Farmers National Banc Corp. Reports Results for Fourth Quarter 2022
Farmers National Banc Corp. (“Farmers” or the “Company”) (NASDAQ: FMNB) reported today net income of $13.4 million for the three months ended December 31, 2022 compared to $5.7 million for the three months ended December 31, 2021. The Company reported diluted earnings per share of $0.39 for the fourth quarter of 2022 versus $0.18 for the same period in 2021. Results for the fourth quarter of 2022 included pretax items of $584,000 for merger related costs and combined net losses of $338,000 on the sale of securities and the sale of other assets. Excluding these items (non-GAAP), net income for the quarter ended December 31, 2022, would have been $14.1 million, or $0.42 per diluted share.
Net income for the twelve months ended December 31, 2022, totaled $60.6 million, or $1.79 per diluted share, compared to $51.8 million, or $1.77 per diluted share for the twelve months ended December 31, 2021. Results for the year ended December 31, 2022, included pre-tax items for acquisition costs of $4.1 million, security losses of $454,000, $8.4 million in other noninterest income for the proceeds of a legal settlement, a $6.0 million charitable contribution to the Farmers Charitable Foundation, $2.1 million in legal expenses associated with the legal settlement and gains of $19,000 on the sale of assets. Net income for the twelve months ended December 31, 2022, excluding these items (non-GAAP), was $64.0 million, or $1.89 per share.
Kevin J. Helmick, President and CEO, stated, “2022 was a strong year for Farmers as we produced record net income, which drove strong returns on assets, equity, and tangible equity. In addition, we successfully integrated the 2021 Cortland Bancorp acquisition, focused on completing the 2023 Emclaire Financial Corp. acquisition, and enhanced our leadership team and board. With the January 2023 completion of the Emclaire Financial Corp. acquisition, we have expanded our presence throughout Pennsylvania and significantly increased our scale with over $5.0 billion in bank assets and $3.0 billion in wealth assets. I believe Farmers is well positioned to navigate an increasingly difficult economic and interest rate environment as a result of our strong asset quality and capital levels, experienced leadership team, and dedication to provide our communities with exceptional financial products and services.”
On March 23, 2022, Farmers entered into an agreement and plan of merger (the “Merger Agreement”) with Emclaire Financial Corp. (formerly NASDAQ: EMCF), a Pennsylvania corporation (“Emclaire”), and the parent company of The Farmers National Bank of Emlenton (“Emlenton”). On July 20, 2022, the transaction received the approval of Emclaire’s shareholders and on December 2, 2022, the transaction received regulatory approval. The transaction closed on January 1, 2023. Emclaire operated 19 branches in ten counties throughout western Pennsylvania and as of December 31, 2022, had total assets of $1.02 billion, gross loans of $797.3 million and deposits of $874.6 million.
Balance Sheet
Total assets declined to $4.08 billion at December 31, 2022 compared to $4.12 billion at September 30, 2022. Gross loans (excluding loans held for sale and PPP loans) increased by $5.2 million to $2.40 billion at December 30, 2022 from the prior quarter.
Securities available for sale decreased $27.1 million to $1.27 billion at December 31, 2022 from $1.30 billion at September 30, 2022. The decrease was primarily driven by runoff and the sale of securities during the quarter offset by improvement in the gross unrealized loss. The gross unrealized loss at December 31, 2022 was $266.5 million compared to $290.1 million at September 30, 2022 and a gross unrealized gain of $11.7 million at December 31, 2021. With continued loan growth and the acquisition of Emclaire, the Company plans on allowing the securities portfolio to shrink and provide liquidity. The volatility in the bond market is expected to continue in 2023, which may result in increased volatility in the fair value of the Company’s available for sale securities.
Total customer deposits (excluding brokered time deposits) declined to $3.42 billion at December 31, 2022 from $3.52 billion at September 30, 2022. Customer deposit balances at December 31, 2021 were $3.55 billion. Intense competition from both other banks and the treasury market itself drove the decline in deposits. In addition, it appears that some customers are utilizing deposit balances to counter the higher cost of living brought on by the inflationary environment in 2022. The Company expects competition for deposits to remain highly elevated for the foreseeable future which will continue to increase funding costs.
