the 4th quarter of 2022 and the 4th quarter of 2021. The Company experienced net charge-offs of $570,000 during the fourth quarter of 2022 compared to $313,000 in the fourth quarter of 2021. Net charge-offs as a percentage of average net loans was 10 basis points for the quarter ended December 31, 2022, compared to 6 basis points for the fourth quarter of 2021. The allowance for credit losses to total loans declined to 1.12% at December 31, 2022, compared to 1.26% at December 31, 2021. The low level of charge-off activity over the last several years continues to result in less allowance for credit losses being required.

Net Interest Income

The net interest margin was 2.99% for the fourth quarter of 2022 compared to 3.21% for the third quarter of 2022 and 3.33% for the fourth quarter of 2021. The decline in net interest margin during the fourth quarter of 2022 compared to the prior quarter and the fourth quarter of 2021 was caused by a rapid increase in deposit rates due to intense competition for deposits, the continued Federal Reserve rate hiking cycle and runoff of deposit balances which are being replaced by much costlier wholesale funding. Loans continue to reprice higher but cannot keep up with the increase in funding costs. Excluding the impact of acquisition marks and related accretion and PPP interest and fees, the net interest margin (non-GAAP) for the fourth quarter of 2022 was 2.96% compared to 3.18% for the third quarter of 2022 and 3.21% for the fourth quarter of 2021. Net interest income decreased to $29.4 million for the fourth quarter of 2022 from $29.7 million for the quarter ended December 31, 2021. The decrease was due to net interest margin compression discussed above offset somewhat by larger average assets. In addition, during the fourth quarter of 2021, the Company recognized $979,000 in interest and fees associated with PPP loans compared to $10,000 in the fourth quarter of 2022.

Noninterest Income

Noninterest income decreased $1.3 million from the fourth quarter of 2021 to the fourth quarter of 2022. The primary reason for the decline was a drop of $1.5 million in the net gains on the sale of loans. This drop was caused by lower mortgage production compared to the prior year due to the dramatic increase in interest rates in 2022 and a lower saleable mix. Bank owned life insurance increased $176,000 in the fourth quarter of 2022 compared to the fourth quarter of 2021. This increase was primarily due to a death benefit of $184,000 received in the fourth quarter of 2022. Insurance commissions increased to $1.1 million in the fourth quarter of 2022 compared to $706,000 in the fourth quarter of 2021. This business exhibited strong growth throughout 2022. Security losses for the fourth quarter of 2022 totaled $366,000 compared to security gains of $25,000 for the same period in 2021. The Company used the proceeds from the sales to pay down wholesale borrowings.

Noninterest Expense

Total noninterest expense decreased to $21.1 million in the fourth quarter of 2022 compared to $27.7 million for the fourth quarter of 2021. The year-over-year decrease was primarily due to the merger costs of $6.5 million incurred in the fourth quarter of 2021 compared to merger costs of $584,000 incurred in the fourth quarter of 2022. In addition, the Company incurred $1.8 million of expense in the fourth quarter of 2021 for prepayment penalties on FHLB advances. There were no prepayment penalties in the fourth quarter of 2022. Offsetting these decreases were increases in salaries and employee benefits primarily related to increased healthcare costs, increased occupancy and equipment expense and increased FDIC insurance expense.

About Farmers National Banc Corp.

Founded in 1887, Farmers National Banc Corp. is a diversified financial services company headquartered in Canfield, Ohio, with $4.1 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 65 banking locations in Mahoning, Trumbull, Columbiana, Portage, Stark, Wayne, Medina, Geauga and Cuyahoga Counties in Ohio and Beaver, Butler, Allegheny, Jefferson, Clarion, Venango, Clearfield, Mercer, Elk and Crawford Counties 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 December 31, 2022 are $3.0 billion. Farmers National Insurance, LLC, a wholly-owned subsidiary of The Farmers National Bank of Canfield, offers 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 certain items, return on average assets excluding merger costs and certain items, return on average equity excluding merger costs and certain items, net interest margin excluding acquisition marks and related accretion and PPP interest and fees, efficiency ratio less one-time expenses, 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.

