株探米国株
英語
エドガーで原本を確認する
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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

or

☐ Transition Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

For the Quarterly period ended June 30, 2025

 

Commission file number 001-35296

 

 

FARMERS NATIONAL BANC CORP.

(Exact name of registrant as specified in its charter)

 

 

OHIO

34-1371693

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No)
   

20 South Broad Street Canfield, OH

44406

(Address of principal executive offices)

(Zip Code)

 

(330) 533-3341

(Registrant’s telephone number, including area code)

 

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

 

 

Securities registered pursuant to Section 12(b) of the Act.

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, No Par Value

FMNB

The NASDAQ Stock Market

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

☐

Accelerated filer

☒
       

Non-accelerated filer

☐

Small reporting company

☐
       

Emerging growth company

☐

    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

  

Outstanding at July 31, 2025

Common Stock, No Par Value

  

37,646,549 shares

 

 

 
Table of Contents

 

 

 

 

Page Number

PART I - FINANCIAL INFORMATION

 
     

Item 1

Financial Statements (Unaudited)

  
     
 

Included in Part I of this report:

  
     
 

Farmers National Banc Corp. and Subsidiaries

  
     
 

Consolidated Condensed Balance Sheets (Unaudited)

2
 

Consolidated Condensed Statements of Income (Unaudited)

3
 

Consolidated Condensed Statements of Comprehensive Income (Unaudited)

4
 

Consolidated Condensed Statements of Stockholders’ Equity (Unaudited)

5
 

Consolidated Condensed Statements of Cash Flows (Unaudited)

6
 

Notes to Unaudited Condensed Consolidated Financial Statements

7
     

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

42
     

Item 3

Quantitative and Qualitative Disclosures About Market Risk

49
     

Item 4

Controls and Procedures

50
     

PART II - OTHER INFORMATION 

50
     

Item 1

Legal Proceedings

50
     

Item 1A

Risk Factors

50
     

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

51
     

Item 3

Defaults Upon Senior Securities

51
     

Item 4

Mine Safety Disclosures

51
     

Item 5

Other Information

51
     

Item 6

Exhibits

52
   

SIGNATURES

53
   

10-Q Certifications

  
   

Section 906 Certifications

  
 

 

1
Table of Contents

 

 

CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)

FARMERS NATIONAL BANC CORP. AND SUBSIDIARIES

 

   

(In Thousands of Dollars)

  
   

June 30,

    

December 31,

  
   

2025

    

2024

  

ASSETS

                

Cash and due from banks

   $ 20,100     $ 20,426  

Federal funds sold and other

     70,640       65,312  

TOTAL CASH AND CASH EQUIVALENTS

     90,740       85,738  

Securities available for sale (Amortized cost $1,497,929 in 2025 and $1,510,681 in 2024)

     1,274,899       1,266,553  

Other investments

     42,410       45,405  

Loans held for sale, at fair value

     2,174       5,005  

Loans

     3,303,359       3,268,346  

Less allowance for credit losses

     38,563       35,863  

NET LOANS

     3,264,796       3,232,483  

Premises and equipment, net

     55,788       52,274  

Goodwill

     167,450       167,450  

Other intangibles, net

     19,281       20,750  

Bank owned life insurance

     117,624       101,418  

Tax credit investments

     34,294       22,000  

Other assets

     108,972       119,848  

TOTAL ASSETS

   $ 5,178,428     $ 5,118,924  
                 

LIABILITIES AND STOCKHOLDERS' EQUITY

                

Deposits:

                

Noninterest-bearing

   $ 995,865     $ 965,507  

Interest-bearing

     3,325,564       3,226,321  

Brokered time deposits

     74,988       74,951  

TOTAL DEPOSITS

     4,396,417       4,266,779  

Short-term borrowings

     203,000       305,000  

Long-term borrowings

     86,428       86,150  

Other liabilities

     54,835       54,967  

TOTAL LIABILITIES

     4,740,680       4,712,896  

Commitments and contingent liabilities

                  

Stockholders' Equity:

                

Common Stock, no par value; 50,000,000 shares authorized; 39,321,709 shares issued in 2025 and 2024; 37,641,666 and 37,585,612 shares outstanding, respectively

     365,790       366,059  

Retained earnings

     271,869       257,173  

Accumulated other comprehensive (loss)

     (176,738 )     (193,265 )

Treasury stock, at cost; 1,680,043 and 1,736,097 shares in 2025 and 2024, respectively

     (23,173 )     (23,939 )

TOTAL STOCKHOLDERS' EQUITY

     437,748       406,028  

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

   $ 5,178,428     $ 5,118,924  

 

See accompanying notes

 

2
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CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)

FARMERS NATIONAL BANC CORP. AND SUBSIDIARIES

 

   

(In Thousands except Per Share Data)

  
   

For the Three Months Ended

    

For the Six Months Ended

  
   

June 30,

    

June 30,

    

June 30,

    

June 30,

  
   

2025

    

2024

    

2025

    

2024

  

INTEREST AND DIVIDEND INCOME

                                

Loans, including fees

   $ 47,050     $ 46,513     $ 93,758     $ 91,530  

Taxable securities

     7,384       6,813       14,480       13,227  

Tax exempt securities

     2,377       2,455       4,828       5,090  

Dividends

     462       322       1,003       684  

Federal funds sold and other interest income

     429       743       939       1,369  

TOTAL INTEREST AND DIVIDEND INCOME

     57,702       56,846       115,008       111,900  

INTEREST EXPENSE

                                

Deposits

     20,240       20,160       39,957       38,549  

Short-term borrowings

     1,536       3,584       3,954       7,524  

Long-term borrowings

     1,005       1,036       1,980       2,074  

TOTAL INTEREST EXPENSE

     22,781       24,780       45,891       48,147  

NET INTEREST INCOME

     34,921       32,066       69,117       63,753  

Provision for credit losses

     3,586       1,395       3,608       1,125  

(Credit) for unfunded commitments

     (38 )     (283 )     (264 )     (462 )

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES

     31,373       30,954       65,773       63,090  

NONINTEREST INCOME

                                

Service charges on deposit accounts

     1,749       1,846       3,507       3,429  

Bank owned life insurance income

     832       652       1,642       1,359  

Trust fees

     2,596       2,345       5,237       4,854  

Insurance agency commissions

     1,828       1,255       3,569       2,783  

Security gains (losses), including fair value changes for equity securities

     36       (124 )     (1,278 )     (2,244 )

Retirement plan consulting fees

     783       623       1,581       1,241  

Investment commissions

     721       478       1,250       910  

Net gains on sale of loans

     329       417       655       714  

Other mortgage banking income, net

     27       192       174       317  

Debit card and EFT fees

     2,017       1,760       3,882       3,327  

Other operating income

     1,204       162       2,384       1,273  

TOTAL NONINTEREST INCOME

     12,122       9,606       22,603       17,963  

NONINTEREST EXPENSES

                                

Salaries and employee benefits

     14,722       14,558       30,888       29,627  

Occupancy and equipment

     4,119       3,815       8,258       7,545  

FDIC insurance and state and local taxes

     1,262       1,185       2,524       2,530  

Professional fees

     1,026       1,194       2,223       2,448  

Advertising

     454       445       910       876  

Intangible amortization

     735       630       1,469       1,318  

Core processing charges

     1,401       1,099       2,798       2,234  

Other operating expenses

     3,456       3,477       6,631       6,864  

TOTAL NONINTEREST EXPENSES

     27,175       26,403       55,701       53,442  

INCOME BEFORE INCOME TAXES

     16,320       14,157       32,675       27,611  

INCOME TAXES

     2,410       2,374       5,187       4,588  

NET INCOME

   $ 13,910     $ 11,783     $ 27,488     $ 23,023  

EARNINGS PER SHARE - basic

   $ 0.37     $ 0.32     $ 0.73     $ 0.62  

EARNINGS PER SHARE - diluted

   $ 0.37     $ 0.31     $ 0.73     $ 0.61  

 

See accompanying notes

 

3
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CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

FARMERS NATIONAL BANC CORP. AND SUBSIDIARIES

 

   

(In Thousands of Dollars)

  
   

For the Three Months Ended

    

For the Six Months Ended

  
   

June 30,

    

June 30,

    

June 30,

    

June 30,

  
   

2025

    

2024

    

2025

    

2024

  

NET INCOME

   $ 13,910     $ 11,783     $ 27,488     $ 23,023  

Other comprehensive income (loss):

                                

Net unrealized holding gains (losses) on available for sale securities

     655       (8,285 )     19,764       (27,460 )

Reclassification adjustment for losses realized in income on sales

     0       126       1,334       2,259  

Reclassification adjustment for (gains) losses realized in income on fair value hedge

     58       211       (177 )     1,556  

Net unrealized holding gains (losses)

     713       (7,948 )     20,921       (23,645 )

Income tax effect

     (150 )     1,669       (4,394 )     4,966  

Unrealized holding gains (losses), net of reclassification and tax

     563       (6,279 )     16,527       (18,679 )

Change in funded status of post-retirement plan, net of tax

     0       0       0       0  

Other comprehensive income (loss), net of tax

     563       (6,279 )     16,527       (18,679 )

TOTAL COMPREHENSIVE INCOME

   $ 14,473     $ 5,504     $ 44,015     $ 4,344  

 

See accompanying notes

 

4
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CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

FARMERS NATIONAL BANC CORP. AND SUBSIDIARIES

(Table Dollar Amounts in Thousands except Per Share Data)

 

                   

Accumulated

                  
                   

Other

                  
   

Common

    

Retained

    

Comprehensive

    

Treasury

          
   

Stock

    

Earnings

    

Income (Loss)

    

Stock

    

Total

  

Balance December 31, 2024

   $ 366,059     $ 257,173     $ (193,265 )   $ (23,939 )   $ 406,028  

Net income

           13,578                   13,578  

Other comprehensive income

                 15,964             15,964  

Restricted share issuance

     (491 )                 491       0  

Stock based compensation expense

     642                         642  

Vesting of Incentive Plan

     (565 )                 565       0  

Share forfeitures for taxes

                       (683 )     (683 )

Dividends paid at $0.17 per share

           (6,395 )                 (6,395 )

Balance March 31, 2025

   $ 365,645     $ 264,356     $ (177,301 )   $ (23,566 )   $ 429,134  

Net income

           13,910                   13,910  

Other comprehensive (loss)

                 563             563  

Restricted share issuance

     (421 )                 421       0  

Stock based compensation expense

     645                         645  

Vesting of Incentive Plan

     (79 )                 79       0  

Share forfeitures for taxes

                       (107 )     (107 )

Dividends paid at $0.17 per share

           (6,397 )                 (6,397 )

Balance June 30, 2025

   $ 365,790     $ 271,869     $ (176,738 )   $ (23,173 )   $ 437,748  

 

                   

Accumulated

                  
                   

Other

                  
   

Common

    

Retained

    

Comprehensive

    

Treasury

          
   

Stock

    

Earnings

    

Income (Loss)

    

Stock

    

Total

  

Balance December 31, 2023

   $ 365,305     $ 236,757     $ (172,554 )   $ (25,093 )   $ 404,415  

Net income

           11,240                   11,240  

Other comprehensive (loss)

                 (12,400 )           (12,400 )

Restricted share issuance

     (363 )                 367       4  

Restricted share forfeitures

     153                   (155 )     (2 )

Stock based compensation expense

     662                         662  

Vesting of Incentive Plan

     (914 )                 919       5  

Share forfeitures for taxes

                       (529 )     (529 )

Dividends paid at $0.17 per share

           (6,369 )                 (6,369 )

Balance March 31, 2024

   $ 364,843     $ 241,628     $ (184,954 )   $ (24,491 )   $ 397,026  

Net income

           11,783                   11,783  

Other comprehensive (loss)

                 (6,279 )           (6,279 )

Restricted share issuance

     (484 )                 489       5  

Stock based compensation expense

     626                         626  

Share forfeitures for taxes

                       (79 )     (79 )

Dividends paid at $0.17 per share

           (6,388 )                 (6,388 )

Balance June 30, 2024

   $ 364,985     $ 247,023     $ (191,233 )   $ (24,081 )   $ 396,694  

 

See accompanying notes.

 

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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)

FARMERS NATIONAL BANC CORP. AND SUBSIDIARIES

 

   

(In Thousands of Dollars)

  
   

Six Months Ended

  
   

June 30,

    

June 30,

  
   

2025

    

2024

  

CASH FLOWS FROM OPERATING ACTIVITIES

                

Net income

   $ 27,488     $ 23,023  

Adjustments to reconcile net income to net cash from operating activities:

                

Provision for credit losses

     3,608       1,125  

Credit for unfunded loans

     (264 )     (462 )

Depreciation and amortization

     3,349       3,103  

Net amortization (accretion) of securities

     (181 )     330  

Available for sale security losses

     1,334       2,259  

Realized gains on equity securities

     (56 )     (15 )

Gains on premises and equipment sales and disposals, net

     (113 )     0  

Stock compensation expense

     1,287       1,288  

Earnings on bank owned life insurance

     (1,531 )     (1,275 )

Income recognized from death benefit on bank owned life insurance

     (111 )     (84 )

Origination of loans held for sale

     (38,327 )     (35,222 )

Proceeds from loans held for sale

     40,213       35,476  

Net gains on sale of loans

     (655 )     (714 )

Net change in other assets and liabilities

     (6,353 )     1,474  

NET CASH FROM OPERATING ACTIVITIES

     29,688       30,306  

CASH FLOWS FROM INVESTING ACTIVITIES

                

Proceeds from maturities and repayments of securities available for sale

     33,680       26,308  

Proceeds from sales of securities available for sale

     23,901       44,756  

Purchases of securities available for sale

     (45,983 )     (45,883 )

Proceeds from sales of equity securities

     55       41  

Purchase of equity securities

     (57 )     (42 )

Proceeds from maturities and repayments of SBIC funds

     910       556  

Purchases of SBIC funds

     (2,465 )     (520 )

Proceeds from redemption of regulatory stock

     11,945       5,224  

Purchase of regulatory stock

     (7,337 )     (7,527 )

Loan originations and payments, net

     (29,458 )     (32,285 )

Purchase of portfolio loans

     (8,044 )     (8,069 )

Proceeds from loans held for sale previously classified as portfolio loans

     3,445       1,594  

Proceeds from BOLI death benefit

     460       551  

Purchase of company owned life insurance

     (15,000 )     0  

Proceeds from land, building and equipment sales

     298       0  

Additions to premises and equipment

     (5,092 )     (3,778 )

NET CASH FROM INVESTING ACTIVITIES

     (38,742 )     (19,074 )

CASH FLOWS FROM FINANCING ACTIVITIES

                

Net change in deposits

     129,638       28,449  

Net change in short-term borrowings

     (102,000 )     51,000  

Cash dividends paid

     (12,727 )     (12,688 )

Cash paid for withholding taxes on share-based awards

     (855 )     (664 )

NET CASH FROM FINANCING ACTIVITIES

     14,056       66,097  

NET CHANGE IN CASH AND CASH EQUIVALENTS

     5,002       77,329  

Beginning cash and cash equivalents

     85,738       103,658  

Ending cash and cash equivalents

   $ 90,740     $ 180,987  

Supplemental cash flow information:

                

Interest paid

   $ 46,658     $ 55,188  

Supplemental noncash disclosures:

                

Issuance of stock awards

   $ 1,556     $ 2,049  

Transfer of loans to loans held for sale

   $ 1,845     $ 0  

Lease liabilities arising from obtaining right-of-use assets

   $ 273     $ 0  

 

See accompanying notes

 

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NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

 

 

Principles of Consolidation:

 

Farmers National Banc Corp. (“Company” or “Farmers”) is a Financial Holding Company registered under the Bank Holding Company Act of 1956, as amended. The Company provides full banking services through its nationally chartered subsidiary, The Farmers National Bank of Canfield (“Bank”). The consolidated financial statements also include the accounts of the Bank’s subsidiaries; Farmers National Insurance, LLC (“Insurance”) and Farmers of Canfield Investment Co. (“Investments”). The Company provides trust and retirement consulting services through its subsidiary, Farmers Trust Company (“Trust”), and insurance services through the Bank’s subsidiary, Insurance. The consolidated financial statements include the accounts of the Company, the Bank and its subsidiaries, along with the Trust company. All significant intercompany balances and transactions have been eliminated in the consolidation.

 

Basis of Presentation:

 

The unaudited consolidated condensed financial statements have been prepared in conformity with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2024 Annual Report to Shareholders included in the Company’s Annual Report on Form 10-K for the year ended  December 31, 2024 (“2024 Form 10-K”). The interim consolidated financial statements include all adjustments (consisting of only normal recurring items) that, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods presented. The results of operations for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year. Certain items included in the prior period financial statements were reclassified to conform to the current period presentation. There was no effect on net income or total stockholders’ equity.

 

Estimates:

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Segments:

 

The Company provides a broad range of financial services to individuals and companies in northeastern Ohio and western Pennsylvania. Operations are managed and financial performance is primarily aggregated and reported in two lines of business, the Bank segment and the Trust segment.

 

Equity:

 

There are 50,000,000 shares authorized and available for issuance as of June 30, 2025. Outstanding shares at  June 30, 2025 were 37,641,666.

 

Comprehensive Income:

 

Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) consists of unrealized gains and losses on securities available for sale and changes in the funded status of the post-retirement plan, which are recognized as components of stockholders’ equity, net of tax effect.

 

Updates to Significant Accounting Policies:

 

New Accounting Standard:

 

On March 29, 2024, the FASB issued ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements.  ASU 2024-02 removes various references to the FASB’s Concepts Statements from the FASB’s Accounting Standards Codification (Codification or GAAP).  The Concepts Statements are non-authoritative guidance issued by the FASB that provide the objectives, qualitative characteristics and other concepts that govern the development of accounting principles by the FASB.  ASU 2024-02 applies to all reporting entities and updates the Codification by eliminating discrete references to the Concepts Statements across a variety of defined terms and Topics within the Codification.  The FASB does not expect these updates to have a significant effect on current accounting practice.  The amendments in ASU 2024-02 are effective for public business entities for fiscal years beginning after December 15, 2024.  Early adoption is permitted.  The adoption of this standard is not expected to have a material effect on the Company’s operating results or financial condition.

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures. The amendments in this update related to the rate reconciliation and income taxes paid disclosures improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. The amendments of this update are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The adoption of this standard is not expected to have a material effect on the Company’s operating results or financial condition.

 

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures. The amendments in this update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The main new provision requires significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. The amendments of this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The standard was adopted by the company and footnote16 - Segment information has been updated per the ASU. 

 

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Business Combinations:

 

On December 16, 2024, Farmers Trust acquired substantially all of the assets of Crest Retirement Advisors, LLC, for $600,000, with an additional $400,000 in contingent consideration payable over two years.  Intangible assets of $770,000 were recorded along with goodwill of $4,000. 

 

 

Securities:

 

The following table summarizes the amortized cost and fair value of the available-for-sale securities portfolio at  June 30, 2025 and December 31, 2024, and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss). No allowance for credit losses have been recognized for the securities portfolio at June 30, 2025 or December 31, 2024.

 

           

Gross

    

Gross

          
   

Amortized

    

Unrealized

    

Unrealized

          

(In Thousands of Dollars)

  

Cost

    

Gains

    

Losses

    

Fair Value

  

June 30, 2025

                                

U.S. Treasury and U.S. government sponsored entities

   $ 121,056     $ 26     $ (11,845 )   $ 109,237  

State and political subdivisions

     594,437       1,210       (109,647 )     486,000  

Corporate bonds

     17,569       210       (504 )     17,275  

Mortgage-backed securities

     605,297       394       (96,746 )     508,945  

Collateralized mortgage obligations

     157,115       438       (6,384 )     151,169  

Small Business Administration

     2,455       0       (182 )     2,273  

Totals

   $ 1,497,929     $ 2,278     $ (225,308 )   $ 1,274,899  

 

           

Gross

    

Gross

          
   

Amortized

    

Unrealized

    

Unrealized

          

(In Thousands of Dollars)

  

Cost

    

Gains

    

Losses

    

Fair Value

  

December 31, 2024

                                

U.S. Treasury and U.S. government sponsored entities

   $ 132,292     $ 0     $ (17,185 )   $ 115,107  

State and political subdivisions

     609,950       1,294       (106,364 )     504,880  

Corporate bonds

     17,849       172       (573 )     17,448  

Mortgage-backed securities

     605,350       34       (112,517 )     492,867  

Collateralized mortgage obligations

     142,525       85       (8,834 )     133,776  

Small Business Administration

     2,715       0       (240 )     2,475  

Totals

   $ 1,510,681     $ 1,585     $ (245,713 )   $ 1,266,553  

 

The proceeds from sales of available-for-sale securities and the associated gains and losses are as follows:

 

   

Three Months Ended

    

Six Months Ended

  
   

June 30,

    

June 30,

  

(In Thousands of Dollars)

  

2025

    

2024

    

2025

    

2024

  

Proceeds

   $ 0     $ 464     $ 23,901     $ 44,756  

Gross gains

     0       0       0       17  

Gross losses

     0       (125 )     (1,334 )     (2,276 )

 

The amortized cost and fair value of the debt securities portfolio are shown in the table below by expected maturity. Expected maturities may differ from contractual maturities if issuers have the right to call or prepay obligations with or without call, or prepayment penalties. Securities not due at a single maturity date are shown separately.

