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 - March 31, 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: 307,747
shares as of March 31, 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-
3-31-96 12-31-95
------- -------
<S> <C> <C>
ASSETS
Cash and due from banks $5,098 $6,677
Interest-bearing deposits in other banks 33 36
Federal funds sold 3,980 4,840
Investment Securities:
Held-to-maturity (approximate market 35,152 34,645
value of $35,753,912 at March 31, 1996
and $35,669,475 at December 31, 1995)
Available-for-sale 42,911 42,353
------------------
Total investment securities 78,063 76,998
------------------
Loans 88,518 91,738
Less: Allowance for loan losses 2,303 2,304
Less: Unearned income 113 141
------------------
Net Loans 86,102 89,293
------------------
Premises and equipment 1,854 1,880
Accrued interest receivable 1,951 2,064
Intangible assets 285 313
Other assets 448 254
------------------
TOTAL ASSETS $177,814 $182,355
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing demand $13,958 $15,627
Interest-bearing 142,516 144,896
------------------
Total deposits 156,474 160,523
------------------
Securities sold under agreements to repurchase 124 200
Advances from FHLB 4,000 5,000
Other liabilities 2,107 1,863
------------------
Total liabilities 162,705 167,586
------------------
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 15,299 14,801
Net unrealized gains (losses) on available-
for-sale securities 27 154
------------------
18,836 18,465
Less: Treasury stock, at cost, 67,253 shares
at March 31, 1996; 66,751 shares at
December 31, 1995 3,727 3,696
------------------
Total stockholders' equity 15,109 14,769
------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $177,814 $182,355
==================
</TABLE>
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<TABLE>
FARMERS NATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
-Unaudited-
<CAPTION>
-In Thousands-
Quarter Ended
3-31-96 3-31-95
------- -------
<S> <C> <C> <C> <C>
Interest and fees on loans $2,015 $1,914
Interest and dividends on
investment securities:
Taxable 881 914
Nontaxable 323 282
Interest on interest-bearing
deposits 0 1
Other interest income 49 63
------------------
Total interest income 3,268 3,174
------------------
Interest expense:
Interest on deposits 1,635 1,499
Interest on federal funds
purchased 0 0
Interest on securities sold under
agreements to repurchase 2 5
Interest on advances from FHLB 74 103
Interest on other borrowings 0 0
------------------
Total interest expense 1,711 1,607
------------------
Net interest income 1,557 1,567
Provision for loan losses 0 0
------------------
Net interest income after provision
for loan losses 1,557 1,567
------------------
Other income:
Investment security gains 0 3
Other 238 220
------------------
Total other income 238 223
------------------
Income before operating expenses 1,795 1,790
------------------
Operating expenses:
Salaries and employee benefits 524 474
Net occupancy expense 171 173
Exam, legal and audit fees 25 28
FDIC insurance premiums 1 85
Environmental expense 0 183
Premium amortization 27 27
Other operating expenses 247 205
------------------
Total operating expenses 995 1,175
------------------
Income before income tax expense 800 615
Applicable tax expense 194 121
------------------
Net income $606 $494
==================
Per common share
Net income $1.97 $1.39
==================
Dividends declared $0.35 $0.32
==================
Weighted average common
shares outstanding 307,972 356,154
==================
</TABLE>
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<TABLE>
FARMERS NATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
-Unaudited-
<CAPTION>
-In Thousands-
Quarter ended
3-31-96 3-31-95
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $606 $494
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation 84 86
Provision for possible loan losses 0 0
Amortization of deposit premium 27 27
Amortization/accretion of investment
securities, net 5 8
Investment securities (gains) 0 (3)
(Increase) Decrease in accrued interest receivable 113 1
(Increase) decrease in other assets (195) (172)
Increase in accrued interest payable 164 328
Increase in other liabilities 279 193
------------------
Net cash provided by operating activities 1,083 962
------------------
Cash flows from investing activities:
(Increase) decrease in federal funds sold 860 8,000
(Increase) in interest-bearing deposits
in other banks 4 (4)
Proceeds from sales, maturities and principal
repayments of investment securities:
Held to Maturity 682 516
Available for sale 3,459 586
Purchases of investment securities:
Held to Maturity (2,321) (1,654)
Available for sale (3,016) (2,804)
Net (increase) Decrease in loans 3,191 (3,189)
Purchase of premises on equipment (57) (56)
------------------
Net cash provided by (used in)
investing activities 2,802 1,395
------------------
Cash flows from financing activities:
Net (decrease) in deposit accounts (4,049) (4,400)
Increase (Decrease) in securities sold
with agreements to repurchase (76) (741)
Increase (Decrease) in advances from FHLB (1,000) 1,000
Dividends paid (308) (310)
Increase in purchase Treasury Stock (31) (10)
------------------
Net cash provided by (used in)
financing activities (5,464) (4,461)
------------------
Net (decrease) in cash and due from banks (1,579) (2,104)
Cash and due from banks, beginning of year 6,677 6,375
------------------
Cash and due from banks, end of period $5,098 $4,271
==================
Supplemental schedule of non cash investing
and financing activities:
Securities available for sale adjustment, net (127) (610)
==================
</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 March 31, 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 three months of 1996, the Company experienced a 3.6%
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 $1,000,000 during the quarter.