Cautionary Statements Regarding Forward-Looking Statements

We make statements in this news release and our related investor conference call, and we may from time to time make other statements, that are 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 certain forward-looking statements include impacts from the length and extent of the economic impacts of the COVID-19 pandemic; significant changes in near-term local, regional, and U.S. economic conditions including those resulting from continued high rates of inflation, tightening monetary policy of the Board of Governors of the Federal Reserve, and possibility of a recession; Farmers’ failure to integrate Emclaire and Emlenton with Farmers in accordance with expectations; deviations from performance expectations related to Emclaire and Emlenton; and the other factors contained in Farmers’ Annual Report on Form 10-K for the year ended December 31, 2021 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, except per share results) Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statements of Income

For the Three Months Ended

 

For the Twelve Months Ended

Dec. 31,

 

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

Dec. 31,

 

Dec. 31,

 

Percent

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

Change

Total interest income

$

38,111

 

$

36,410

 

$

34,286

 

$

33,279

 

$

31,685

 

$

142,086

 

$

116,459

 

22.0

%

Total interest expense

 

8,679

 

 

4,629

 

 

2,575

 

 

2,037

 

 

1,986

 

 

17,920

 

 

8,469

 

111.6

%

Net interest income

 

29,432

 

 

31,781

 

 

31,711

 

 

31,242

 

 

29,699

 

 

124,166

 

 

107,990

 

15.0

%

Provision (credit) for credit losses

 

416

 

 

448

 

 

616

 

 

(358

)

 

5,366

 

 

1,122

 

 

4,893

 

-77.1

%

Noninterest income

 

8,200

 

 

8,827

 

 

9,477

 

 

17,698

 

 

9,538

 

 

44,202

 

 

38,193

 

15.7

%

Acquisition related costs

 

584

 

 

872

 

 

674

 

 

1,940

 

 

6,521

 

 

4,070

 

 

7,109

 

-42.7

%

Other expense

 

20,511

 

 

20,527

 

 

20,787

 

 

28,516

 

 

21,140

 

 

90,341

 

 

72,067

 

25.4

%

Income before income taxes

 

16,121

 

 

18,761

 

 

19,111

 

 

18,842

 

 

6,210

 

 

72,835

 

 

62,114

 

17.3

%

Income taxes

 

2,765

 

 

3,315

 

 

3,160

 

 

2,998

 

 

508

 

 

12,238

 

 

10,270

 

19.2

%

Net income

$

13,356

 

$

15,446

 

$

15,951

 

$

15,844

 

$

5,702

 

$

60,597

 

$

51,844

 

16.9

%

 
Average diluted shares outstanding

 

33,962

 

 

33,932

 

 

33,923

 

 

33,937

 

 

32,074

 

 

33,929

 

 

29,280

 

Basic earnings per share

 

0.39

 

 

0.46

 

 

0.47

 

 

0.47

 

 

0.18

 

 

1.79

 

 

1.78

 

Diluted earnings per share

 

0.39

 

 

0.46

 

 

0.47

 

 

0.47

 

 

0.18

 

 

1.79

 

 

1.77

 

Cash dividends per share

 

0.17

 

 

0.16

 

 

0.16

 

 

0.16

 

 

0.14

 

 

0.65

 

 

0.47

 

Performance Ratios
Net Interest Margin (Annualized)

 

2.99

%

 

3.21

%

 

3.25

%

 

3.27

%

 

3.33

%

 

3.18

%

 

3.45

%

Efficiency Ratio (Tax equivalent basis)

 

52.59

%

 

50.55

%

 

49.95

%

 

61.36

%

 

63.61

%

 

53.68

%

 

51.13

%

Return on Average Assets (Annualized)

 

1.31

%

 

1.48

%

 

1.54

%

 

1.52

%

 

0.58

%

 

1.46

%

 

1.52

%

Return on Average Equity (Annualized)

 

20.16

%

 

18.71

%

 

17.97

%

 

13.89

%

 

5.24

%

 

17.24

%

 

13.64

%

Dividends to Net Income

 

43.10

%

 

35.06

%

 

33.95

%

 

34.18

%

 

82.99

%

 

36.31

%

 

27.11

%

Other Performance Ratios (Non-GAAP)
Return on Average Tangible Assets

 

1.32

%

 

1.52

%

 

1.57

%

 