 

   

June 30, 2025

  

(In Thousands of Dollars)

  

Amortized Cost

    

Fair Value

  

Maturity

                

Within one year

   $ 3,493     $ 3,485  

One to five years

     56,426       51,968  

Five to ten years

     176,719       161,858  

Beyond ten years

     496,424       395,201  

Mortgage-backed, collateralized mortgage obligations and Small Business Administration securities

     764,867       662,387  

Total

   $ 1,497,929     $ 1,274,899  

 

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The following table summarizes the investment securities with unrealized losses for which an allowance for credit losses has not been recorded at June 30, 2025 and December 31, 2024, aggregated by major security type and length of time in a continuous unrealized loss position.

 

   

Less than 12 Months

    

12 Months or Longer

    

Total

  
   

Fair

    

Unrealized

    

Fair

    

Unrealized

    

Fair

    

Unrealized

  

(In Thousands of Dollars)

  

Value

    

Loss

    

Value

    

Loss

    

Value

    

Loss

  

June 30, 2025

                                                
                                                 

U.S. Treasury and U.S. government sponsored entities

   $ 1,045     $ (13 )   $ 107,303     $ (11,832 )   $ 108,348     $ (11,845 )

State and political subdivisions

     36,417       (2,310 )     412,515       (107,337 )     448,932       (109,647 )

Corporate bonds

     3,724       (42 )     8,415       (462 )     12,139       (504 )

Mortgage-backed securities

     9,399       (79 )     452,400       (96,667 )     461,799       (96,746 )

Collateralized mortgage obligations

     67,299       (797 )     51,047       (5,587 )     118,346       (6,384 )

Small Business Administration

     0       0       2,273       (182 )     2,273       (182 )

Total

   $ 117,884     $ (3,241 )   $ 1,033,953     $ (222,067 )   $ 1,151,837     $ (225,308 )

 

   

Less than 12 Months

    

12 Months or Longer

    

Total

  
   

Fair

    

Unrealized

    

Fair

    

Unrealized

    

Fair

    

Unrealized

  

(In Thousands of Dollars)

  

Value

    

Loss

    

Value

    

Loss

    

Value

    

Loss

  

December 31, 2024

                                                
                                                 

U.S. Treasury and U.S. government sponsored entities

   $ 4,592     $ (320 )   $ 110,515     $ (16,865 )   $ 115,107     $ (17,185 )

State and political subdivisions

     66,436       (4,946 )     400,911       (101,418 )     467,347       (106,364 )

Corporate bonds

     4,303       (146 )     8,568       (427 )     12,871       (573 )

Mortgage-backed securities

     30,143       (365 )     460,172       (112,152 )     490,315       (112,517 )

Collateralized mortgage obligations

     65,046       (2,210 )     51,405       (6,624 )     116,451       (8,834 )

Small Business Administration

     0       0       2,475       (240 )     2,475       (240 )

Total

   $ 170,520     $ (7,987 )   $ 1,034,046     $ (237,726 )   $ 1,204,566     $ (245,713 )

 

As of June 30, 2025, the Company’s security portfolio consisted of 923 securities, 818 of which were in an unrealized loss position. The treasury, agency, mortgage-backed securities, collateralized mortgage obligations and small business administration securities that the Company owns are all issued by government sponsored entities and therefore contain no potential for credit loss. The Company does not consider any of its available-for-sale securities with unrealized losses to be attributable to credit-related factors, as the unrealized losses have occurred as a result of changes in noncredit related factors such as changes in interest rates, market spreads and market conditions subsequent to purchase, not credit deterioration. The vast majority of the Company's state and political subdivisions holdings are of high credit quality and are rated AA or higher. In addition, management has both the ability and intent to hold the securities for a period of time sufficient to allow for the recovery in fair value. As of June 30, 2025, the Company has not recorded an allowance for credit losses on available for sale (“AFS”) securities.

 

At December 31, 2024, the Company’s security portfolio consisted of 946 securities, 842 of which were in an unrealized loss position. The treasury, agency, mortgage-backed securities, collateralized mortgage obligations and small business administration securities that the Company owns are all issued by government sponsored entities and therefore contain no potential for credit loss. At December 31, 2024, the Company did not consider any of its available-for-sale securities with unrealized losses to be attributable to credit-related factors, as the unrealized losses have occurred as a result of changes in noncredit related factors such as changes in interest rates, market spreads and market conditions subsequent to purchase, not credit deterioration. The vast majority of the Company's state and political subdivisions holdings are of high credit quality and are rated AA or higher. In addition, management had both the ability and intent to hold the securities for a period of time sufficient to allow for the recovery in fair value. At December 31, 2024, the Company had not recorded an allowance for credit losses on available for sale (“AFS”) securities.

 

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Equity Securities

 

The Company also holds equity securities which include $16.0 million in Small Business Investment Company (“SBIC”) partnership investments as well as $336,000 in local and regional bank holdings and other miscellaneous equity funds at June 30, 2025. At December 31, 2024, the Company held $14.5 million in SBIC investments and $277,000 in local and regional bank holdings and other miscellaneous equity funds. These investments are held at modified cost and any changes in the modified costs are recognized in income in both 2025 and 2024.

 

 

Loans:

 

Loan balances were as follows:

 

(In Thousands of Dollars)

  

June 30, 2025

    

December 31, 2024

  

Commercial real estate

                

Owner occupied

   $ 402,058     $ 391,302  

Non-owner occupied

     703,132       695,699  

Farmland

     216,905       206,786  

Other

     279,972       295,713  

Commercial

                

Commercial and industrial

     363,009       349,966  

Agricultural

     53,694       55,606  

Residential real estate

                

1-4 family residential

     849,443       845,081  

Home equity lines of credit

     171,312       158,014  

Consumer

                

Indirect

     227,612       232,822  

Direct

     17,761       19,143  

Other

     7,990       7,989  

Total loans

   $ 3,292,888     $ 3,258,121  

Net deferred loan costs

     10,471       10,225  

Allowance for credit losses

     (38,563 )     (35,863 )

Net loans

   $ 3,264,796     $ 3,232,483  

 

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Allowance for credit loss activity

 

The following tables present the activity in the allowance for credit losses by portfolio segment for the three and six month periods ended June 30, 2025 and 2024:

 

Three Months Ended June 30, 2025

 

   

Commercial

            

Residential

                  

(In Thousands of Dollars)

  

Real Estate

    

Commercial

    

Real Estate

    

Consumer

    

Total

  

Allowance for credit losses

                                        

Beginning balance

   $ 19,480     $ 4,383     $ 7,065     $ 4,621     $ 35,549  

Provision for credit losses

     2,149       901       191       345       3,586  

Loans charged off

     (22 )     (341 )     (58 )     (327 )     (748 )

Recoveries

     20       30       12       114       176  

Total ending allowance balance

   $ 21,627     $ 4,973     $ 7,210     $ 4,753     $ 38,563  

 

Six Months Ended June 30, 2025

 

   

Commercial

            

Residential

                  

(In Thousands of Dollars)

  

Real Estate

    

Commercial

    

Real Estate

    

Consumer

    

Total

  

Allowance for credit losses

                                        

Beginning balance

   $ 19,259     $ 4,628     $ 7,271     $ 4,705     $ 35,863  

Provision (Credit) for credit losses

     2,412       776       (43 )     463       3,608  

Loans charged off

     (66 )     (654 )     (77 )     (649 )     (1,446 )

Recoveries

     22       223       59       234       538  

Total ending allowance balance

   $ 21,627     $ 4,973     $ 7,210     $ 4,753     $ 38,563  

 

Three Months Ended June 30, 2024

 

   

Commercial

            

Residential

                  

(In Thousands of Dollars)

  

Real Estate

    

Commercial

    

Real Estate

    

Consumer

    

Total

  

Allowance for credit losses

                                        

Beginning balance

   $ 17,481     $ 4,543     $ 6,840     $ 4,295     $ 33,159  

(Credit) Provision for credit losses

     (258 )     428       628       597       1,395  

Loans charged off

     0       (372 )     (51 )     (238 )     (661 )

Recoveries

     0       29       5       64       98  

Total ending allowance balance

   $ 17,223     $ 4,628     $ 7,422     $ 4,718     $ 33,991  

 

Six Months Ended  June 30, 2024

 

   

Commercial

            

Residential

                  

(In Thousands of Dollars)

  

Real Estate

    

Commercial

    

Real Estate

    

Consumer

    

Total

  

Allowance for credit losses

                                        

Beginning balance

   $ 18,150     $ 5,087     $ 6,916     $ 4,287     $ 34,440  

(Credit) Provision for credit losses

     (799 )     490       559       875       1,125  

Loans charged off

     (146 )     (1,015 )     (81 )     (701 )     (1,943 )

Recoveries

     18       66       28       257       369  

Total ending allowance balance

   $ 17,223     $ 4,628     $ 7,422     $ 4,718     $ 33,991  

 

The cumulative loss rate used as the basis for the estimate of credit losses is comprised of the Company's historical loss experience from December 31, 2011 to June 30, 2025. As of June 30, 2025, the Company expects that the markets in which it operates will experience minimal changes to economic conditions, stable trend in unemployment rate, and a level trend of delinquencies. Management adjusted historical loss experience for these expectations. No reversion adjustments were necessary, as the starting point for the Company's estimate was a cumulative loss rate covering the expected contractual term of the portfolio. While there are many factors that go into the calculation of the allowance for credit losses, the change in the balances from  June 30, 2024 to June 30, 2025 is largely attributed to three commercial real estate non-owner occupied relationships individually evaluated and specifically reserved for, loss ratio trends of commercial real estate non-owner occupied, and increased loan balances. These factors were partially offset by adjustments made to the maximum loss rates that anchor the qualitative factors and adjustments to the Portfolio Composition and Growth qualitative factor.

 

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The following tables present the amortized cost basis of loans on nonaccrual status and loans past due over 89 days still accruing as of June 30, 2025 and December 31, 2024:

 

   

Nonaccrual with

    

Nonaccrual with

    

Loans past due

  
   

no allowance

    

an allowance

    

over 89 days

  

(In Thousands of Dollars)

  

for credit loss

    

for credit loss

    

still accruing

  

June 30, 2025

                        

Commercial real estate

                        

Owner occupied

   $ 195     $ 401     $ 0  

Non-owner occupied

     1,976       16,702       0  

Farmland

     0       50       0  

Other

     0       1,082       0  

Commercial

                        

Commercial and industrial

     182       3,231       0  

Agricultural

     0       256       0  

Residential real estate

                        

1-4 family residential

     664       2,019       0  

Home equity lines of credit

     30       441       0  

Consumer

                        

Indirect

     11       561       0  

Direct

     0       18       0  

Other

     0       0       0  

Total loans

   $ 3,058     $ 24,761     $ 0  

 

   

Nonaccrual with

    

Nonaccrual with

    

Loans past due

  
   

no allowance

    

an allowance

    

over 89 days

  

(In Thousands of Dollars)

  

for credit loss

    

for credit loss

    

still accruing

  

December 31, 2024

                        

Commercial real estate

                        

Owner occupied

   $ 0     $ 937     $ 0  

Non-owner occupied

     0       8,105       0  

Farmland

     1,757       3       0  

Other

     0       0       525  

Commercial

                        

Commercial and industrial

     145       3,713       0  

Agricultural

     177       183       0  

Residential real estate

                        

1-4 family residential

     513       3,967       90  

Home equity lines of credit

     94       409       0  

Consumer

                        

Indirect

     37       463       0  

Direct

     66       34       0  

Other

     0       0       0  

Total loans

   $ 2,789     $ 17,814     $ 615  

 

The above table for the period ending December 31, 2024 does not include a $1.52 million owner occupied commercial real estate loan and a $77,000 commercial & industrial loan that were held for sale and in nonaccrual status. There were no loans that were held for sale and in nonaccrual status for the period ending  June 30, 2025.

 

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The following tables present the amortized cost basis of collateral-dependent loans by class of loans as of June 30, 2025 and December 31, 2024:

 

(In Thousands of Dollars)

  

Real Estate

    

Business Assets

    

Vehicles

    

Cash

  

June 30, 2025

                                

Commercial real estate

                                

Owner occupied

   $ 346     $ 0     $ 0     $ 0  

Non-owner occupied

     29,473       0       0       0  

Farmland

     0       0       0       0  

Other

     1,082       0       0       0  

Commercial

                                

Commercial and industrial

     0       2,485       0       0  

Agricultural

     0       0       0       0  

Residential real estate

                                

1-4 family residential

     3,203       0       0       0  

Home equity lines of credit

     249       0       0       0  

Consumer

                                

Indirect

     0       0       30       0  

Direct

     0       0       6       0  

Other

     0       0       0       0  

Total loans

   $ 34,353     $ 2,485     $ 36     $ 0  

 

(In Thousands of Dollars)

  

Real Estate

    

Business Assets

    

Vehicles

    

Cash

  

December 31, 2024

                                

Commercial real estate

                                

Owner occupied

   $ 0     $ 0     $ 0     $ 0  

Non-owner occupied

     8,119       0       0       0  

Farmland

     1,757       0       0       0  

Other

     0       0       0       0  

Commercial

                                

Commercial and industrial

     0       2,591       0       0  

Agricultural

     0       177       0       0  

Residential real estate

                                

1-4 family residential

     3,573       0       0       0  

Home equity lines of credit

     264       0       0       0  

Consumer

                                

Indirect

     0       0       70       0  

Direct

     0       0       9       66  

Other

     0       0       0       0  

Total loans

   $ 13,713     $ 2,768     $ 79     $ 66  

 

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The following tables present the aging of the amortized cost basis in past due loans as of June 30, 2025 and December 31, 2024 by class of loans.

 

                   

90 Days

                          
                   

or More

                          
   

30-59 Days

    

60-89 Days

    

Past Due

    

Total

    

Loans Not

          

(In Thousands of Dollars)

  

Past Due

    

Past Due

    

and Nonaccrual

    

Past Due

    

Past Due

    

Total

  

June 30, 2025

                                                

Commercial real estate

                                                

Owner occupied

   $ 1,684     $ 0     $ 596     $ 2,280     $ 399,553     $ 401,833  

Non-owner occupied

     551       0       18,678       19,229       683,526       702,755  

Farmland

     1,450       216       50       1,716       215,021       216,737  

Other

     0       0       1,082       1,082       278,377       279,459  

Commercial

                                                

Commercial and industrial

     1,391       378       3,413       5,182       359,378       364,560  

Agricultural

     353       185       256       794       53,792       54,586  

Residential real estate

                                                

1-4 family residential

     7,208       1,874       2,683       11,765       838,312       850,077  

Home equity lines of credit

     618       79       471       1,168       170,336       171,504  

Consumer

                                                

Indirect

     1,420       248       572       2,240       233,797       236,037  

Direct

     66       0       18       84       17,734       17,818  

Other

     5       1       0       6       7,987       7,993  

Total loans

   $ 14,746     $ 2,981     $ 27,819     $ 45,546     $ 3,257,813     $ 3,303,359  

  

                   

90 Days

                          
                   

or More

                          
   

30-59 Days

    

60-89 Days

    

Past Due

    

Total

    

Loans Not

          

(In Thousands of Dollars)

  

Past Due

    

Past Due

    

and Nonaccrual

    

Past Due

    

Past Due

    

Total

  

December 31, 2024

                                                

Commercial real estate

                                                

Owner occupied

   $ 95     $ 446     $ 937     $ 1,478     $ 389,630     $ 391,108  

Non-owner occupied

     15       52       8,105       8,172       687,112       695,284  

Farmland

     53       0       1,760       1,813       204,787       206,600  

Other

     0       113       525       638       294,543       295,181  

Commercial

                                                

Commercial and industrial

     941       324       3,858       5,123       346,410       351,533  

Agricultural

     284       26       360       670       55,759       56,429  

Residential real estate

                                                

1-4 family residential

     6,688       1,943       4,570       13,201       832,338       845,539  

Home equity lines of credit

     104       0       503       607       157,532       158,139  

Consumer

                                                

Indirect

     1,385       473       500       2,358       238,997       241,355  

Direct

     59       30       100       189       18,996       19,185  

Other

     0       1       0       1       7,992       7,993  

Total loans

   $ 9,624     $ 3,408     $ 21,218     $ 34,250     $ 3,234,096     $ 3,268,346  

  

14
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Loan Restructurings

 

The Company evaluates all loan restructurings according to the accounting guidance for loan modifications to determine if the restructuring results in a new loan or a continuation of the existing loan. Loan modifications to borrowers experiencing financial difficulty that result in a direct change in the timing or amount of contractual cash flows include situations where there is principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and combinations of the listed modifications. Therefore, the disclosures related to loan restructurings are only for modifications that directly affect cash flows.

 

Any restructuring of a loan in which the borrower has experienced financial difficulty and the terms of the loan are more favorable than would generally be considered for borrowers with the same credit characteristics would be individually evaluated. Otherwise, the restructured loan remains in the appropriate segment in the ACL model.