Total stockholders’ equity increased to $292.3 million at December 31, 2022 from $265.6 million at September 30, 2022 but has declined from $472.4 million at December 31, 2021. The decrease in stockholders’ equity since December 31, 2021 has primarily been due to the decline in accumulated other comprehensive income associated with the rapid increase in U.S. treasury rates in 2022 which has had a negative effect on the value of the Company’s available for sale securities, and in turn, the dollar amount that flows through accumulated other comprehensive income. The Company’s tangible book value per share (non-GAAP) was $5.60 at December 31, 2022 compared to $4.79 at September 30, 2022, and $10.91 at December 31, 2021.
Credit Quality
Non-performing loans (NPLs) were $14.8 million at December 31, 2022 compared to $16.2 million at December 31, 2021. The NPL to loans ratio was 0.62% at December 31, 2022 compared to 0.69% at December 31, 2021. Non-performing assets to assets has also declined from 0.39% at December 31, 2021 to 0.36% at December 31, 2022. Early stage delinquencies, defined as 30-89 days delinquent, were $9.6 million, or 0.40% of total loans, at December 31, 2022 compared to $8.9 million, or 0.38% of total loans at December 31, 2021.
The Company recorded a provision for credit losses and unfunded commitments of $416,000 in the fourth quarter of 2022 compared to a provision for credit losses of $5.4 million in the fourth quarter of 2021. During the fourth quarter of 2021, the Company completed the acquisition of Cortland Bancorp and recorded a $4.9 million provision for credit losses related to the acquisition which accounts for the majority of the difference in provision costs between the 4th quarter of 2022 and the 4th quarter of 2021. The Company experienced net charge-offs of $570,000 during the fourth quarter of 2022 compared to $313,000 in the fourth quarter of 2021. Net charge-offs as a percentage of average net loans was 10 basis points for the quarter ended December 31, 2022, compared to 6 basis points for the fourth quarter of 2021. The allowance for credit losses to total loans declined to 1.12% at December 31, 2022, compared to 1.26% at December 31, 2021. The low level of charge-off activity over the last several years continues to result in less allowance for credit losses being required.
Net Interest Income
The net interest margin was 2.99% for the fourth quarter of 2022 compared to 3.21% for the third quarter of 2022 and 3.33% for the fourth quarter of 2021. The decline in net interest margin during the fourth quarter of 2022 compared to the prior quarter and the fourth quarter of 2021 was caused by a rapid increase in deposit rates due to intense competition for deposits, the continued Federal Reserve rate hiking cycle and runoff of deposit balances which are being replaced by much costlier wholesale funding. Loans continue to reprice higher but cannot keep up with the increase in funding costs. Excluding the impact of acquisition marks and related accretion and PPP interest and fees, the net interest margin (non-GAAP) for the fourth quarter of 2022 was 2.96% compared to 3.18% for the third quarter of 2022 and 3.21% for the fourth quarter of 2021. Net interest income decreased to $29.4 million for the fourth quarter of 2022 from $29.7 million for the quarter ended December 31, 2021. The decrease was due to net interest margin compression discussed above offset somewhat by larger average assets. In addition, during the fourth quarter of 2021, the Company recognized $979,000 in interest and fees associated with PPP loans compared to $10,000 in the fourth quarter of 2022.
Noninterest Income
Noninterest income decreased $1.3 million from the fourth quarter of 2021 to the fourth quarter of 2022. The primary reason for the decline was a drop of $1.5 million in the net gains on the sale of loans. This drop was caused by lower mortgage production compared to the prior year due to the dramatic increase in interest rates in 2022 and a lower saleable mix. Bank owned life insurance increased $176,000 in the fourth quarter of 2022 compared to the fourth quarter of 2021. This increase was primarily due to a death benefit of $184,000 received in the fourth quarter of 2022. Insurance commissions increased to $1.1 million in the fourth quarter of 2022 compared to $706,000 in the fourth quarter of 2021. This business exhibited strong growth throughout 2022. Security losses for the fourth quarter of 2022 totaled $366,000 compared to security gains of $25,000 for the same period in 2021. The Company used the proceeds from the sales to pay down wholesale borrowings.
