FARMERS NATIONAL BANC : ANNOUNCES RECORD 2021 RESULTS - Form 8-K

FARMERS NATIONAL BANC CORP. ANNOUNCES

RECORD 2021 RESULTS

•

Earnings per diluted share of $0.18 ($0.50 excluding one-time items, non-GAAP) for 4th quarter of 2021

•

Completed the acquisition of Cortland Bancorp

•

Issued $75.0 million of subordinated debt at a rate of 3.125%

•

156 consecutive quarters of profitability

•

Efficiency ratio, (excluding one-time items, non-GAAP), of 47.4% for the fourth quarter of 2021

•

Allowance for credit losses ratio of 1.26% at December 31, 2021

•

Return on average assets, (excluding one-time items, non-GAAP), was 1.65% for the fourth quarter of 2021

•

ROAE and ROATE, (excluding one-time items, non-GAAP), 14.8% and 18.5%, respectively, for fourth quarter of 2021

CANFIELD, Ohio (January 27, 2022) - Farmers National Banc Corp. ("Farmers" or the "Company") (NASDAQ: FMNB) today announced financial results for the three and twelve months ended December 31, 2021.

On a GAAP basis, net income for the fourth quarter of 2021 was $5.7 million, or $0.18 per diluted share, compared to $11.4 million, or $0.40 per diluted share, for the three months ended December 31, 2020. The results for the quarter included pretax items for acquisition related provision for credit loss expense of $4.9 million, $6.5 million for acquisition costs, $1.8 million for a prepayment penalty on an FHLB advance, security gains of $25,000, a loss of $195,000 on the sale of assets, and a one-time gain of $239,000 for the sale of Farmers' credit card portfolio. Excluding these items (non-GAAP), core net income for the quarter ended December 31, 2021, would have been $16.2 million, or $0.50 per diluted share.

Net income for the twelve months ended December 31, 2021, totaled $51.8 million, or $1.77 per diluted share, compared to $41.9 million, or $1.47 per diluted share for the twelve months ended December 31, 2020. Results for the year ended December 31, 2021, included pre-tax items for acquisition related provision for credit loss expense of $4.9 million, acquisition costs of $7.1 million, prepayment penalties on FHLB advances of $2.1 million, security gains of $1.0 million, a loss of $247,000 on the sale of assets, and the one-time gain of $239,000 on the sale of the credit card portfolio. Net income for the twelve months ended December 31, 2021, excluding these items (non-GAAP), was $62.3 million, or $2.13 per share.

On November 1, 2021, Farmers and Cortland Bancorp ("Cortland") completed the previously announced merger of Cortland into Farmers in a cash and stock transaction. Under the terms of the merger agreement, shareholders of Cortland were able to elect to receive either $28.00 per share in cash or 1.75 shares of Farmers' common stock, subject to an overall limitation of 75% of the Cortland shares being exchanged for Farmers shares and 25% for cash. The merger combines two complementary banking institutions with similar culture and operating philosophies, and will further solidify Farmers' market share in Trumbull and Mahoning counties while expanding Farmers' presence in the greater Cleveland market. In February 2022, the systems integration of Farmers and Cortland will be completed, bringing the combined 48 branches together under one name.

At the closing of the merger, Farmers issued 5.6 million shares of its common stock along with cash of $29.6 million, which represented a transaction value of approximately $128.5 million based on its closing stock price of $17.82 on October 31, 2021. The transaction value has been allocated to assets acquired and liabilities assumed, including $482.2 million in loans and loans held for sale, $305.2 million in other tangible assets, $695.3 million in deposits, $17.9 million in other liabilities and $54.4 million in goodwill and other intangible assets. Prior to closing, Cortland incurred $3.3 million of merger-related costs. The year-over-year comparison of Farmers results is impacted by the Cortland merger, with 2021 including two months of combined operations from Cortland compared to none in the prior year.

Kevin J. Helmick, President and CEO, stated, "The last two years have brought unbelievable challenges to the world and our industry. Through it all, the Farmers team has continued to deliver record earnings and superior returns while catering to the needs of the communities we serve. I am extremely proud of our staff for all of their hard work. With the closing of the Cortland acquisition, I look forward to the possibilities in 2022."