 

The following table presents the amortized cost basis of loans that were both experiencing financial difficulty and modified during the three and six months ended June 30, 2025 and June 30, 2024, by class and type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below:

 

Three Months Ended June 30, 2025

  

Amortized Cost

          
                            Combination             % of Total  
                           

Term Extension

            

Class of

  
   

Payment

    

Term

    

Interest Rate

    

and Interest

            

Financing

  

(In Thousands of Dollars)

  

Deferral

    

Extension

    

Reduction

    

Rate Reduction

    

Total

    

Receivable

  

Commercial real estate

                                                

Non-owner occupied

   $ 0     $ 11,128     $ 0     $ 0     $ 11,128       0.02 %

Commercial

                                                

Commercial and industrial

     0       0       0       58     $ 58       0.00 %

Residential real estate

                                                

1-4 family residential

     103       0       0       0     $ 103       0.00 %

Home equity lines of credit

     0       0       0       75     $ 75       0.00 %

Total modifications to borrowers experiencing financial difficulty

   $ 103     $ 11,128     $ 0     $ 133     $ 11,364       0.00 %

 

Six Months Ended June 30, 2025

  

Amortized Cost

          
                           

Combination

            

% of Total

  
                           

Term Extension

            

Class of

  
   

Payment

    

Term

    

Interest Rate

    

and Interest

            

Financing

  

(In Thousands of Dollars)

  

Deferral

    

Extension

    

Reduction

    

Rate Reduction

    

Total

    

Receivable

  

Commercial real estate

                                                

Non-owner occupied

   $ 0     $ 11,128     $ 0     $ 0     $ 11,128       0.02 %

Commercial

                                                

Commercial and industrial

     124       0       0       58     $ 182       0.00 %

Residential real estate

                                                

1-4 family residential

     103       0       0       0     $ 103       0.00 %

Home equity lines of credit

     0       14       0       75     $ 89       0.00 %

Total modifications to borrowers experiencing financial difficulty

   $ 227     $ 11,142     $ 0     $ 133     $ 11,502       0.00 %

 

Three Months Ended June 30, 2024

  

Amortized Cost

          
                           

Combination

            

% of Total

  
                           

Term Extension

            

Class of

  
   

Payment

    

Principal

    

Interest Rate

    

and Interest

            

Financing

  

(In Thousands of Dollars)

  

Deferral

    

Forgiveness

    

Reduction

    

Rate Reduction

    

Total

    

Receivable

  

Residential real estate

                                                

Home equity lines of credit

   $ 0     $ 0     $ 0     $ 20     $ 20       0.01 %

Total modifications to borrowers experiencing financial difficulty

   $ 0     $ 0     $ 0     $ 20     $ 20       0.00 %

  

Six Months Ended June 30, 2024

  

Amortized Cost

          
                           

Combination

            

% of Total

  
                           

Term Extension

            

Class of

  
   

Payment

    

Principal

    

Interest Rate

    

and Interest

            

Financing

  

(In Thousands of Dollars)

  

Deferral

    

Forgiveness

    

Reduction

    

Rate Reduction

    

Total

    

Receivable

  

Residential real estate

                                                

1-4 family residential

   $ 0     $ 0     $ 29     $ 20     $ 49       0.03 %

Total modifications to borrowers experiencing financial difficulty

   $ 0     $ 0     $ 29     $ 20     $ 49       0.00 %

   

15
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The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the three and six months ended June 30, 2025 and June 30, 2024:

 

 

   

Payment Deferral

    

Term Extension

    

Interest Rate Reduction

  
   

Weighted-Average

    

Weighted-Average Years

    

Weighted-Average

  
   

Principal Deferred

    

Added to the Life

    

Contractual Interest Rate

  

Three Months Ended June 30, 2025

                  

From

    

To

  

Commercial real estate

                                

Non-owner occupied

             1                  

Commercial

                                

Commercial and industrial

             6       10.25 %     8.00 %

Residential real estate

                                

1-4 family residential

   $ 6                          

Home equity lines of credit

             10       7.75 %     4.00 %

 

   

Payment Deferral

    

Term Extension

    

Interest Rate Reduction

  
   

Weighted-Average

    

Weighted-Average Years

    

Weighted-Average

  
   

Principal Deferred

    

Added to the Life

    

Contractual Interest Rate

  

Six Months Ended June 30, 2025

                  

From

    

To

  

Commercial real estate

                                

Non-owner occupied

             1                  

Commercial

                                

Commercial and industrial

   $ 112       6       10.25 %     8.00 %

Residential real estate

                                

1-4 family residential

     6                          

Home equity lines of credit

             9       7.75 %     4.00 %

 

   

Payment Deferral

    

Term Extension

    

Interest Rate Reduction

  
   

Weighted-Average

    

Weighted-Average Years

    

Weighted-Average

  
   

Principal Deferred

    

Added to the Life

    

Contractual Interest Rate

  

Three Months Ended June 30, 2024

                  

From

    

To

  

Residential real estate

                                

Home Equity Lines of Credit

             10       10.75 %     7.25 %

 

   

Payment Deferral

    

Term Extension

    

Interest Rate Reduction

  
   

Weighted-Average

    

Weighted-Average Years

    

Weighted-Average

  
   

Principal Deferred

    

Added to the Life

    

Contractual Interest Rate

  

Six Months Ended June 30, 2024

                  

From

    

To

  

Residential real estate

                                

1-4 family residential

             10       10.45 %     5.92 %

 

The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of such loans that have been modified in the three and six months ended June 30, 2025 and June 30, 2024:

 

Three Months Ended June 30, 2025

  

Payment status (Amortized cost Basis)

  
           

30-89

    

90+

  

(In Thousands of Dollars)

  

Current

    

Days past due

    

Days past due

  

Accrual restructured loans

                        

Commercial real estate

                        

Non-owner occupied

   $ 11,128     $ 0     $ 0  

Commercial

                        

Commercial and industrial

     0       0       0  

Residential real estate

                        

1-4 family residential

     103       0       0  

Home equity lines of credit

     75       0       0  

Total accruing restructured loans

   $ 11,306     $ 0     $ 0  
                         

Nonaccrual restructured loans

                        

Commercial real estate

                        

Non-owner occupied

   $ 0     $ 0     $ 0  

Commercial

                        

Commercial and industrial

     58       0       0  

Residential real estate

                        

1-4 family residential

     0       0       0  

Home equity lines of credit

     0       0       0  

Total nonaccrual restructured loans

     58       0       0  

Total restructured loans

   $ 11,364     $ 0     $ 0  

 

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Six Months Ended June 30, 2025

  

Payment status (Amortized cost Basis)

  
           

30-89

    

90+

  

(In Thousands of Dollars)

  

Current

    

Days past due

    

Days past due

  

Accrual restructured loans

                        

Commercial real estate

                        

Non-owner occupied

   $ 11,128     $ 0     $ 0  

Commercial

                        

Commercial and industrial

     0       0       0  

Residential real estate

                        

1-4 family residential

     103       0       0  

Home equity lines of credit

     89       0       0  

Total accruing restructured loans

   $ 11,320     $ 0     $ 0  
                         

Nonaccrual restructured loans

                        

Commercial real estate

                        

Non-owner occupied

   $ 0     $ 0     $ 0  

Commercial

                        

Commercial and industrial

     58       0       124  

Residential real estate

                        

1-4 family residential

     0       0       0  

Home equity lines of credit

     0       0       0  

Total nonaccrual restructured loans

   $ 58     $ 0     $ 124  

Total restructured loans

   $ 11,378     $ 0     $ 124  

 

Three Months Ended June 30, 2024

  

Payment status (Amortized cost Basis)

  
           

30-89

    

90+

  

(In Thousands of Dollars)

  

Current

    

Days past due

    

Days past due

  

Accrual restructured loans

                        

Residential real estate

                        

Home equity lines of credit

   $ 20     $ 0     $ 0  

Total accruing restructured loans

   $ 20     $ 0     $ 0  
                         

Nonaccrual restructured loans

                        

Total nonaccrual restructured loans

   $ 0     $ 0     $ 0  

Total restructured loans

   $ 20     $ 0     $ 0  

 

Six Months Ended June 30, 2024

  

Payment status (Amortized cost Basis)

  
           

30-89

    

90+

  

(In Thousands of Dollars)

  

Current

    

Days past due

    

Days past due

  

Accrual restructured loans

                        

Residential real estate

                        

Home equity lines of credit

   $ 20     $ 0     $ 0  

Total accruing restructured loans

   $ 20     $ 0     $ 0  
                         

Nonaccrual restructured loans

                        

Residential real estate

                        

Home equity lines of credit

     0       29       0  

Total nonaccrual restructured loans

   $ 0     $ 29     $ 0  

Total restructured loans

   $ 20     $ 29     $ 0  

  

17
Table of Contents
 

As of June 30, 2025, the Company had no commitments to lend any additional funds on restructured loans.

 

The following table presents the amortized cost basis of loans that had a payment default during the three and six months ended June 30, 2025 and  June 30, 2024, and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty. For purposes of this disclosure a default occurs when within 12 months of the original modification, a loan is 30 days contractually past due under the modified terms:

 

Three Months Ended June 30, 2025

  

Amortized Cost

  
                           

Combination

  
                           

Term Extension

  
   

Payment

    

Term

    

Interest Rate

    

and Interest Rate

  

(In Thousands of Dollars)

  

Deferral

    

Extension

    

Reduction

    

Reduction

  

Commercial

                                

Commercial and industrial

   $ 0     $ 0     $ 0     $ 0  

Residential real estate

                                

Home equity lines of credit

     0       0       0       0  

Total modifications to borrowers experiencing financial difficulty

   $ 0     $ 0     $ 0     $ 0  

 

Six Months Ended June 30, 2025

  

Amortized Cost

  
                           

Combination

  
                           

Term Extension

  
   

Payment

    

Term

    

Interest Rate

    

and Interest Rate

  

(In Thousands of Dollars)

  

Deferral

    

Extension

    

Reduction

    

Reduction

  

Commercial

                                

Commercial and industrial

   $ 124     $ 0     $ 0     $ 0  

Residential real estate

                                

Home equity lines of credit

     0       0       0       19  

Total modifications to borrowers experiencing financial difficulty

   $ 124     $ 0     $ 0     $ 19  

 

Three Months Ended June 30, 2024

  

Amortized Cost

  
                           

Combination

  
                           

Term Extension

  
   

Payment

    

Term

    

Interest Rate

    

and Interest Rate

  

(In Thousands of Dollars)

  

Deferral

    

Extension

    

Reduction

    

Reduction

  

Residential real estate

                                

Home equity lines of credit

   $ 0     $ 0     $ 29     $ 0  

Total modifications to borrowers experiencing financial difficulty

   $ 0     $ 0     $ 29     $ 0  

 

Six Months Ended June 30, 2024

  

Amortized Cost

  
                           

Combination

  
                           

Term Extension

  
   

Payment

    

Term

    

Interest Rate

    

and Interest Rate

  

(In Thousands of Dollars)

  

Deferral

    

Extension

    

Reduction

    

Reduction

  

Residential real estate

                                

1-4 family residential

   $ 0     $ 0     $ 30     $ 41  

Home equity lines of credit

     0       0       29       0  

Total modifications to borrowers experiencing financial difficulty

   $ 0     $ 0     $ 59     $ 41  

 

Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance of the credit losses is adjusted by the same amount.

  

18
Table of Contents
 
 

Credit Quality Indicators

 

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company establishes a risk rating at origination for all commercial loan and commercial real estate relationships. For relationships over $3 million, management monitors the loans on an ongoing basis for any changes in the borrower’s ability to service their debt. Management also affirms the risk ratings for the loans in their respective portfolios on an annual basis. The Company uses the following definitions for risk ratings:

 

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

 

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Substandard loans are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

 

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

 

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

 

The Company considers the performance of the loan portfolio and its impact on the allowance for credit losses. For residential, consumer indirect and direct loan classes, the Company evaluates credit quality based on the aging status of the loan and by payment activity. Nonperforming loans are loans past due 90 days and still accruing interest and nonaccrual loans.

 

19
Table of Contents
 

The following table presents total loans by risk categories and year of origination:

 

   

Term Loans Amortized Cost Basis by Origination Year

  

(In Thousands of Dollars)

                                                   Revolving          

As of June 30, 2025

  

2025

    

2024

    

2023

    

2022

    

2021

    

Prior

    

Loans

    

Total

  

Commercial real estate - Owner occupied:

                                                                

Risk Rating

                                                                

Pass

   $ 31,538     $ 50,068     $ 55,261     $ 43,181     $ 57,614     $ 154,668     $ 2,236     $ 394,566  

Special mention

     0       670       1,822       0       1,094       79       0       3,665  

Substandard

     0       0       1,349       588       1       1,664       0       3,602  

Total commercial real estate - Owner occupied loans

   $ 31,538     $ 50,738     $ 58,432     $ 43,769     $ 58,709     $ 156,411     $ 2,236     $ 401,833  
                                                                 

Commercial real estate - Owner Occupied: Current period gross write-offs

   $ 0     $ 0     $ 0     $ 0     $ 22     $ 0     $ 0     $ 22  
                                                                 

Commercial real estate - Non-owner occupied:

                                                                

Risk Rating

                                                                

Pass

   $ 34,515     $ 63,118     $ 50,257     $ 121,201     $ 77,106     $ 288,451     $ 9,619     $ 644,267  

Special mention

     0       0       0       4,021       309       4,462       200       8,992  

Substandard

     0       6,932       127       7,339       10,461       22,988       0       47,847  

Doubtful

     0       0       0       0       1,649       0       0       1,649  

Total commercial real estate - Non-owner occupied loans

   $ 34,515     $ 70,050     $ 50,384     $ 132,561     $ 89,525     $ 315,901     $ 9,819     $ 702,755  
                                                                 

Commercial real estate - Non-owner occupied: Current period gross write-offs

   $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  
                                                                 

Commercial real estate - Farmland:

                                                                

Risk Rating

                                                                

Pass

   $ 10,645     $ 26,256     $ 24,145     $ 37,260     $ 17,535     $ 96,783     $ 3,360     $ 215,984  

Special mention

     0       81       0       0       0       0       0       81  

Substandard

     0       0       0       0       360       312       0       672  

Total commercial real estate - Farmland loans

   $ 10,645     $ 26,337     $ 24,145     $ 37,260     $ 17,895     $ 97,095     $ 3,360     $ 216,737  
                                                                 

Commercial real estate - Farmland: Current period gross write-offs

   $ 0     $ 0     $ 0     $ 0     $ 0     $ 44     $ 0     $ 44  
                                                                 

Commercial real estate - Other:

                                                                

Risk Rating

                                                                

Pass

   $ 15,329     $ 44,333     $ 90,026     $ 64,039     $ 27,500     $ 26,284     $ 2,122     $ 269,633  

Special mention

     0       0       0       7,315       0       1,407       0       8,722  

Substandard

     0       0       970       0       111       23       0       1,104  

Total commercial real estate - Other loans

   $ 15,329     $ 44,333     $ 90,996     $ 71,354     $ 27,611     $ 27,714     $ 2,122     $ 279,459  
                                                                 

Commercial real estate - Other: Current period gross write-offs

   $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  

 

20
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Term Loans Amortized Cost Basis by Origination Year (Continued)

  

(In Thousands of Dollars)

                                                   Revolving          

As of June 30, 2025

  

2025

    

2024

    

2023

    

2022

    

2021

    

Prior

    

Loans

    

Total

  

Commercial - Commercial and industrial:

                                                                

Risk Rating

                                                                

Pass

   $ 46,742     $ 75,552     $ 62,669     $ 46,730     $ 16,356     $ 24,163     $ 79,742     $ 351,954  

Special mention

     0       0       0       2,418       305       169       1,919       4,811  

Substandard

     0       248       54       2,837       863       1,759       2,034       7,795  

Total commercial - Commercial and industrial loans

   $ 46,742     $ 75,800     $ 62,723     $ 51,985     $ 17,524     $ 26,091     $ 83,695     $ 364,560  
                                                                 

Commercial - Commercial and industrial: Current period gross write-offs

   $ 0     $ 79     $ 144     $ 189     $ 56     $ 47     $ 28     $ 543  
                                                                 

Commercial - Agricultural:

                                                                

Risk Rating

                                                                

Pass

   $ 6,277     $ 8,177     $ 9,355     $ 10,119     $ 3,656     $ 1,682     $ 15,056     $ 54,322  

Special mention

     0       0       0       0       0       0       0       0  

Substandard

     0       66       33       44       29       92       0       264  

Total commercial - Agricultural loans

   $ 6,277     $ 8,243     $ 9,388     $ 10,163     $ 3,685     $ 1,774     $ 15,056     $ 54,586  
                                                                 

Commercial - Agricultural: Current period gross write-offs

   $ 0     $ 81     $ 16     $ 1     $ 0     $ 13     $ 0     $ 111  
                                                                 

Residential real estate - 1-4 family residential:

                                                                

Payment Performance

                                                                

Performing

   $ 37,221     $ 90,715     $ 66,211     $ 150,974     $ 146,564     $ 352,168     $ 3,541     $ 847,394  

Nonperforming

     0       0       412       168       379       1,724       0       2,683  

Total residential real estate - 1-4 family residential loans

   $ 37,221     $ 90,715     $ 66,623     $ 151,142     $ 146,943     $ 353,892     $ 3,541     $ 850,077  
                                                                 

Residential real estate - 1-4 family residential: Current period gross write-offs

   $ 0     $ 0     $ 0     $ 0     $ 18     $ 31     $ 0     $ 49  
                                                                 

Residential real estate - Home equity lines of credit:

                                                                

Payment Performance

                                                                

Performing

   $ 0     $ 26     $ 116     $ 433     $ 127     $ 4,652     $ 165,679     $ 171,033  

Nonperforming

     0       0       0       99       0       372       0       471  

Total residential real estate - Home equity lines of credit loans

   $ 0     $ 26     $ 116     $ 532     $ 127     $ 5,024     $ 165,679     $ 171,504  
                                                                 

Residential real estate - Home equity lines of credit: Current period gross write-offs

   $ 0     $ 0     $ 0     $ 28     $ 0     $ 0     $ 0     $ 28  

 

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Term Loans Amortized Cost Basis by Origination Year (Continued)

  

(In Thousands of Dollars)

                                                   Revolving          

As of June 30, 2025

  

2025

    

2024

    

2023

    

2022

    

2021

    

Prior

    

Loans

    

Total

  

Consumer - Indirect:

                                                                

Payment Performance

                                                                

Performing

   $ 36,226     $ 67,297     $ 46,906     $ 39,221     $ 19,028     $ 26,787     $ 0     $ 235,465  

Nonperforming

     0       78       115       75       151       153       0       572  

Total consumer - Indirect loans

   $ 36,226     $ 67,375     $ 47,021     $ 39,296     $ 19,179     $ 26,940     $ 0     $ 236,037  
                                                                 

Consumer - Indirect: Current period gross write-offs

   $ 0     $ 139     $ 8     $ 33     $ 40     $ 299     $ 0     $ 519  
                                                                 

Consumer - Direct:

                                                                

Payment Performance

                                                                

Performing

   $ 2,309     $ 2,050     $ 1,767     $ 1,515     $ 821     $ 9,005     $ 333     $ 17,800  

Nonperforming

     0       0       7       2       0       9       0       18  

Total consumer - Direct loans

   $ 2,309     $ 2,050     $ 1,774     $ 1,517     $ 821     $ 9,014     $ 333     $ 17,818  
                                                                 

Consumer - Direct: Current period gross write-offs

   $ 0     $ 6     $ 10     $ 7     $ 0     $ 12     $ 0     $ 35  
                                                                 

Consumer - Other:

                                                                

Payment Performance

                                                                

Performing

   $ 0     $ 1     $ 0     $ 101     $ 64     $ 364     $ 7,463     $ 7,993  

Nonperforming

     0       0       0       0       0       0       0       0  

Total consumer - Other loans

   $ 0     $ 1     $ 0     $ 101     $ 64     $ 364     $ 7,463     $ 7,993  
                                                                 

Consumer - Other: Current period gross write-offs

   $ 0     $ 0     $ 5     $ 0     $ 1     $ 89     $ 0     $ 95  

 

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Term Loans Amortized Cost Basis by Origination Year

  

(In Thousands of Dollars)

                                                   Revolving          

As of December 31, 2024

  

2024

    

2023

    

2022

    

2021

    

2020

    

Prior

    

Loans

    

Total

  

Commercial real estate - Owner occupied:

                                                                

Risk Rating

                                                                

Pass

   $ 45,588     $ 56,389     $ 46,323     $ 60,179     $ 45,428     $ 127,665     $ 1,984     $ 383,556  

Special mention

     0       3,228       0       1,118       0       519       0       4,865  

Substandard

     0       0       659       0       0       1,962       66       2,687  

Total commercial real estate - Owner occupied loans

   $ 45,588     $ 59,617     $ 46,982     $ 61,297     $ 45,428     $ 130,146     $ 2,050     $ 391,108  
                                                                 

Commercial real estate - Owner Occupied: Current period gross write-offs

   $ 0     $ 0     $ 72     $ 0     $ 21     $ 0     $ 0     $ 93  
                                                                 

Commercial real estate - Non-owner occupied:

                                                                

Risk Rating

                                                                

Pass

   $ 61,974     $ 44,323     $ 125,547     $ 78,933     $ 71,322     $ 251,465     $ 8,978     $ 642,542  

Special mention

     0       0       6,284       313       1,356       10,024       150       18,127  

Substandard

     7,065       407       0       11,249       7,129       7,931       0       33,781  

Doubtful

     0       0       0       834       0       0       0       834  

Total commercial real estate - Non-owner occupied loans

   $ 69,039     $ 44,730     $ 131,831     $ 91,329     $ 79,807     $ 269,420     $ 9,128     $ 695,284  
                                                                 

Commercial real estate - Non-owner occupied: Current period gross write-offs

   $ 0     $ 0     $ 0     $ 4,380     $ 146     $ 0     $ 0     $ 4,526  
                                                                 

Commercial real estate - Farmland:

                                                                

Risk Rating

                                                                

Pass

   $ 19,832     $ 20,803     $ 39,126     $ 18,734     $ 31,620     $ 71,162     $ 3,071     $ 204,348  

Substandard

     0       0       0       317       0       1,935       0       2,252  

Total commercial real estate - Farmland loans

   $ 19,832     $ 20,803     $ 39,126     $ 19,051     $ 31,620     $ 73,097     $ 3,071     $ 206,600  
                                                                 

Commercial real estate - Farmland: Current period gross write-offs

   $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  
                                                                 

Commercial real estate - Other:

                                                                

Risk Rating

                                                                

Pass

   $ 40,993     $ 108,346     $ 65,724     $ 39,091     $ 8,493     $ 21,744     $ 728     $ 285,119  

Special mention

     0       990       7,480       112       0       1,448       0       10,030  

Substandard

     0       0       0       0       0       32       0       32  

Total commercial real estate - Other loans

   $ 40,993     $ 109,336     $ 73,204     $ 39,203     $ 8,493     $ 23,224     $ 728     $ 295,181  
                                                                 

Commercial real estate - Other: Current period gross write-offs

   $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  

 

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Term Loans Amortized Cost Basis by Origination Year (Continued)

  

(In Thousands of Dollars)

                                                   Revolving          

As of December 31, 2024

  