Noninterest Expense
Total noninterest expense decreased to $21.1 million in the fourth quarter of 2022 compared to $27.7 million for the fourth quarter of 2021. The year-over-year decrease was primarily due to the merger costs of $6.5 million incurred in the fourth quarter of 2021 compared to merger costs of $584,000 incurred in the fourth quarter of 2022. In addition, the Company incurred $1.8 million of expense in the fourth quarter of 2021 for prepayment penalties on FHLB advances. There were no prepayment penalties in the fourth quarter of 2022. Offsetting these decreases were increases in salaries and employee benefits primarily related to increased healthcare costs, increased occupancy and equipment expense and increased FDIC insurance expense.
About Farmers National Banc Corp.
Founded in 1887, Farmers National Banc Corp. is a diversified financial services company headquartered in Canfield, Ohio, with $4.1 billion in banking assets. Farmers National Banc Corp.’s wholly-owned subsidiaries are comprised of The Farmers National Bank of Canfield, a full-service national bank engaged in commercial and retail banking with 65 banking locations in Mahoning, Trumbull, Columbiana, Portage, Stark, Wayne, Medina, Geauga and Cuyahoga Counties in Ohio and Beaver, Butler, Allegheny, Jefferson, Clarion, Venango, Clearfield, Mercer, Elk and Crawford Counties in Pennsylvania, and Farmers Trust Company, which operates five trust offices and offers services in the same geographic markets. Total wealth management assets under care at December 31, 2022 are $3.0 billion. Farmers National Insurance, LLC, a wholly-owned subsidiary of The Farmers National Bank of Canfield, offers a variety of insurance products.
Non-GAAP Disclosure
This press release includes disclosures of Farmers’ tangible common equity ratio, return on average tangible assets, return on average tangible equity, net income excluding costs related to acquisition activities and certain items, return on average assets excluding merger costs and certain items, return on average equity excluding merger costs and certain items, net interest margin excluding acquisition marks and related accretion and PPP interest and fees, efficiency ratio less one-time expenses, and allowance for credit losses to gross loans, excluding PPP loans and acquired loans, which are financial measures not prepared in accordance with generally accepted accounting principles in the United States (GAAP). A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed by GAAP. Farmers believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and Farmers’ marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with GAAP. The reconciliations of non-GAAP financial measures to their GAAP equivalents are included in the tables following Consolidated Financial Highlights below.
Cautionary Statements Regarding Forward-Looking Statements
We make statements in this news release and our related investor conference call, and we may from time to time make other statements, that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Farmers’ financial condition, results of operations, asset quality trends and profitability. Forward-looking statements are not historical facts but instead represent only management’s current expectations and forecasts regarding future events, many of which, by their nature, are inherently uncertain and outside of Farmers’ control. Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions, as well as any statements related to future expectations of performance or conditional verbs, such as “will,” “would,” “should,” “could” or “may.” Farmers’ actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Factors that could cause Farmers’ actual results to differ materially from those described in certain forward-looking statements include impacts from the length and extent of the economic impacts of the COVID-19 pandemic; significant changes in near-term local, regional, and U.S. economic conditions including those resulting from continued high rates of inflation, tightening monetary policy of the Board of Governors of the Federal Reserve, and possibility of a recession; Farmers’ failure to integrate Emclaire and Emlenton with Farmers in accordance with expectations; deviations from performance expectations related to Emclaire and Emlenton; and the other factors contained in Farmers’ Annual Report on Form 10-K for the year ended December 31, 2021 and subsequent Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (SEC) and available on Farmers’ website (www.farmersbankgroup.com) and on the SEC’s website (www.sec.gov). Forward-looking statements are not guarantees of future performance and should not be relied upon as representing management’s views as of any subsequent date. Farmers does not undertake any obligation to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.