Balance Sheet

Total assets at December 31, 2021, grew to $4.14 billion compared to $3.32 billion at September 30, 2021 and $3.07 billion at December 31, 2020. The acquisition of Cortland added $841.7 million in assets to the balance sheet. Gross loans (excluding loans held for sale) were $2.33 billion at December 31, 2021, compared to $1.89 billion at September 30, 2021 and $2.08 billion at December 31, 2020. Gross loan growth for the quarter totaled $436.9 million and included $470.6 million in gross loans associated with the acquisition of Cortland (excluding Cortland's PPP loans) offset by a decline in PPP loan balances of $26.3 million (inclusive of Cortland's PPP loans) and a decline in other loan balances of $7.4 million which includes the sale of the Company's credit card portfolio. The credit card portfolio had a balance of $3.0 million at the time of sale. At December 31, 2021, the Company has $37.5 million of PPP loans before deferred fees still to be forgiven and $1.3 million in net deferred fees associated with these loans still to be recognized into income.

Available for sale securities increased to $1.43 billion at December 31, 2021, an increase of $852.1 million from December 31, 2020. During 2021, the Company continued to deploy excess cash balances into securities. The Cortland acquisition in the fourth quarter was responsible for $130.6 million of the growth in the portfolio.

Total deposits at December 31, 2021, were $3.55 billion compared to $2.87 billion at September 30, 2021, and $2.61 billion at December 31, 2020. The growth, year over year, was due to $695.3 million in deposits obtained in the acquisition of Cortland and $241.1 million of organic growth, or 9.2% organically. After adjusting for Cortland in the fourth quarter, deposits shrank $14.5 million for the quarter.

Total stockholders' equity increased to $472.4 million at December 31, 2021, compared to $377.5 million at September 30, 2021 and $350.1 million at December 31, 2020. The increase in stockholders' equity was due to the Cortland acquisition and the Company's earnings offset by dividends paid to common shareholders and changes in other comprehensive income.

Credit Quality

Non-performing loans to loans declined to 0.69% at December 31, 2021, compared to 0.78% at September 30, 2021. Early stage delinquencies, defined as 30-89 days past due, were $8.9 million, or 0.38% of total loans, at December 31, 2021, compared to $6.9 million, or 0.37% of total loans, for the prior quarter.

On January 1, 2021, Farmers adopted the Current Expected Credit Loss ("CECL") model of accounting for credit losses. At adoption, Farmers recorded a $2.16 million increase to its allowance for loan losses and a $0.29 million increase to its reserve for off-balance sheet commitments for a combined $2.45 million, of which $1.94 million was recorded as a reduction to retained earnings with the remainder to deferred taxes. In connection with the Cortland acquisition, on November 1, 2021, Farmers recorded a $6.16 million increase to its allowance for loan losses, which was comprised of $4.87 million required to be recorded as a provision for credit losses related to non-purchased credit deteriorated loans and $1.29 million required to be recorded as a reduction of loan balances for purchased credit deteriorated loans.

Excluding the merger impact noted above, the fourth quarter 2021 results include net charge-offs of $313,000 and a provision for credit loss of $691,000 compared to net charge-offs of $197,000 and a provision expense of $3.0 million for the same period in 2020. As an overall percentage of loans, the allowance for credit losses increased to 1.26% at December 31, 2021, compared to 1.22% for the quarter ended September 30, 2021. Excluding the PPP loans, this allowance for credit losses to gross loans ratio increases to 1.28% (non-GAAP) as of December 31, 2021. Total net charge-offs as a percentage of average net loans outstanding was 6 basis points for the quarter ended December 31, 2021, compared to 4 basis points for the fourth quarter of 2020.

Net interest income

Net interest income was $29.7 million for the fourth quarter of 2021 compared to $25.8 million for the fourth quarter of 2020. The increase was due to growth in average interest earning assets, including the acquisition of Cortland, offset by a decline in net interest margin of 36 basis points. The net interest margin was 3.33% for the current quarter which is down from the 3.47% net interest margin reported in the third quarter of 2021 and lower than the 3.69% net interest margin reported in the fourth quarter of 2020. The decline in net interest margin in the fourth quarter of 2021 compared to the third quarter of 2021 was driven by the acquisition of Cortland and the issuance of subordinated debt, the proceeds of which were used to purchase securities. Excluding the impact of acquisition marks and related accretion and PPP interest and fees (non-GAAP), the net interest margin for the fourth quarter of 2021 was 3.21% compared to 3.37% for the third quarter of 2021 and 3.51% for the fourth quarter of 2020.

