FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended - June 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _________
Commission file number - 0-10782
FARMERS NATIONAL BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3156490
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
121 West First Street, Geneseo, Illinois 61254
(Address of principal executive offices)
Registrant's telephone number, including area code - (309) 944-5361
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES - (X) NO - ( )
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 306,316
shares as of June 30, 1996
Transitional Small Business Disclosure format: YES - ( ) NO - (X)
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FARMERS NATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<CAPTION>
Unaudited
-In Thousands-
6-30-96 12-31-95
<S> <C> <C>
ASSETS
Cash and due from banks $3,620 $6,677
Interest-bearing deposits in other banks 27 36
Federal funds sold 4,860 4,840
Investment Securities:
Held-to-maturity (approximate market 34,143 34,645
value of $34,252,725 at June 30, 1996
and $35,669,475 at December 31, 1995)
Available-for-sale 43,678 42,353
------------------
Total investment securities 77,821 76,998
------------------
Loans 90,342 91,738
Less: Allowance for loan losses 2,340 2,304
Less: Unearned income 91 141
------------------
Net Loans 87,911 89,293
------------------
Premises and equipment 1,804 1,880
Accrued interest receivable 2,030 2,064
Intangible assets 258 313
Other assets 380 254
------------------
TOTAL ASSETS $178,711 $182,355
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing demand $12,288 $15,627
Interest-bearing 145,822 144,896
------------------
Total deposits 158,110 160,523
------------------
Securities sold under agreements to repurchase 86 200
Advances from FHLB 3,500 5,000
Other liabilities 1,654 1,863
------------------
Total liabilities 163,350 167,586
------------------
Contingencies and commitments
STOCKHOLDERS' EQUITY
Common Stock; $5 par value; authorized 600,000
shares; issued 375,000 shares 1,875 1,875
Additional paid-in capital 1,635 1,635
Retained earnings 15,817 14,801
Net unrealized gains (losses) on available-
for-sale securities (150) 154
------------------
19,177 18,465
Less: Treasury stock, at cost, 68,684 shares
at June 30, 1996; 66,751 shares at
December 31, 1995 3,816 3,696
------------------
Total stockholders' equity 15,361 14,769
------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $178,711 $182,355
==================
</TABLE>
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<TABLE>
FARMERS NATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
-Unaudited-
<CAPTION>
-In Thousands-
Quarter Ended Six Months Ended
6-30-96 6-30-95 6-30-96 6-30-95
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $1,911 $1,982 $3,926 $3,896
Interest and dividends on
investment securities:
Taxable 883 949 1,764 1,863
Nontaxable 327 287 650 569
Interest on interest-bearing
deposits 2 0 2 1
Other interest income 65 29 114 92
-------------------------------------
Total interest income 3,188 3,247 6,456 6,421
-------------------------------------
Interest expense:
Interest on deposits 1,605 1,579 3,240 3,078
Interest on federal funds
purchased 0 5 0 5
Interest on securities sold under
agreements to repurchase 1 3 3 8
Interest on advances from FHLB 62 125 136 228
Interest on other borrowings 0 9 0 9
-------------------------------------
Total interest expense 1,668 1,721 3,379 3,328
-------------------------------------
Net interest income 1,520 1,526 3,077 3,093
Provision for loan losses 0 0 0 0
-------------------------------------
Net interest income after provision
for loan losses 1,520 1,526 3,077 3,093
-------------------------------------
Other income:
Investment security gains 6 17 6 20
Other 263 237 501 457
-------------------------------------
Total other income 269 254 507 477
-------------------------------------
Income before operating expenses 1,789 1,780 3,584 3,570
-------------------------------------
Operating expenses:
Salaries and employee benefits 547 510 1,071 984
Net occupancy expense 170 176 341 349
Exam, legal and audit fees 25 27 50 55
FDIC insurance premiums 0 85 1 170
Environmental expense 0 37 0 220
Premium amortization 27 27 54 54
Other operating expenses 191 209 438 414