1.55

%

 

0.60

%

 

1.50

%

 

1.55

%

Return on Average Tangible Equity

 

32.81

%

 

27.06

%

 

25.23

%

 

17.92

%

 

6.57

%

 

24.31

%

 

16.13

%

 
Consolidated Statements of Financial Condition

Dec. 31,

 

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2021

 

Assets
Cash and cash equivalents

$

75,551

 

$

79,981

 

$

65,458

 

$

137,627

 

$

112,790

 

Securities available for sale

 

1,268,025

 

 

1,295,133

 

 

1,361,682

 

 

1,463,626

 

 

1,427,677

 

Other investments

 

33,444

 

 

34,399

 

 

34,451

 

 

34,019

 

 

30,459

 

 
Loans held for sale

 

858

 

 

2,142

 

 

2,714

 

 

1,904

 

 

4,545

 

Loans

 

2,404,750

 

 

2,399,981

 

 

2,374,485

 

 

2,304,971

 

 

2,331,082

 

Less allowance for credit losses

 

26,978

 

 

27,282

 

 

27,454

 

 

27,015

 

 

29,386

 

Net Loans

 

2,377,772

 

 

2,372,699

 

 

2,347,031

 

 

2,277,956

 

 

2,301,696

 

 
Other assets

 

326,550

 

 

335,668

 

 

303,028

 

 

290,723

 

 

265,582

 

Total Assets

$

4,082,200

 

$

4,120,022

 

$

4,114,364

 

$

4,205,855

 

$

4,142,749

 

 
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing

$

896,957

 

$

934,638

 

$

983,713

 

$

963,143

 

$

916,237

 

Interest-bearing

 

2,526,760

 

 

2,590,054

 

 

2,586,829

 

 

2,690,668

 

 

2,630,998

 

Brokered time deposits

 

138,051

 

 

42,459

 

 

54,996

 

 

40,000

 

 

0

 

Total deposits

 

3,561,768

 

 

3,567,151

 

 

3,625,538

 

 

3,693,811

 

 

3,547,235

 

Other interest-bearing liabilities

 

183,211

 

 

243,098

 

 

137,985

 

 

87,872

 

 

87,758

 

Other liabilities

 

44,926

 

 

44,154

 

 

29,392

 

 

30,286

 

 

35,324

 

Total liabilities

 

3,789,905

 

 

3,854,403

 

 

3,792,915

 

 

3,811,969

 

 

3,670,317

 

Stockholders' Equity

 

292,295

 

 

265,619

 

 

321,449

 

 

393,886

 

 

472,432

 

Total Liabilities
and Stockholders' Equity

$

4,082,200

 

$

4,120,022

 

$

4,114,364

 

$

4,205,855

 

$

4,142,749

 

 
Period-end shares outstanding

 

34,055

 

 

34,060

 

 

34,032

 

 

34,008

 

 

33,898

 

Book value per share

$

8.58

 

$

7.80

 

$

9.45

 

$

11.58

 

$

13.94

 

Tangible book value per share (Non-GAAP)*

 

5.60

 

 

4.79

 

 

6.46

 

 

8.58

 

 

10.91

 

 
* Tangible book value per share is calculated by dividing tangible common equity by outstanding shares
 
Capital and Liquidity
Common Equity Tier 1 Capital Ratio (a)

 

13.61

%

 

13.36

%

 

13.30

%

 

13.31

%

 

13.16

%

Total Risk Based Capital Ratio (a)

 

17.66

%

 

17.44

%

 

17.46

%

 

17.59

%

 

17.60

%

Tier 1 Risk Based Capital Ratio (a)

 

14.22

%

 

13.97

%

 

13.92

%

 

13.95

%

 

13.82

%

Tier 1 Leverage Ratio (a)

 

9.84

%

 

10.24

%

 

9.56

%

 

9.56

%

 

10.12

%

Equity to Asset Ratio

 

7.16

%

 

6.45

%

 

7.81

%

 

9.37

%

 

11.40

%

Tangible Common Equity Ratio (b)

 

4.79

%

 

4.06

%

 

5.47

%

 

7.11

%

 

9.15

%

Net Loans to Assets

 

58.25

%

 

57.59

%

 

57.04

%

 