Noninterest income

Noninterest income declined to $9.5 million for the quarter ended December 31, 2021 compared to $10.5 million for the fourth quarter in 2020. Net gains on the sale of loans decreased to $1.7 million for the fourth quarter of 2021 compared to $3.6 million in the fourth quarter of 2020 due to lower origination volumes and tighter margins. In addition, security gains and other noninterest income were lower by $154,000 and $251,000, respectively, in the fourth quarter of 2021 compared to the same period in 2020. These declines have been partially offset by increases to service charges on deposit of $208,000, a 22.4% increase, trust fees of $559,000, a 28.7% increase, investment commissions of $161,000, a 35.8% increase, and an increase in bank owned life insurance (BOLI) income of $227,000 from the purchase of additional insurance in December 2020 and the addition of Cortland's BOLI.

Noninterest expense

Total noninterest expense for the fourth quarter of 2021 increased to $27.7 million compared to $19.6 million in the fourth quarter of 2020. Excluding merger related costs and a $1.8 million prepayment penalty for the payoff of a $40 million FHLB advance, noninterest expense in the fourth quarter of 2021 was $19.3 million compared to $17.8 million of noninterest expense in the fourth quarter of 2020 after excluding merger related costs in that quarter. This increase in noninterest expense after adjusting for these items was primarily due to the acquisition of Cortland.

Covid Support Efforts

Farmers offered special financial assistance to support customers who were experiencing financial hardships related to the COVID-19 pandemic. The Company offered three month deferrals upon request by the borrowers, beginning in the middle of March, 2020 and concluding at the end of the three month deferral period. For those borrowers in industries that were greatly impacted by COVID-19, additional deferrals were considered and granted beyond the initial three month period. The range of deferred months for subsequent requests was three to nine months. The decline in deferred loans and balances was due to borrowers not requesting additional deferments and beginning to restart payments under the original terms of their loan. At December 31, 2021, Farmers had no customers still on deferral.

Farmers is also a preferred SBA lender and we dedicated significant additional staff and other resources to help our customers complete and submit their applications and supporting documentation for loans offered under the Paycheck Protection Program (PPP) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, so that they could obtain SBA approval and receive funding as quickly as possible. During the initial 2020 period of the PPP program, the Company facilitated PPP assistance to 1,714 business customers totaling $199.8 million. The Company, on behalf of its customers, began processing borrower applications for PPP forgiveness at the beginning of September 2020. The SBA has up to ninety days to review an application for PPP forgiveness and provide a decision at the end of that review. Once forgiveness of the PPP loans has been communicated and payment is received from the SBA, the Company will record the cash received from the SBA, pay-off the loans based on the amount of forgiveness provided and accelerate the amount of net deferred loan fees/costs recognized for the portion of the PPP loans that are forgiven.

About Farmers National Banc Corp.

Founded in 1887, Farmers National Banc Corp. is a diversified financial services company headquartered in Canfield, Ohio, with $4.4 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 48 banking locations in Mahoning, Trumbull, Columbiana, Portage, Stark, Wayne, Medina, Geauga and Cuyahoga Counties in Ohio and Beaver County 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, 2021 are $3.1 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, 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.