-------------------------------------
Total operating expenses 960 1,071 1,955 2,246
-------------------------------------
Income before income tax expense 829 709 1,629 1,324
Applicable tax expense 204 152 398 273
-------------------------------------
Net income $625 $557 $1,231 $1,051
=====================================
Per common share
Net income $2.04 $1.71 $4.00 $3.09
=====================================
Dividends declared $0.35 $0.32 $0.70 $0.64
=====================================
Weighted average common
shares outstanding 306,776 324,848 307,374 340,501
=====================================
</TABLE>
<PAGE>
<TABLE>
FARMERS NATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
-Unaudited-
<CAPTION>
-In Thousands-
Quarter ended
6-30-96 6-30-95
<S> <C> <C>
Cash flows from operating activities:
Net income $1,231 $1,051
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation 171 176
Provision for possible loan losses 0 0
Amortization of deposit premium 54 54
Amortization/accretion of investment
securities, net 16 7
Investment securities (gains) (6) (20)
(Increase) Decrease in accrued interest receivable 34 (107)
(Increase) decrease in other assets (127) (161)
Increase (decrease) in accrued interest payable (70) 162
Increase in other liabilities 61 130
------------------
Net cash provided by operating activities 1,364 1,292
------------------
Cash flows from investing activities:
(Increase) decrease in federal funds sold (20) 8,985
(Increase) in interest-bearing deposits
in other banks 10 (7)
Proceeds from sales, maturities and principal
repayments of investment securities:
Held to Maturity 1,939 888
Available for sale 5,499 912
Purchases of investment securities:
Held to Maturity (2,566) (3,070)
Available for sale (6,008) (2,804)
Net (increase) Decrease in loans 1,382 (5,200)
Purchase of premises on equipment (95) (152)
------------------
Net cash provided by (used in)
investing activities 141 (448)
------------------
Cash flows from financing activities:
Net (decrease) in deposit accounts (2,413) (1,396)
Increase (Decrease) in securities sold
with agreements to repurchase (114) (904)
Increase in note payable 0 1,000
Increase (Decrease) in advances from FHLB (1,500) 2,500
Dividends paid (416) (424)
Increase in purchase Treasury Stock (120) (2,894)
------------------
Net cash provided by (used in)
financing activities (4,563) (2,118)
------------------
Net (decrease) in cash and due from banks (3,058) (1,274)
Cash and due from banks, beginning of year 6,677 6,375
------------------
Cash and due from banks, end of period $3,619 $5,101
==================
Supplemental schedule of non cash investing
and financing activities:
Securities available for sale adjustment, net (304) (75)
==================
</TABLE>
<PAGE>
Summary of Significant Accounting Policies
The Consolidated Statements of Condition of Farmers National Bancorp,
Inc. and subsidiaries, at December 31, 1995 have been taken from
audited financial statements at that date. All other consolidated
financial statements contained herein have been prepared by the
management of the Company and are unaudited. In the opinion of
management, the accompanying unaudited consolidated financial
statements presented herein contain all adjustments consisting of
normal recurring accruals necessary to present fairly the financial
position of the Company at June 30, 1996 and the results of its
operations and statement of cash flows for the periods presented herein
on a consistent basis with that of prior periods.
As discussed previously, the Bank has adopted SFAS 114 & 118,
"Accounting by Creditors for Impairment of a Loan."
Item 2. Managements' Discussion and Analysis of Financial Condition
and Results of Operations
(1) Material Changes in Financial Condition
During the first half of 1996, the Company experienced a 1.6%
decrease in loans. This decrease is similar to the same period in the
previous two years, and is cyclical in nature related to the
agricultural economy. Cash and due from banks and federal funds sold
were also somewhat lower this quarter.
Deposits were also somewhat lower at the end of the period. Again this
is an expected trend, similar to the previous two years. Advances from
Federal Home Loan Bank were reduced by $1,500,000 during the period.