54.16

%

 

55.56

%

Loans to Deposits

 

67.52

%

 

67.28

%

 

65.49

%

 

62.40

%

 

65.72

%

Asset Quality
Non-performing loans

$

14,803

 

$

12,976

 

$

14,107

 

$

14,046

 

$

16,195

 

Non-performing assets

 

14,876

 

 

13,042

 

 

14,107

 

 

14,046

 

 

16,195

 

Loans 30 - 89 days delinquent

 

9,605

 

 

6,659

 

 

8,716

 

 

7,304

 

 

8,891

 

Charged-off loans

 

754

 

 

783

 

 

177

 

 

1,590

 

 

470

 

Recoveries

 

184

 

 

178

 

 

135

 

 

149

 

 

157

 

Net Charge-offs

 

570

 

 

605

 

 

42

 

 

1,441

 

 

313

 

Annualized Net Charge-offs to
Average Net Loans Outstanding

 

0.10

%

 

0.10

%

 

0.01

%

 

0.25

%

 

0.06

%

Allowance for Credit Losses to Total Loans

 

1.12

%

 

1.14

%

 

1.16

%

 

1.17

%

 

1.26

%

Non-performing Loans to Total Loans

 

0.62

%

 

0.54

%

 

0.59

%

 

0.61

%

 

0.69

%

Allowance to Non-performing Loans

 

182.25

%

 

210.25

%

 

194.61

%

 

192.33

%

 

181.45

%

Non-performing Assets to Total Assets

 

0.36

%

 

0.32

%

 

0.34

%

 

0.33

%

 

0.39

%

 
(a) December 31, 2022 ratio is estimated
(b) This is a non-GAAP financial measure. A reconciliation to GAAP is shown below

For the Three Months Ended

Dec. 31,

 

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

End of Period Loan Balances

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2021

 

Commercial real estate

$

1,028,050

 

$

1,028,484

 

$

1,040,243

 

$

1,000,972

 

$

1,011,891

 

Commercial

 

293,643

 

296,932

 

285,981

 

298,903

 

313,836

Residential real estate

 

475,791

 

 

474,014

 

 

464,489

 

 

455,501

 

 

453,635

 

HELOC

 

132,179

 

 

132,267

 

 

129,392

 

 

128,221

 

 

127,433

 

Consumer

 

221,260

 

 

222,706

 

 

218,219

 

 

192,586

 

 

189,522

 

Agricultural loans

 

246,937

 

 

239,081

 

 

230,477

 

 

224,845

 

 

232,365

 

Total, excluding net deferred loan costs

$

2,397,860

 

$

2,393,484

 

$

2,368,801

 

$

2,301,028

 

$

2,328,682

 

For the Three Months Ended

 

For the Twelve Months Ended

Dec. 31,

 

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

Dec. 31,

 

Dec. 31,

Noninterest Income

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2021

 

 

2022

 

 

 

2021

 

Service charges on deposit accounts

$

1,203

 

$

1,229

 

$

1,139

 

$

1,145

 

$

1,138

$

4,716

 

$

3,660

 

Bank owned life insurance income, including death benefits

 

590

 

 

406

 

 

405

 

 

409

 

 

414

 

1,810

 

 

1,338

 

Trust fees

 

2,373

 

 

2,370

 

 

2,376

 

 

2,519

 

 

2,509

 

9,638

 

 

9,438

 

Insurance agency commissions

 

1,133

 

 

1,136

 

 

1,086

 

 

1,047

 

 

706

 

4,402

 

 

3,456

 

Security gains (losses), including fair value changes for equity securities

 

(366

)

 

(17

)

 

(60

)

 

(11

)

 

25

 

(454

)

 

1,004

 

Retirement plan consulting fees

 

337

 

 

332

 

 

323

 

 

397

 

 

378

 

1,389

 

 

1,421

 

Investment commissions

 

508

 

 

424

 

 

557

 

 

694

 

 

611

 

2,183

 

 

2,276

 

Net gains on sale of loans

 

242

 

 

326

 

 

365

 

 

1,129

 

 

1,728

 

2,062

 

 

8,285

 

Other mortgage banking fee income (loss), net

 

98

 

 

94

 

 

39

 

 

60

 

 

