Farmers National Banc (FMNB) 8-K 2017 Second Quarter Financial Results

EXHIBIT 99.1

July 26, 2017

Press Release

Source:	Farmers National Banc Corp.
	Kevin J. Helmick, President and CEO
	20 South Broad Street, P.O. Box 555
	Canfield, OH 44406
	330.533.3341
	Email:exec@farmersbankgroup.com

FARMERS NATIONAL BANC CORP. ANNOUNCES

2017 SECOND QUARTER FINANCIAL RESULTS

• Earnings per diluted share increased to $0.21 for the quarter ended June 30, 2017 compared to $0.19 for same quarter in 2016

• 138 consecutive quarters of profitability

• 11% organic loan growth since June 30, 2016

• Annualized return on average assets was 1.11% and annualized return on average equity 10.25% for the quarter ended June 30, 2017

• Noninterest income increased 6% compared to same quarter in 2016

• Non-performing assets to total assets remain at low levels, 0.32% at June 30, 2017

CANFIELD, Ohio (July 26, 2017) – Farmers National Banc Corp. (Farmers) (NASDAQ: FMNB) today reported financial results for the three months ended June 30, 2017.

Net income for the three months ended June 30, 2017 was $5.7 million, or $0.21 per diluted share, which compares to $5.0 million, or $0.19 per diluted share, for the three months ended June 30, 2016 and $5.8 million or $0.21 per diluted share for the linked quarter. Excluding acquisition expenses net income for the three month period ended June 30, 2017 would have been $5.8 million. Annualized return on average assets and return on average equity were 1.11% and 10.25%, respectively, for the three month period ending June 30, 2017, compared to 1.06% and 9.69% for the same three month period in 2016, and 1.17% and 10.87% for the linked quarter. Farmers’ return on average tangible equity (Non-GAAP) also improved to 12.77% for the quarter ended June 30, 2017 compared to 12.22% for the same quarter in 2016 and 13.54% for the linked quarter.

Net income for the six months ended June 30, 2017 was $11.5 million, or $0.42 per diluted share, compared to $9.8 million or $0.36 per diluted share for the same six month period in 2016. Return on average assets and return on average equity were 1.14% and 10.52%, respectively, for the six months ended June 30, 2017, compared to 1.05% and 9.61% for the same period in 2016. Excluding expenses related to acquisition activities net income for the six month period ended June 30, 2017 would have been $11.6 million or $0.43 per diluted share.

On March 13, 2017, Farmers entered into an agreement and plan of merger with Monitor Bancorp, Inc. (Monitor), the holding company for The Monitor Bank, located in Holmes County in Ohio. This transaction has obtained all regulatory approvals and is expected to close during the third quarter of 2017. This transaction will serve as an entrance into the attractive Holmes County market for Farmers. Monitor has an excellent core deposit base and has been a solid earner with strong asset quality. This transaction will help Farmers continue to grow its market share, balance sheet and earnings. As of December 31, 2016, Monitor had total assets of $43.3 million, which included net loans of $22.3 million and deposits of $37.2 million. For the year ended December 31, 2016, Monitor’s return on average assets and return on average equity were 0.74% and 5.44%, respectively.

Kevin J. Helmick, President and CEO, stated, “ We are looking forward to close our fourth acquisition in the past two years, which further enhances Farmers’ brand and delivers long-term value for our shareholders. We remain focused on our strategic growth plan which has paved the way for the company to reach over $2 billion in assets in 2017. This growth enhances profitability by creating significant economies of scale and improved operational efficiencies. We continue to be encouraged by our organic loan growth, which has increased 11% during the past twelve months, and improvements in our level of noninterest income.”

2017 Second Quarter Financial Highlights

• Loan growth

Total loans were $1.51 billion at June 30, 2017, compared to $1.36 billion at June 30, 2016, representing an increase of 10.8%. The increase in loans is a direct result of Farmers’ focus on loan growth utilizing a talented lending and credit team, while adhering to a sound underwriting discipline. The increase in loans has occurred across each of the major loan categories. Loans now comprise 77.6% of the Bank’s average earning assets for the quarter ended June 30, 2017, an improvement compared to 76.2% for the same period in 2016. This improvement, along with the growth in earning assets, has resulted in an 11% increase in tax equated loan income in the second quarter of 2017 compared to the same quarter in 2016.

