Farmers’ Acquisition of Cortland Driven by Growth Opportunities

CANFIELD, Ohio – In an industry with tightening margins, a tighter competition for talent and the need for a diverse offering of financial products, Farmers National Bancorp’s acquisition of Cortland Bancorp “made all the sense in the world,” said Kevin Helmick, president and CEO of Farmers.

The deal, valued at $124 million by Farmers’ chief financial officer Carl Culp, was announced Wednesday morning. It is expected to close in the fourth quarter. The combined entity will have assets of more than $4.1 billion, Helmick said.

“They’re in our backyard and we share markets and customers. With that, we share the same values with a customer-centric philosophy and very similar risk management philosophies,” Helmick said in an interview Wednesday with The Business Journal following the merger announcement. “We take an approach to lending that surrounds small businesses. They’re so important to our economy, to our region and to our local communities. When we look at a partner like Cortland, they very much feel the same way.”

When the merger is finalized later this year, all existing Cortland Bank branches will be rebranded as Farmers offices, expanding the Canfield-based bank to 48 sites and a presence in the Cleveland suburbs and Portage and Summit counties. Cortland expanded into those areas organically, Helmick said, and they are “similar to the areas we serve today.” 

“We feel they provide good growth opportunities. As a larger bank than Cortland, we have things like Farmers Trust Co., Farmers Investment Group and our insurance company,” the Farmers CEO said. “We’ll be able to leverage those and take them to communities like Hudson, Fairlawn and Strongsville.”

Farmers National Bank President and CEO Kevin Helmick

Coming off a year where benchmark interest rates are low – and were near zero for a portion of the year – the expansion of service lines that don’t rely on interest to generate income are crucial, Helmick said, especially considering that post-pandemic loan growth has been slower than historic norms. Offering noninterest products to new customers, whether they’re in the Mahoning Valley or the far side of Cleveland, is a “win-win.”

Following the merger, Farmers National Bank will have the second-largest market share in Trumbull County and the third-largest in Mahoning County, Helmick said. In a conference call with investors following the announcement, Culp said Farmers’ key assumptions included a cost savings of 39%, with 75% of that amount realized in 2022 and fully realized thereafter. The purchase price is nearly 13 times Cortland Bank’s earnings in the past 12 months, he added, and Farmers expects to earn back its investment in just over three years.

While Helmick touts the benefits to customers – Farmers will be able to expand its digital platforms as well, he said – the bank itself also comes away a winner as Cortland Bank President and CEO James Gasior and chief operating officer Timothy Carney will take on new roles at Farmers. Gasior will be corporate development officer and senior executive vice president, while Carney will be chief banking officer.

With talent at a premium across the country, including in the banking industry, their addition is invaluable, Helmick said.

“Tim has relationships across northeast Ohio and in his role as chief banking officer, we look for him to capitalize on those relationships to help us drive business,” he said of the additions. “Jim’s proven leadership as a CEO will be invaluable to all of us as our new corporate development officer. He’ll help us think strategically about what’s next for Farmers and the combined companies. The role he’ll play is around the integration of the cultures at our companies and that can’t be overstated.”

Farmers will also add two members of Cortland Bancorp’s board of directors to its own board.

Neither Gasior or Carney were available for an interview Wednesday. In the merger announcement, Gasior said “The combination with Farmers is a natural one. Our similar cultures and operating philosophies will help us deliver value and liquidity to our shareholders while enhancing the products we can offer our customers.”

Between now and the deal’s closing later this year, the work to be done by Farmers and Cortland is largely regulatory, but that doesn’t mean there aren’t bigger questions flowing through the minds of executives.

“It’s thinking about what’s next: bigger platforms and bigger reach. Can Farmers continue to grow with Cortland’s resources? Can we continue to thrive?” Helmick said. “We think we can.”

Copyright 2021 The Business Journal, Youngstown, Ohio.