2

 

291

 

 

(136

)

Debit card and EFT fees

 

1,407

 

 

1,463

 

 

1,528

 

 

1,416

 

 

1,424

 

5,814

 

 

5,144

 

Other noninterest income

 

675

 

 

1,064

 

 

1,719

 

 

8,893

 

 

603

 

12,351

 

 

2,307

 

Total Noninterest Income

$

8,200

 

$

8,827

 

$

9,477

 

$

17,698

 

$

9,538

$

44,202

 

$

38,193

 

 
 

For the Three Months Ended

 

For the Twelve Months Ended

Dec. 31,

 

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

Dec. 31,

 

Dec. 31,

Noninterest Expense

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2021

 

 

2022

 

 

 

2021

 

Salaries and employee benefits

$

11,385

 

$

10,724

 

$

11,073

 

$

11,831

 

$

10,230

$

45,013

 

$

39,393

 

Occupancy and equipment

 

2,753

 

 

3,028

 

 

2,918

 

 

2,680

 

 

2,422

 

11,379

 

 

8,486

 

FDIC insurance and state and local taxes

 

1,010

 

 

1,017

 

 

979

 

 

945

 

 

772

 

3,951

 

 

2,859

 

Professional fees

 

938

 

 

985

 

 

1,056

 

 

3,135

 

 

1,296

 

6,114

 

 

4,191

 

Merger related costs

 

584

 

 

872

 

 

674

 

 

1,940

 

 

6,521

 

4,070

 

 

7,109

 

Advertising

 

472

 

 

596

 

 

487

 

 

392

 

 

776

 

1,947

 

 

1,859

 

Intangible amortization

 

702

 

 

432

 

 

419

 

 

420

 

 

414

 

1,973

 

 

1,362

 

Core processing charges

 

742

 

 

738

 

 

1,123

 

 

745

 

 

880

 

3,348

 

 

3,198

 

Other noninterest expenses

 

2,509

 

 

3,007

 

 

2,732

 

 

8,368

 

 

4,350

 

16,616

 

 

10,719

 

Total Noninterest Expense

$

21,095

 

$

21,399

 

$

21,461

 

$

30,456

 

$

27,661

$

94,411

 

$

79,176

 

Average Balance Sheets and Related Yields and Rates
(Dollar Amounts in Thousands)
 
Three Months Ended Three Months Ended
December 31, 2022 December 31, 2021
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST (1) RATE (1) BALANCE INTEREST (1) RATE (1)
EARNING ASSETS
Loans (2)

$

2,394,872

$

29,092

4.86

%

$

2,187,770

$

24,946

4.52

%

Taxable securities

 

1,105,545

 

 

5,556

 

2.01

 

 

892,563

 

 

3,948

 

1.75

 

Tax-exempt securities (2)

 

453,917

 

 

3,580

 

3.15

 

 

410,016

 

 

3,397

 

3.29

 

Other investments

 

33,901

 

 

326

 

3.85

 

 

26,475

 

 

142

 

2.13

 

Federal funds sold and other

 

59,108

 

 

336

 

2.27

 

 

114,496

 

 

39

 

0.14

 

Total earning assets

 

4,047,343

 

 

38,890

 

3.84

 

 

3,631,320

 

 

32,472

 

3.55

 

Nonearning assets

 

33,154

 

 

248,581

 

Total assets

$

4,080,497

 

$

3,879,901

 

INTEREST-BEARING LIABILITIES
Time deposits

$

370,914

 

$

1,261

 

1.36

%

$

379,786

 

$

697

 

0.73

%

Brokered time deposits

 

115,021

 

 

1,034

 

3.60

 

 

0

 

 

0

 

0.00

 

Savings deposits

 

871,584

 

 

879

 

0.40

 

 

736,732

 

 

202

 

0.11

 

Demand deposits - interest bearing

 

1,301,475

 

 

3,805

 

1.17

 

 

1,367,921

 

 

475

 

0.14

 

Short term borrowings

 

85,641

 

 

777

 

3.63

 

 

0

 

 

2

 

0.00

 

Long term borrowings

 

88,138

 

 

922

 

4.18

 

 

80,799

 

 

610

 

3.00

 

Total interest-bearing liabilities

$

2,832,773

 