Forward-Looking Statements

This earnings release contains 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 the forward-looking statements include impacts from the COVID-19 pandemic, including further resurgence in the spread of COVID-19, on local, national and global economic conditions; higher default rates on loans made to our customers related to COVID-19 and its impact on our customers' operations and financial condition; unexpected changes in interest rates or disruptions in the mortgage markets related to COVID-19 or other responses to the health crisis; impacts of the upcoming U.S. elections on the regulatory landscape, capital markets, and response to and management of the COVID-19 pandemic including further economic stimulus from the federal government; Farmers' failure to integrate Cortland and Cortland Bank with Farmers in accordance with expectations; deviations from performance expectations related to Cortland and Cortland Bank; and the other factors contained in Farmers' Annual Report on Form 10-K for the year ended December 31, 2020 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, 2021			Sept. 30, 2021			June 30, 2021			March 31, 2021			Dec. 31, 2020			Dec. 31, 2021			Dec. 31, 2020			Percent Change
Total interest income		$	31,685			$	28,375			$	28,609			$	27,790			$	28,833			$	116,459			$	112,327				3.7	%
Total interest expense			1,986				1,841				2,119				2,523				3,030				8,469				16,136				-47.5	%
Net interest income			29,699				26,534				26,490				25,267				25,803				107,990				96,191				12.3	%
Provision for credit losses			5,366				(948	)			50				425				3,000				4,893				9,100				-46.2	%
Noninterest income			9,538				9,015				9,508				10,132				10,499				38,193				36,161				5.6	%
Acquisition related costs			6,521				472				104				12				1,798				7,109				3,223				120.6	%
Other expense			21,140				16,656				16,966				17,305				17,796				72,067				69,757				3.3	%
Income before income taxes			6,210				19,369				18,878				17,657				13,708				62,114				50,272				23.6	%
Income taxes			508				3,358				3,303				3,101				2,351				10,270				8,396				22.3	%
Net income		$	5,702			$	16,011			$	15,575			$	14,556			$	11,357			$	51,844			$	41,876				23.8	%
Average diluted shares outstanding			32,074				28,361				28,353				28,336				28,322				29,280				28,394
Basic earnings per share			0.18				0.57				0.55				0.52				0.40				1.78				1.48
Diluted earnings per share			0.18				0.56				0.55				0.51				0.40				1.77				1.47
Cash dividends per share			0.14				0.11				0.11				0.11				0.11				0.47				0.44
Performance Ratios
Net Interest Margin (Annualized)			3.33	%			3.47	%			3.52	%			3.54	%			3.69	%			3.45	%			3.70	%
Efficiency Ratio (Tax equivalent basis)			63.61	%			46.04	%			45.70	%			47.76	%			50.07	%			51.13	%			52.55	%
Return on Average Assets (Annualized)			0.58	%			1.92	%			1.90	%			1.87	%			1.49	%			1.52	%			1.46	%
Return on Average Equity (Annualized)			5.24	%			16.93	%			17.17	%			16.81	%			13.10	%			13.64	%			12.80	%
Dividends to Net Income			82.99	%			19.41	%			19.95	%			21.35	%			27.30	%			27.11	%			29.62	%
Other Performance Ratios (Non-GAAP)
Return on Average Tangible Assets			0.60	%			1.97	%			1.93	%			1.87	%			1.52	%			1.55	%			1.48	%
Return on Average Tangible Equity			6.57	%			19.63	%			19.81	%			19.30	%			15.48	%			16.13	%			15.07	%

Consolidated Statements of Financial Condition
		Dec. 31, 2021			Sept. 30, 2021			June 30, 2021			March 31, 2021			Dec. 31, 2020
Assets
Cash and cash equivalents		$	112,790			$	79,808			$	149,357			$	326,385			$	254,621
Securities available for sale			1,427,677				1,183,361				996,271				802,866				575,600
Other investments			30,459				19,041				20,573				21,317				21,528
Loans held for sale			4,545				2,628				1,922				3,993				4,766
Loans			2,331,082				1,894,216				1,959,865				2,037,404				2,078,044
Less allowance for credit losses (a)			29,386				23,136				24,806				24,935				22,144
Net Loans			2,301,696				1,871,080				1,935,059				2,012,469				2,055,900
Other assets			265,582				161,129				156,876				157,494				158,733
Total Assets		$	4,142,749			$	3,317,047			$	3,260,058			$	3,324,524			$	3,071,148
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing		$	916,237			$	675,938			$	663,640			$	675,045			$	608,791
Interest-bearing			2,630,998				2,190,475				2,115,183				2,158,009				2,002,087
Total deposits			3,547,235				2,866,413				2,778,823				2,833,054				2,610,878
Other interest-bearing liabilities			87,758				49,649				78,369				79,683				78,906
Other liabilities			35,324				23,461				35,958				64,432				31,267
Total liabilities			3,670,317				2,939,523				2,893,150				2,977,169				2,721,051
Stockholders' Equity			472,432				377,524				366,908				347,355				350,097
Total Liabilities and Stockholders' Equity		$	4,142,749			$	3,317,047			$	3,260,058			$	3,324,524			$	3,071,148
Period-end shares outstanding			33,898				28,322				28,322				28,308				28,258
Book value per share		$	13.94			$	13.33			$	12.95			$	12.27			$	12.39
Tangible book value per share (Non-GAAP)*			10.91				11.61				11.23				10.53				10.63

*	Tangible book value per share is calculated by dividing tangible common equity by outstanding shares

