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 - September 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 September 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-
9-30-96 12-31-95
<S> <C> <C>
ASSETS
Cash and due from banks $6,023 $6,677
Interest-bearing deposits in other banks 9 36
Federal funds sold 1,519 4,840
Investment Securities:
Held-to-maturity (approximate market 33,375 34,645
value of $33,801,486 at September 30, 1996
and $35,669,475 at December 31, 1995)
Available-for-sale 45,029 42,353
-------------------
Total investment securities 78,404 76,998
-------------------
Loans 93,232 91,738
Less: Allowance for loan losses 2,343 2,304
Less: Unearned income 68 141
-------------------
Net Loans 90,821 89,293
-------------------
Premises and equipment 1,732 1,880
Accrued interest receivable 2,191 2,064
Intangible assets 231 313
Other assets 523 254
-------------------
TOTAL ASSETS $181,453 $182,355
===================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing demand $13,714 $15,627
Interest-bearing 146,329 144,896
-------------------
Total deposits 160,043 160,523
-------------------
Securities sold under agreements to repurchase 274 200
Advances from FHLB 3,500 5,000
Other liabilities 1,924 1,863
-------------------
Total liabilities 165,741 167,586
-------------------
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 16,356 14,801
Net unrealized gains (losses) on available-
for-sale securities (338) 154
-------------------
19,528 18,465
Less: Treasury stock, at cost, 68,684 shares
at September 30, 1996; 66,751 shares at
December 31, 1995 3,816 3,696
-------------------
Total stockholders' equity 15,712 14,769
-------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $181,453 $182,355
===================
</TABLE>
<PAGE>
<TABLE>
FARMERS NATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
-Unaudited-
<CAPTION>
-In Thousands-
Quarter Ended Nine Months Ended
9-30-96 9-30-95 9-30-96 9-30-95
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $1,999 $2,050 $5,925 $5,946
Interest and dividends on
investment securities:
Taxable 900 911 2,664 2,774
Nontaxable 325 298 975 867
Interest on interest-bearing
deposits 0 0 2 1
Other interest income 39 61 153 153
---------------------------------------
Total interest income 3,263 3,320 9,719 9,741
---------------------------------------
Interest expense:
Interest on deposits 1,643 1,652 4,883 4,730
Interest on federal funds
purchased 4 0 4 5
Interest on securities sold under
agreements to repurchase 3 2 6 10
Interest on advances from FHLB 57 139 193 367
Interest on other borrowings 0 19 0 28
---------------------------------------
Total interest expense 1,707 1,812 5,086 5,140
---------------------------------------
Net interest income 1,556 1,508 4,633 4,601
Provision for loan losses 0 0 0 0
---------------------------------------
Net interest income after provision
for loan losses 1,556 1,508 4,633 4,601
---------------------------------------
Other income:
Investment security gains 0 41 6 61
Other 265 219 766 676
---------------------------------------
Total other income 265 260 772 737
---------------------------------------
Income before operating expenses 1,821 1,768 5,405 5,338
---------------------------------------
Operating expenses:
Salaries and employee benefits 548 522 1,619 1,506
Net occupancy expense 170 165 511 518
Exam, legal and audit fees 26 34 76 89
FDIC insurance premiums 1 39 2 209
Environmental expense 0 5 0 225
Premium amortization 27 27 81 81
Other operating expenses 185 181 623 591
---------------------------------------
Total operating expenses 957 973 2,912 3,219
---------------------------------------
Income before income tax expense 864 795 2,493 2,119
Applicable tax expense 218 189 616 462
---------------------------------------
Net income $646 $606 $1,877 $1,657
=======================================
Per common share
Net income $2.11 $1.96 $6.11 $5.02
=======================================
Dividends declared $0.35 $0.32 $1.05 $0.96
=======================================
Weighted average common
shares outstanding 306,516 309,091 307,088 330,031
=======================================
</TABLE>
<PAGE>
<TABLE>
FARMERS NATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
-Unaudited-
<CAPTION>
-In Thousands-
Nine months ended
9-30-96 9-30-95
<S> <C> <C>
Cash flows from operating activities:
Net income $1,877 $1,657
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation 260 264
Provision for possible loan losses 0 0
Amortization of deposit premium 81 81
Amortization/accretion of investment
securities, net 30 8
Investment securities (gains) (6) (61)
(Increase) Decrease in accrued interest receivable (127) (263)
(Increase) decrease in other assets (88) (64)
Increase in accrued interest payable 145 477
Increase in other liabilities 117 97
-------------------