2024

    

2023

    

2022

    

2021

    

2020

    

Prior

    

Loans

    

Total

  

Commercial - Commercial and industrial:

                                                                

Risk Rating

                                                                

Pass

   $ 84,491     $ 72,388     $ 55,279     $ 26,780     $ 10,744     $ 20,223     $ 70,675     $ 340,580  

Special mention

     0       0       0       167       165       46       84       462  

Substandard

     31       118       5,653       282       244       1,682       2,481       10,491  

Total commercial - Commercial and industrial loans

   $ 84,522     $ 72,506     $ 60,932     $ 27,229     $ 11,153     $ 21,951     $ 73,240     $ 351,533  
                                                                 

Commercial - Commercial and industrial: Current period gross write-offs

   $ 48     $ 273     $ 389     $ 125     $ 228     $ 257     $ 313     $ 1,633  
                                                                 

Commercial - Agricultural:

                                                                

Risk Rating

                                                                

Pass

   $ 9,085     $ 11,703     $ 13,160     $ 5,481     $ 1,768     $ 850     $ 13,958     $ 56,005  

Special mention

     0       0       0       0       0       0       61       61  

Substandard

     0       0       35       29       162       137       0       363  

Total commercial - Agricultural loans

   $ 9,085     $ 11,703     $ 13,195     $ 5,510     $ 1,930     $ 987     $ 14,019     $ 56,429  
                                                                 

Commercial - Agricultural: Current period gross write-offs

   $ 0     $ 1     $ 49     $ 13     $ 29     $ 17     $ 0     $ 109  
                                                                 

Residential real estate - 1-4 family residential:

                                                                

Payment Performance

                                                                

Performing

   $ 79,820     $ 69,319     $ 157,403     $ 153,569     $ 119,770     $ 257,827     $ 3,261     $ 840,969  

Nonperforming

     0       0       473       278       1,626       2,193       0       4,570  

Total residential real estate - 1-4 family residential loans

   $ 79,820     $ 69,319     $ 157,876     $ 153,847     $ 121,396     $ 260,020     $ 3,261     $ 845,539  
                                                                 

Residential real estate - 1-4 family residential: Current period gross write-offs

   $ 0     $ 0     $ 0     $ 37     $ 0     $ 118     $ 0     $ 155  
                                                                 

Residential real estate - Home equity lines of credit:

                                                                

Payment Performance

                                                                

Performing

   $ 0     $ 119     $ 153     $ 127     $ 68     $ 4,118     $ 153,051     $ 157,636  

Nonperforming

     0       0       29       0       0       376       98       503  

Total residential real estate - Home equity lines of credit loans

   $ 0     $ 119     $ 182     $ 127     $ 68     $ 4,494     $ 153,149     $ 158,139  
                                                                 

Residential real estate - Home equity lines of credit: Current period gross write-offs

   $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  

 

24
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Term Loans Amortized Cost Basis by Origination Year (Continued)

  

(In Thousands of Dollars)

                                                   Revolving          

As of December 31, 2024

  

2024

    

2023

    

2022

    

2021

    

2020

    

Prior

    

Loans

    

Total

  

Consumer - Indirect:

                                                                

Payment Performance

                                                                

Performing

   $ 78,306     $ 55,525     $ 49,548     $ 23,331     $ 14,183     $ 19,962     $ 0     $ 240,855  

Nonperforming

     0       57       233       97       62       51       0       500  

Total consumer - Indirect loans

   $ 78,306     $ 55,582     $ 49,781     $ 23,428     $ 14,245     $ 20,013     $ 0     $ 241,355  
                                                                 

Consumer - Indirect: Current period gross write-offs

   $ 10     $ 100     $ 206     $ 192     $ 174     $ 430     $ 0     $ 1,112  
                                                                 

Consumer - Direct:

                                                                

Payment Performance

                                                                

Performing

   $ 2,735     $ 2,319     $ 2,406     $ 1,075     $ 792     $ 9,432     $ 326     $ 19,085  

Nonperforming

     0       0       6       15       66       13       0       100  

Total consumer - Direct loans

   $ 2,735     $ 2,319     $ 2,412     $ 1,090     $ 858     $ 9,445     $ 326     $ 19,185  
                                                                 

Consumer - Direct: Current period gross write-offs

   $ 0     $ 7     $ 38     $ 6     $ 5     $ 120     $ 0     $ 176  
                                                                 

Consumer - Other:

                                                                

Payment Performance

                                                                

Performing

   $ 0     $ 0     $ 0     $ 60     $ 0     $ 409     $ 7,524     $ 7,993  

Nonperforming

     0       0       0       0       0       0       0       0  

Total consumer - Other loans

   $ 0     $ 0     $ 0     $ 60     $ 0     $ 409     $ 7,524     $ 7,993  
                                                                 

Consumer - Other: Current period gross write-offs

   $ 0     $ 0     $ 1     $ 0     $ 0     $ 182     $ 0     $ 183  

 

The previous table for the period ending  December 31, 2024 does not include a $1.63 million non-owner occupied commercial real estate loan that was held for sale and risk rated substandard. For the period ending  June 30, 2025, there were no loans that were held for sale and risk rated substandard. In the 1-4 family residential real estate portfolio at June 30, 2025, other real estate owned and foreclosure properties were $52,000 and $415,000, respectively.  At December 31, 2024, other real estate owned and foreclosure properties were $52,000 and $631,000, respectively.

 

The Company follows ASU 2016-13 to calculate the allowance for credit losses which requires projecting credit losses over the lifetime of the credits. The ACL is adjusted through the provision for credit losses and reduced by net charge offs of loans. Although the Company has a diversified loan portfolio, the credit risk in the loan portfolio is largely influenced by general economic conditions and trends of the counties and markets in which the debtors operate, and the resulting impact on the operations of borrowers or on the value of any underlying collateral.

 

The credit loss estimation process involves procedures that consider the unique characteristics of the Company’s loan portfolio segments. These segments are disaggregated into the loan pools for monitoring. A model of risk characteristics, such as loss history and delinquency experience, trends in past due and non-performing loans, as well as existing economic conditions and supportable forecasts are used to determine credit loss assumptions.

 

The Company uses two methodologies to analyze loan pools. The cohort method and the probability of default/loss given default (“PD/LGD”). Cohort relies on the creation of cohorts to capture loans that qualify for a particular segment, as of a point in time. Those loans are then tracked over their remaining lives to determine their loss experience. The Company aggregates financial assets on the basis of similar risk characteristics when evaluating loans on a collective basis. Those characteristics include, but are not limited to, internal or external credit score, risk ratings, financial asset, loan type, collateral type, size, effective interest rate, term, or geographical location. The Company uses cohort primarily for consumer loan portfolios.

 

The probability of default portion of PD/LGD is defined by the Company as 90 days past due, placed on non-accrual, loan restructuring for borrowers experiencing financial difficulty or is partially, or wholly, charged-off. Typically, a one-year time period is used to assess probability of default (“PD”). PD can be measured and applied using various risk criteria. Risk rating is one common way to apply PDs. Loss given default LGD is to determine the percentage of loss by facility or collateral type. LGD estimates can sometimes be driven, or influenced, by product type, industry or geography. The Company uses PD/LGD primarily for commercial loan portfolios.

 

25
Table of Contents
 

The following table presents the loan pools and the associated methodology used during the calculation of the allowance for credit losses in 2025.

 

Portfolio Segments

  

Loan Pool

  

Methodology

  

Loss Drivers

Residential real estate

  

1-4 Family Residential Real Estate - 1st Liens

  

Cohort

  

Credit Loss History
   

1-4 Family Residential Real Estate - 2nd Liens

  

Cohort

  

Credit Loss History

Home Equity Lines of Credit

  

Home Equity Lines of Credit

  

Cohort

  

Credit Loss History

Consumer Finance

  

Cash Reserves

  

Cohort

  

Credit Loss History
   

Direct

  

Cohort

  

Credit Loss History
   

Indirect

  

Cohort

  

Credit Loss History

Commercial

  

Commercial and Industrial

  

PD/LGD

  

Credit Loss History
   

Agricultural

  

PD/LGD

  

Credit Loss History
   

Municipal

  

PD/LGD

  

Credit Loss History

Commercial real estate

  

Owner Occupied

  

PD/LGD

  

Credit Loss History
   

Non-Owner Occupied

  

PD/LGD

  

Credit Loss History
   

Multifamily

  

PD/LGD

  

Credit Loss History
   

Farmland

  

PD/LGD

  

Credit Loss History
   

Construction

  

PD/LGD

  

Credit Loss History

 

According to the accounting standard, an entity may make an accounting policy election not to measure an allowance for credit losses for accrued interest receivable if the entity writes off the applicable accrued interest receivable balance in a timely manner. The Company has made the accounting policy election not to measure an allowance for credit losses for accrued interest receivables for all loan segments. Current policy dictates that a loan will be placed on nonaccrual status, with the current accrued interest receivable balance being written off, upon the loan being 90 days delinquent or when the loan is deemed to be collateral dependent and the collateral analysis shows insufficient collateral coverage based on a current assessment of the value of the collateral.

 

In addition, ASC Topic 326 requires the Company to establish a liability for anticipated credit losses for unfunded commitments. To accomplish this, the Company must first establish a loss expectation for extended (funded) commitments. This loss expectation, expressed as a ratio to the amortized cost basis, is then applied to the portion of unfunded commitments not considered unilaterally cancelable, and considered by the company’s management as likely to fund over the life of the instrument. At June 30, 2025, the Company had $686 million in unfunded commitments and set aside $1.30 million in anticipated credit losses. At December 31, 2024, the Company had $692 million in unfunded commitments and set aside $1.56 million in anticipated credit losses. The $6 million decrease in unfunded commitments and $260,000 decrease in the reserve for anticipated credit losses is due to existing construction loan projects that are moving forward and advances are being made to the loan. This reserve is recorded in other liabilities as opposed to the ACL.

 

The determination of the ACL is complex and the Company makes decisions on the effects of factors that are inherently uncertain. Evaluations of the loan portfolio and individual credits require certain estimates, assumptions and judgments as to the facts and circumstances related to particular situations or credits. The ACL was $38.6 million at June 30, 2025 and $35.9 million at December 31, 2024. The increase of $2.7 million was due to the individual evaluation of three commercial real estate non-owner occupied relationships which increased the Company's specific reserve, increased loss ratio trends of commercial real estate non-owner occupied loans, and increased loan balances. These factors were partially offset by the adjustments to the maximum loss ratio that anchors the qualitative factors and adjustments to the Portfolio Composition and Growth and Commercial Concentration qualitative factors of certain loan pools.

 

Purchased Loans

 

Under ASU Topic 326, when loans are purchased with evidence of more than significant deterioration of credit, they are accounted for as purchase credit deteriorated (“PCD”). PCD loans acquired in a transaction are marked to fair value and a mark on yield is recorded. In addition, an adjustment is made to the ACL for the expected loss on the acquisition date. These loans are assessed on a regular basis and subsequent adjustments to the ACL are recorded on the income statement. During 2025, the Company has not acquired any additional PCD loans. The outstanding balance at June 30, 2025 and related allowance on PCD loans is as follows:

 

   

June 30, 2025

    

December 31, 2024

  

(In Thousands of Dollars)

     Loan Balance       ACL Balance       Loan Balance       ACL Balance  

Commercial real estate

                                

Owner Occupied

   $ 298     $ 10     $ 333     $ 11  

Non-owner Occupied

     25,418       1,466       26,890       420  

Farmland

     0       0       3       0  

Commercial

                                

Commercial and industrial

     1,025       62       1,561       115  

Agricultural

     88       6       117       8  

Residential real estate

                                

1-4 family residential

     1,194       6       1,264       7  

Home equity lines of credit

     4       0       3       0  

Total

   $ 28,027     $ 1,550     $ 30,171     $ 561  

    

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Revenue from Contracts with Customers:

 

All material revenue from contracts with customers in the scope of ASC 606 is recognized within noninterest income. ASC 606 rules govern the disclosure of revenue tied to contracts. The following table presents the Company’s noninterest income by revenue stream and reportable segment, net of eliminations, for the three and six months ended June 30, 2025 and 2024.

 

   

Trust

    

Bank

          

(In Thousands of Dollars)

  

Segment

    

Segment

    

Totals

  

For Three Months Ended June 30, 2025

                        

Service charges on deposit accounts

   $ 0     $ 1,749     $ 1,749  

Debit card and EFT fees

     0       2,017       2,017  

Trust fees

     2,596       0       2,596  

Insurance agency commissions

     0       1,828       1,828  

Retirement plan consulting fees

     783       0       783  

Investment commissions

     0       721       721  

Other (outside the scope of ASC 606)

     0       2,428       2,428  

Total noninterest income

   $ 3,379     $ 8,743     $ 12,122  

 

   

Trust

    

Bank

          

(In Thousands of Dollars)

  

Segment

    

Segment

    

Totals

  

For Six Months Ended June 30, 2025

                        

Service charges on deposit accounts

   $ 0     $ 3,507     $ 3,507  

Debit card and EFT fees

     0       3,882       3,882  

Trust fees

     5,237       0       5,237  

Insurance agency commissions

     0       3,569       3,569  

Retirement plan consulting fees

     1,581       0       1,581  

Investment commissions

     0       1,250       1,250  

Other (outside the scope of ASC 606)

     0       3,577       3,577  

Total noninterest income

   $ 6,818     $ 15,785     $ 22,603  

 

   

Trust

    

Bank

          

(In Thousands of Dollars)

  

Segment

    

Segment

    

Totals

  

For Three Months Ended June 30, 2024

                        

Service charges on deposit accounts

   $ 0     $ 1,846     $ 1,846  

Debit card and EFT fees

     0       1,760       1,760  

Trust fees

     2,345       0       2,345  

Insurance agency commissions

     0       1,255       1,255  

Retirement plan consulting fees

     623       0       623  

Investment commissions

     0       478       478  

Other (outside the scope of ASC 606)

     0       1,299       1,299  

Total noninterest income

   $ 2,968     $ 6,638     $ 9,606  

 

   

Trust

    

Bank

          

(In Thousands of Dollars)

  

Segment

    

Segment

    

Totals

  

For Six Months Ended June 30, 2024

                        

Service charges on deposit accounts

   $ 0     $ 3,429     $ 3,429  

Debit card and EFT fees

     0       3,327       3,327  

Trust fees

     4,854       0       4,854  

Insurance agency commissions

     0       2,783       2,783  

Retirement plan consulting fees

     1,241       0       1,241  

Investment commissions

     0       910       910  

Other (outside the scope of ASC 606)

     0       1,419       1,419  

Total noninterest income

   $ 6,095     $ 11,868     $ 17,963  

 

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A description of the Company’s revenue streams under ASC 606 follows:

 

Service charges on deposit accounts – The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Management reviewed the deposit account agreements, and determined that the agreements can be terminated at any time by either the Bank or the account holder. Transaction fees, such as balance transfers, wires and overdraft charges are settled the day the performance obligation is satisfied. The Bank’s monthly service charges and maintenance fees are for services provided to the customer on a monthly basis and are considered a series of services that have the same pattern of transfer each month. The review of service charges assessed on deposit accounts included the amount of variable consideration that is a part of the monthly charges. It was found that the waiver of service charges due to insufficient funds and dormant account fees is immaterial and would not require a change in the accounting treatment for these fees under the revenue standards.

 

Debit Card Interchange Fees – Customers and the Bank have an account agreement and maintain deposit balances with the Bank. Customers use a bank issued debit card to purchase goods and services, and the Bank earns interchange fees on those transactions, typically a percentage of the sale amount of the transaction. The Bank records the amount due when it receives the settlement from the payment network. Payments from the payment network are received and recorded into income on a daily basis. There are no contingent debit card interchange fees recorded by the Company that could be subject to a clawback in future periods.

 

Trust fees – Services provided to Trust customers are a series of distinct services that have the same pattern of transfer each month. Fees for trust accounts are billed and drafted from trust accounts monthly. The Company records these fees on the income statement on a monthly basis. Fees are assessed based on the total investable assets of the customer’s trust account. A signed contract between the Company and the customer is maintained for all customer trust accounts with payment terms identified. It is probable that the fees will be collectible as funds being managed are accessible by the asset manager. Past history of trust fee income recorded by the Company indicates that it is highly unlikely that a significant reversal could occur. There are no contingent incentive fees recorded by the Company that could be subject to a clawback in future periods.

 

Insurance Agency Commissions – Insurance agency commissions are received from insurance carriers for the agency’s share of commissions from customer premium payments. These commissions are recorded into income when checks are received from the insurance carriers, and there is no contingent portion associated with these commission checks. There may be a short time-lag in recording revenue when cash is received instead of recording the revenue when the policy is signed by the customer, but the time lag is insignificant and does not impact the revenue recognition process.

 

Insurance also receives incentive checks from the insurance carriers for achieving specified levels of production with particular carriers. These amounts are recorded into income when a check is received, and there are no contingent amounts associated with these payments that may be clawed back by the carrier in the future. Similar to the monthly commissions explained in the preceding paragraph, there may be a short time-lag in recording incentive revenue on a cash basis as opposed to estimating the amount of incentive revenue expected to be earned, this does not materially impact the recognition of Insurance revenue. If there were any amounts that would need to be refunded for one specific Insurance customer, management believes the reversal would not be significant.

 

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Other potential situations surrounding the recognition of Insurance revenue include estimating potential refunds due to the likely cancellation of a percentage of customers canceling their policies and recording revenue at the time of policy renewals.

 

Retirement Plan Consulting Fees – Revenue is recognized based on the level of work performed for the client. Any payments that are received for work to be performed in the future are recorded in a deferred revenue account, and recorded into income when the fees are earned.

 

Investment Commissions – Investment commissions are earned through the sales of non-deposit investment products to customers of the Company. The sales are conducted through a third-party broker-dealer. When the commissions are received and recorded into income on the Bank’s income statement, there is no contingent portion that may need to be refunded back to the broker dealer.

 

Other – Income items included in “Other” are Bank owned life insurance income, security gains, net gains on the sale of loans and other operating income. Any amounts within the scope of ASC 606 are deemed immaterial.

 

 

Fair Value:

 

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

 

There are three levels of inputs that may be used to measure fair values:

 

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

 

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

Level 3 – Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

 

The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

 

Investment Securities

 

The Company uses a third party service to estimate fair value on available for sale securities on a monthly basis. The Company’s service provider uses a leading evaluation pricing service for U.S. domestic fixed income securities and values securities using exit pricing requirements. The Company independently corroborates the fair value received through this pricing service by obtaining the pricing through a second source at the end of each quarter. The fair values for investment securities, which consist of equity securities that are recorded at fair value to comply with exit pricing, are determined by quoted market prices in active markets, if available (Level 1). The equity securities change in fair value is recorded in the income statement. For securities where quoted prices are not available, fair values are calculated based on quoted prices for similar assets in active markets, quoted prices for similar assets in markets that are not active or inputs other than quoted prices, which provide a reasonable basis for fair value determination. Such inputs may include interest rates and yield curves, prepayment speeds, credit risks and default rates. The inputs used are principally derived from observable market data (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). The fair values of Level 3 investment securities are determined by using unobservable inputs to measure fair value of assets for which there is little, if any, market activity at the measurement date, using reasonable inputs and assumptions based on the best information at the time, to the extent that inputs are available without undue cost and effort.

 

At June 30, 2025, the Company determined that no securities had a fair value less than amortized cost that was as a result of credit deterioration as outlined in ASU 2016-13.

 

Loans Held For Sale, at Fair Value

 

The fair value of loans held for sale is estimated based upon binding contracts or quotes from third party investors (Level 2).

 

Mortgage Banking Derivatives

 

The fair value of mortgage banking derivatives are calculated using derivative valuation models that utilize quoted prices for similar assets adjusted for the specific attributes of the commitments and other observable market data at the valuation date (Level 2).

 

Loan Servicing Rights

 

Loan servicing rights are evaluated for impairment based upon the fair value of the rights as compared to the carrying amount at the end of each quarter. If the carrying amount of an individual tranche exceeds the fair value then an impairment is recorded on that tranche so that the servicing asset is carried at fair value. The calculation of the fair value is performed by an independent third party and the model uses factors such as the interest rate, prepayment speeds and other default rate assumptions that market participants would use in estimating the future net servicing income that can be validated against available market data (Level 2).

 

Interest Rate Swaps

 

The Company periodically enters into interest rate swap agreements with its commercial customers who desire a fixed rate loan term that is longer than the Company is willing to extend. The Company enters into a reciprocal swap agreement with a third party that offsets the interest rate risk from the interest rate extended to the customer. The fair value of these interest rate swap derivative instruments is calculated by an independent third party and are based upon valuation models that use observable market data as of the measurement date (Level 2).