• Loan quality

Non-performing assets to total assets remain at a low level, currently at 0.32%. Early stage delinquencies also continue to remain at low levels, at $7.1 million, or 0.47% of total loans, at June 30, 2017. Net charge-offs for the current quarter were $523 thousand, compared to $660 thousand in the same quarter in 2016 and total net charge-offs as a percentage of average net loans outstanding is only 0.14% for the quarter ended June 30, 2017. Lending to the energy sector is insignificant and less than 1% of the loan portfolio.

• Net interest margin

The net interest margin for the three months ended June 30, 2017 was 4.05%, a 1 basis point decrease from the quarter ended June 30, 2016. In comparing the first quarter of 2017 to the same period in 2016, asset yields increased 11 basis points, while the cost of interest-bearing liabilities increased 14 basis points. The net interest margin is impacted by the additional accretion as a result of the discounted loan portfolios acquired in the NBOH and Tri-State mergers, which increased the net interest margin by 2 and 9 basis points for the quarters ended June 30, 2017 and 2016, respectively.

• Noninterest income

Noninterest income increased 5.5% to $6.1 million for the quarter ended June 30, 2017 compared to $5.7 million in 2016. Gains on the sale of mortgage loans increased $351 thousand, or 65% in the current year’s quarter compared to the same quarter in 2016. Insurance agency commissions increased $379 thousand in comparing the same two quarters due mainly to the acquisition of the Bowers Group that closed on June 1, 2016. Debit card interchange fees increased $179 thousand or 27.3% in comparing the second quarter of 2017 to the same quarter in 2016. Other operating income is down $286 thousand in June 30, 2017 compared to the same quarter in 2016, mainly as a result of a $262 thousand gain on the sale of land that was recognized during the second quarter of 2016.

• Noninterest expenses

Farmers has remained committed to managing the level of noninterest expenses. Total noninterest expenses for the second quarter of 2017 increased to $15.8 million compared to $14.8 million in the same quarter in 2016, primarily as a result of an increase in salaries and employee benefits of $1.1 million, offset by a $156 thousand decrease in other operating expenses and a $120 thousand decrease in merger related costs. There were also $155 thousand of litigation settlement expense in the current quarter ended June 30, 2017 compared to none in the same quarter in 2016. It is important to note that annualized noninterest expenses measured as a percentage of quarterly average assets decreased from 3.13% in the second quarter of 2016 to 3.08% in the second quarter of 2017.

• Efficiency ratio

The efficiency ratio for the quarter ended June 30, 2017 improved to 60.8% compared to 62.6% for the same quarter in 2016. The main factors leading to this improvement were the increase in net interest income and noninterest income, the decrease in merger related costs, along with the stabilized level of noninterest expenses relative to average assets as explained in the preceding paragraphs.

2017 Outlook

Mr. Helmick added, “We are encouraged by the promising start to 2017 in our financial results. We will focus our energy on the seamless integration of our newly acquired bank and customers and we remain committed to the businesses and families we serve and to our community banking approach and culture.”