Equity increased in a normal manner during the period.
There were no other significant changes or trends which occurred during
the period.
Under Federal Reserve regulations the company is required to maintain
risk-based capital of at least 8.0%. At June 30, 1996 the Company's
risk-based capital ratio was 17.79%. The Company's core or leverage
capital is well above the required minimums.
The liquidity of the bank remains strong. In addition to maintaining
sufficient liquid assets to meet expecting funding needs during the
next 90 days, about 40% of the total assets of the bank are available
sources of liquidity to meet unexpected funding needs, should they
arise. In addition, investment securities held-to-maturity and
available-for-sale include unrealized gains of $915,509 and
unrealized losses of $960,879.
(2) Material Changes In the Results of Operations
Net income and earnings per share for the second quarter and first
half of 1996 have increased significantly compared to comparible
periods last year. Net income for the second quarter is up 12% from
last year and net income for the first half of 1996 is up 17% from last
year. Contributing to the increases is the near elimination of F.D.I.C
insurance premiums. In addition, the bank is not providing for
environmental expenditures this year as it did in 1995.
Earnings per share have increased more dramatically, approximately 19%
for the second quarter, 29% for the first half of 1996, compared to the
same periods last year. These larger increases are attributable to
the increase in net income coupled with the Company's stock
repurchasing program.
Net interest income is down slightly, even though the volume of earning
assets was basically unchanged. The bank's market area is extremely
competitive, particularly from non-bank providers.
(3) Other Items
The Company continues to develop a environmental remediation plan for
the west lot. This mater has been disclosed in each filing since the
third quarter of 1994. Although there can be no assurance, we become
more comfortable each day that, under the new risk-based standards,
we will be able to resolve the matter properly with little or no
additional expense to the Company.
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
None to report.
Item 2.
Changes in Securities
None to report.
Item 3.
Defaults Upon Senior Securities
None to report.
Item 4.
Submission of Matters to a Vote of Security Holders.
None to report.
Item 5.
Other Information
None to report.
Item 6.
Exhibits and Reports on Form 8-K
None to report.
Pursuant to the Requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FARMERS NATIONAL BANCORP, INC.
Dated: July 24, 1996 _______________________________
Gaylon E. Martin, President
Dated: July 24, 1996 _______________________________
Wayne A. Hulting, Controller
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,620
<INT-BEARING-DEPOSITS> 27
<FED-FUNDS-SOLD> 4,860
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 43,678
<INVESTMENTS-CARRYING> 34,143
<INVESTMENTS-MARKET> 34,253
<LOANS> 90,342
<ALLOWANCE> 2,340
<TOTAL-ASSETS> 178,711
<DEPOSITS> 158,110
<SHORT-TERM> 86
<LIABILITIES-OTHER> 1,654
<LONG-TERM> 3,500
<COMMON> 1,875
0
0
<OTHER-SE> 17,302
<TOTAL-LIABILITIES-AND-EQUITY> 178,711
<INTEREST-LOAN> 3,926
<INTEREST-INVEST> 2,414
<INTEREST-OTHER> 116
<INTEREST-TOTAL> 6,456
<INTEREST-DEPOSIT> 3,240
<INTEREST-EXPENSE> 3,379
<INTEREST-INCOME-NET> 3,077
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 6
<EXPENSE-OTHER> 1,955
<INCOME-PRETAX> 1,629
<INCOME-PRE-EXTRAORDINARY> 1,629
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,231
<EPS-PRIMARY> 4.00
<EPS-DILUTED> 4.00
<YIELD-ACTUAL> 3.56
<LOANS-NON> 18
<LOANS-PAST> 1
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2304
<CHARGE-OFFS> 7
<RECOVERIES> 43
<ALLOWANCE-CLOSE> 2340
<ALLOWANCE-DOMESTIC> 9
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2331
</TABLE>