Farmers National Banc Corp. and Subsidiaries Consolidated Financial Highlights (Amounts in thousands, except per share results) Unaudited
Consolidated Statements of Income
For the Three Months Ended
For the Twelve Months Ended
Dec. 31,
Sept. 30,
June 30,
March 31,
Dec. 31,
Dec. 31,
Dec. 31,
Percent
2022
2022
2022
2022
2021
2022
2021
Change
Total interest income$
38,111
$
36,410
$
34,286
$
33,279
$
31,685
$
142,086
$
116,459
22.0
%
Total interest expense
8,679
4,629
2,575
2,037
1,986
17,920
8,469
111.6
%
Net interest income
29,432
31,781
31,711
31,242
29,699
124,166
107,990
15.0
%
Provision (credit) for credit losses
416
448
616
(358
)
5,366
1,122
4,893
-77.1
%
Noninterest income
8,200
8,827
9,477
17,698
9,538
44,202
38,193
15.7
%
Acquisition related costs
584
872
674
1,940
6,521
4,070
7,109
-42.7
%
Other expense
20,511
20,527
20,787
28,516
21,140
90,341
72,067
25.4
%
Income before income taxes
16,121
18,761
19,111
18,842
6,210
72,835
62,114
17.3
%
Income taxes
2,765
3,315
3,160
2,998
508
12,238
10,270
19.2
%
Net income$
13,356
$
15,446
$
15,951
$
15,844
$
5,702
$
60,597
$
51,844
16.9
%
Average diluted shares outstanding
33,962
33,932
33,923
33,937
32,074
33,929
29,280
Basic earnings per share
0.39
0.46
0.47
0.47
0.18
1.79
1.78
Diluted earnings per share
0.39
0.46
0.47
0.47
0.18
1.79
1.77
Cash dividends per share
0.17
0.16
0.16
0.16
0.14
0.65
0.47
Performance Ratios Net Interest Margin (Annualized)
2.99
%
3.21
%
3.25
%
3.27
%
3.33
%
3.18
%
3.45
%
Efficiency Ratio (Tax equivalent basis)
52.59
%
50.55
%
49.95
%
61.36
%
63.61
%
53.68
%
51.13
%
Return on Average Assets (Annualized)
1.31
%
1.48
%
1.54
%
1.52
%
0.58
%
1.46
%
1.52
%
Return on Average Equity (Annualized)
20.16
%
18.71
%
17.97
%
13.89
%
5.24
%
17.24
%
13.64
%
Dividends to Net Income
43.10
%
35.06
%
33.95
%
34.18
%
82.99
%
36.31
%
27.11
%
Other Performance Ratios (Non-GAAP) Return on Average Tangible Assets
1.32
%
1.52
%
1.57
%
1.55
%
0.60
%
1.50
%
1.55
%
Return on Average Tangible Equity
32.81
%
27.06
%
25.23
%
17.92
%
6.57
%
24.31
%
16.13
%
Consolidated Statements of Financial ConditionDec. 31,
Sept. 30,
June 30,
March 31,
Dec. 31,
2022
2022
2022
2022
2021
Assets Cash and cash equivalents
$
75,551
$
79,981
$
65,458
$
137,627
$
112,790
Securities available for sale
1,268,025
1,295,133
1,361,682
1,463,626
1,427,677
Other investments
33,444
34,399
34,451
34,019
30,459
Loans held for sale
858
2,142
2,714
1,904
4,545
Loans
2,404,750
2,399,981
2,374,485
2,304,971
2,331,082
Less allowance for credit losses
26,978
27,282
27,454
27,015
29,386
Net Loans
2,377,772
2,372,699
2,347,031
2,277,956
2,301,696
Other assets
326,550
335,668
303,028
290,723
265,582
Total Assets
$
4,082,200
$
4,120,022
$
4,114,364
$
4,205,855
$
4,142,749
Liabilities and Stockholders' Equity Deposits Noninterest-bearing
$
896,957
$
934,638
$
983,713
$
963,143
$
916,237
Interest-bearing
2,526,760
2,590,054
2,586,829
2,690,668
2,630,998
Brokered time deposits
138,051
42,459
54,996
40,000
0
Total deposits
3,561,768
3,567,151
3,625,538
3,693,811
3,547,235
Other interest-bearing liabilities
183,211
243,098
137,985
87,872
87,758
Other liabilities
44,926
44,154
29,392
30,286
35,324
Total liabilities
3,789,905
3,854,403
3,792,915
3,811,969
3,670,317
Stockholders' Equity
292,295
265,619
321,449
393,886
472,432