Founded in 1887, Farmers National Banc Corp. is a diversified financial services company headquartered in Canfield, Ohio, with $2 billion in banking assets and $1 billion in trust 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 38 banking locations in Mahoning, Trumbull, Columbiana, Stark, Wayne, Medina and Cuyahoga Counties in Ohio and Beaver County in Pennsylvania, Farmers Trust Company, which operates three trust offices and offers services in the same geographic markets, and National Associates, Inc. Farmers National Insurance, LLC and Bowers Insurance Agency, Inc., wholly-owned subsidiaries of The Farmers National Bank of Canfield, offer 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 and net income excluding costs related to acquisition activities and litigation settlement expenses, 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 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 can be found in Farmers’ Annual Report on Form 10-K for the year ended December 31, 2016, which has been filed with the Securities and Exchange Commission (SEC) and is 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 Six Months Ended
	June 30, 2017			March 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			June 30, 2017			June 30, 2016			Percent Change
Total interest income	$	20,042		$	18,850		$	18,469		$	18,332		$	17,950		$	38,892		$	35,697			9.0	%
Total interest expense		1,669			1,319			1,178			1,139			1,061			2,988			2,061			45.0	%
Net interest income		18,373			17,531			17,291			17,193			16,889			35,904			33,636			6.7	%
Provision for loan losses		950			1,050			990			1,110			990			2,000			1,770			13.0	%
Noninterest income		6,055			5,887			6,076			6,485			5,737			11,942			10,683			11.8	%
Merger related costs		104			62			19			31			224			166			513			-67.6	%
Other expense		15,660			14,551			14,981			15,194			14,559			30,211			28,714			5.2	%
Income before income taxes		7,714			7,755			7,377			7,343			6,853			15,469			13,322			16.1	%
Income taxes		2,004			1,972			2,014			1,967			1,833			3,976			3,504			13.5	%
Net income	$	5,710		$	5,783		$	5,363		$	5,376		$	5,020		$	11,493		$	9,818			17.1	%
Average shares outstanding		27,067			27,054			27,048			27,048			26,965			27,061			26,951
Basic and diluted earnings per share		0.21			0.21			0.20			0.20			0.19			0.42			0.36
Cash dividends		1,353			1,353			1,082			1,082			1,083			2,707			2,160
Cash dividends per share		0.05			0.05			0.04			0.04			0.04			0.10			0.08
Performance Ratios
Net Interest Margin (Annualized)		4.05	%		4.01	%		3.95	%		3.97	%		4.06	%		4.03	%		4.07	%
Efficiency Ratio (Tax equivalent basis)		60.79	%		58.79	%		60.37	%		60.85	%		62.60	%		59.81	%		62.63	%
Return on Average Assets (Annualized)		1.11	%		1.17	%		1.08	%		1.10	%		1.06	%		1.14	%		1.05	%
Return on Average Equity (Annualized)		10.25	%		10.87	%		9.74	%		9.97	%		9.69	%		10.52	%		9.61	%
Dividends to Net Income		23.70	%		23.40	%		20.18	%		20.13	%		21.57	%		23.55	%		22.00	%
Other Performance Ratios (Non-GAAP)
Return on Average Tangible Assets		1.14	%		1.18	%		1.11	%		1.13	%		1.08	%		1.16	%		1.06	%
Return on Average Tangible Equity		12.77	%		13.54	%		12.34	%		12.73	%		12.22	%		13.10	%		12.10	%

Consolidated Statements of Financial Condition
	June 30, 2017		March 31, 2017		Dec. 31, 2016		Sept. 30, 2016		June 30, 2016
Assets
Cash and cash equivalents	$	64,640	$	61,251	$	41,778	$	67,372	$	62,184
Securities available for sale		391,628		377,072		369,995		368,729		378,432
Loans held for sale		583		1,098		355		2,148		1,737
Loans		1,505,273		1,461,461		1,427,635		1,395,620		1,358,484
Less allowance for loan losses		11,746		11,319		10,852		10,518		9,720
Net Loans		1,493,527		1,450,142		1,416,783		1,385,102		1,348,764
Other assets		135,286		136,924		137,202		137,657		134,002
Total Assets	$	2,085,664	$	2,026,487	$	1,966,113	$	1,961,008	$	1,925,119

Liabilities and Stockholders’ Equity
Deposits
Noninterest-bearing	$	387,596	$	374,399	$	366,870	$	352,441	$	339,364
Interest-bearing		1,153,407		1,165,821		1,157,886		1,139,724		1,108,078
Total deposits		1,541,003		1,540,220		1,524,756		1,492,165		1,447,442
Other interest-bearing liabilities		298,827		245,069		213,496		235,757		247,934
Other liabilities		19,147		23,136		14,645		17,649		17,252
Total liabilities		1,858,977		1,808,425		1,752,897		1,745,571		1,712,628
Stockholders’ Equity		226,687		218,062		213,216		215,437		212,491
Total Liabilities and Stockholders’ Equity	$	2,085,664	$	2,026,487	$	1,966,113	$	1,961,008	$	1,925,119
Period-end shares outstanding		27,067		27,067		27,048		27,048		27,048
Book value per share	$	8.38	$	8.06	$	7.88	$	7.96	$	7.86
Tangible book value per share (Non-GAAP)*		6.73		6.40		6.21		6.29		6.17

