On July 24, 2024, Farmers National Banc Corp (FMNB, Financial) released its 8-K filing reporting earnings for the second quarter of 2024. Farmers National Banc Corp is a one-bank holding company engaged in various financial activities, including securities underwriting, insurance, and merchant banking. The company operates primarily in the domestic banking, trust, retirement consulting, insurance, and financial management industries, with the majority of its revenue derived from the bank segment.
Performance Overview
Farmers National Banc Corp reported net income of $11.8 million, or $0.31 per diluted share, for the three months ended June 30, 2024. This represents a decline from $15.0 million, or $0.40 per diluted share, for the same period in 2023. However, excluding pretax items such as the $515,000 loss on the sale of investment securities, the adjusted net income was $12.2 million, or $0.33 per diluted share, aligning with analyst estimates.
Financial Achievements and Challenges
Despite the year-over-year decline in net income, the company experienced strong loan growth, with total loans increasing to $3.24 billion at the end of Q2 2024, up from $3.18 billion at the end of Q1 2024. Total assets also grew to $5.16 billion, compared to $5.08 billion at the end of Q1 2024. However, the net interest margin declined from 2.92% in Q2 2023 to 2.71% in Q2 2024, primarily due to increased funding costs.
Income Statement Highlights
| Metric | Q2 2024 | Q2 2023 | % Change |
|---|---|---|---|
| Total Interest Income | $56.8 million | $52.8 million | 7.6% |
| Total Interest Expense | $24.8 million | $18.2 million | 36.3% |
| Net Interest Income | $32.1 million | $34.6 million | -7.2% |
| Noninterest Income | $9.6 million | $9.4 million | 2.1% |
| Noninterest Expense | $26.4 million | $26.4 million | 0.0% |
| Net Income | $11.8 million | $15.0 million | -21.3% |
Balance Sheet and Cash Flow
Total deposits increased slightly to $4.21 billion at the end of Q2 2024, up from $4.20 billion at the end of Q1 2024. Noninterest-bearing deposits declined to $968.7 million from $977.5 million in Q1 2024. The company’s total stockholders’ equity was $396.7 million, a slight decrease from $397.0 million at the end of Q1 2024.
Credit Quality
Non-performing loans increased slightly to $12.9 million at the end of Q2 2024, compared to $12.0 million at the end of Q1 2024. The provision for credit losses and unfunded commitments totaled $1.1 million for Q2 2024, up from $25,000 in Q2 2023. The allowance for credit losses to total loans was 1.05% at the end of Q2 2024, compared to 1.04% at the end of Q1 2024.
Commentary
Kevin J. Helmick, President and CEO, stated, “Our second quarter financial results are encouraging as we experienced strong loan growth along with sequential improvement in net interest income. We are pleased that asset quality also continues to be a source of strength. Over the near term, we remain focused on supporting the financial needs of our communities, while ensuring the Company is well positioned to create long-term value for our shareholders.”
Analysis
Farmers National Banc Corp's performance in Q2 2024 reflects a mixed bag of achievements and challenges. While the company has shown strong loan growth and maintained asset quality, the decline in net interest margin and increased funding costs pose significant challenges. The slight increase in non-performing loans and the provision for credit losses indicate a cautious approach towards maintaining credit quality amidst a challenging economic environment.
Overall, Farmers National Banc Corp's ability to meet analyst estimates for adjusted earnings per share and its strategic focus on long-term value creation for shareholders are positive indicators for value investors. However, the company must navigate the pressures of increased funding costs and a competitive deposit market to sustain its growth trajectory.
Explore the complete 8-K earnings release (here) from Farmers National Banc Corp for further details.
