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Farmers National Banc Reports 2013 4Q Financial Results

February 8, 2014

Farmers National Banc Corp. reported financial results for the three and 12 months ended Dec. 31, 2013.

In a release on Jan. 29, the Company said that net income for the three months ended Dec. 31, 2013 was $2.3 million, or $0.12 per diluted share compared to $2.6 million, or $0.14 per diluted share for the fourth quarter ended Dec. 31, 2012. Net income for the year ended Dec. 31, 2013 was $7.8 million, or $0.41 per diluted share compared to $9.9 million, or $0.53 per diluted share for 2012. During the 2013 third quarter, the Company recorded charges of $1.3 million related to severance costs for terminated employees. Excluding these severance expenses, net income for 2013 would have been $8.6 million, or $0.46 per share.

Kevin Helmick, President and CEO, said, "Excluding security gains of $586 thousand in the fourth quarter of 2012 and compared to $8 thousand in the fourth quarter of 2013, net income for the current quarter increased $40 thousand. Our efficiency ratio improved to 67.96 percent, in the 2013 fourth quarter, representing the lowest quarter in the past two years. The improvement in our efficiency ratio is consistent with our strategy to increase fee income and decrease noninterest expenses. We are also pleased to report that net loans increased 7.5 percent during 2013. Most of this growth came from our commercial real estate, residential real estate and indirect loan portfolios."

Northeast Ohio Expansion

Farmers is excited to announce it is establishing a branch office in Rocky River in the previously-acquired NAI building. Farmers will take its unique brand of business banking into the Greater Cleveland market utilizing a model similar to the Farmers' Canton office. The expansion kicked-off with the hiring of two key associates, David Simko, Vice President/Commercial Banking and Ted Grabowski, Vice President/Private Client Relationship Manager. Farmers will also hire a Financial Advisor, Mortgage Loan Consultant and Universal Banker for the office located at 20325 Center Ridge Rd.

2013 Financial Highlights

-Loan growth

Total loans were $630.7 million at year-end 2013, compared to $586.6 million at year-end 2012. This represents an increase of 7.52 percent. The improvement in the local economy is the main factor driving the increase in loans. Most of the increase in loans has occurred in the commercial real estate, residential real estate and indirect loan portfolios. Loans comprised 56.2 percent of the Bank's average earning assets in 2013, compared to 54.8 percent in 2012.

-Loan quality

Net charge-offs decreased from $2.9 million for the year ended Dec. 31, 2012 to $1.4 million in 2013. Most of the improvement occurred in the commercial and commercial real estate loan portfolios. Non-performing assets to total assets remain at a safe level, currently at 0.81 percent. Early stage delinquencies also remain at low levels, down $58 thousand from Dec. 31, 2012 to $3.6 million at Dec. 31, 2013.

-Net interest margin

The net interest margin for the quarter ended Dec. 31, 2013 was 3.53 percent, an improvement of 6 basis points over the 3.47 percent reported for the quarter ended Sept. 30, 2013. Asset yields increased 6 basis points, while the cost of interest-bearing liabilities remain unchanged.

-Cost saving initiatives

The Company underwent a cost reduction program in 2013 that included the closure of two retail branch locations and the elimination of several full time positions. In addition to the cost savings initiatives, the Company also made adjustments to the fee structure for its retail and commercial banking products and services. As a result of these actions, the Company's efficiency ratio improved to 67.96 percent for the quarter ended Dec. 31, 2013, which compares favorably to the 72.48 percent reported in the fourth quarter in 2012.

2014 Outlook

Helmick said: "While the economy continues to slowly improve, we are excited about the opportunities to sustain the momentum our company has seen in loan growth while maintaining our consistent asset quality levels. We also continue our discipline of closely monitoring levels of non-interest income while growing non-interest revenues."

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