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

Capital and Liquidity
Common Equity Tier 1 Capital Ratio (a)		11.79	%		11.75	%		11.69	%		11.67	%		11.61	%
Total Risk Based Capital Ratio (a)		12.52	%		12.61	%		12.53	%		12.51	%		12.41	%
Tier 1 Risk Based Capital Ratio (a)		11.79	%		11.89	%		11.83	%		11.81	%		11.75	%
Tier 1 Leverage Ratio (a)		9.38	%		9.47	%		9.41	%		9.35	%		9.37	%
Equity to Asset Ratio		10.87	%		10.76	%		10.84	%		10.99	%		11.04	%
Tangible Common Equity Ratio		8.93	%		8.74	%		8.75	%		8.88	%		8.87	%
Net Loans to Assets		71.61	%		71.56	%		72.06	%		70.63	%		70.06	%
Loans to Deposits		97.68	%		94.89	%		93.63	%		93.53	%		93.85	%
Asset Quality
Non-performing loans	$	6,355		$	6,553		$	8,170		$	8,003		$	8,360
Other Real Estate Owned		236			318			482			506			572
Non-performing assets		6,591			6,871			8,652			8,509			8,932
Loans 30 - 89 days delinquent		7,052			8,258			12,747			10,986			11,371
Charged-off loans		725			943			841			562			820
Recoveries		202			360			185			250			160
Net Charge-offs		523			583			656			312			660
Annualized Net Charge-offs to Average Net Loans Outstanding		0.14	%		0.16	%		0.20	%		0.09	%		0.20	%
Allowance for Loan Losses to Total Loans		0.78	%		0.77	%		0.76	%		0.75	%		0.72	%
Non-performing Loans to Total Loans		0.42	%		0.45	%		0.57	%		0.57	%		0.62	%
Allowance to Non-performing Loans		184.83	%		172.73	%		132.83	%		131.43	%		116.27	%
Non-performing Assets to Total Assets		0.32	%		0.34	%		0.44	%		0.43	%		0.46	%

(a) June 30, 2017 ratio is estimated

Reconciliation of Common Stockholders’ Equity to Tangible Common Equity

											For the Six Months Ended
	June 30,		March 31,		Dec. 31,		Sept. 30,		June 30,		June 30,		June 30,
	2017		2017		2016		2016		2016		2017		2016
Stockholders’ Equity	$	226,687	$	218,062	$	213,216	$	215,437	$	212,491	$	226,687	$	212,491
Less Goodwill and other intangibles		44,425		44,789		45,154		45,299		45,718		44,425		45,718
Tangible Common Equity	$	182,262	$	173,273	$	168,062	$	170,138	$	166,773	$	182,262	$	166,773
Average Stockholders’ Equity		223,544		215,819		219,028		214,484		207,776		220,308		205,407
Less Average Goodwill and other intangibles		44,665		45,028		45,173		45,575		43,475		44,845		43,137
Average Tangible Common Equity	$	178,879	$	170,791	$	173,855	$	168,909	$	164,301	$	175,463	$	162,270

Reconciliation of Total Assets to Tangible Assets

											For the Six Months Ended
	June 30,		March 31,		Dec. 31,		Sept. 30,		June 30,		June 30,		June 30,
	2017		2017		2016		2016		2016		2017		2016
Total Assets	$	2,085,664	$	2,026,487	$	1,966,113	$	1,961,008	$	1,925,119	$	2,085,664	$	1,925,119
Less Goodwill and other intangibles		44,425		44,789		45,154		45,299		45,718		44,425		45,718
Tangible Assets	$	2,041,239	$	1,981,698	$	1,920,959	$	1,915,709	$	1,879,401	$	2,041,239	$	1,879,401
Average Assets		2,055,758		2,001,084		1,977,589		1,949,204		1,897,068		2,025,939		1,889,308
Less average Goodwill and other intangibles		44,665		45,028		45,173		45,575		43,475		44,845		43,137
Average Tangible Assets	$	2,011,093	$	1,956,056	$	1,932,416	$	1,903,629	$	1,853,593	$	1,981,094	$	1,846,171