Total Liabilities and Stockholders' Equity
$
4,082,200
$
4,120,022
$
4,114,364
$
4,205,855
$
4,142,749
Period-end shares outstanding
34,055
34,060
34,032
34,008
33,898
Book value per share
$
8.58
$
7.80
$
9.45
$
11.58
$
13.94
Tangible book value per share (Non-GAAP)*
5.60
4.79
6.46
8.58
10.91
* Tangible book value per share is calculated by dividing tangible common equity by outstanding shares Capital and Liquidity Common Equity Tier 1 Capital Ratio (a)
13.61
%
13.36
%
13.30
%
13.31
%
13.16
%
Total Risk Based Capital Ratio (a)
17.66
%
17.44
%
17.46
%
17.59
%
17.60
%
Tier 1 Risk Based Capital Ratio (a)
14.22
%
13.97
%
13.92
%
13.95
%
13.82
%
Tier 1 Leverage Ratio (a)
9.84
%
10.24
%
9.56
%
9.56
%
10.12
%
Equity to Asset Ratio
7.16
%
6.45
%
7.81
%
9.37
%
11.40
%
Tangible Common Equity Ratio (b)
4.79
%
4.06
%
5.47
%
7.11
%
9.15
%
Net Loans to Assets
58.25
%
57.59
%
57.04
%
54.16
%
55.56
%
Loans to Deposits
67.52
%
67.28
%
65.49
%
62.40
%
65.72
%
Asset Quality Non-performing loans$
14,803
$
12,976
$
14,107
$
14,046
$
16,195
Non-performing assets
14,876
13,042
14,107
14,046
16,195
Loans 30 - 89 days delinquent
9,605
6,659
8,716
7,304
8,891
Charged-off loans
754
783
177
1,590
470
Recoveries
184
178
135
149
157
Net Charge-offs
570
605
42
1,441
313
Annualized Net Charge-offs to Average Net Loans Outstanding
0.10
%
0.10
%
0.01
%
0.25
%
0.06
%
Allowance for Credit Losses to Total Loans
1.12
%
1.14
%
1.16
%
1.17
%
1.26
%
Non-performing Loans to Total Loans
0.62
%
0.54
%
0.59
%
0.61
%
0.69
%
Allowance to Non-performing Loans
182.25
%
210.25
%
194.61
%
192.33
%
181.45
%
Non-performing Assets to Total Assets
0.36
%
0.32
%
0.34
%
0.33
%
0.39
%
(a) December 31, 2022 ratio is estimated (b) This is a non-GAAP financial measure. A reconciliation to GAAP is shown belowFor the Three Months Ended
Dec. 31,
Sept. 30,
June 30,
March 31,
Dec. 31,
End of Period Loan Balances
2022
2022
2022
2022
2021
Commercial real estate
$
1,028,050
$
1,028,484
$
1,040,243
$
1,000,972
$
1,011,891
Commercial
293,643
296,932
285,981
298,903
313,836
Residential real estate
475,791
474,014
464,489
455,501
453,635
HELOC
132,179
132,267
129,392
128,221
127,433
Consumer
221,260
222,706
218,219
192,586
189,522
Agricultural loans
246,937
239,081
230,477
224,845
232,365
Total, excluding net deferred loan costs
$
2,397,860
$
2,393,484
$
2,368,801
$
2,301,028
$
2,328,682
For the Three Months Ended
For the Twelve Months Ended
Dec. 31,
Sept. 30,
June 30,
March 31,
Dec. 31,
Dec. 31,
Dec. 31,
Noninterest Income
2022
2022
2022
2022
2021
2022
2021
Service charges on deposit accounts
$
1,203
$
1,229
$
1,139
$
1,145
$
1,138
$
4,716
$
3,660
Bank owned life insurance income, including death benefits
590
406
405
409
414
1,810
1,338
Trust fees
2,373
2,370
2,376
2,519
2,509
9,638
9,438
Insurance agency commissions
1,133
1,136
1,086
1,047
706
4,402
3,456
Security gains (losses), including fair value changes for equity securities
(366
)
(17
)
(60
)
(11
)
25
(454
)
1,004
Retirement plan consulting fees
337
332
323
397
378
1,389
1,421
Investment commissions
508
424
557
694
611
2,183
2,276
Net gains on sale of loans
242
326
365
1,129
1,728
2,062
8,285
Other mortgage banking fee income (loss), net
98
94
39
60
2
291
(136
)
Debit card and EFT fees
1,407
1,463
1,528
1,416
1,424
5,814
5,144
