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FN

FARMERS NATIONAL BANC CORP /OH/ (FMNB)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 EPS of $0.36 GAAP and $0.39 adjusted; EPS beat S&P consensus of $0.34 on an adjusted basis, while “revenue” (NII + fees as tracked by S&P) of ~$44.9m was just below ~$45.2m consensus. Drivers: margin expansion to 2.85%, stronger fee income, and a modest provision recovery; partially offset by $1.3m pretax losses on security/asset sales (2.2-year earn-back) . EPS beat and revenue miss vs S&P Global consensus marked with asterisks below (S&P Global)*
  • Net interest margin expanded 15 bps YoY to 2.85% and 13 bps QoQ, aided by Fed cuts reducing funding costs and asset yields continuing to reprice higher; management expects further NIM expansion in 2025, magnitude dependent on future cuts .
  • Credit quality improved: NPLs to loans fell to 0.64% (0.70% in Q4), annualized net charge-offs 0.04%, and ACL/loans steady at 1.09%; management actively managing singled-out relationships (one moved to held-for-sale) .
  • Balance sheet mix and liquidity improved: deposits rose $214.5m QoQ (incl. +$85m brokered CDs and +$129.5m customer), loan/deposit ratio fell to 72.6%, and FHLB capacity stood at ~$749m; entering Columbus with a new commercial LPO to support growth .
  • Potential stock catalysts: continued NIM expansion, realization of securities restructuring earn-back (2.2 years), fee-income momentum (trust, insurance, retirement services), and resolution/sale of select NPLs; watch tariff/macro uncertainty impacting loan demand .

What Went Well and What Went Wrong

  • What Went Well

    • Margin expansion and earnings quality: NIM rose to 2.85% (from 2.72% in Q4 and 2.70% in Q1’24) on lower funding costs and rising asset yields; adjusted EPS of $0.39 reflected core improvements despite realized losses .
    • Fee income breadth: Noninterest income increased to $10.5m from $8.4m YoY on stronger service charges, BOLI, trust, insurance, retirement consulting (Crest acquisition), and debit card volumes .
    • Credit stabilization: NPLs/loans improved to 0.64% (0.70% prior quarter), annualized NCOs at 0.04%, and a small provision recovery; management expects sale of a designated NPL in Q2 .

  • What Went Wrong

    • Securities restructuring cost: Realized $1.3m pretax losses to restructure $23.8m AFS, though reinvestment yield is 260 bps higher and earn-back is ~2.2 years .
    • Efficiency ratio ticked higher sequentially (59.6% vs 56.4% in Q4) on seasonality and higher operating expenses (notably salaries/benefits and occupancy from weather/timing) even as it improved YoY .
    • Loan balances down slightly QoQ (C&I/CRE softness), with management citing borrower uncertainty and incremental tariff risk, though pipeline improved into Q2 .

Financial Results

Core P&L and Profitability (company-reported)

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Net Interest Income ($mm)31.69 31.88 32.74 34.20
Noninterest Income ($mm)8.36 12.34 11.41 10.48
Provision for Credit Losses ($mm)(0.45) 7.01 0.30 (0.20)
Net Income ($mm)11.24 8.54 14.39 13.58
Diluted EPS ($)0.30 0.23 0.38 0.36
Net Interest Margin (Annualized)2.70% 2.66% 2.72% 2.85%
Efficiency Ratio (TE basis)61.54% 58.47% 56.42% 59.60%

Notes: Adjusted (non-GAAP) EPS was $0.39 in Q1 2025 (vs $0.34 in Q1 2024), reflecting add-back of after-tax net losses on security/asset sales .

Estimate Comparison (S&P Global consensus) – Q1 2025

MetricActual*Consensus*Surprise
Primary EPS$0.39*$0.34*+$0.05 (beat)
Revenue (S&P definition)$44.88m*$45.20m*-$0.32m (miss)

Values retrieved from S&P Global*

Noninterest Income Mix

Category ($000)Q1 2024Q1 2025
Service charges on deposit accounts1,583 1,758
Bank-owned life insurance707 810
Trust fees2,510 2,641
Insurance agency commissions1,528 1,741
Security gains (losses) incl. equity FV(2,120) (1,313)
Retirement plan consulting617 798
Investment commissions432 529
Net gains on sale of loans297 326
Other mortgage banking (net)125 147
Debit card & EFT1,567 1,866
Other noninterest income1,111 1,178
Total Noninterest Income8,357 10,481

Balance Sheet and Risk KPIs

KPIQ1 2024Q4 2024Q1 2025
Loans (EOP, $mm)3,181.3 3,268.3 3,251.4
Total Deposits (EOP, $mm)4,198.1 4,266.8 4,481.3
Brokered Time Deposits (EOP, $mm)0.0 75.0 160.0
Loans/Deposits75.78% 76.60% 72.55%
CET1 Ratio (bank)10.88% 11.26% 11.48%
Tier 1 Leverage8.19% 8.37% 8.54%
NPLs/Loans0.38% 0.70% 0.64%
Annualized Net Charge-offs0.13% 0.08% 0.04%
ACL/Loans1.04% 1.10% 1.09%
TBV/Share ($)5.52 5.80 6.42
FHLB Available Capacity ($mm)—549.7 749.3