Reconciliation of Net Income, Excluding Costs Related to Acquisition Activities

											For the Six Months
	For the Three Months Ended										Ended
	June 30,		March 31,		Dec. 31,		Sept. 30,		June 30,		June 30,		June 30,
	2017		2017		2016		2016		2016		2017		2016
Income before income taxes - Reported	$	7,714	$	7,755	$	7,377	$	7,343	$	6,853	$	15,469	$	13,322
Acquisition Costs		104		62		19		31		224		166		513
Income before income taxes - Adjusted		7,818		7,817		7,396		7,374		7,077		15,635		13,835
Income tax expense (b)		2,014		1,987		2,018		1,973		1,899		4,001		3,645
Net income - Adjusted	$	5,804	$	5,830	$	5,378	$	5,401	$	5,178	$	11,634	$	10,190
Average shares outstanding		27,067		27,054		27,048		27,048		26,965		27,061		26,951
EPS excluding acquisition costs	$	0.21	$	0.22	$	0.20	$	0.20	$	0.19	$	0.43	$	0.38

(b) The income tax expense change from actual income tax expense relates to the deductibility of certain acquisition costs

Reconciliation of Return on Average Assets and Average Equity, Excluding Acquisition Costs

																For the Six Months
	For the Three Months Ended															Ended
	June 30,			March 31,			Dec. 31,			Sept. 30,			June 30,			June 30,			June 30,
	2017			2017			2016			2016			2016			2017			2016
ROA excluding acquisition costs (c)		1.13	%		1.17	%		1.09	%		1.11	%		1.09	%		1.15	%		1.08	%
ROE excluding acquisition costs (d)		10.39	%		10.81	%		9.82	%		10.07	%		9.97	%		10.56	%		9.92	%

(c) Net income -adjusted divided by average assets

(d) Net income - adjusted divided by average equity

	For the Three Months Ended
	June 30,			March 31,		Dec. 31,		Sept. 30,		June 30,
End of Period Loan Balances	2017			2017		2016		2016		2016
Commercial real estate	$	476,844		$	456,917	$	446,975	$	426,657	$	418,269
Commercial		215,676			208,913		204,771		207,228		201,796
Residential real estate		445,991			441,593		430,674		423,009		418,693
Consumer		220,454			216,648		212,836		205,466		192,232
Agricultural loans		142,687			133,868		128,981		129,959		124,551
Total, excluding net deferred loan costs	$	1,501,652		$	1,457,939	$	1,424,237	$	1,392,319	$	1,355,541
	For the Three Months Ended
	June 30,			March 31,		Dec. 31,		Sept. 30,		June 30,
Noninterest Income	2017			2017		2016		2016		2016
Service charges on deposit accounts	$	989		$	951	$	1,031	$	1,057	$	987
Bank owned life insurance income		191			201		208		194		201
Trust fees		1,523			1,678		1,482		1,693		1,564
Insurance agency commissions		672			674		559		569		293
Security gains		(14	)		13		1		31		41
Retirement plan consulting fees		399			513		444		561		496
Investment commissions		253			222		310		308		356
Net gains on sale of loans		891			607		838		1,063		540
Debit card and EFT fees		836			653		722		656		657
Other operating income		315			375		481		353		602
Total Noninterest Income	$	6,055		$	5,887	$	6,076	$	6,485	$	5,737
	For the Three Months Ended
	June 30,			March 31,		Dec. 31,		Sept. 30,		June 30,
Noninterest Expense	2017			2017		2016		2016		2016
Salaries and employee benefits	$	8,853		$	8,287	$	8,248	$	8,366	$	7,740
Occupancy and equipment		1,631			1,587		1,748		1,587		1,616
State and local taxes		424			417		363		394		394
Professional fees		775			747		803		671		754
Merger related costs		104			62		19		31		224
Litigation settlement expense		155			0		0		0		0
Advertising		317			244		241		383		363
FDIC insurance		234			235		199		287		286
Intangible amortization		365			365		368		421		335
Core processing charges		717			655		743		738		580
Telephone and data		242			241		275		206		233
Other operating expenses		1,947			1,773		1,993		2,141		2,258
Total Noninterest Expense	$	15,764		$	14,613	$	15,000	$	15,225	$	14,783