Capital and Liquidity
Common Equity Tier 1 Capital Ratio (b)			13.13	%			14.58	%			13.95	%			13.49	%			13.22	%
Total Risk Based Capital Ratio (b)			17.56	%			16.25	%			15.54	%			15.10	%			14.72	%
Tier 1 Risk Based Capital Ratio (b)			13.79	%			15.18	%			14.39	%			13.93	%			13.67	%
Tier 1 Leverage Ratio (b)			10.11	%			10.17	%			9.70	%			9.69	%			9.77	%
Equity to Asset Ratio			11.40	%			11.38	%			11.25	%			10.45	%			11.40	%
Tangible Common Equity Ratio (c)			9.15	%			10.06	%			9.90	%			9.10	%			9.94	%
Net Loans to Assets			55.56	%			56.41	%			59.36	%			60.53	%			66.94	%
Loans to Deposits			65.72	%			66.08	%			70.53	%			71.92	%			79.59	%
Asset Quality
Non-performing loans		$	16,195			$	14,744			$	13,873			$	11,640			$	13,835
Other Real Estate Owned			0				0				30				30				0
Non-performing assets			16,195				14,744				13,903				11,670				13,835
Loans 30 - 89 days delinquent			8,891				6,944				7,606				7,183				9,297
Charged-off loans			470				411				502				284				387
Recoveries			157				125				323				200				190
Net Charge-offs			313				286				179				84				197
Annualized Net Charge-offs to
Average Net Loans Outstanding			0.06	%			0.06	%			0.04	%			0.02	%			0.04	%
Allowance for Credit Losses to Total Loans (a)			1.26	%			1.22	%			1.27	%			1.22	%			1.07	%
Non-performing Loans to Total Loans			0.69	%			0.78	%			0.71	%			0.57	%			0.67	%
Allowance to Non-performing Loans (a)			181.45	%			156.92	%			178.81	%			214.22	%			160.06	%
Non-performing Assets to Total Assets			0.39	%			0.44	%			0.43	%			0.35	%			0.45	%

(a)	CECL methodology used during 2021. Prior periods used the incurred loss methodology.

(b)	December 31, 2021 ratio is estimated

(c)	This is a non-GAAP financial measure. A reconciliation to GAAP is shown below

		For the Three Months Ended
End of Period Loan Balances		Dec. 31, 2021			Sept. 30, 2021			June 30, 2021			March 31, 2021			Dec. 31, 2020
Commercial real estate		$	1,011,891			$	690,407			$	704,809			$	702,556			$	713,936
Commercial			313,836				302,356				351,261				406,064				404,492
Residential real estate			453,635				376,901				383,187				400,982				413,841
HELOC			127,433				106,750				107,153				107,501				110,352
Consumer			189,522				189,497				190,064				193,295				203,061
Agricultural loans			232,365				226,896				223,427				227,073				232,129
Total, excluding net deferred loan costs		$	2,328,682			$	1,892,807			$	1,959,901			$	2,037,471			$	2,077,811

		For the Three Months Ended			For the Twelve Months Ended
Noninterest Income		Dec. 31, 2021			Sept. 30, 2021			June 30, 2021			March 31, 2021			Dec. 31, 2020			Dec. 31, 2021			Dec. 31, 2020
Service charges on deposit accounts		$	1,138			$	924			$	790			$	808			$	930			$	3,660			$	3,682
Bank owned life insurance income			414				340				300				284				187				1,338				795
Trust fees			2,509				2,335				2,358				2,236				1,950				9,438				7,632
Insurance agency commissions			706				799				948				1,003				776				3,456				3,124
Security gains, including fair value changes			25				459				32				488				179				1,004				380
Retirement plan consulting fees			378				334				389				320				394				1,421				1,523
Investment commissions			611				638				523				504				450				2,276				1,530
Net gains on sale of loans			1,728				1,466				2,191				2,900				3,610				8,285				11,362
Other mortgage banking fee income, net			2				32				(55	)			(115	)			108				(136	)			(83	)
Debit card and EFT fees			1,424				1,227				1,322				1,171				1,061				5,144				4,264
Other noninterest income			603				461				710				533				854				2,307				1,952
Total Noninterest Income		$	9,538			$	9,015			$	9,508			$	10,132			$	10,499			$	38,193			$	36,161