Net cash provided by operating activities 2,289 2,196
-------------------
Cash flows from investing activities:
(Increase) decrease in federal funds sold 3,321 8,150
(Increase) in interest-bearing deposits
in other banks 27 (15)
Proceeds from sales, maturities and principal
repayments of investment securities:
Held to Maturity 3,001 1,197
Available for sale 7,736 2,884
Purchases of investment securities:
Held to Maturity (2,864) (3,850)
Available for sale (9,976) (3,229)
Net (increase) Decrease in loans (1,528) (6,699)
Purchase of premises on equipment (112) (167)
-------------------
Net cash provided by (used in)
investing activities (395) (1,729)
-------------------
Cash flows from financing activities:
Net (decrease) in deposit accounts (479) (406)
Increase (Decrease) in securities sold
with agreements to repurchase 73 (1,021)
Increase in note payable 0 1,000
Increase (Decrease) in advances from FHLB (1,500) 1,500
Dividends paid (523) (523)
Increase in purchase Treasury Stock (120) (2,952)
-------------------
Net cash provided by (used in)
financing activities (2,549) (2,402)
-------------------
Net (decrease) in cash and due from banks (655) (1,935)
Cash and due from banks, beginning of year 6,677 6,375
-------------------
Cash and due from banks, end of period $6,022 $4,440
===================
Supplemental schedule of non cash investing
and financing activities:
Securities available for sale adjustment, net (337) 37
===================
</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 September 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
The Company has experienced very few significant changes in its financial
condition to date in 1996. During the first nine months of 1996, the
Company experienced a 1.7% increase in loans and a 2.34% decrease in
investments. Deposits were virtually unchanged during the period.
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 September 30, 1996 the Company's
risk-based capital ratio was 17.91%. 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 $1,044,915 and unrealized losses of
$1,058,563.
(2) Material Changes In the Results of Operations
Net income and earnings per share for the third quarter and first nine
months of 1996 have increased significantly compared to comparable
periods last year. Net income for the third quarter is up 6% from last
year and net income for the first nine months of 1996 is up 13% 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 7% for
the third quarter, 21% for the first nine months 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 up slightly, even though the volume of earning
assets was slightly decreased.
(3) Other Items
Since 1994, the Company has disclosed that it continues to develop an
environmental remediation plan for a vacant lot across the street from
the main bank.
In July, a site investigation and risk evaluation report was prepared and
submitted to the Illinois Environmental Protection Agency. The report
proposes that the Company continue to monitor the site to determine if
any contaminates appear to be migrating beyond the property limits. It
appears at this time that no soil remediation is necessary at the site.
However, a non-aqueous phase liquid (NAPL) layer has been found in one
of the monitoring wells. Two options for removal of the NAPL layer are
being evaluated. One option is a pump and dispose and the other is an
excavation. Once further evaluaton is done and a choice of action has
been made, the Agency will be notified.
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
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: October 29, 1996 _______________________________
Gaylon E. Martin, President
Dated: October 29, 1996 _______________________________
Wayne A. Hulting, Controller
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 6,023
<INT-BEARING-DEPOSITS> 9
<FED-FUNDS-SOLD> 1,519
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 45,029
<INVESTMENTS-CARRYING> 33,375
<INVESTMENTS-MARKET> 33,801
<LOANS> 93,232
<ALLOWANCE> 2,343
<TOTAL-ASSETS> 181,453
<DEPOSITS> 160,043
<SHORT-TERM> 274
<LIABILITIES-OTHER> 1,924
<LONG-TERM> 3,500
<COMMON> 1,875
0
0
<OTHER-SE> 17,653
<TOTAL-LIABILITIES-AND-EQUITY> 181,453
<INTEREST-LOAN> 5,925
<INTEREST-INVEST> 3,639
<INTEREST-OTHER> 155
<INTEREST-TOTAL> 9,719
<INTEREST-DEPOSIT> 4,883
<INTEREST-EXPENSE> 5,086
<INTEREST-INCOME-NET> 4,633
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 6
<EXPENSE-OTHER> 2,912
<INCOME-PRETAX> 2,493
<INCOME-PRE-EXTRAORDINARY> 2,493
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,877
<EPS-PRIMARY> 6.11
<EPS-DILUTED> 6.11
<YIELD-ACTUAL> 3.57
<LOANS-NON> 17
<LOANS-PAST> 727
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2304
<CHARGE-OFFS> 8
<RECOVERIES> 47
<ALLOWANCE-CLOSE> 2343
<ALLOWANCE-DOMESTIC> 14
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2329
</TABLE>