Average Balance Sheets and Related Yields and Rates

(Dollar Amounts in Thousands)

	Three Months Ended							Three Months Ended
	June 30, 2017							June 30, 2016
	AVERAGE							AVERAGE
	BALANCE		INTEREST (1)		RATE (1)			BALANCE		INTEREST (1)		RATE (1)
EARNING ASSETS
Loans (2)	$	1,472,575	$	17,572		4.79	%	$	1,320,777	$	15,787		4.79	%
Taxable securities		216,414		1,265		2.34			246,590		1,288		2.10
Tax-exempt securities (2)		164,369		1,791		4.37			129,772		1,377		4.26
Equity securities		10,216		123		4.83			9,637		113		4.70
Federal funds sold and other		33,053		82		1.00			26,137		27		0.41
Total earning assets		1,896,627		20,833		4.41			1,732,913		18,592		4.30
Nonearning assets		159,131							164,155
Total assets	$	2,055,758						$	1,897,068
INTEREST-BEARING LIABILITIES
Time deposits	$	234,952	$	652		1.11	%	$	249,491	$	472		0.76	%
Savings deposits		526,398		183		0.14			540,251		159		0.12
Demand deposits		399,413		281		0.28			323,869		162		0.20
Short term borrowings		271,313		501		0.74			208,660		144		0.28
Long term borrowings		9,705		52		2.15			20,746		124		2.40
Total interest-bearing liabilities	$	1,441,781		1,669		0.46		$	1,343,017		1,061		0.32
NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS’ EQUITY
Demand deposits		378,499							334,007
Other liabilities		11,934							12,268
Stockholders’ equity		223,544							207,776
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,055,758						$	1,897,068
Net interest income and interest rate spread			$	19,164		3.95	%			$	17,531		3.98	%
Net interest margin						4.05	%						4.06	%

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

(2) For 2017, adjustments of $170 thousand and $621 thousand, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2016, adjustments of $164 thousand and $478 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 35%, less disallowances.

	Six Months Ended							Six Months Ended
	June 30, 2017							June 30, 2016
	AVERAGE							AVERAGE
	BALANCE		INTEREST (1)		RATE (1)			BALANCE		INTEREST (1)		RATE (1)
EARNING ASSETS
Loans (2)	$	1,454,599	$	34,210		4.74	%	$	1,306,617	$	31,217		4.80	%
Taxable securities		214,076		2,383		2.24			253,635		2,725		2.16
Tax-exempt securities		158,674		3,430		4.36			129,149		2,733		4.26
Equity securities (2)		10,071		238		4.77			9,599		226		4.73
Federal funds sold and other		33,637		145		0.87			27,340		65		0.48
Total earning assets		1,871,057		40,406		4.35			1,726,340		36,966		4.31
Nonearning assets		154,882							162,968
Total assets	$	2,025,939						$	1,889,308
INTEREST-BEARING LIABILITIES
Time deposits	$	235,036	$	1,152		0.99	%	$	246,219	$	881		0.72	%
Savings deposits		523,257		353		0.14			536,543		310		0.12
Demand deposits		392,049		525		0.27			320,691		309		0.19
Short term borrowings		260,469		828		0.64			212,068		319		0.30
Long term borrowings		10,991		130		2.39			21,384		242		2.28
Total interest-bearing liabilities	$	1,421,802		2,988		0.42		$	1,336,905		2,061		0.31
NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS’ EQUITY
Demand deposits	$	370,790						$	334,296
Other liabilities		13,039							12,700
Stockholders’ equity		220,308							205,407
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,025,939						$	1,889,308
Net interest income and interest rate spread			$	37,418		3.93	%			$	34,905		4.00	%
Net interest margin						4.03	%						4.07	%

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

(2) For 2017, adjustments of $325 thousand and $1.2 million, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2016, adjustments of $324 thousand and $945 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 35%, less disallowances.