 

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Table of Contents
 

The Company also entered into a fair value hedge to mitigate the risk of further interest rate increases and the subsequent impact on the valuation of the company’s state and political subdivision municipal bond portfolio. The Company uses an independent third party to perform a market valuation analysis for this derivative (Level 2).

 

Collateral Dependent Loans

 

Fair value estimates of collateral dependent loans that are individually reviewed are based on the fair value of the collateral, less estimated costs to sell. Loans carried at fair value generally receive individual allocations of the allowance for credit losses in 2024 and 2025. For collateral dependent loans, fair value is commonly based on recent real estate appraisals or in quoted sales price in certain instances. Appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Adjustments to a quoted price are routinely made to factor in data that affect the marketability of the collateral. Such adjustments, in both instances, are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. These loans are evaluated on a quarterly basis and adjusted accordingly.

 

Other Real Estate Owned

 

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair values are commonly based on recent real estate appraisals. These appraisals may use a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

 

Appraisals for both collateral-dependent loans and other real estate owned are performed by certified general appraisers (for commercial and commercial real estate properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the Appraisal Department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. On an annual basis, the Company compares the actual selling price of collateral that has been sold to the most recent appraised value to determine what adjustments should be made to appraisals to arrive at fair value.

 

Assets measured at fair value on a recurring basis are summarized below:

 

           

Fair Value Measurements at June 30, 2025 Using:

  
           

Quoted

                  
           

Prices in

    

Significant

          
           

Active Markets

    

Other

    

Significant

  
           

for Identical

    

Observable

    

Unobservable

  
   

Carrying

    

Assets

    

Inputs

    

Inputs

  

(In Thousands of Dollars)

  

Value

    

(Level 1)

    

(Level 2)

    

(Level 3)

  

Financial Assets

                                

Investment securities available-for sale

                                

U.S. Treasury and U.S. government sponsored entities

   $ 109,237     $ 0     $ 109,237     $ 0  

State and political subdivisions

     486,000       0       486,000       0  

Corporate bonds

     17,275       0       15,856       1,419  

Mortgage-backed securities-residential

     508,945       0       508,945       0  

Collateralized mortgage obligations

     151,169       0       151,169       0  

Small Business Administration

     2,273       0       2,273       0  

Total investment securities

     1,274,899       0       1,273,480       1,419  
                                 

Equity securities

     336       336       0       0  

Loans held for sale

     2,174       0       2,174       0  

Interest rate swaps

     1,783       0       1,783       0  

Interest rate lock commitments

     87       0       87       0  

Financial Liabilities

                                

Interest rate swaps

     1,783       0       1,783       0  

Fair value hedge derivative

     571       0       571       0  

Mortgage banking derivative

     68       0       68       0  

 

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Table of Contents
 
           

Fair Value Measurements at December 31, 2024 Using:

  
           

Quoted

                  
           

Prices in

    

Significant

          
           

Active Markets

    

Other

    

Significant

  
           

for Identical

    

Observable

    

Unobservable

  
   

Carrying

    

Assets

    

Inputs

    

Inputs

  

(In Thousands of Dollars)

  

Value

    

(Level 1)

    

(Level 2)

    

(Level 3)

  

Financial Assets

                                

Investment securities available-for sale

                                

U.S. Treasury and U.S. government sponsored entities

   $ 115,107     $ 0     $ 115,107     $ 0  

State and political subdivisions

     504,880       0       504,880       0  

Corporate bonds

     17,448       0       16,039       1,409  

Mortgage-backed securities-residential

     492,867       0       492,867       0  

Collateralized mortgage obligations

     133,776       0       133,776       0  

Small Business Administration

     2,475       0       2,475       0  

Total investment securities

     1,266,553       0       1,265,144       1,409  
                                 

Equity securities

     277       277       0       0  

Loans held for sale

     5,005       0       5,005       0  

Interest rate swaps

     3,766       0       3,766       0  

Interest rate lock commitments

     19       0       19       0  

Mortgage banking derivative

     17       0       17       0  

Financial Liabilities

                                

Interest rate swaps

     3,766       0       3,766       0  

Fair value hedge derivative

     168       0       168       0  

 

There were no significant transfers between Level 1 and Level 2 during the periods presented above.

 

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

 

   

Three Months ended

    

Six Months Ended

  
   

June 30,

    

June 30,

  

(In Thousands of Dollars)

  

2025

    

2024

    

2025

    

2024

  

Beginning Balance

   $ 1,412     $ 1,340     $ 1,409     $ 1,340  

Transfers between levels

     0       0       0       0  

Acquired and/or purchased

     0       0       0       0  

Discount accretion (premium amortization)

     15       13       29       26  

Repayments, calls and maturities

     0       0       0       0  

Changes in unrealized gains (losses)

     (8 )     44       (19 )     31  

Ending Balance

   $ 1,419     $ 1,397     $ 1,419     $ 1,397  

 

Assets measured at fair value on a non-recurring basis are summarized below:

 

           

Fair Value Measurements at June 30, 2025 Using:

  
           

Quoted

                  
           

Prices in

    

Significant

          
           

Active Markets

    

Other

    

Significant

  
           

for Identical

    

Observable

    

Unobservable

  
   

Carrying

    

Assets

    

Inputs

    

Inputs

  

(In Thousands of Dollars)

  

Value

    

(Level 1)

    

(Level 2)

    

(Level 3)

  

Financial Assets

                                

Individually evaluated loans

                                

Commercial real estate

                                

Owner occupied

   $ 126     $ 0     $ 0     $ 126  

Non-owner occupied

     12,112       0       0       12,112  

Other

     1,041       0       0       1,041  

Commercial and industrial

     2,170       0       0       2,170  

1–4 family residential

     535       0       0       535  

Mortgage servicing rights

     847       0       847       0  

 

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Fair Value Measurements at December 31, 2024 Using:

  
           

Quoted

                  
           

Prices in

    

Significant

          
           

Active Markets

    

Other

    

Significant

  
           

for Identical

    

Observable

    

Unobservable

  
   

Carrying

    

Assets

    

Inputs

    

Inputs

  

(In Thousands of Dollars)

  

Value

    

(Level 1)

    

(Level 2)

    

(Level 3)

  

Financial Assets

                                

Individually evaluated loans

                                

Commercial real estate

                                

Non-owner occupied

   $ 7,286     $ 0     $ 0     $ 7,286  

Commercial and industrial

     2,418       0       0       2,418  

1–4 family residential

     1,132       0       0       1,132  

Mortgage servicing rights

     403       0       403       0  

 

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at the periods ended June 30, 2025 and December 31, 2024:

 

                 

Range
         

Valuation

  

Unobservable

  

(Weighted

June 30, 2025

  

Fair value

  

Technique(s)

  

Input(s)

  

Average)

Individually evaluated loans

                  

Commercial real estate

   $ 13,279  

Income Approach

  

Adjustment for difference between cap rates of comparable sales

   (54.04%) - 64.36% (42.03%)

Commercial

     2,170  

Quoted price for collateral

  

Offer Price

   12.71%

Residential

     535  

Sales comparison

  

Adjustment for differences between comparable sales

   (19.11%) - 13.04% 3.62%

 

 

                 

Range
         

Valuation

  

Unobservable

  

(Weighted

December 31, 2024

  

Fair value

  

Technique(s)

  

Input(s)

  

Average)

Individually evaluated loans

                  

Commercial real estate

   $ 7,286  

Income approach

  

Adjustment for difference between cap rates of comparable sales

   (56.03%) - 69.02% (40.71%)

Commercial

     2,418  

Quoted price for collateral

  

Offer Price

   6.67%

Residential

     1,132  

Sales comparison

  

Adjustment for differences between comparable sales

   (8.91%) - (6.22%) (7.16%)

 

The carrying amounts and estimated fair values of financial instruments not previously disclosed at June 30, 2025 and December 31, 2024 are as follows:

 

            Fair Value Measurements at June 30, 2025 Using:  
   

Carrying

                                  

(In Thousands of Dollars)

  

Amount

    

Level 1

    

Level 2

    

Level 3

    

Total

  

Financial assets

                                        

Cash and cash equivalents

   $ 90,740     $ 20,100     $ 70,640     $ 0     $ 90,740  

Regulatory stock

     26,061       n/a       n/a       n/a       n/a  

Loans, net

     3,264,796       0       0       3,151,770       3,151,770  

Financial liabilities

                                        

Deposits

     4,396,417       3,550,026       844,293       0       4,394,319  

Short-term borrowings

     203,000       0       203,000       0       203,000  

Long-term borrowings

     86,428       0       76,694       0       76,694  

 

          Fair Value Measurements at December 31, 2024 Using:  
   

Carrying

        

(In Thousands of Dollars)

  

Amount

    

Level 1

    

Level 2

    

Level 3

    

Total

  

Financial assets

                                        

Cash and cash equivalents

   $ 85,738     $ 20,426     $ 65,312     $ 0     $ 85,738  

Regulatory stock

     30,669       n/a       n/a       n/a       n/a  

Loans, net

     3,232,483       0       0       3,082,292       3,082,292  

Financial liabilities

                                        

Deposits

     4,266,779       3,429,116       835,967       0       4,265,083  

Short-term borrowings

     305,000       0       305,000       0       305,000  

Long-term borrowings

     86,150       0       78,721       0       78,721  

 

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Goodwill and Intangible Assets:

 

Goodwill associated with the Company’s past acquisitions totaled $167.4 million at June 30, 2025 and December 31, 2024. Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value, which is determined through an impairment test. Management performs goodwill impairment testing on an annual basis as of September 30, or whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying value. As of June 30, 2025, no events or changes in circumstances indicated that the fair value of the reporting unit was below its carrying value. The Company will continue to monitor its goodwill for possible impairment.

 

Acquired Intangible Assets

 

Acquired intangible assets were as follows:

 

   

June 30, 2025

    

December 31, 2024

  
   

Gross Carrying

    

Accumulated

    

Gross Carrying

    

Accumulated

  

(In Thousands of Dollars)

  

Amount

    

Amortization

    

Amount

    

Amortization

  

Amortized intangible assets:

                                

Customer relationship intangibles

   $ 7,975     $ (7,170 )   $ 7,975     $ (7,088 )

Non-compete contracts

     457       (433 )     457       (426 )

Trade name

     1,131       (481 )     1,131       (468 )

Core deposit intangible

     32,115       (14,313 )     32,115       (12,946 )

Total

   $ 41,678     $ (22,397 )   $ 41,678     $ (20,928 )

 

Aggregate amortization expense was $735,000 and $1.5 million for the three and six month periods ended June 30, 2025 Amortization expense was $630,000 and $1.3 million for the three and six month periods ended June 30, 2024. 

 

Estimated amortization expense for each of the next five periods and thereafter:

 

2025 (6 months)

   $ 1,430  

2026

     2,798  

2027

     2,684  

2028

     2,674  

2029

     2,665  

Thereafter

     7,030  

Total

   $ 19,281  

 

 

Leases:

 

The Company has operating leases for branch office locations, vehicles, land and certain office equipment such as printers and copiers. The leases have remaining lease terms of up to 17.1 years, some of which had options to extend the lease for up to 15 years, while the Fairlawn lending building lease was terminated in April of 2025. The Fairview Park building lease was scheduled to terminate in April of 2025, but has been extended until April of 2027. This lease location has an initial right of use asset and lease liability recorded of $124,000. The Beachwood branch lease located at 24755 Chagrin Blvd. was terminated effective January 31, 2025, and the Branch was moved into a new location at 22835 Chagrin Blvd on February 3, 2025.  This new lease location was effective in December of 2024, with an initial right of use asset and lease liability recorded of $971,000.

 

The right of use assets and lease liabilities were $7.8 million and $8.0 million as of June 30, 2025, respectively, and $9.7 million and $9.9 million at December 31, 2024, respectively. The right of use assets are included in other assets while the lease liabilities are included in other liabilities on the balance sheet.

 

Lease expense for the three and six month periods ended June 30, 2025 and 2024 was $351,000 and $644,000, respectively. Lease expense for the three and six month periods ended June 30, 2024 was $327,000 and $658,000, respectively. The weighted-average remaining lease term for all leases was 8.93 years as of June 30, 2025. The weighted-average discount rate was 3.46% for all leases as of June 30, 2025.

 

Maturities of lease liabilities are as follows as of June 30, 2025:

 

2025 (6 months)

   $ 664  

2026

     1,264  

2027

     1,141  

2028

     1,081  

2029

     964  

Thereafter

     4,386  

Total Payments

     9,500  

Less: lease liability expense

     (1,463 )

Total

   $ 8,037  

 

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Derivative Financial Instruments:

 

Interest Rate Swaps

 

The Company maintains an interest rate protection program for commercial loan customers. Under this program, the Company provides a variable rate loan while creating a fixed rate loan for the customer by the customer entering into an interest rate swap with terms that match the loan. The Company offsets its risk exposure by entering into an offsetting interest rate swap with an unaffiliated institution. The Company had interest rate swaps associated with commercial loans with a notional value of $66.8 million and fair value of $1.8 million in other assets and $1.8 million in other liabilities at June 30, 2025. At December 31, 2024, the Company had interest rate swaps associated with commercial loans with a notional value of $65.7 million and fair value of $3.8 million in other assets and $3.8 million in other liabilities. The interest rate swaps with both the customers and third parties are not designated as hedges under FASB ASC 815. As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC 820.

 

There were no net gains or losses for interest rate swaps for the three or six month periods ended June 30, 2025 and 2024.

 

Interest Rate Swap Designated as a Fair Value Hedge

 

The Company has one interest rate swap with a notional amount of $100.0 million that was in place at both June 30, 2025 and December 31, 2024. This swap is designated as a fair value hedge to mitigate the risk of further interest rate increases and the subsequent impact on the valuation of the company’s state and political subdivision municipal bond portfolio. The gross aggregate fair value of the swap at June 30, 2025 is $(571,000) and is recorded as a $579,000 mark to market adjustment in other liabilities and $8,000 recorded to other assets for the accrued interest receivable in the Consolidated Balance Sheet. At December 31, 2024, the gross aggregate fair value of the swap was $(168,000) and was recorded as a $418,000 mark to market adjustment in other liabilities, and $250,000 was recorded to other assets for the accrued interest receivable in the Consolidated Balance Sheet. The Company expects the hedge to remain in effect for the remaining term of the swap, which matures August 2026. A summary of the interest rate swap designated as a fair value hedge is presented below:

 

(In Thousands of Dollars)

     June 30, 2025       December 31, 2024  

Notional amount fair value hedge

   $ 100,000     $ 100,000  

Fixed pay rates

     4.35 %     4.35 %

Variable SOFR receive rates

     4.45 %     4.49 %

Remaining maturity (in years)

     1.1       1.6  

Fair value

   $ (571 )   $ (168 )

 

Mortgage Banking Derivatives

 

Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third-party investors are considered derivatives. The Company enters into forward commitments for the future delivery of residential mortgage loans when the interest rate locks are committed in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. These mortgage banking derivatives are not designated in hedge relationships.

 

The net gains (losses) relating to non-designated derivative instruments used for risk management are included in Net Gains on Sale of Loans on the Consolidated Statements of Income and are summarized below for the quarters ended June 30, 2025 and June 30, 2024:

 

   

Three Months Ended

    

Six Months Ended

  
   

June 30,

    

June 30,

  
   

2025

    

2024

    

2025

    

2024

  

Forward sales contracts

   $ (53 )   $ 16     $ (85 )   $ 18  

Interest rate lock commitments

     31       (8 )     67       (55 )

 

The following table reflects the amount and fair value of mortgage banking derivatives included in the Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024:

 

   

June 30, 2025

    

December 31, 2024

  
   

Notional

    

Fair

    

Notional

    

Fair

  

(In Thousands of Dollars)

   Amount     Value     Amount     Value  

Included in other assets:

                                

Forward sales contracts

   $ 0     $ 0     $ 6,500     $ 17  

Interest rate lock commitments

     10,664       87       4,896       19  

Mortgage banking derivative

     112       1       0       0  

Total included in other assets

   $ 10,776     $ 88     $ 11,396     $ 36  
                                 

Included in other liabilities:

                                

Forward sales contracts

   $ 11,000     $ 68     $ 0     $ 0  

 

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Earnings Per Share:

 

The computation of basic and diluted earnings per share is shown in the following table:

 

   

Three Months Ended

    

Six Months Ended

  
   

June 30,

    

June 30,

  
   

2025

    

2024

    

2025

    

2024

  

Basic EPS

                                

Net income (In thousands of dollars)

   $ 13,910     $ 11,783     $ 27,488     $ 23,023  

Weighted average shares outstanding

     37,442,047       37,325,648       37,411,497       37,301,931  

Basic earnings per share

   $ 0.37     $ 0.32     $ 0.73     $ 0.62  
                                 

Diluted EPS

                                

Net income (In thousands of dollars)

   $ 13,910     $ 11,783     $ 27,488     $ 23,023  

Weighted average shares outstanding for basic earnings per share

     37,442,047       37,325,648       37,411,497       37,301,931  

Dilutive effect of restricted stock awards

     179,965       161,485       210,662       177,655  

Weighted average shares for diluted earnings per share

     37,622,012       37,487,133       37,622,159       37,479,586  

Diluted earnings per share

   $ 0.37     $ 0.31     $ 0.73     $ 0.61  

 

There were 145,125 and 100,718 restricted stock awards that were considered anti-dilutive for the three and six month periods ended June 30, 2025, respectively. There were 159,178 and 160,678 restricted stock awards that were considered anti-dilutive for the three and six month periods ended June 30, 2024.

 

 

Stock Based Compensation:

 

In April of 2022, the Company, with the approval of shareholders, created the 2022 Equity Incentive Plan (the “2022 Plan”). The 2022 Plan permits the award of up to one million shares to the Company’s directors and employees to attract and retain exceptional personnel, motivate performance and, most importantly, to help align the interests of the Company’s executives with those of the Company’s shareholders. The 2022 Plan replaced the 2017 Plan. There were 66,080 service time based share awards and 102,336 performance based share awards granted under the 2022 Plan during the six month period ended June 30, 2025, as shown in the table below. The actual number of performance based shares issued will depend on the relative performance of the Company’s average return on equity compared to a group of peer companies over a three year vesting period, ending December 31, 2027. As of June 30, 2025, 379,265 shares are still available to be awarded from the 2022 Plan. The 2017 Plan has been sunset.

 

The restricted stock awards were granted with a fair value price equal to the market price of the Company’s common stock at the date of the grant. Expense recognized was $645,000 and $1.3 million for the three and six months ended June 30, 2025, respectively. During prior periods, the expense recognized was $626,000 and $1.3 million for the three and six months ended June 30, 2024, respectively. As of June 30, 2025, there was $3.5 million of total unrecognized compensation expense related to the nonvested shares granted under the Plan. The remaining cost is expected to be recognized over 2.7 years.

 

The following is the activity under the Plans during the six month period ended June 30, 2025.

 

   

Maximum

    

Weighted

    

Maximum

    

Weighted

  
   

Awarded

    

Average

    

Awarded

    

Average

  
   

Service

    

Grant Date

    

Performance

    

Grant Date

  
   

Units

    

Fair Value

    

Units

    

Fair Value

  

Beginning balance - non-vested shares

     231,430     $ 14.35       222,920     $ 14.57  

Granted

     66,080       13.65       102,336       14.38  

Vested

     (101,333 )     13.93       (47,514 )     14.06  

Forfeited

     (1,762 )     12.44       (8,085 )     12.44  

Ending balance - non-vested shares

     194,415     $ 13.37       269,657     $ 14.13  

 

The following is the activity under the Plans during the six month period ended June 30, 2024.

 

   

Maximum

    

Weighted

    

Maximum

    

Weighted

  
   

Awarded

    

Average

    

Awarded

    

Average

  
   

Service

    

Grant Date

    

Performance

    

Grant Date

  
   

Units

    

Fair Value

    

Units

    

Fair Value

  

Beginning balance - non-vested shares

     253,776     $ 14.97       209,484     $ 15.01  

Granted

     61,425       13.07       99,253       13.81  

Vested

     (63,506 )     12.92       (66,192 )     13.79  

Forfeited

     (11,167 )     17.24       (19,625 )     15.05  

Ending balance - non-vested shares

     240,528     $ 14.47       222,920     $ 14.57  

 

The 148,847 shares that vested during the six month period ended June 30, 2025 had a weighted average fair value of $13.97 per share.