Guidance Changes

Metric/TopicPeriodPrevious (Q4 2024 commentary)Current (Q1 2025 commentary)Change
Net interest margin trajectory2025Expected to expand in 2025 as funding costs reprice lower after Fed cuts Expects NIM to continue to expand in 2025; magnitude depends on future Fed cuts Maintained
Funding costsNear-termYield on interest-bearing liabilities fell from 2.84% (Q3) to 2.72% (Q4) Interest-bearing liabilities 2.52% in Q1 vs 2.61% in Q1’24; Fed cuts continue to help Improving
Loan growthQ2 2025 pipeline—Pipeline shows improvement, but tariffs introduce uncertainty New color
Credit resolutionQ1–Q2 2025Expected sale/payoff of select NPLs in Q1 2025 Designated $1.8m NPL to held-for-sale; sale expected in Q2 2025 Timing update
Securities strategy2025Volatility anticipated; unrealized losses elevated Restructured $23.8m AFS; 260 bps reinvestment pickup; ~2.2-year earn-back; bond market volatility anticipated Executing repositioning
DividendOngoing$0.17 per share (Q4 paid) $0.17 declared Feb 26, 2025; $0.17 declared May 27, 2025 Maintained

Earnings Call Themes & Trends (narrative across quarters)

TopicQ3 2024 (Q-2)Q4 2024 (Q-1)Q1 2025 (Current)Trend
Net interest marginNIM 2.66%; pressure from funding costs; Fed cut at Sept-end set up Q4 improvement NIM 2.72%; funding cost down QoQ; expected 2025 expansion NIM 2.85%; further expansion expected as assets reprice and Fed cuts flow through Improving
Credit qualitySingle office CRE credit drove $4.4m charge-off; provision elevated NPLs up QoQ; expected sale/payoff of some NPLs in Q1 NPLs/loans down to 0.64%; small provision recovery; one NPL moved to HFS, sale expected Q2 Stabilizing
Deposits/funding mixAdded ~$75m brokered in Q3; customer deposit growth Seasonal public funds decline drove QoQ deposit drop Deposits +$214.5m QoQ incl. +$85m brokered and +$129.5m customer; L/D 72.6% Strengthening
Fee-based businessesStrong growth across trust, insurance, cards; SBIC variability Continued strong fee businesses; some categories normalized Broad-based growth including Crest-driven retirement fees; card volumes higher Positive
Securities/ALMUnrealized losses improved in Q3 then rose in Q4 with rates Elevated unrealized losses at YE AFS restructuring: 260 bps pickup; ~2.2-year earn-back; unrealized losses fell QoQ Proactive reposition
Expansion/market strategy—Acquired Crest Retirement (Columbus) Opened Columbus commercial LPO; adding proven bankers Growth initiatives
Macro/tariffs——Tariffs add uncertainty to borrower decision-making New headwind

Management Commentary

  • “We entered 2025 from a position of strength with a legacy of profitability, strong asset quality and robust liquidity levels… [and] the Company’s exciting entrance into the growth market of greater Columbus.” — Kevin J. Helmick, President & CEO .
  • “The net interest margin improved to 2.85%… The year-over-year increase… was due to higher yields on earning assets and lower funding costs… The Company expects its net interest margin will continue to expand in 2025 but the degree… will depend on future Federal Reserve cuts…” .
  • “The Company… restructured $23.8 million of available for sale securities and reinvested… with yields approximately 260 bps higher… The earn back on the $1.3 million loss… is approximately 2.2 years.” .
  • “The pipeline for the second quarter currently shows improvement but the introduction of tariffs adds more uncertainty to the decision making of borrowers.” .

Q&A Highlights

  • A full Q1 2025 earnings call transcript was not available in our document set; the press release indicates a standard earnings process and provides detailed commentary on NIM trajectory, credit, deposits, and ALM actions . Any call clarifications on guidance were not accessible via transcript in our search window.

Estimates Context

  • EPS beat: Adjusted EPS $0.39* vs S&P consensus $0.34* (+$0.05); note GAAP diluted EPS was $0.36 with $1.3m pretax security/asset sale losses recognized (2.2-year earn-back) . Values retrieved from S&P Global*
  • Revenue slight miss: S&P “Revenue” actual $44.88m* vs $45.20m* consensus (-$0.32m); company-reported components were NII $34.2m and fees $10.5m (total $44.7m) . Values retrieved from S&P Global*
  • Estimate breadth: Q1 2025 had ~3 EPS estimates and ~2 revenue estimates in S&P Global, indicating modest coverage for this regional bank.*

Values retrieved from S&P Global*

Key Takeaways for Investors

  • NIM expansion is the core near-term earnings lever; Fed path and asset repricing cadence drive magnitude. Continued decline in funding costs and lagged asset yield benefits support sequential EPS resilience .
  • Fee-income breadth offers diversification: trust, insurance, retirement consulting (Crest), and cards are growing; this reduces dependence on spread income into 2025 .
  • Credit normalization is progressing: NPL ratio down QoQ, very low NCOs, and targeted resolution/sale of specific credits; watch office/CRE and any macro spillover .
  • ALM repositioning is accretive with a defined payback: the AFS restructuring should lift run-rate yields; a 2.2-year earn-back limits risk while enhancing future NII .
  • Funding strength and liquidity provide flexibility: deposit growth (incl. public funds seasonality and brokered CDs), lower L/D, and substantial FHLB capacity position FMNB for selective growth or further balance sheet optimization .
  • Columbus expansion is a wedge for loan and fee growth; near-term macro/tariff uncertainty could weigh on C&I/CRE demand, but pipeline improvement suggests potential Q2 recovery .
  • Dividend appears steady at $0.17; capital ratios improved QoQ (CET1 11.48%); watch TBV accretion as unrealized losses moderate and securities repositioning earns back .

Citations:

  • Q1 2025 press release and financial tables
  • Q4 2024 press release and financial tables
  • Q3 2024 press release and financial tables
  • Other relevant Q1 press releases: Dividend (Feb 26, 2025) , Chief Banking Officer (Jan 15, 2025)

S&P Global consensus and actuals marked with asterisks; Values retrieved from S&P Global*