Other noninterest income
675
1,064
1,719
8,893
603
12,351
2,307
Total Noninterest Income
$
8,200
$
8,827
$
9,477
$
17,698
$
9,538
$
44,202
$
38,193
For the Three Months Ended
For the Twelve Months Ended
Dec. 31,
Sept. 30,
June 30,
March 31,
Dec. 31,
Dec. 31,
Dec. 31,
Noninterest Expense
2022
2022
2022
2022
2021
2022
2021
Salaries and employee benefits
$
11,385
$
10,724
$
11,073
$
11,831
$
10,230
$
45,013
$
39,393
Occupancy and equipment
2,753
3,028
2,918
2,680
2,422
11,379
8,486
FDIC insurance and state and local taxes
1,010
1,017
979
945
772
3,951
2,859
Professional fees
938
985
1,056
3,135
1,296
6,114
4,191
Merger related costs
584
872
674
1,940
6,521
4,070
7,109
Advertising
472
596
487
392
776
1,947
1,859
Intangible amortization
702
432
419
420
414
1,973
1,362
Core processing charges
742
738
1,123
745
880
3,348
3,198
Other noninterest expenses
2,509
3,007
2,732
8,368
4,350
16,616
10,719
Total Noninterest Expense
$
21,095
$
21,399
$
21,461
$
30,456
$
27,661
$
94,411
$
79,176
Average Balance Sheets and Related Yields and Rates (Dollar Amounts in Thousands) Three Months Ended Three Months Ended December 31, 2022 December 31, 2021 AVERAGE YIELD/ AVERAGE YIELD/ BALANCE INTEREST (1) RATE (1) BALANCE INTEREST (1) RATE (1) EARNING ASSETS Loans (2)
$
2,394,872
$
29,092
4.86
%
$
2,187,770
$
24,946
4.52
%
Taxable securities
1,105,545
5,556
2.01
892,563
3,948
1.75
Tax-exempt securities (2)
453,917
3,580
3.15
410,016
3,397
3.29
Other investments
33,901
326
3.85
26,475
142
2.13
Federal funds sold and other
59,108
336
2.27
114,496
39
0.14
Total earning assets
4,047,343
38,890
3.84
3,631,320
32,472
3.55
Nonearning assets
33,154
248,581
Total assets
$
4,080,497
$
3,879,901
INTEREST-BEARING LIABILITIES Time deposits
$
370,914
$
1,261
1.36
%
$
379,786
$
697
0.73
%
Brokered time deposits
115,021
1,034
3.60
0
0
0.00
Savings deposits
871,584
879
0.40
736,732
202
0.11
Demand deposits - interest bearing
1,301,475
3,805
1.17
1,367,921
475
0.14
Short term borrowings
85,641
777
3.63
0
2
0.00
Long term borrowings
88,138
922
4.18
80,799
610
3.00
Total interest-bearing liabilities
$
2,832,773
8,678
1.23
$
2,565,238
1,986
0.31
NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS' EQUITY Demand deposits - noninterest bearing
938,881
851,130
Other liabilities
43,904
31,824
Stockholders' equity
264,939
431,709
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
4,080,497
$
3,879,901
Net interest income and interest rate spread
$
30,212
2.61
%
$
30,486
3.24
%
Net interest margin2.99
%
3.33
%
(1) Interest and yields are calculated on a tax-equivalent basis where applicable. (2) For 2022, adjustments of $72 thousand and $707 thousand, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2021, adjustments of $86 thousand and $701 thousand, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. These adjustments were based on a marginal federal income tax rate of 21%, less disallowances. Twelve Months Ended Twelve Months Ended December 31, 2022 December 31, 2021 AVERAGE YIELD/ AVERAGE YIELD/ BALANCE INTEREST (1) RATE (1) BALANCE INTEREST (1) RATE (1) EARNING ASSETS Loans (2)$
2,358,724
$
108,100
4.58
%
$
2,041,347
$
95,180
4.66
%
Taxable securities
1,081,966
20,843
1.93
617,475
11,399
1.85
Tax-exempt securities (2)
465,855
14,952
3.21
348,627
12,027
3.45
Other investments
