Friday, April 27, 2012CANFIELD, Ohio -- With a solid performance in 2011 behind him and having just released the results of a good first quarter, John S. Gulas, the president and CEO of Farmers National Banc Corp., informed shareholders Thursday their company is positioned for more growth -- through acquisition, building new offices and internally.
In the wake of the Great Recession and the burst housing bubble, banks have more regulations to comply with and this is placing a greater strain on the resources of smaller banks than large banks, Gulas said. In an interview afterward, he said Farmers has had conversations with directors and senior management of smaller banks upset at how the expense of compliance is cutting into their profitability and reducing their ability to pay dividends.
Such banks might find an offer that Farmers extended attractive in such an environment, that their shareholders could benefit more as a part of a larger bank, such as Farmers, than remaining independent. He did not identify whom he held these conversations with.
At Farmers’ annual meeting in the parish center of St. Michael Church, Gulas reviewed a year of success that showed Farmers National Bank outperforming the average statistics of all banks headquartered in Ohio and the national averages.
Take asset quality: In 2011, Farmers reported its nonperforming assets as a percent of total assets was 1.08% compared to the Ohio average of 2.23% and the U.S. average of 2.79%.
Or stock price: Farmers, which began trading on the Nasdaq Exchange Sept. 15, saw the price of its shares increase in value nearly 40% in 2011 and rise another 31.11% the first quarter of this year.
Farmers has become more diversified in its sources of revenue through the acquisition of what is now Farmers Trust Co. and forming Farmers Insurance Co. and so less dependent on interest income. Three years ago, Gulas noted, fee and service charge income was 16%. Last year it was 23%.
This results in part from the growth of Farmers Trust Co., which had $633 million in assets under management when Farmers National Banc Corp. bought it in 2009, and has some $950 million in assets under management today. It also results from the more than 280 property-and-casualty policies Farmers Insurance has sold since March 2010.
In addition, during the most recent open-enrollment season of Medicare, Farmers sold 80 such policies, Gulas reported.
Core deposits have increased because of the number of landowners who negotiated the mineral rights to oil and gas companies and deposited the proceeds at Farmers Bank. This was helped in large measure through the bank creating a shale resource team and introducing certificates of deposit aimed at such depositors that allow them to earn as much as 1% as they consult with attorneys and accountants on how best to use their newly found wealth.
Core deposits -- best defined as “funds that stay with you,” as the chief financial officer and executive vice president, Carl D. Culp, put it – comprise 88% of Farmers deposits, he reported. And deposits increased 2.6% last year. That might not sound like much but, as he said, “the growth in money-market accounts and noninterest demand deposits was offset by a decrease in time deposits as our customers continue to move balances to more liquid accounts.”
In the business part of the meeting, shareholders re-elected Anne Frederick Crawford, David Z. Paull and Lance J. Ciroli as independent directors for terms of three years.
Crawford, a director since 2004, is an attorney in Canfield.
Paull, a director since January 2011, is the vice president of human resources and labor relations for RTI International Metals Inc.
And Ciroli, a director of the bank since October 2010 and the corporation since last Oct. 1, operates NBE Bank Consulting Services, which he founded after working as an assistant deputy comptroller in the Office of the Comptroller of the Currency.
The public accounting firm of Crowe Horwath LLP was chosen again as Farmers’ outside auditor for this year. Farmers paid Crowe Horwath $229,000 in audit fees in 2011 and $212,500 in 2010. Audit-related fees fell to $3,600 in 2011 from $120,000 in 2010. And tax fees fell to $16,200 in 2011 from $25,400 in 2010.
Despite an overwhelming majority to amend Article XIII of the articles of incorporation and provide management with more flexibility to raise capital by abolishing pre-emptive rights, the majority wasn’t overwhelming enough. As with the previous two efforts, those who returned their proxy ballots voted yes, this time 85%, Gulas said.
The articles state that an unreturned vote is the same as a “no” vote, not an abstention, and many shareholders with relatively small positions in Farmers did not respond. Farmers management had a consultant call these shareholders and urge them to vote.
The margin of defeat continues to narrow, Gulas said, and the matter will be placed on the agenda of next year’s annual meeting even though those present voted to allow an adjournment of this year’s meeting to solicit additional proxies.
Farmers opened an office in Stark County last year and moved its trust company offices to a new building on McClurg Road in Boardman this year. In July it will move its Howland trust operations to a new building roughly 150 yards away.
As to opening or building new offices this year, “We have two or three projects in different stages,” Gulas said afterward, declining to elaborate. “Our home is here,” he said, because the majority of the company’s offices are in Trumbull, Mahoning and Columbiana counties.
Copyright 2012 The Business Journal, Youngstown, Ohio.