		For the Three Months Ended			For the Twelve Months Ended
Noninterest Expense		Dec. 31, 2021			Sept. 30, 2021			June 30, 2021			March 31, 2021			Dec. 31, 2020			Dec. 31, 2021			Dec. 31, 2020
Salaries and employee benefits		$	10,230			$	9,321			$	9,866			$	9,976			$	9,638			$	39,393			$	39,826
Occupancy and equipment			2,422				1,899				1,890				2,275				2,060				8,486				7,254
State and local taxes			620				552				551				554				515				2,277				2,138
Professional fees			1,296				1,009				830				1,056				341				4,191				2,733
Merger related costs			6,521				472				104				12				1,798				7,109				3,223
Advertising			776				466				357				260				478				1,859				1,531
FDIC insurance			152				140				120				170				100				582				750
Intangible amortization			414				316				316				316				332				1,362				1,327
Core processing charges			880				860				831				627				831				3,198				3,551
Other noninterest expenses			4,350				2,093				2,205				2,071				3,501				10,719				10,647
Total Noninterest Expense		$	27,661			$	17,128			$	17,070			$	17,317			$	19,594			$	79,176			$	72,980

Business Combination

Consideration
Cash		$	29,618
Stock			98,921
Fair value of total consideration transferred		$	128,539
Fair value of assets acquired
Cash and cash equivalents		$	113,391
Securities available for sale			130,574
Other investments			16,092
Loans, net			482,168
Premises and equipment			12,644
Bank owned life insurance			21,547
Core deposit intangible			5,886
Current and deferred taxes			3,135
Other assets			7,805
Total assets acquired			793,242
Fair value of liabilities assumed
Deposits			695,274
Short-term borrowings			4,246
Long-term borrowings			4,262
Accrued interest payable and other liabilities			9,386
Total liabilities			713,168
Net assets acquired		$	80,074
Goodwill created			48,465
Total net assets acquired		$	128,539

Average Balance Sheets and Related Yields and Rates

(Dollar Amounts in Thousands)

		Three Months Ended December 31, 2021			Three Months Ended December 31, 2020
		AVERAGE BALANCE			INTEREST (1)			YIELD/ RATE (1)			AVERAGE BALANCE			INTEREST (1)			YIELD/ RATE (1)
EARNING ASSETS
Loans (2)		$	2,187,770			$	24,946				4.52	%		$	2,110,031			$	25,409				4.79	%
Taxable securities			892,563				3,948				1.75				223,306				1,335				2.38
Tax-exempt securities (2)			410,016				3,397				3.29				262,829				2,514				3.81
Other investments			26,475				142				2.13				15,138				128				3.36
Federal funds sold and other			114,496				39				0.14				237,357				67				0.11
Total earning assets			3,631,320				32,472				3.55				2,848,661				29,453				4.11
Nonearning assets			248,581						184,344
Total assets		$	3,879,901					$	3,033,005
INTEREST-BEARING LIABILITIES
Time deposits		$	379,786			$	697				0.73	%		$	458,340			$	1,591				1.38	%
Brokered time deposits			0				0				0.00				43,685				98				0.89
Savings deposits			736,732				202				0.11				489,071				236				0.19
Demand deposits - interest bearing			1,367,921				475				0.14				995,977				804				0.32
Short term borrowings			0				2				0.00				3,859				7				0.72
Long term borrowings			80,799				610				3.00				76,400				294				1.53
Total interest-bearing liabilities		$	2,565,238				1,986				0.31			$	2,067,332				3,030				0.58
NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits - noninterest bearing			851,130						593,955
Other liabilities			31,824						26,769
Stockholders' equity			431,709						344,949
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	3,879,901					$	3,033,005
Net interest income and interest rate spread			$	30,486				3.24	%			$	26,423				3.53	%
Net interest margin					3.33	%					3.69	%

(1)	Interest and yields are calculated on a tax-equivalent basis where applicable.