33,153
871
2.63
21,912
498
2.27
Federal funds sold and other
76,253
684
0.90
180,718
200
0.11
Total earning assets
4,015,951
145,450
3.62
3,210,079
119,304
3.72
Nonearning assets
128,757
195,805
Total assets
$
4,144,708
$
3,405,884
INTEREST-BEARING LIABILITIES Time deposits
$
360,687
$
3,044
0.84
%
$
393,039
$
3,652
0.93
%
Brokered time deposits
56,965
1,240
2.18
11,737
75
0.64
Savings deposits
846,418
1,352
0.16
569,179
712
0.13
Demand deposits - interest bearing
1,392,058
7,449
0.54
1,240,014
2,336
0.19
Short term borrowings
55,668
1,408
2.53
3,957
7
0.28
Long term borrowings
87,972
3,427
3.90
70,057
1,687
2.40
Total interest-bearing liabilities
$
2,799,768
17,920
0.64
$
2,287,983
8,469
0.37
NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS' EQUITY Demand deposits - noninterest bearing
$
959,294
$
714,978
Other liabilities
34,180
23,498
Stockholders' equity
351,466
379,425
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
4,144,708
$
3,405,884
Net interest income and interest rate spread
$
127,530
2.98
%
$
110,835
3.35
%
Net interest margin3.18
%
3.45
%
(1) Interest and yields are calculated on a tax-equivalent basis where applicable. (2) For 2022, adjustments of $310 thousand and $3.1 million, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2021, adjustments of $360 thousand and $2.5 million, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. These adjustments were based on a marginal federal income tax rate of 21%, less disallowances. Reconciliation of Total Assets to Tangible AssetsFor the Three Months Ended
For the Twelve Months Ended
Dec. 31,
Sept. 30,
June 30,
March 31,
Dec. 31,
Dec. 31,
Dec. 31,
2022
2022
2022
2022
2021
2022
2021
Total Assets
$
4,082,200
$
4,120,022
$
4,114,364
$
4,205,855
$
4,142,749
$
4,082,200
$
4,142,749
Less Goodwill and other intangibles
101,666
102,368
101,767
102,187
102,606
101,666
102,606
Tangible Assets
$
3,980,534
$
4,017,654
$
4,012,597
$
4,103,668
$
4,040,143
$
3,980,534
$
4,040,143
Average Assets
4,144,708
4,164,855
4,155,719
4,178,618
3,879,901
4,144,708
3,405,884
Less average Goodwill and other intangibles
102,126
101,981
102,042
102,462
84,580
102,151
58,111
Average Tangible Assets
$
4,042,582
$
4,062,874
$
4,053,677
$
4,076,156
$
3,795,321
$
4,042,557
$
3,347,773
Reconciliation of Common Stockholders' Equity to Tangible Common Equity
For the Three Months Ended
For the Twelve Months Ended
Dec. 31,
Sept. 30,
June 30,
March 31,
Dec. 31,
Dec. 31,
Dec. 31,
2022
2022
2022
2022
2021
2022
2021
Stockholders' Equity
$
292,295
$
265,619
$
321,449
$
393,886
$
472,432
$
292,295
$
472,432
Less Goodwill and other intangibles
101,666
102,368
101,767
102,187
102,606
101,666
102,606
Tangible Common Equity
$
190,629
$
163,251
$
219,682
$
291,699
$
369,826
$
190,629
$
369,826
Average Stockholders' Equity
264,939
330,300
354,981
456,206
431,709
351,466
379,425
Less average Goodwill and other intangibles
102,126
101,981
102,042
102,462
84,580
102,151
58,111
Average Tangible Common Equity
$
162,813
$
228,319
$
252,939
$
353,744
$
347,129
$
249,315
$
321,314
Reconciliation of Net Income, Less Merger and Certain Items
For the Three Months Ended
For the Twelve Months Ended
Dec. 31,
Sept. 30,
June 30,
March 31,
Dec. 31,
Dec. 31,
Dec. 31,
2022
2022
2022
2022
2021
2022
2021
Net income