Equity increased in a normal manner during the quarter.
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 March 31, 1996 the Company's
risk-based capital ratio was 17.66%. 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, almost 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 $1,315,843 and
unrealized losses of $686,720.
(2) Material Changes In the Results of Operations
Net income and earnings per share for the first quarter of 1996 have
increased significantly compared to the first quarter of 1995. Net
income for the quarter is $606,000 up 22% from last year. Contributing
to the increase 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. For the quarter, the return on shareholder
equity was approximately 16.2%.
Earnings per share have increased more dramatically, approximately 42%,
compared to last year. The larger increase is attributable to the
increase in net income coupled with the Company's stock repurchasing
program. The Company continues to be interested in repurchasing stock
from stockholders who wish to sell their shares.
Net interest income is down slightly, even though the volume of earning
assets has increased. The bank's market area is extremely
competitive, especially from non-bank providers. In particular,
credit unions, who continue to be exempt from federal income taxation,
and whose original purpose was to provide small groups of individuals
who share a "common bond" with a mechanism for assistance in their
financial affairs, now solicit business from everyone in our market
without regard for the "common bond". They effectively give back to
their customers, through extremely competetive pricing, the share we
must give to the U.S. Treasury in the form of income taxes.
(3) Other Items
The Company continues to develop a environmental remediation plan for
the west lot. This matter 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
Item 4.
Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Stockholders was held on March 12, 1996. The only
matter submitted to and approved by the stockholders at the annual
meeting was the election of directors, Barbara S. Kuhns, Gaylon E.
Martin, C. Everett Swanson were all re-elected as directors for three-
year terms expiring in 1999. The results of the election are as
follows:
-Votes Cast-
For Against Total
------ ------ ------
Barbara S. Kuhns 211,754 16,625 228,379
Gaylon E. Martin 227,518 861 228,379
C. Everett Swanson 227,554 825 228,379
In addition to the three directors elected, the following persons
continue to serve as directors after the annual meeting; Glenn DeSmith,
Richard D. Ford, Howard M. Feldman, Emil Klingler, Jr., and H. Willard
Nelson, Ronald G. Reiling, and Robert C. Anderson.
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: April 20, 1996 _______________________________
Gaylon E. Martin, President
Dated: April 20, 1996 _______________________________
Wayne A. Hulting, Controller
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 5,098
<INT-BEARING-DEPOSITS> 33
<FED-FUNDS-SOLD> 3,980
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 42,911
<INVESTMENTS-CARRYING> 35,152
<INVESTMENTS-MARKET> 35,754
<LOANS> 88,518
<ALLOWANCE> 2,303
<TOTAL-ASSETS> 177,814
<DEPOSITS> 156,474
<SHORT-TERM> 124
<LIABILITIES-OTHER> 2,107
<LONG-TERM> 4,000
<COMMON> 1,875
0
0
<OTHER-SE> 16,961
<TOTAL-LIABILITIES-AND-EQUITY> 177,814
<INTEREST-LOAN> 2,015
<INTEREST-INVEST> 1,204
<INTEREST-OTHER> 49
<INTEREST-TOTAL> 3,268
<INTEREST-DEPOSIT> 1,635
<INTEREST-EXPENSE> 1,711
<INTEREST-INCOME-NET> 1,557
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 995
<INCOME-PRETAX> 800
<INCOME-PRE-EXTRAORDINARY> 800
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 606
<EPS-PRIMARY> 1.97
<EPS-DILUTED> 1.97
<YIELD-ACTUAL> 3.65
<LOANS-NON> 75
<LOANS-PAST> 2
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2304
<CHARGE-OFFS> 4
<RECOVERIES> 3
<ALLOWANCE-CLOSE> 2304
<ALLOWANCE-DOMESTIC> 8
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2296
</TABLE>