 

8,678

 

1.23

 

$

2,565,238

 

 

1,986

 

0.31

 

NONINTEREST-BEARING LIABILITIES
AND STOCKHOLDERS' EQUITY
Demand deposits - noninterest bearing

 

938,881

 

 

851,130

 

Other liabilities

 

43,904

 

 

31,824

 

Stockholders' equity

 

264,939

 

 

431,709

 

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY

$

4,080,497

 

$

3,879,901

 

Net interest income and interest rate spread

$

30,212

 

2.61

%

$

30,486

 

3.24

%

Net interest margin

2.99

%

3.33

%

 
(1) Interest and yields are calculated on a tax-equivalent basis where applicable.
(2) For 2022, adjustments of $72 thousand and $707 thousand, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2021, adjustments of $86 thousand and $701 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.
 
Twelve Months Ended Twelve Months Ended
December 31, 2022 December 31, 2021
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST (1) RATE (1) BALANCE INTEREST (1) RATE (1)
EARNING ASSETS
Loans (2)

$

2,358,724

 

$

108,100

 

4.58

%

$

2,041,347

 

$

95,180

 

4.66

%

Taxable securities

 

1,081,966

 

 

20,843

 

1.93

 

 

617,475

 

 

11,399

 

1.85

 

Tax-exempt securities (2)

 

465,855

 

 

14,952

 

3.21

 

 

348,627

 

 

12,027

 

3.45

 

Other investments

 

33,153

 

 

871

 

2.63

 

 

21,912

 

 

498

 

2.27

 

Federal funds sold and other

 

76,253

 

 

684

 

0.90

 

 

180,718

 

 

200

 

0.11

 

Total earning assets

 

4,015,951

 

 

145,450

 

3.62

 

 

3,210,079

 

 

119,304

 

3.72

 

Nonearning assets

 

128,757

 

 

195,805

 

Total assets

$

4,144,708

 

$

3,405,884

 

INTEREST-BEARING LIABILITIES
Time deposits

$

360,687

 

$

3,044

 

0.84

%

$

393,039

 

$

3,652

 

0.93

%

Brokered time deposits

 

56,965

 

 

1,240

 

2.18

 

 

11,737

 

 

75

 

0.64

 

Savings deposits

 

846,418

 

 

1,352

 

0.16

 

 

569,179

 

 

712

 

0.13

 

Demand deposits - interest bearing

 

1,392,058

 

 

7,449

 

0.54

 

 

1,240,014

 

 

2,336

 

0.19

 

Short term borrowings

 

55,668

 

 

1,408

 

2.53

 

 

3,957

 

 

7

 

0.28

 

Long term borrowings

 

87,972

 

 

3,427

 

3.90

 

 

70,057

 

 

1,687

 

2.40

 

Total interest-bearing liabilities

$

2,799,768

 

 

17,920

 

0.64

 

$

2,287,983

 

 

8,469

 

0.37

 

NONINTEREST-BEARING LIABILITIES
AND STOCKHOLDERS' EQUITY
Demand deposits - noninterest bearing

$

959,294

 

$

714,978

 

Other liabilities

 

34,180

 

 

23,498

 

Stockholders' equity

 

351,466

 

 

379,425

 

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY

$

4,144,708

 

$

3,405,884

 

Net interest income and interest rate spread

$

127,530

 

2.98

%

$

110,835

 

3.35

%

Net interest margin

3.18

%

3.45

%

 
(1) Interest and yields are calculated on a tax-equivalent basis where applicable.
(2) For 2022, adjustments of $310 thousand and $3.1 million, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2021, adjustments of $360 thousand and $2.5 million, 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.
Reconciliation of Total Assets to Tangible Assets

For the Three Months Ended

 

For the Twelve Months Ended

Dec. 31,

 

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

Dec. 31,

 

Dec. 31,

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Total Assets

$

4,082,200

 

$

4,120,022

 

$

4,114,364

 

$

4,205,855

 

$

4,142,749

 

$

4,082,200

 

$

4,142,749

 

Less Goodwill and other intangibles

 

101,666

 

 

102,368

 

 

101,767

 

 

102,187

 

 

102,606

 

 

101,666

 

 

102,606

 