 

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Other Comprehensive Income (Loss):

 

The following tables represent the changes in accumulated other comprehensive income (loss) by component, net of tax, for the three and six month periods ended June 30, 2025 and 2024.

 

           

Reclassification

                  
   

Net unrealized

    

adjustment for

                  
   

holding (losses)

    

(gains) losses

                  
   

gains on available

    

realized in income

    

Change in funded status

          

(In Thousands of Dollars)

  

for sale securities

    

on fair value hedge

    

of post-retirement plan

    

Total

  

Balance December 31, 2024

   $ (192,860 )   $ (403 )   $ (2 )   $ (193,265 )

Other comprehensive (loss) before reclassification

     15,096       0       0       15,096  

Amounts reclassified from accumulated other comprehensive income

     1,054       (186 )     0       868  

Net current period other comprehensive (loss) income

     16,150       (186 )     0       15,964  

Balance March 31, 2025

   $ (176,710 )   $ (589 )   $ (2 )   $ (177,301 )

Other comprehensive (loss) before reclassification

     517       0       0       517  

Amounts reclassified from accumulated other comprehensive income

     0       46       0       46  

Net current period other comprehensive (loss) income

     517       46       0       563  

Balance June 30, 2025

   $ (176,193 )   $ (543 )   $ (2 )   $ (176,738 )
                                 

Balance December 31, 2023

   $ (171,539 )   $ (1,013 )   $ (2 )   $ (172,554 )

Other comprehensive income before reclassification

     (15,149 )     0       0       (15,149 )

Amounts reclassified from accumulated other comprehensive (loss)

     1,686       1,063       0       2,749  

Net current period other comprehensive income

     (13,463 )     1,063       0       (12,400 )

Balance March 31, 2024

   $ (185,002 )   $ 50     $ (2 )   $ (184,954 )

Other comprehensive (loss) before reclassification

     (6,545 )     0       0       (6,545 )

Amounts reclassified from accumulated other comprehensive income

     99       167       0       266  

Net current period other comprehensive (loss)

     (6,446 )     167       0       (6,279 )

Balance June 30, 2024

   $ (191,448 )   $ 217     $ (2 )   $ (191,233 )

 

Amounts reclassified out of each component of accumulated other comprehensive income (loss) were not material for the three and six month periods ended June 30, 2025 and 2024.

 

 

Regulatory Capital Matters:

 

Banks and bank holding companies are subject to various regulatory capital requirements administered by the federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action by regulators that, if undertaken, could have a direct material effect on the financial statements. Management believes that as of June 30, 2025, the Company and the Bank meet all capital adequacy requirements to which they are subject.

 

The FDIC and other federal banking regulators revised the risk-based capital requirements applicable to financial holding companies and insured depository institutions, including the Company and the Bank, to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision (“Basel III”).

 

The common equity tier 1 capital, tier 1 capital and total capital ratios are calculated by dividing the respective capital amounts by risk-weighted assets. The leverage ratio is calculated by dividing tier 1 capital by adjusted average total assets.

 

Basel III limits capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity tier 1 capital, tier 1 capital and total capital to risk-weighted assets in addition to the amount necessary to meet minimum risk-based capital requirements. Excluding the additional buffer, Basel III requires the Company and the Bank to maintain (i) a minimum ratio of common equity tier 1 capital to risk-weighted assets of at least 4.5%, (ii) a minimum ratio of tier 1 capital to risk-weighted assets of at least 6.0%, (iii) a minimum ratio of total capital to risk-weighted assets of at least 8.0% and (iv) a minimum leverage ratio of at least 4.0%.

 

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If only adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At June 30, 2025 and December 31, 2024, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

 

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Actual and required capital amounts and ratios, which do not include the capital conservation buffer, are presented below at June 30, 2025 and December 31, 2024:

 

                                   

To be Well Capitalized

  
                   

Requirement For Capital

    

Under Prompt Corrective

  
   

Actual

    

Adequacy Purposes:

    

Action Provisions:

  
   

Amount

    

Ratio

    

Amount

    

Ratio

    

Amount

    

Ratio

  

June 30, 2025

                                                

Common equity tier 1 capital ratio

                                                

Consolidated

   $ 432,040       11.56 %   $ 168,120       4.5 %     N/A       N/A  

Bank

     472,048       12.67 %     167,621       4.5 %     242,120       6.5 %

Total risk based capital ratio

                                                

Consolidated

     561,901       15.04 %     298,880       8.0 %     N/A       N/A  

Bank

     511,909       13.74 %     297,994       8.0 %     372,492       10.0 %

Tier 1 risk based capital ratio

                                                

Consolidated

     450,040       12.05 %     224,160       6.0 %     N/A       N/A  

Bank

     472,048       12.67 %     223,495       6.0 %     297,994       8.0 %

Tier 1 leverage ratio

                                                

Consolidated

     450,040       8.67 %     207,544       4.0 %     N/A       N/A  

Bank

     472,048       9.12 %     206,974       4.0 %     258,718       5.0 %
                                                 

December 31, 2024

                                                

Common equity tier 1 capital ratio

                                                

Consolidated

   $ 415,825       11.14 %   $ 167,991       4.5 %     N/A       N/A  

Bank

     442,747       11.88 %     167,712       4.5 %   $ 242,251       6.5 %

Total risk based capital ratio

                                                

Consolidated

     543,250       14.55 %     298,651       8.0 %     N/A       N/A  

Bank

     480,173       12.88 %     298,155       8.0 %     372,694       10.0 %

Tier 1 risk based capital ratio

                                                

Consolidated

     433,825       11.62 %     223,988       6.0 %     N/A       N/A  

Bank

     442,747       11.88 %     223,616       6.0 %     298,155       8.0 %

Tier 1 leverage ratio

                                                

Consolidated

     433,825       8.36 %     207,544       4.0 %     N/A       N/A  

Bank

     442,747       8.55 %     207,066       4.0 %     258,832       5.0 %

 

 

Segment Information:

 

The Company's reportable segments are determined by the Chief Financial Officer, who is the designated chief operating decision maker, based upon information provided about the Company's products and services offered, primarily distinguished between the banking and trust operations.  The segments are also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business, which are then aggregated if operating performance, products/services, and customers are similar.  The chief operating decision maker uses revenue streams to evaluate product pricing and significant expenses to assess performance of each segment to evaluate compensation of certain employees.  Segment pretax profit is used to assess the performance of the banking segment by monitoring the net interest margin and non-interest expenses.  Segment pretax profit is also used to assess the performance of the trust segment by monitoring trust service fees, retirement plan consulting fees and non-interest expenses.  Loans and investments provide the significant revenues in the banking operation, while trust service fees and retirement plan consulting fees provide the significant revenues in trust operations.  Interest expense, provisions for credit losses and payroll provide the significant expenses in the banking operation, while payroll provides the significant expense in the trust segment.  All operations are domestic.

 

Accounting policies for segments are the same as those described in the Financial Statement Notes.  Income taxes are calculated on operating income.  Transactions among segments are made at fair value.

 

Significant segment totals are reconciled to the financial statements as follows:

 

   

Trust

    

Bank

    

Consolidated

  

(In Thousands of Dollars)

  

Segment

    

Segment

    

Segment totals

  

June 30, 2025

                        

Total assets for reportable segments

   $ 17,910     $ 5,162,387     $ 5,180,297  

Eliminations and other

                     (1,869 )

Total consolidated assets

                   $ 5,178,428  

 

   

Trust

    

Bank

    

Consolidated

  

(In Thousands of Dollars)

  

Segment

    

Segment

    

Segment totals

  

December 31, 2024

                        

Total assets for reportable segments

   $ 17,204     $ 5,104,012     $ 5,121,216  

Eliminations and other

                     (2,292 )

Total consolidated assets

                   $ 5,118,924  

 

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Trust

    

Bank

    

Consolidated

  

(In Thousands of Dollars)

  

Segment

    

Segment

    

Segment totals

  

For Three Months Ended June 30, 2025

                        

Interest income - loans including fees

   $ 0     $ 47,050     $ 47,050  

Interest income - investments

     0       9,729       9,729  

Trust fees

     2,596       0       2,596  

Retirement plan consulting fees

     783       0       783  

Total consolidated segment revenues

     3,379       56,779       60,158  

Reconciliation of revenue

                        

Other revenues

                     9,666  

Total consolidated revenues

                     69,824  
                         

Interest expense - deposits

     0       20,240       20,240  

Interest expense - borrowings

     0       2,541       2,541  

Provision for credit losses and unfunded loans

     0       3,548       3,548  

Payroll expenses

     1,441       13,258       14,699  

Total consolidated segment expenses

     1,441       39,587       41,028  
                         

Segment profit

     1,938       17,192       19,130  

Reconciliation of expenses

                        

Other expenses *

                     12,476  

Total consolidated expenses

                     53,504  
                         

Total consolidated income before taxes

                   $ 16,320  

Other segment disclosures

                        

Occupancy and equipment

     140       3,964       4,104  

Intangible amortization

     23       712       735  

 

   

Trust

    

Bank

    

Consolidated

  

(In Thousands of Dollars)

  

Segment

    

Segment

    

Segment totals

  

For Six Months Ended June 30, 2025

                        

Interest income - loans including fees

   $ 0     $ 93,758     $ 93,758  

Interest income - investments

     0       19,243       19,243  

Trust fees

     5,237       0       5,237  

Retirement plan consulting fees

     1,581       0       1,581  

Total consolidated segment revenues

     6,818       113,001       119,819  

Reconciliation of revenue

                        

Other revenues

                     17,792  

Total consolidated revenues

                     137,611  
                         

Interest expense - deposits

     0       39,957       39,957  

Interest expense - borrowings

     0       5,934       5,934  

Provision for credit losses and unfunded loans

     0       3,344       3,344  

Payroll expenses

     2,915       27,939       30,854  

Total consolidated segment expenses

     2,915       77,174       80,089  
                         

Segment profit

     3,903       35,827       39,730  

Reconciliation of expenses

                        

Other expenses *

                     24,847  

Total consolidated expenses

                     104,936  
                         

Total consolidated income before taxes

                   $ 32,675  

Other segment disclosures

                        

Occupancy and equipment

     283       7,948       8,231  

Intangible amortization

     46       1,424       1,470  

  

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Trust

    

Bank

    

Consolidated

  

(In Thousands of Dollars)

  

Segment

    

Segment

    

Segment totals

  

For Three Months Ended June 30, 2024

                        

Interest income - loans including fees

   $ 0     $ 46,513     $ 46,513  

Interest income - investments

     0       9,222       9,222  

Trust fees

     2,345       0       2,345  

Retirement plan consulting fees

     623       0       623  

Total consolidated segment revenues

     2,968       55,735       58,703  

Reconciliation of revenue

                        

Other revenues

                     7,749  

Total consolidated revenues

                     66,452  
                         

Interest expense - deposits

     0       20,160       20,160  

Interest expense - borrowings

     0       4,620       4,620  

Provision for credit losses and unfunded loans

     0       1,112       1,112  

Payroll expenses

     1,368       13,174       14,542  

Total consolidated segment expenses

     1,368       39,066       40,434  
                         

Segment profit

     1,600       16,669       18,269  

Reconciliation of expenses

                        

Other expenses *

                     11,861  

Total consolidated expenses

                     52,295  
                         

Total consolidated income before taxes

                   $ 14,157  

Other segment disclosures

                        

Occupancy and equipment

     91       3,714       3,805  

Intangible amortization

     12       617       629  

 

   

Trust

    

Bank

    

Consolidated

  

(In Thousands of Dollars)

  

Segment

    

Segment

    

Segment totals

  

For Six Months Ended June 30, 2024

                        

Interest income - loans including fees

   $ 0     $ 91,530     $ 91,530  

Interest income - investments

     0       18,225       18,225  

Trust fees

     4,854       0       4,854  

Retirement plan consulting fees

     1,241       0       1,241  

Total consolidated segment revenues

     6,095       109,755       115,850  

Reconciliation of revenue

                        

Other revenues

                     14,013  

Total consolidated revenues

                     129,863  
                         

Interest expense - deposits

     0       38,549       38,549  

Interest expense - borrowings

     0       9,598       9,598  

Provision for credit losses and unfunded loans

     0       663       663  

Payroll expenses

     2,730       26,868       29,598  

Total consolidated segment expenses

     2,730       75,678       78,408  
                         

Segment profit

     3,365       34,077       37,442  

Reconciliation of expenses

                        

Other expenses *

                     23,844  

Total consolidated expenses

                     102,252  
                         

Total consolidated income before taxes

                   $ 27,611  

Other segment disclosures

                        

Occupancy and equipment

     190       7,338       7,528  

Intangible amortization

     24       1,294       1,318  
 

 

* The Bank segment includes Farmers National Insurance and Farmers of Canfield Investment Co.

 

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Short-term borrowings:

 

The Bank had short-term advances from the Federal Home Loan Bank ("FHLB") of $203 million at June 30, 2025, and $305.0 million at December 31, 2024. The interest rate on these borrowings was 4.37% for the period ended  June 30, 2025, and 4.45% for the period ended  December 31, 2024. These short-term borrowings were borrowed using the FHLB's short term repurchase advance program, as these products allow the most flexibility to meet the Bank's varying liquidity needs. These FHLB advances were secured by pledged assets which are described in the following Long-Term Borrowings footnote.

 

The Bank has access to a line of credit for $25.0 million at a major domestic bank that is below prime rate. The line and terms are periodically reviewed by the lending bank and is generally subject to withdrawal at their discretion. There were no outstanding borrowings under this line at June 30, 2025, or December 31, 2024.

 

Farmers has one unsecured revolving line of credit for $5.0 million. This line can be renewed annually and has an interest rate of prime with a floor of 3.5%. There was no outstanding balance on this line at either June 30, 2025, or December 31, 2024.

 

Long-term borrowings:

 

There were no long-term advances from the FHLB at June 30, 2025, or at December 31, 2024.

 

Long-term and short-term FHLB advances are secured by a blanket pledge of residential mortgage, commercial real estate, and multi-family loans totaling $1.7 billion for both periods ending  June 30, 2025 and December 31, 2024. Based on this collateral, the Bank is eligible to borrow an additional $596.9 million at June 30, 2025.

 

In November 2021, the Company completed the issuance of $75.0 million aggregate principal amount, fixed-to-floating rate subordinated notes due December 15, 2031, in a private offering exempt from the registration requirements under the Securities Act of 1933, as amended. The notes carry a fixed rate of 3.125% for five years at which time they will convert to a floating rate based on the three-month term secured overnight funding rate, plus a spread of 220 basis points. The net proceeds from the sale were approximately $73.8 million, after deducting the offering expenses. The Company’s intent was to use the proceeds from the sale for general corporate purposes, which may include, without limitation, providing capital to support its growth organically or through acquisitions, in financing investments, capital expenditures, repurchasing its common shares and for investments in the Bank as regulatory capital. The subordinated debentures are included in Total Capital under current regulatory guidelines and interpretations.

 

In August 2024, the Company bought back and retired $3 million of the outstanding subordinated notes. The Company may, at its option, beginning December 15, 2026, redeem additional portions of the notes, in whole or in part, from time to time, subject to certain conditions.

 

On November 1, 2021, the Company completed its acquisition of Cortland, which included the assumption of Floating Rate Junior Subordinated Debt Securities due September 15, 2037 (the “junior subordinated debt securities”) at an acquisition-date fair value of $4.3 million, held in a wholly-owned statutory trust whose common securities were wholly-owned by Cortland. The sole assets of the statutory trust are the junior subordinated debt securities and related payments. The junior subordinated debt securities and the back-up obligations, in the aggregate, constitute a full and unconditional guarantee of the obligations of the statutory trust under the capital securities held by third-party investors. The securities bear interest at a rate of 1.45% over the 3-month term SOFR rate that includes an additional spread adjustment of 26 basis points. The rate at June 30, 2025 was 6.03% and at December 31, 2024 the rate was 6.07%.

 

On January 7, 2020, the Company completed its acquisition of Maple Leaf, which included the assumption of Floating Rate Junior Subordinated Debt Securities due December 15, 2036 (the “junior subordinated debt securities”) held in a wholly-owned statutory trust whose common securities were wholly-owned by Maple Leaf. The sole assets of the statutory trust are the junior subordinated debt securities and related payments. The junior subordinated debt securities and the back-up obligations, in the aggregate, constitute a full and unconditional guarantee of the obligations of the statutory trust under the capital securities held by third-party investors. The securities bear interest at a rate of 1.80% over the 3-month term SOFR rate that includes an additional spread adjustment of 26 basis points. The rate at June 30, 2025 was 6.38% and at December 31, 2024 the rate was 6.42%.

 

In 2015, the Company completed its acquisition of National Bancshares Corporation, which included the assumption of Floating Rate Junior Subordinated Debt Securities due June 15, 2035 (the “junior subordinated debt securities”) held in a wholly-owned statutory trust, TSEO Statutory Trust I. The sole assets of the statutory trust are the junior subordinated debt securities and related payments. The junior subordinated debt securities and the back-up obligations, in the aggregate, constitute a full and unconditional guarantee of the obligations of the statutory trust under the capital securities held by third-party investors. The securities bear interest at a rate of 1.70% over the 3-month term SOFR rate that includes an additional spread adjustment of 26 basis points. The rate at June 30, 2025 was 6.28% and at December 31, 2024 the rate was 6.32%.

 

In all three instances, the Company may redeem the junior subordinated debentures at any quarter-end, in whole, or in part, at par. This type of subordinated debenture qualifies as Tier 1 capital for regulatory purposes in determining and evaluating the Company’s capital adequacy.

 

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A summary of all junior subordinated debentures issued by the Company to affiliates and subordinated debentures follows. For the junior subordinated debentures, these amounts represent the par value of the obligations owed to these affiliates, including the Company’s equity interest in the trusts along with any unamortized fair value marks. For the subordinated debentures, these amounts represent the par value less the remaining deferred offering expense associated with the issuance of the debentures. Balances were as follows at June 30, 2025 and December 31, 2024:

 

(In Thousands of Dollars)

     June 30, 2025       December 31, 2024  

TSEO Statutory Trust I

   $ 2,594     $ 2,570  

Maple Leaf Financial Statutory Trust II

     8,075       7,964  

Cortland Statutory Trust I

     4,465       4,437  

Total junior subordinated debentures owed to unconsolidated subsidiary trusts

   $ 15,134     $ 14,971  

Subordinated Debentures

   $ 71,294     $ 71,179  

Total long-term borrowings

   $ 86,428     $ 86,150  

 

 

Tax Credit Investments:

 

The Company invests in qualified affordable housing projects, as well as solar investment tax credits.

 

At June 30, 2025 and December 31, 2024, the balance of the investment for qualified affordable housing projects was $27.0 million and $22.0 million, respectively. Total unfunded commitments related to the investments in qualified affordable housing projects totaled $17.7 million and $13.9 million at June 30, 2025 and December 31, 2024. The Company expects to complete the fulfillment of these commitments during the year ending 2040.

 

In the second quarters ended June 30, 2025 and June 30, 2024, the Company recognized amortization expense of $492,000 and $407,000, respectively, from its investment in qualified affordable housing projects. In the six month periods ended June 30, 2025 and June 30, 2024, the Company recognized amortization expense of $965,000 and $813,000, respectively, from its investment in qualified affordable housing projects. This amortization expense was included within income tax expense on the consolidated statements of income.

 

Additionally, during the second quarters ended June 30, 2025 and June 30, 2024, the Company recognized tax credits and other benefits from its investment in affordable housing tax credits of $589,000 and $502,000, respectively. In the six month periods ended June 30, 2025 and June 30, 2024, the Company recognized tax credits and other benefits from its investment in affordable housing tax credits of $1.2 million and $1.0 million, respectively. The qualified affordable housing investment credits are included in the net changes in other assets and liabilities in the cash flows from operating activities in the consolidated statements of cash flows. During the six month periods ended June 30, 2025 and June 30, 2024, the Company did not incur impairment losses related to its investment in affordable housing tax credits.

 

In the first quarter of 2025, the Company began investing in solar investment tax credits and at June 30, 2025 the balance of the investment was $7.3 million. Total unfunded commitments related to the investments in solar investment tax credits totaled $6.3 million at  June 30, 2025. The Company expects this investment to be fully funded during 2025. There were no investments in solar investment tax credits at December 31, 2024.

 

In the second quarter ended June 30, 2025, the Company recognized amortization expense of $2.4 million from its investment in solar investment tax credits. In the six month period ended June 30, 2025, the Company recognized amortization expense of $2.4 million from its investment in solar investment tax credits. This amortization expense was included within income tax expense on the consolidated statements of income.  The Company did not have a similar investment in 2024. 