$
13,356
$
15,446
$
15,951
$
15,844
$
5,702
$
60,597
$
51,844
Acquisition related costs - after tax
475
711
564
1,540
5,232
3,290
5,731
Acquisition related provision - after tax
0
0
0
0
3,846
0
3,846
Lawsuit settlement income - after tax
0
0
0
(6,616
)
0
(6,616
)
0
Lawsuit settlement contingent legal expense - after tax
0
0
0
1,639
0
1,639
0
Charitable donation - after tax
0
0
0
4,740
0
4,740
0
FHLB prepayment penalties - after tax
0
0
0
0
1,425
0
1,682
Net loss (gain) on asset/security sales - after tax
268
4
(25
)
97
134
344
(598
)
Gain on sale of credit card portfolio - after tax
0
0
0
0
(189
)
0
(189
)
Net income - Adjusted$
14,099
$
16,161
$
16,490
$
17,244
$
16,150
$
63,994
$
62,316
Diluted EPS excluding merger and one-time items
$
0.42
$
0.48
$
0.49
$
0.51
$
0.50
$
1.89
$
2.13
Return on Average Assets excluding merger and certain items (Annualized)
1.36
%
1.55
%
1.59
%
1.65
%
1.65
%
1.54
%
1.83
%
Return on Average Equity excluding merger and certain items (Annualized)
21.29
%
19.57
%
18.58
%
15.12
%
14.84
%
18.21
%
16.42
%
Return on Average Tangible Equity excluding acquisition costs and certain items (Annualized)
34.64
%
28.31
%
26.08
%
19.50
%
18.46
%
25.67
%
19.39
%
Efficiency ratio excluding certain itemsFor the Three Months Ended
For the Twelve Months Ended
Dec. 31,
Sept. 30,
June 30,
March 31,
Dec. 31,
Dec. 31,
Dec. 31,
2022
2022
2022
2022
2021
2022
2021
Net interest income, tax equated
$
30,212
$
32,636
$
32,583
$
32,100
$
30,486
$
127,530
$
110,835
Noninterest income
8,200
8,827
9,477
17,698
9,538
44,202
38,193
Legal settlement income
0
0
0
(8,375
)
0
(8,375
)
0
Net loss (gain) on asset/security sales
338
6
(32
)
123
170
435
(757
)
Gain on sale of credit card portfolio
0
0
0
0
(239
)
0
(239
)
Net interest income and noninterest income adjusted
38,750
41,469
42,028
41,546
39,955
163,792
148,032
Noninterest expense less intangible amortization
20,393
20,967
21,042
30,036
27,247
92,438
77,817
Charitable donation
0
0
0
6,000
0
6,000
0
Contingent legal settlement expense
0
0
0
2,075
0
2,075
0
Acquisition related costs
584
872
674
1,940
6,521
4,070
7,109
FHLB prepayment penalties
0
0
0
0
1,804
0
2,129
Noninterest income adjusted
19,809
20,095
20,368
20,021
18,922
80,293
68,579
Efficiency ratio excluding one-time items
51.12
%
48.46
%
48.46
%
48.19
%
47.36
%
49.02
%
46.33
%
Net interest margin excluding acquisition marks and PPP interest and feesFor the Three Months Ended
For the Twelve Months Ended
Dec. 31,
Sept. 30,
June 30,
March 31,
Dec. 31,
Dec. 31,
Dec. 31,
2022
2022
2022
2022
2021
2022
2021
Net interest income, tax equated
$
30,212
$
32,636
$
32,583
$
32,100
$
30,486
$
127,530
$
110,835
Acquisition marks
209
246
381
957
496
1,793
932
PPP interest and fees
10
62
634
686
979
1,392
6,621
Adjusted and annualized net interest income
119,972
129,312
126,272
121,828
115,098
124,345
103,283
Average earning assets
4,047,343
4,065,085
4,015,385
3,931,506
3,631,320
4,015,951
3,210,079
Less PPP average balances
485
1,586
16,019
30,003
47,939
11,914
95,226
Adjusted average earning assets
4,046,858
4,063,499
3,999,366
3,901,503
3,583,381
4,004,037
3,114,853
Net interest margin excluding marks and PPP interest and fees
2.96
%
3.18
%
3.16
%
3.12
%
3.21
%
3.11
%
3.32
%
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