Tangible Assets

$

3,980,534

 

$

4,017,654

 

$

4,012,597

 

$

4,103,668

 

$

4,040,143

 

$

3,980,534

 

$

4,040,143

 

Average Assets

 

4,144,708

 

 

4,164,855

 

 

4,155,719

 

 

4,178,618

 

 

3,879,901

 

 

4,144,708

 

 

3,405,884

 

Less average Goodwill and other intangibles

 

102,126

 

 

101,981

 

 

102,042

 

 

102,462

 

 

84,580

 

 

102,151

 

 

58,111

 

Average Tangible Assets

$

4,042,582

 

$

4,062,874

 

$

4,053,677

 

$

4,076,156

 

$

3,795,321

 

$

4,042,557

 

$

3,347,773

 

 
 
Reconciliation of Common Stockholders' Equity to Tangible Common Equity

For the Three Months Ended

 

For the Twelve Months Ended

Dec. 31,

 

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

Dec. 31,

 

Dec. 31,

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Stockholders' Equity

$

292,295

 

$

265,619

 

$

321,449

 

$

393,886

 

$

472,432

 

$

292,295

 

$

472,432

 

Less Goodwill and other intangibles

 

101,666

 

 

102,368

 

 

101,767

 

 

102,187

 

 

102,606

 

 

101,666

 

 

102,606

 

Tangible Common Equity

$

190,629

 

$

163,251

 

$

219,682

 

$

291,699

 

$

369,826

 

$

190,629

 

$

369,826

 

Average Stockholders' Equity

 

264,939

 

 

330,300

 

 

354,981

 

 

456,206

 

 

431,709

 

 

351,466

 

 

379,425

 

Less average Goodwill and other intangibles

 

102,126

 

 

101,981

 

 

102,042

 

 

102,462

 

 

84,580

 

 

102,151

 

 

58,111

 

Average Tangible Common Equity

$

162,813

 

$

228,319

 

$

252,939

 

$

353,744

 

$

347,129

 

$

249,315

 

$

321,314

 

 
 
Reconciliation of Net Income, Less Merger and Certain Items

For the Three Months Ended

 

For the Twelve Months Ended

Dec. 31,

 

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

Dec. 31,

 

Dec. 31,

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net income

$

13,356

 

$

15,446

 

$

15,951

 

$

15,844

 

$

5,702

 

$

60,597

 

$

51,844

 

Acquisition related costs - after tax

 

475

 

 

711

 

 

564

 

 

1,540

 

 

5,232

 

 

3,290

 

 

5,731

 

Acquisition related provision - after tax

 

0

 

 

0

 

 

0

 

 

0

 

 

3,846

 

 

0

 

 

3,846

 

Lawsuit settlement income - after tax

 

0

 

 

0

 

 

0

 

 

(6,616

)

 

0

 

 

(6,616

)

 

0

 

Lawsuit settlement contingent legal expense - after tax

 

0

 

 

0

 

 

0

 

 

1,639

 

 

0

 

 

1,639

 

 

0

 

Charitable donation - after tax

 

0

 

 

0

 

 

0

 

 

4,740

 

 

0

 

 

4,740

 

 

0

 

FHLB prepayment penalties - after tax

 

0

 

 

0

 

 

0

 

 

0

 

 

1,425

 

 

0

 

 

1,682

 

Net loss (gain) on asset/security sales - after tax

 

268

 

 

4

 

 

(25

)

 

97

 

 

134

 

 

344

 

 

(598

)

Gain on sale of credit card portfolio - after tax

 

0

 

 

0

 

 

0

 

 

0

 

 

(189

)

 

0

 

 

(189

)

Net income - Adjusted

$

14,099

 

$

16,161

 

$

16,490

 

$

17,244

 

$

16,150

 

$

63,994

 

$

62,316

 

Diluted EPS excluding merger and one-time items

$

0.42

 

$

0.48

 

$

0.49

 

$

0.51

 

$

0.50

 

$

1.89

 

$

2.13

 

Return on Average Assets excluding merger and certain items (Annualized)

 

1.36

%

 

1.55

%

 

1.59

%

 

1.65

%

 

1.65

%

 

1.54

%

 

1.83

%

Return on Average Equity excluding merger and certain items (Annualized)