(2)

For 2021, adjustments of $86 thousand and $701 thousand, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2020, adjustments of $101 thousand and $519 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 December 31, 2021			Twelve Months Ended December 31, 2020
		AVERAGE BALANCE			INTEREST (1)			YIELD/ RATE (1)			AVERAGE BALANCE			INTEREST (1)			YIELD/ RATE (1)
EARNING ASSETS
Loans (2)		$	2,041,347			$	95,180				4.66	%		$	2,062,936			$	98,779				4.79	%
Taxable securities			617,475				11,399				1.85				209,817				5,423				2.58
Tax-exempt securities (2)			348,627				12,027				3.45				250,394				9,675				3.86
Other investments			21,912				498				2.27				16,073				543				3.38
Federal funds sold and other			180,718				201				0.11				124,447				298				0.24
Total earning assets			3,210,079				119,305				3.72				2,663,667				114,718				4.31
Nonearning assets			195,805						205,727
Total assets		$	3,405,884					$	2,869,394
INTEREST-BEARING LIABILITIES
Time deposits		$	393,039			$	3,652				0.93	%		$	480,302			$	8,083				1.68	%
Brokered time deposits			11,737				75				0.64				72,472				1,057				1.46
Savings deposits			569,179				712				0.13				462,021				1,080				0.23
Demand deposits - interest bearing			1,240,014				2,336				0.19				856,462				4,161				0.49
Short term borrowings			3,957				11				0.28				20,764				359				1.73
Long term borrowings			70,057				1,683				2.40				82,451				1,396				1.69
Total interest-bearing liabilities		$	2,287,983				8,469				0.37			$	1,974,472				16,136				0.82
NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits - noninterest bearing		$	714,978					$	546,177
Other liabilities			23,498						21,570
Stockholders' equity			379,425						327,175
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	3,405,884					$	2,869,394
Net interest income and interest rate spread			$	110,836				3.35	%			$	98,582				3.49	%
Net interest margin					3.45	%					3.70	%

(1)	Interest and yields are calculated on a tax-equivalent basis where applicable.

(2)

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. For 2020, adjustments of $400 thousand and $2.0 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 Assets

		For the Three Months Ended			For the Twelve Months Ended
		Dec. 31, 2021			Sept. 30, 2021			June 30, 2021			March 31, 2021			Dec. 31, 2020			Dec. 31, 2021			Dec. 31, 2020
Total Assets		$	4,142,749			$	3,317,047			$	3,260,058			$	3,324,524			$	3,071,148			$	4,142,749			$	3,071,148
Less Goodwill and other intangibles			102,606				48,670				48,985				49,301				49,617				102,606				49,617
Tangible Assets		$	4,040,143			$	3,268,377			$	3,211,073			$	3,275,223			$	3,021,531			$	4,040,143			$	3,021,531
Average Assets			3,879,901				3,304,708				3,280,316				3,155,695				3,033,005				3,405,912				2,869,394
Less average Goodwill and other intangibles			84,580				48,879				49,193				49,509				51,476				58,111				49,363
Average Tangible Assets		$	3,795,321			$	3,255,829			$	3,231,123			$	3,106,186			$	2,981,529			$	3,347,801			$	2,820,031

Reconciliation of Common Stockholders' Equity to Tangible Common Equity

		For the Three Months Ended			For the Twelve Months Ended
		Dec. 31, 2021			Sept. 30, 2021			June 30, 2021			March 31, 2021			Dec. 31, 2020			Dec. 31, 2021			Dec. 31, 2020
Stockholders' Equity		$	472,432			$	377,524			$	366,908			$	347,355			$	350,097			$	472,432			$	350,097
Less Goodwill and other intangibles			102,606				48,670				48,985				49,301				49,617				102,606				49,617
Tangible Common Equity		$	369,826			$	328,854			$	317,923			$	298,054			$	300,480			$	369,826			$	300,480
Average Stockholders' Equity			431,709				375,208				363,753				351,190				344,949				379,425				327,175
Less average Goodwill and other intangibles			84,580				48,879				49,193				49,509				51,476				58,111				49,363
Average Tangible Common Equity		$	347,129			$	326,329			$	314,560			$	301,681			$	293,473			$	321,314			$	277,812