 

Additionally, during the second quarter ended June 30, 2025, the Company recognized tax credits and other benefits from its investment in solar investment tax credits of $2.6 million. In the six month period ended June 30, 2025, the Company recognized tax credits and other benefits from its investment in solar investment tax credits of $2.6 million. The solar investment tax credits are included in the net changes in other assets and liabilities in the cash flows from operating activities in the consolidated statements of cash flows. During the six month period ended June 30, 2025, the Company did not incur impairment losses related to its investment in solar investment tax credits.  The Company did not have a similar investment in 2024. 

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Cautionary Note Regarding Forward Looking Statements

 

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are not statements of historical fact, but rather statements based on the Company’s current expectations, beliefs and assumptions regarding the future of Farmers’ business, future plans and strategies, projections, anticipated events and trends, its intended results and future performance, the economy and other future conditions. Forward-looking statements are preceded by terms such as “will,” “would,” “should,” “could,” “may,” “expect,” “estimate,” “believe,” “anticipate,” “intend,” “plan,” “project,” or variations of these words, or similar expressions. Forward-looking statements are not a guarantee of future performance and actual future results could differ materially from those contained in forward-looking information. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Numerous uncertainties, risks, and changes could cause or contribute to Farmers’ actual results, performance, and achievements to be materially different from those expressed or implied by the forward-looking statements.

 

Factors that could cause or contribute to such differences include, without limitation, risks and uncertainties detailed from time to time in the Company’s filings with the Securities and Exchange Commission (the “Commission”), including without limitation, the risk factors disclosed in Item 1A, “Risk Factors,” in the Company’s 2024 Form 10-K, as updated in Item 1A, “Risk Factors,” in this Quarterly Report on Form 10-Q.

 

Many of these factors are beyond the Company’s ability to control or predict, and readers are cautioned not to put undue reliance on those forward-looking statements. The following, which is not intended to be an all-encompassing list, summarizes several factors that could cause the Company’s actual results to differ materially from those anticipated or expected in any forward-looking statement:

 

  •

general economic conditions in markets where the Company conducts business, which could materially impact credit quality trends;
  •

the length and extent of the economic impacts of the ongoing conflict in Ukraine;
  • the length and extent of U.S. and foreign country tariff policies and their impact on global, national, and regional economic conditions; 
  •

actions by the Federal Reserve Board, U.S. Treasury and other government agencies, including those that impact money supply, market interest rates and inflation;
  •

disruptions in the mortgage and lending markets and significant or unexpected fluctuations in interest rates related to governmental responses to inflation, including financial stimulus packages and interest rate changes;
  •

general business conditions in the banking industry;
  •

the regulatory environment;
  •

general fluctuations in interest rates;
  •

demand for loans in the market areas where the Company conducts business;
  •

rapidly changing technology and evolving banking industry standards;
  •

competitive factors, including increased competition with regional and national financial institutions;
  •

Farmers' ability to attract, recruit and retain skilled employees; and
  •

new service and product offerings by competitors and price pressures.

 

Other factors not currently anticipated may also materially and adversely affect the Company’s results of operations, cash flows and financial position. There can be no assurance that future results will meet expectations. While the Company believes that the forward-looking statements in the presentation are reasonable, you should not place undue reliance on any forward-looking statement. In addition, these statements speak only as of the date made. The Company does not undertake, and expressly disclaims, any obligation to update or alter any statements whether as a result of new information, future events or otherwise, except as may be required by applicable law.  

 

Recent Market and Regulatory Developments

 

Various and significant legislation affecting financial institutions and the financial industry is from time to time introduced in the U.S. Congress and state legislatures, as well as by regulatory agencies. Such initiatives may include proposals to expand or contract the powers of bank holding companies and depository institutions or proposals to substantially change the financial institution regulatory system.

 

On July 4, 2025, the “One Big Beautiful Bill Act” (“OBBBA”) was signed into law by President Trump. OBBBA delivers a sweeping legislative package aimed at fulfilling key economic and policy priorities of the Trump administration – it extends and modifies certain key provisions from the Tax Cuts and Jobs Act of 2017 and expands certain incentives from the Inflation Reduction Act of 2022 while accelerating the phase-out of others. Because OBBBA was effective after the close of the calendar quarter, no financial statement impact was reflected in the second quarter of 2025. While several key provisions will impact the Company going forward, and we are still evaluating the provisions of OBBBA, we do not expect the impacts to be material to the Company or its financial results.

 

Also, such statutes, regulations and policies are continually under review by Congress, state legislatures and federal and state regulatory agencies and are subject to change at any time, particularly in the current economic and regulatory environment. Any such change in statutes, regulations or regulatory policies applicable to the Company could have a material effect on the business of the Company.

 

Results of Operations. The following is a comparison of selected financial ratios and other results at or for the three and six month periods ended June 30, 2025 and 2024:

 

   

At or for the Three Months Ended

    

At or for the Six Months Ended

  
   

June 30,

    

June 30,

  

(In Thousands, except Per Share Data)

  

2025

    

2024

    

2025

    

2024

  

Total assets

   $ 5,178,428     $ 5,156,853     $ 5,178,428     $ 5,156,853  

Net income

   $ 13,910     $ 11,783     $ 27,488     $ 23,023  

Diluted earnings per share

   $ 0.37     $ 0.31     $ 0.73     $ 0.61  

Return on average assets (annualized)

     1.08 %     0.93 %     1.07 %     0.91 %

Return on average equity (annualized)

     13.08 %     12.15 %     13.10 %     11.76 %

Dividends to net income

     54.21 %     54.04 %     54.13 %     55.61 %

Net loans to assets

     63.05 %     62.12 %     63.05 %     62.12 %

Loans to deposits

     75.14 %     76.97 %     75.14 %     76.97 %

 

Net Income. The Company reported net income of $13.9 million, or $0.37 per diluted share, for the quarter ended June 30, 2025 compared to $11.8 million, or $0.31 per diluted share, for the quarter ended June 30, 2024. The results for the second quarter of 2025 were impacted by pretax gains on the sale of investment securities and other assets totaling $173,000.

 

The Company reported net income of $27.5 million, or $0.73 per diluted share, for the six months ended June 30, 2025 compared to $23.0 million, or $0.61 per diluted share, for the six months ended June 30, 2024. The year-to-date results were impacted by net pretax losses on the sale of investment securities and other assets totaling $1.2 million.

 

Net Interest Income. The following schedule details the various components of net interest income for the periods indicated. All asset yields are calculated on a tax-equivalent basis where applicable. Security yields are based on amortized cost.

 

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Average Balance Sheets and Related Yields and Rates

(Dollar Amounts in Thousands)

 

   

Three Months Ended

    

Three Months Ended

  
   

June 30, 2025

    

June 30, 2024

  
   

AVERAGE

                    

AVERAGE

                  
   

BALANCE

    

INTEREST

    

RATE (1)

    

BALANCE

    

INTEREST

    

RATE (1)

  

EARNING ASSETS

                                                

Loans (2)

   $ 3,274,394     $ 47,160       5.76 %   $ 3,215,141     $ 46,590       5.80 %

Taxable securities

     1,141,799       7,384       2.59 %     1,118,598       6,813       2.44 %

Tax-exempt securities (2)

     364,531       2,900       3.18 %     379,761       2,973       3.13 %

Other investments

     40,206       462       4.60 %     33,441       322       3.85 %

Federal funds sold and other

     65,841       429       2.61 %     78,591       743       3.78 %

TOTAL EARNING ASSETS

     4,886,771       58,335       4.77 %     4,825,532       57,441       4.76 %

Nonearning assets

     245,890                       218,984                  

TOTAL ASSETS

   $ 5,132,661                     $ 5,044,516                  
                                                 

INTEREST-BEARING LIABILITIES

                                                

Time deposits

   $ 751,828     $ 6,584       3.50 %   $ 744,422     $ 7,233       3.89 %

Brokered time deposits

     96,461       1,047       4.34 %     0       0       0.00 %

Savings deposits

     1,145,277       4,284       1.50 %     1,102,443       4,117       1.49 %

Demand deposits - interest bearing

     1,440,090       8,325       2.31 %     1,391,767       8,810       2.53 %

Total interest-bearing deposits

     3,433,656       20,240       2.36 %     3,238,632       20,160       2.49 %
                                                 

Short term borrowings

     137,725       1,536       4.46 %     299,543       3,585       4.79 %

Long term borrowings

     86,354       1,005       4.66 %     88,834       1,035       4.66 %

Total borrowed funds

     224,079       2,541       4.54 %     388,377       4,620       4.76 %
                                                 

TOTAL INTEREST-BEARING LIABILITIES

     3,657,735       22,781       2.49 %     3,627,009       24,780       2.73 %
                                                 

NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS' EQUITY

                                                

Demand deposits - noninterest bearing

     992,990                       972,290                  

Other liabilities

     56,687                       57,336                  

Stockholders' equity

     425,249                       387,881                  

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

   $ 5,132,661                     $ 5,044,516                  

Net interest income and interest rate spread

           $ 35,554       2.28 %           $ 32,661       2.03 %

Net interest margin

                     2.91 %                     2.71 %

  

(1)

Rates are calculated on an annualized basis.

(2)

Interest on certain tax-exempt loans and tax-exempt securities in 2025 and 2024 is not taxable for Federal income tax purposes. In order to compare the tax-exempt yields on these assets to taxable yields, the interest earned on these assets is adjusted to a pre-tax equivalent amount based on the marginal corporate federal income tax rate of 21%

  

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Average Balance Sheets and Related Yields and Rates

(Dollar Amounts in Thousands)

 

   

Six Months Ended

    

Six Months Ended

  
   

June 30, 2025

    

June 30, 2024

  
   

AVERAGE

                    

AVERAGE

                  
   

BALANCE

    

INTEREST

    

RATE (1)

    

BALANCE

    

INTEREST

    

RATE (1)

  

EARNING ASSETS

                                                

Loans (2)

   $ 3,268,186     $ 93,970       5.75 %   $ 3,198,239     $ 91,686       5.73 %

Taxable securities

     1,138,707       14,480       2.54 %     1,109,972       13,227       2.38 %

Tax-exempt securities (2)

     370,770       5,890       3.18 %     393,918       6,182       3.14 %

Other investments

     42,177       1,003       4.76 %     33,924       684       4.03 %

Federal funds sold and other

     69,687       939       2.69 %     75,174       1,369       3.64 %

TOTAL EARNING ASSETS

     4,889,527       116,282       4.76 %     4,811,227       113,148       4.70 %

Nonearning assets

     236,226                       223,014                  

TOTAL ASSETS

   $ 5,125,753                     $ 5,034,241                  
                                                 

INTEREST-BEARING LIABILITIES

                                                

Time deposits

   $ 739,103     $ 13,216       3.58 %   $ 738,159     $ 14,281       3.87 %

Brokered time deposits

     119,798       2,585       4.32 %     0       0       0.00 %

Savings deposits

     1,130,350       8,296       1.47 %     1,093,511       7,716       1.41 %

Demand deposits - interest bearing

     1,412,543       15,860       2.25 %     1,371,058       16,553       2.41 %

Total interest-bearing deposits

     3,401,794       39,957       2.35 %     3,202,728       38,550       2.41 %
                                                 

Short term borrowings

     177,862       3,954       4.45 %     312,167       7,524       4.82 %

Long term borrowings

     86,282       1,980       4.59 %     88,778       2,073       4.67 %

Total borrowed funds

     264,144       5,934       4.49 %     400,945       9,597       4.79 %
                                                 

TOTAL INTEREST-BEARING LIABILITIES

     3,665,938       45,891       2.50 %     3,603,673       48,147       2.67 %
                                                 

NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS' EQUITY

                                                

Demand deposits

     985,347                       983,728                  

Other liabilities

     54,802                       55,125                  

Stockholders' equity

     419,666                       391,715                  

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

   $ 5,125,753                     $ 5,034,241                  

Net interest income and interest rate spread

           $ 70,391       2.26 %           $ 65,001       2.03 %

Net interest margin

                     2.88 %                     2.70 %

  

(1)

Rates are calculated on an annualized basis.

(2)

Interest on certain tax-exempt loans and tax-exempt securities in 2025 and 2024 is not taxable for Federal income tax purposes. In order to compare the tax-exempt yields on these assets to taxable yields, the interest earned on these assets is adjusted to a pre-tax equivalent amount based on the marginal corporate federal income tax rate of 21%

  

Net Interest Income. Net interest income for the three months ended June 30, 2025, was $34.9 million compared to $32.1 million for the three months ended June 30, 2024. A 20 basis point increase in the net interest margin along with a higher earning asset base were the primary reasons for this increase.

 

The net interest margin for the three-month period ended June 30, 2025, was 2.91% compared to 2.71% for the same period in 2024. Interest-earning asset yields increased 1 basis point in the second quarter of 2025 compared to the second quarter of 2024 while the cost of interest-bearing liabilities decreased 24 basis points when comparing these two periods. This decrease in funding costs has been due to the reduction in the Fed Funds rate in the fourth quarter of 2024.  Deposit costs have declined as a result of this action.  

 

Net interest income for the six-month period ended June 30, 2025, was $69.1 million compared to $63.8 million for the same period in 2024.  The increase in net interest income was driven by the same factors as discussed above.  The net interest margin was 2.88% for the six-month period ended June 30, 2025 compared to 2.70% for the same period in 2024.  The increase in net interest margin for the six-month period ended June 30, 2024, was also driven by the same factors discussed previously.

 

Provision for Credit Losses and Provision for Unfunded Loans. The provision for credit losses and unfunded loans was $3.5 million for the three months ended June 30, 2025, compared to $1.1 million for the three months ended June 30, 2024. The provision in the second quarter of 2025 was driven primarily by $2.6 million in specific reserves placed on two nonperforming loans.  

 

For the first six months of 2025, the Company recorded a provision for credit losses and unfunded loans of $3.3 million compared to a provision for credit losses and unfunded loans of $663,000 for the same period of 2024. The increase in the provision was mainly due to the specific reserves placed on two nonperforming loans discussed previously.  

 

Noninterest Income. Noninterest income for the second quarter of 2025 was of $12.1 million compared to $9.6 million for the second quarter of 2024. This increase was due to improved profitability across all fee based lines of business and a lower level of losses on the sale of available for sale securities. 

 

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Service charges on deposit accounts declined $97,000 to $1.7 million for the second quarter of 2025 compared to $1.8 million for the second quarter in 2024. Bank owned life insurance income increased $180,000 during the second quarter of 2025 to $832,000 compared to $652,000 in the second quarter of 2024 as policy crediting rates have increased over the last twelve months. Trust fees increased to $2.6 million at June 30, 2025, from $2.3 million at June 30, 2024. The increase was due to continued growth in the business unit. Insurance agency commissions grew to $1.8 million in the second quarter of 2025 from $1.3 million in the second quarter of 2024.  The Company shared in the commission from the purchase of the new BOLI policies which added $329,000 to insurance commissions for the quarter.  Annuity sales also continue to drive growth.  Gain on the sale of securities totaled $36,000 in the second quarter of 2025 compared to losses on the sale of securities of $124,000 during the second quarter of 2024.  Retirement plan consulting fees increased to $783,000 in the second quarter of 2025 from $330,000 in the second quarter of 2024 primarily due to the acquisition of Crest Retirement Advisors LLC in late December of 2024.  Investment commissions grew $243,000 in the second quarter of 2025 compared to the second quarter of 2024.  The Company has a strong sales team in this line of business and is looking to grow with deeper penetration into newer markets.  Debit card income grew from $1.8 million in the second quarter of 2024 to $2.0 million in the second quarter of 2025 as better volumes were realized in the current period.  Other noninterest income was $1.2 million in the second quarter of 2025 compared to $162,000 in the second quarter of 2024.  SBIC income was $587,000 in the second quarter of 2025 compared to a loss of $1,000 in the second quarter of 2025.  The Company also realized gains on the sale of assets of $137,000 in the second quarter of 2025 compared to losses on the sale of assets of $391,000 in the second quarter of 2024.

 

For the six months ended June 30, 2025, noninterest income increased by $4.6 million compared to the six months ended June 30, 2024.  The increase was primarily due to improved profitability across all fee based lines of business and a lower level of losses on the sale of available for sale securities.  

 

Service charges on deposit accounts increased to $3.5 million in the first six months of 2025 compared to $3.4 million in the same period in 2024 due to the fee increases discussed above.  Bank owned life insurance income increased to $1.6 million for the six months ended June 30, 2025 compared to $1.4 million for the six months ended June 30, 2024.  The Company purchased an additional $15.0 million in policies during the first quarter of 2025 and policy crediting rates have increased over the last twelve months. Trust fees increased to $5.2 million in the first six months of 2025 from $4.9 million in the first six months of 2024 due to continued strong growth in this line of business.  Insurance agency commissions were $3.6 million for the six months ended June 30, 2025 compared to $2.8 million for the same period in 2024.  The Company shared in the commission from the purchase of the new BOLI policies which added $329,000 to insurance commissions for the year.  Annuity sales also continue to drive growth.  Loss on the sale of securities was $1.3 million and $2.2 million for the six months ended June 30 2025 and 2024, respectfully.  The bank restructured $23.8 million at the end of the first quarter of 2025 resulting in the loss realized on the sale.  Retirement plan consulting fees increased to $1.6 million in the first half of 2025 from $1.2 million in the same period of 2024 primarily due to the acquisition of Crest Retirement Advisors LLC in late December of 2024.  Investment commissions grew $340,000 in the first half of 2025 compared to the same time frame in 2024.  The Company has a strong sales team in this line of business and is looking to grow with deeper penetration into newer markets.  Debit card income grew from $3.3 million in the first half of 2024 to $3.9 million in the first six months of 2025 as better volumes were realized in the current period.  Other noninterest income increased to $2.4 million in the first six months of 2025 from $1.3 million in the first six months of 2024.  SBIC income was $1.3 million in the first six months of 2025 compared to a $462,000 in the same period of 2024. 

 

 

Noninterest Expense. Noninterest expense totaled $27.2 million for the quarter ended June 30, 2025 compared to $26.4 million for the quarter ended June 30, 2024. Salaries and employee benefits were $14.7 million in the second quarter of 2025 compared to $14.6 million in the second quarter of 2024. The increase was primarily driven by higher salaries associated with employee raises, the acquisition of Crest Retirement in the fourth quarter of 2024 and higher commission expense from increased revenue in the fee-based businesses offset by lower healthcare expense.  Occupancy and equipment expense increased to $4.1 million in the second quarter of 2025 from $3.8 million in the second quarter of 2024 due to increased maintenance costs in 2025, the result of more severe winter weather.  Professional fess declined to $1.0 million in the second quarter of 2025 from $1.2 million in the second quarter of 2024 due primarily to lower legal expenses in 2025.  Core processing expense increased to $1.4 million in the second quarter of 2025 from $1.1 million in the second quarter of 2024.  The increase was due to annual increases and timing differences.   

 

Noninterest expense increased to $55.7 million for the six months ended June 30, 2025 from $53.4 million for the same period in 2024.  Salaries and employee benefits were $30.9 million in the first half of 2025 compared to $29.6 million in the first six months of 2024.  The increase was primarily driven by higher salaries associated with employee raises, the acquisition of Crest Retirement in the fourth quarter of 2024 and higher commission expense from increased revenue in the fee-based businesses offset by lower healthcare expense. Occupancy and equipment expense increased $713,000 from $7.5 million for the six months ended June 30, 2024 to $8.3 million for the same period in 2025 due to increased maintenance costs in 2025 as a result of more severe winter weather.  Core processing charges were $2.8 million for the first six months of 2025 compared to $2.2 million for the first six months of 2024 as a result of annual increases and timing differences.  

 

Income Taxes. Income tax expense was $2.4 million for the three months ended June 30, 2025 and June 30, 2024. 

 

Income tax expense was $5.2 million for the six months ended June 30, 2025 compared to $4.6 million for the same period in 2024 due to higher pretax income in 2025.  

 

Financial Condition

 

Cash and Cash Equivalents. Cash and cash equivalents increased $5.0 million during the first six months of 2025 to $90.7 million from $85.7 million at December 31, 2024. The increase in the cash balances was primarily due to the Company intentionally holding more liquidity on its balance sheet at June 30, 2025.