 

21.29

%

 

19.57

%

 

18.58

%

 

15.12

%

 

14.84

%

 

18.21

%

 

16.42

%

Return on Average Tangible Equity excluding acquisition costs and certain items (Annualized)

 

34.64

%

 

28.31

%

 

26.08

%

 

19.50

%

 

18.46

%

 

25.67

%

 

19.39

%

 
 
Efficiency ratio excluding certain items

For the Three Months Ended

 

For the Twelve Months Ended

Dec. 31,

 

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

Dec. 31,

 

Dec. 31,

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net interest income, tax equated

$

30,212

 

$

32,636

 

$

32,583

 

$

32,100

 

$

30,486

 

$

127,530

 

$

110,835

 

Noninterest income

 

8,200

 

 

8,827

 

 

9,477

 

 

17,698

 

 

9,538

 

 

44,202

 

 

38,193

 

Legal settlement income

 

0

 

 

0

 

 

0

 

 

(8,375

)

 

0

 

 

(8,375

)

 

0

 

Net loss (gain) on asset/security sales

 

338

 

 

6

 

 

(32

)

 

123

 

 

170

 

 

435

 

 

(757

)

Gain on sale of credit card portfolio

 

0

 

 

0

 

 

0

 

 

0

 

 

(239

)

 

0

 

 

(239

)

Net interest income and noninterest income adjusted

 

38,750

 

 

41,469

 

 

42,028

 

 

41,546

 

 

39,955

 

 

163,792

 

 

148,032

 

Noninterest expense less intangible amortization

 

20,393

 

 

20,967

 

 

21,042

 

 

30,036

 

 

27,247

 

 

92,438

 

 

77,817

 

Charitable donation

 

0

 

 

0

 

 

0

 

 

6,000

 

 

0

 

 

6,000

 

 

0

 

Contingent legal settlement expense

 

0

 

 

0

 

 

0

 

 

2,075

 

 

0

 

 

2,075

 

 

0

 

Acquisition related costs

 

584

 

 

872

 

 

674

 

 

1,940

 

 

6,521

 

 

4,070

 

 

7,109

 

FHLB prepayment penalties

 

0

 

 

0

 

 

0

 

 

0

 

 

1,804

 

 

0

 

 

2,129

 

Noninterest income adjusted

 

19,809

 

 

20,095

 

 

20,368

 

 

20,021

 

 

18,922

 

 

80,293

 

 

68,579

 

Efficiency ratio excluding one-time items

 

51.12

%

 

48.46

%

 

48.46

%

 

48.19

%

 

47.36

%

 

49.02

%

 

46.33

%

 
 
Net interest margin excluding acquisition marks and PPP interest and fees

For the Three Months Ended

 

For the Twelve Months Ended

Dec. 31,

 

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

Dec. 31,

 

Dec. 31,

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net interest income, tax equated

$

30,212

 

$

32,636

 

$

32,583

 

$

32,100

 

$

30,486

 

$

127,530

 

$

110,835

 

Acquisition marks

 

209

 

 

246

 

 

381

 

 

957

 

 

496

 

 

1,793

 

 

932

 

PPP interest and fees

 

10

 

 

62

 

 

634

 

 

686

 

 

979

 

 

1,392

 

 

6,621

 

Adjusted and annualized net interest income

 

119,972

 

 

129,312

 

 

126,272

 

 

121,828

 

 

115,098

 

 

124,345

 

 

103,283

 

Average earning assets

 

4,047,343

 

 

4,065,085

 

 

4,015,385

 

 

3,931,506

 

 

3,631,320

 

 

4,015,951

 

 

3,210,079

 

Less PPP average balances

 

485

 

 

1,586

 

 

16,019

 

 

30,003

 

 

47,939

 

 

11,914

 

 

95,226

 

Adjusted average earning assets

 

4,046,858

 

 

4,063,499

 

 

3,999,366

 

 

3,901,503

 

 

3,583,381

 

 

4,004,037

 

 

3,114,853

 

Net interest margin excluding marks and PPP interest and fees

 

2.96

%

 

3.18

%

 

3.16

%

 

3.12

%

 

3.21

%

 

3.11

%

 

3.32

%

 

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