Reconciliation of Net Income, Less Merger and One-Time Items

		For the Three Months Ended			For the Twelve Months Ended
		Dec. 31, 2021			Sept. 30, 2021			June 30, 2021			March 31, 2021			Dec. 31, 2020			Dec. 31, 2021			Dec. 31, 2020
Net income		$	5,702			$	16,011			$	15,575			$	14,556			$	11,357			$	51,844			$	41,876
Acquisition related costs - after tax			5,232				468				83				9				1,431				5,731				2,585
Acquisition related provision - after tax			3,846				0				0				0				0				3,846				0
FHLB prepayment penalties - after tax			1,425				257				0				0				0				1,682				666
Net loss (gain) on asset/security sales - after tax			134				(362	)			(26	)			(344	)			502				(598	)			404
Gain on sale of credit card portfolio - after tax			(189	)			0				0				0				0				(189	)			0
Net income - Adjusted		$	16,150			$	16,374			$	15,632			$	14,221			$	13,290			$	62,316			$	45,531
Diluted EPS excluding merger and one-time items		$	0.50			$	0.58			$	0.55			$	0.50			$	0.47			$	2.13			$	1.60
Return on Average Assets excluding merger and one-time items (Annualized)			1.65	%			1.97	%			1.91	%			1.83	%			1.74	%			1.83	%			1.59	%
Return on Average Equity excluding merger and one-time items (Annualized)			14.84	%			17.31	%			17.24	%			16.42	%			15.29	%			16.42	%			13.92	%
Return on Average Tangible Equity excluding acquisition costs and one-time items (Annualized)			18.46	%			19.91	%			19.93	%			19.12	%			17.97	%			19.39	%			16.39	%

Efficiency ratio excluding one-time items

		For the Three Months Ended			For the Twelve Months Ended
		Dec. 31, 2021			Sept. 30, 2021			June 30, 2021			March 31, 2021			Dec. 31, 2020			Dec. 31, 2021			Dec. 31, 2020
Net interest income, after tax		$	30,492			$	27,256			$	27,192			$	25,901			$	26,423			$	110,840			$	98,582
Noninterest income			9,538				9,015				9,508				10,132				10,499				38,193				36,161
Net loss (gain) on asset/security sales			170				(458	)			(33	)			(436	)			635				(757	)			511
Gain on sale of credit card portfolio			(239	)			0				0				0				0				(239	)			0
Net interest income and noninterest income adjusted			39,961				35,813				36,667				35,597				37,557				148,037				135,254
Noninterest expense less intangible amortization			27,247				16,813				16,755				17,002				19,213				77,817				70,001
Acquisition related costs			6,521				472				104				12				1,798				7,109				3,223
FHLB prepayment penalties			1,804				325				0				0				0				2,129				0
Noninterest income adjusted			18,922				16,016				16,651				16,990				17,415				68,579				66,778
Efficiency ratio excluding one-time items			47.35	%			44.72	%			45.41	%			47.73	%			46.37	%			46.33	%			49.37	%

Net interest margin excluding acquisition marks and PPP interest and fees

		For the Three Months Ended			For the Twelve Months Ended
		Dec. 31, 2021			Sept. 30, 2021			June 30, 2021			March 31, 2021			Dec. 31, 2020			Dec. 31, 2021			Dec. 31, 2020
Net interest income, fully-taxable equivalent		$	30,486			$	27,256			$	27,192			$	25,901			$	26,423			$	110,836			$	98,582
Acquisition marks			496				(35	)			200				271				308				932				1,126
PPP interest and fees			979				1,402				2,097				2,144				2,456				6,621				4,914
Adjusted and annualized net interest income			115,098				102,712				99,854				95,249				93,865				103,283				92,542
Average earning assets			3,631,320				3,120,336				3,077,915				2,937,144				2,848,661				3,210,079				2,663,667
less PPP average balances			47,939				76,990				131,856				125,168				177,382				95,226				121,641
Adjusted average earning assets			3,583,381				3,043,346				2,946,059				2,811,976				2,671,279				3,114,853				2,542,026
Net interest margin excluding marks and PPP interest and fees			3.21	%			3.37	%			3.39	%			3.39	%			3.51	%			3.32	%			3.64	%

Reconciliation of Allowance for Credit Losses to Gross Loans, Excluding PPP Loans and Acquired Loans

		For the Three Months Ended
		Dec. 31, 2021			Sept. 30, 2021			June 30, 2021			March 31, 2020			Dec. 31, 2020
Gross Loans		$	2,331,082			$	1,894,216			$	1,959,865			$	2,037,404			$	2,078,044
PPP Loans, net			36,215				53,580				92,073				136,826				125,396
Loans less PPP			2,294,867				1,840,636				1,867,792				1,900,578				1,952,648
Allowance for Credit Losses to Gross Loans Excluding PPP (a)			1.28	%			1.26	%			1.33	%			1.31	%			1.13	%
Acquired Loans			654,552				211,954				233,790				251,616				272,150

(a)	CECL methodology used for the 2021 quarters. Prior period used the incurred loss methodology.