 

Securities. The Company had securities available for sale totaling $1.27 billion as of June 30, 2025 and December 31, 2024. Net unrealized losses on the portfolio totaled $223.0 million at June 30, 2025, compared to $244.1 million at December 31, 2024.  The Company also restructured $23.9 million of available for sale securities and reinvested the proceeds into securities with yields approximately 260 basis points higher than those sold.  The earn back on the $1.3 million loss that was incurred on the sale is approximately 2.2 years.  The Company anticipates continued volatility in the bond market in 2025. 

 

Loans. Net loans (excluding loans held for sale) increased to $3.30 billion at June 30, 2025 from $3.27 billion at December 31, 2024. The increase in 2025 is primarily due to increases in commercial and commercial real estate loans.

 

The following tables present the amortized cost basis of the Company's commercial real estate portfolio segment by industry as of June 30, 2025 and December 31, 2024:

 

           

% of Commercial

            

Weighted Average

    

Weighted Average

  

(In Thousands of Dollars)

  

Amortized Cost

    

Real Estate

    

% of Total Portfolio

    

Loan-to-Value

    

Occupancy

  

June 30, 2025

                                        

Commercial real estate

                                        

Retail

   $ 341,684       21.34 %     10.34 %     53.13 %     87.09 %

Farmland

     216,965       13.55 %     6.57 %     48.96 %     100.00 %

Warehouse/Industrial

     194,976       12.18 %     5.90 %     51.50 %     90.71 %

Office

     197,175       12.32 %     5.97 %     58.13 %     76.90 %

Multifamily

     178,369       11.14 %     5.40 %     60.20 %     70.57 %

Medical

     138,736       8.67 %     4.20 %     50.97 %     92.62 %

Hotel

     43,873       2.74 %     1.33 %     45.93 %     79.74 %

Special Purpose

     79,750       4.98 %     2.41 %     51.77 %     98.62 %

Restaurant

     49,152       3.07 %     1.49 %     50.00 %     100.00 %

Multifamily - Construction

     67,648       4.23 %     2.05 %     59.59 %     31.20 %

All Other

     92,684       5.79 %     2.81 %     48.63 %     93.80 %

Total

   $ 1,601,012       100.00 %     48.47 %                

 

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% of Commercial

            

Weighted Average

    

Weighted Average

  

(In Thousands of Dollars)

  

Amortized Cost

    

Real Estate

    

% of Total Portfolio

    

Loan-to-Value

    

Occupancy

  

December 31, 2024

                                        

Commercial real estate

                                        

Retail

   $ 345,354       21.75 %     10.57 %     53.93 %     85.07 %

Farmland

     206,600       13.01 %     6.32 %     49.63 %     100.00 %

Warehouse/Industrial

     186,316       11.73 %     5.70 %     54.26 %     72.23 %

Office

     192,269       12.11 %     5.88 %     53.70 %     74.06 %

Multifamily

     158,168       9.96 %     4.84 %     61.16 %     85.75 %

Medical

     147,353       9.28 %     4.51 %     46.27 %     92.60 %

Hotel

     44,301       2.79 %     1.36 %     45.24 %     79.65 %

Special Purpose

     85,361       5.37 %     2.61 %     51.83 %     98.53 %

Restaurant

     50,990       3.21 %     1.56 %     51.36 %     100.00 %

Multifamily - Construction

     73,857       4.65 %     2.26 %     53.28 %     29.61 %

All Other

     97,605       6.14 %     2.99 %     48.05 %     94.97 %

Total

   $ 1,588,174       100.00 %     48.60 %                

 

Allowance for Credit Losses. The following table indicates key asset quality ratios that management evaluates on an ongoing basis. The amortized cost balances were used in the calculations.

 

Asset Quality History

(In Thousands of Dollars)

 

   

6/30/2025

    

3/31/2025

    

12/31/2024

    

9/30/2024

    

6/30/2024

  

Nonperforming loans

   $ 27,819     $ 20,724     $ 22,818     $ 19,076     $ 12,870  

Nonperforming loans as a % of total loans

     0.84 %     0.64 %     0.70 %     0.58 %     0.40 %

Non-performing assets

   $ 28,052     $ 20,902     $ 22,093     $ 19,137     $ 12,975  

Non-performing assets as a % of total assets

     0.54 %     0.41 %     0.45 %     0.37 %     0.25 %

Loans delinquent 30-89 days

   $ 17,727     $ 11,192     $ 13,032     $ 15,562     $ 18,546  

Loans delinquent 30-89 days as a % of total loans

     0.54 %     0.34 %     0.40 %     0.47 %     0.57 %

Allowance for credit losses

   $ 38,563     $ 35,549     $ 35,863     $ 36,186     $ 33,991  

Allowance for credit losses as a % of total loans

     1.17 %     1.09 %     1.10 %     1.10 %     1.05 %

Allowance for credit losses as a % of nonperforming loans

     138.62 %     171.54 %     157.17 %     189.69 %     264.11 %

Net charge-offs for the quarter

   $ 572     $ 336     $ 635     $ 4,612     $ 563  

Annualized net charge-offs to average net loans outstanding

     0.07 %     0.04 %     0.08 %     0.58 %     0.07 %

 

The Company's allowance for credit losses increased to $38.6 million for the period ended June 30, 2025, from $35.9 million for the period ended December 31, 2024. The increase in provision was primarily driven by $2.6 million in specific reserves placed on two nonperforming loans.  The Company estimates the ACL based on the amortized cost basis of the underlying loan and has made an accounting policy election to exclude accrued interest from the loan’s amortized cost basis and the related measurement of the ACL. Estimating the amount of the ACL is a function of a number of factors, including but not limited to changes in the loan portfolio, net charge-offs, trends in past due and nonaccrual loans, and the level of potential problem loans, all of which may be susceptible to significant change.

 

Based on the evaluation of the adequacy of the allowance for credit losses, management believes that the allowance for credit losses at June 30, 2025 is adequate. The provision for credit losses is based on management’s judgment after taking into consideration all factors connected with the collectability of the existing loan portfolio. Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Specific factors considered by management in determining the amounts charged to operating expenses include previous credit loss experience, the status of past due interest and principal payments, the quality of financial information supplied by loan customers and the general condition of the industries in the community to which loans have been made.

 

Deposits. Total deposits increased to $4.40 billion at June 30, 2025 from $4.27 billion at December 31, 2024.  Customer deposits grew $129.6 million, including an increase of $34.7 million in public funds.  The additional deposits were used to pay down borrowings.  

 

Short-term Borrowings. Total short-term borrowing balances decreased from $305.0 million at December 31, 2024 to $203.0 million at June 30, 2025. This decrease was due to the Company using the proceeds from deposits to pay down short-term borrowings.

 

Total Stockholders' Equity. Total stockholders’ equity increased to $437.7 million at June 30, 2025 from $406.0 million at December 31, 2024. The increase was primarily due to a $16.5 million decrease in the accumulated other comprehensive loss coupled with growth in retained earnings of $14.7 million due to $27.5 million of net income recognized during the first half of the year partially offset by dividends paid on outstanding common shares.  

 

The capital management function is a regular process that consists of providing capital for both the current financial position and the anticipated future growth of the Company. At June 30, 2025, the Company is required to maintain 4.5% common equity tier 1 to risk weighted assets excluding the conservation buffer to be adequately capitalized. The Company’s common equity tier 1 to risk weighted assets was 11.56%, total risk-based capital ratio stood at 15.04%, and the Tier 1 risk-based capital ratio and Tier 1 leverage ratio were at 12.05% and 8.67%, respectively, at June 30, 2025. Management believes that the Company and the Bank meet all capital adequacy requirements to which they are subject, as of June 30, 2025.

 

Federal bank regulatory agencies finalized a rule that simplifies capital requirements for community banks by allowing them to adopt a simple leverage ratio to measure capital adequacy. The community bank leverage ratio framework removes requirements for calculating and reporting risk-based capital ratios for a qualifying community bank that opts into the framework. The Company has not elected to adopt this framework.

 

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Critical Accounting Policies

 

The Company follows financial accounting and reporting policies that are in accordance with U.S. GAAP. These policies are presented in Note 1 of the consolidated audited financial statements in the Company’s Annual Report to Shareholders included in the Company’s 2024 Form 10-K. Critical accounting policies are those policies that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The Company has identified two accounting policies that are critical accounting policies and an understanding of these policies is necessary to understand the Company’s financial statements. These policies relate to determining the adequacy of the allowance for credit losses and if there is any impairment of goodwill or other intangible. Additional information regarding these policies is included in the notes to the aforementioned 2024 consolidated financial statements, Note 1 (Summary of Significant Accounting Policies), Note 4 (Loans), and the sections captioned “Loan Portfolio.”

 

Farmers maintains an allowance for credit losses. The allowance for credit losses is presented as a reserve against loans on the balance sheets. Credit losses are charged off against the allowance for credit losses, while recoveries of amounts previously charged off are credited to the allowance for credit losses. A provision for credit losses is charged to operations based on management’s periodic evaluation of adequacy of the allowance.

 

The Company’s allowance for credit losses represents management’s estimate of expected credit losses over the remaining expected life of the Company’s financial assets measured at amortized cost and certain off-balance sheet lending-related commitments.

 

The allowance for credit losses involves significant judgment on a number of matters including the weighting of macroeconomic forecasts and microeconomic statistics, incorporation of historical loss experience, assessment of risk characteristics, assignment of risk ratings, valuation of collateral, and the determination of remaining expected life. Refer to Note 4 for further information on these judgments as well as the Company’s policies and methodologies used to determine the Company’s allowance for credit losses.

 

A significant judgment involved in estimating the Company’s allowance for credit losses relates to the macroeconomic forecasts used to estimate credit losses over the four-quarter forecast period within the Company’s methodology. The four-quarter forecast incorporates three macroeconomic variables (“MEV”) that are relevant for exposures across the Company.

 

  •

U.S. changes in real gross domestic product (GDP).
  •

U.S. personal consumption expenditures (PCE) inflation.
  •

U.S. civilian unemployment rate.

 

Changes in the Company’s assumptions and forecasts of economic conditions could significantly affect its estimate of expected credit losses in the portfolio at the balance sheet date or lead to significant changes in the estimate from one reporting period to the next.

 

It is difficult to estimate how potential changes in any one factor or input might affect the overall allowance for credit losses because management considers a wide variety of factors and inputs in estimating the allowance for credit losses. Changes in the factors and inputs considered may not occur at the same rate and may not be consistent across all product types, and changes in factors and inputs may be directionally inconsistent, such that improvement in one factor or input may offset deterioration in others.

 

To consider the impact of a hypothetical alternate macroeconomic forecast, the Company compared the modeled credit losses determined using its central and relative adverse macroeconomic scenarios. The central and relative adverse scenarios each included the three MEVs, but differed in the levels, paths and peaks/troughs of those variables over the four-quarter forecast period.

 

For example, compared to the Company’s central scenario that is based on a four-quarter forecasted change in U.S. real GDP of 1.40% from 4Q2024 to 4Q2025, U.S. PCE inflation of 3.00%, and U.S. unemployment of 4.50%, the Company’s relative adverse scenario assumes a four-quarter forecast with a contraction of U.S. real GDP, a PCE inflation between 5.00% and 7.00% and an elevated U.S. unemployment rate between 6.00% and 7.00%. This analysis is not intended to estimate expected future changes in the allowance for credit losses, for a number of reasons, including:

 

  •

The impacts of changes in the MEVs are both interrelated and nonlinear, so the results of this analysis cannot be simply extrapolated for more severe changes in macroeconomic variables.
  •

Expectations of future changes in portfolio composition and borrower behavior can significantly affect the allowance for credit losses.

 

To demonstrate the sensitivity of credit loss estimates to macroeconomic forecasts as of June 30, 2025, the Company compared the modeled estimates under its relative adverse scenario for two of the Company’s largest loan pools to its central scenario for the same loan pools. Without considering offsetting or correlated effects in other qualitative components of the Company’s allowance for credit losses, the comparison between these two scenarios for the exposures below reflect the following differences:

 

  •

An increase of approximately $649,000 for residential real estate loans and lending-related commitments
  •

An increase of approximately $900,000 for commercial real estate non-owner occupied loans and lending-related commitments

 

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This analysis relates only to the modeled credit loss estimates and is not intended to estimate changes in the overall allowance for credit losses as it does not reflect any potential changes in the other adjustments to the quantitative calculation, which would also be influenced by the judgment management applies to the modeled lifetime loss estimates to reflect the uncertainty and imprecision of these modeled lifetime loss estimates based on then-current circumstances and conditions.

 

Recognizing that forecasts of macroeconomic conditions are inherently uncertain, the Company believes that its process to consider the available information and associated risks and uncertainties is appropriately governed and that its estimates of expected credit losses were reasonable and appropriate for the period ended June 30, 2025.

 

The Company uses two methodologies to analyze loan pools. The cohort method and the PD/LGD. Cohort relies on the creation of cohorts to capture loans that qualify for a particular segment, as of a point in time. Those loans are then tracked over their remaining lives to determine their loss experience. The Company aggregates financial assets on the basis of similar risk characteristics when evaluating loans on a collective basis. Those characteristics include, but are not limited to, internal or external credit score, risk ratings, financial asset, loan type, collateral type, size, effective interest rate, term, or geographical location. The Company uses cohort primarily for consumer loan portfolios.

 

The PD portion of PD/LGD is defined by the Company as 90 days past due, placed on non-accrual, or is partially or wholly charged-off. Typically, a one-year time period is used to assess PD. PD can be measured and applied using various risk criteria. Risk rating is one common way to apply PDs. LGD is to determine the percentage of loss by facility or collateral type. LGD estimates can sometimes be driven, or influenced, by product type, industry or geography. The Company uses PD/LGD primarily for commercial loan portfolios.

 

Management believes that the accounting for goodwill and other intangible assets also involves a higher degree of judgment than most other significant accounting policies. GAAP establishes standards for the amortization of acquired intangible assets and the impairment assessment of goodwill. Goodwill arising from business combinations represents the value attributable to unidentifiable intangible assets in the business acquired. The Company’s goodwill relates to the value inherent in the banking industry and that value is dependent upon the ability of the Company’s subsidiaries to provide quality, cost-effective services in a competitive marketplace. The goodwill value is supported by revenue that is in part driven by the volume of business transacted. A decrease in earnings resulting from a decline in the customer base or the inability to deliver cost-effective services over sustained periods can lead to impairment of goodwill that could adversely impact earnings in future periods. GAAP requires an annual evaluation of goodwill for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The fair value of the goodwill is estimated by reviewing the past and projected operating results for the subsidiaries and comparable industry information. At June 30, 2025, on a consolidated basis, Farmers had intangibles of $19.3 million subject to amortization and $167.5 million in goodwill, which was not subject to periodic amortization.

 

Liquidity

 

The Company maintains, in the opinion of management, liquidity sufficient to satisfy depositors’ requirements and meet the credit needs of customers. The Company depends on its ability to maintain its market share of deposits as well as its potential of acquiring new funds. The Company’s ability to attract deposits and borrow funds depends in large measure on its profitability, capitalization and overall financial condition. The Company’s objective in liquidity management is to maintain the ability to meet loan commitments, purchase securities or to repay deposits and other liabilities in accordance with their terms without an adverse impact on current or future earnings. Principal sources of liquidity for the Company include assets considered relatively liquid, such as federal funds sold, cash-due from banks, as well as cash flows from maturities and repayments of loans, and to a lesser extent securities.

 

Along with its liquid assets, the Bank has additional sources of liquidity available which help to ensure that adequate funds are available as needed. These other sources include, but are not limited to, access to funds in the wholesale arena, the ability to obtain deposits through the adjustment of interest rates and the purchasing of federal funds and borrowings on approved lines of credit at major domestic banks. The Bank has a line of credit totaling $25.0 million and the Company has a revolving line of credit with a correspondent bank totaling $5.0 million. There was no balance on either of these lines at June 30, 2025 or December 31, 2024. The Company also has access to borrow $12.1 million at the Federal Reserve Discount Window, however, there was no balance on this line at June 30, 2025 or December 31, 2024. The Federal Reserve Discount Window can be an additional source of funds with the posting of additional collateral. As of June 30, 2025, the Bank had $203.0 million in outstanding balances with the FHLB. Additional borrowing capacity at the FHLB was approximately $596.9 million at June 30, 2025. The Bank views its membership in the FHLB as a solid source of liquidity.  Management feels that its liquidity position is adequate and will continue to monitor the position on a monthly basis.

 

Off-Balance Sheet Arrangements

 

In the normal course of business, to meet the financial needs of our customers, we are a party to financial instruments with off-balance sheet risk. These financial instruments generally include commitments to originate mortgage, commercial and consumer loans, and involve to varying degrees, elements of credit and interest rate risk in excess of amounts recognized in the Consolidated Balance Sheets. The Bank’s maximum exposure to credit loss in the event of nonperformance by the borrower is represented by the contractual amount of those instruments. Because some commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The same credit policies are used in making commitments as are used for on-balance sheet instruments. Collateral is required in instances where deemed necessary. Undisbursed balances of loans closed include funds not disbursed but committed for construction projects. Unused lines of credit include funds not disbursed, but committed for, home equity, commercial and consumer lines of credit. Financial standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Those guarantees are primarily used to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Total unused commitments were $736.6 million at June 30, 2025, and $692.4 million at December 31, 2024. Additionally, the Company has committed up to $20.2 million in subscriptions in SBIC investment funds. At June 30, 2025, the Company had invested $15.2 million in these funds.

 

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Recent Market and Regulatory Developments

 

Various and significant legislation affecting financial institutions and the financial industry is from time to time introduced in the U.S. Congress and state legislatures, as well as by regulatory agencies. Such initiatives may include proposals to expand or contract the powers of bank holding companies and depository institutions or proposals to substantially change the financial institution regulatory system.

 

Also, such statutes, regulations and policies are continually under review by Congress, state legislatures and federal and state regulatory agencies and are subject to change at any time, particularly in the current economic and regulatory environment. Any such change in statutes, regulations or regulatory policies applicable to the Company could have a material effect on the business of the Company.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Important considerations in asset/liability management are liquidity, the balance between interest rate sensitive assets and liabilities and the adequacy of capital. Interest rate sensitive assets and liabilities are those which have rates subject to change within a future time period due to maturity of the instrument or changes in market rates. While liquidity management involves meeting the funds flow requirements of the Company, the management of interest rate sensitivity focuses on the structure of these assets and liabilities with respect to maturity and repricing characteristics. Managing interest rate sensitive assets and liabilities provides a means of tempering fluctuating interest rates and maintaining net interest margins through periods of changing interest rates. The Company monitors interest rate sensitive assets and liabilities to determine the overall interest rate position over various time frames.

 

The Company considers the primary market exposure to be interest rate risk. Simulation analysis is used to monitor the Company’s exposure to changes in interest rates, and the effect of the change to net interest income. The following table shows the effect on net interest income and the net present value of equity from a sudden and sustained 400 basis point increase to a 400 basis point decrease in market interest rates. The assumptions and predictions include inputs to compute baseline net interest income, expected changes in rates on interest bearing deposit accounts and loans, competition and various other factors that are difficult to accurately predict.

 

Changes In Interest Rate

    

June 30, 2025

    

December 31, 2024

    

ALCO

  

(basis points)

    

Result

    

Result

    

Guidelines

  

Net Interest Income Change

                          

+400

       -7.4 %     -9.0 %     -12.5 %

+300

       -5.8 %     -7.0 %     -10.0 %

+200

       -3.9 %     -4.7 %     -7.5 %

+100

       -2.1 %     -2.5 %     -5.0 %
-100       1.6 %     2.2 %     -5.0 %
-200       2.9 %     3.9 %     -10.0 %
-300       4.0 %     5.5 %     -15.0 %
-400       4.3 %     6.1 %     -20.0 %

Net Present Value Of Equity Change

                          

+400

       -31.0 %     -37.2 %     -12.5 %

+300

       -23.2 %     -27.3 %     -10.0 %

+200

       -14.8 %     -17.7 %     -7.5 %

+100

       -7.4 %     -9.0 %     -5.0 %
-100       4.1 %     5.5 %     -10.0 %
-200       4.6 %     7.1 %     -15.0 %
-300       1.0 %     4.4 %     -20.0 %
-400       -3.9 %     1.5 %     -25.0 %


The yield curve has changed dramatically over the past three years. From March 2022 to July 2023, in an intense effort to diffuse inflation, the Federal Open Market Committee raised the discount rate from 0.25% to 5.50%. The committee then held the discount rate at 5.50% until September 2024 when they cut the discount rate by a total of 100 basis points over the last four months of 2024. These rate cuts were an attempt to guide the economy into a “soft landing”, where the still comparatively elevated rate was set at a level that was intended to continue to bring down inflation without harming the job market or the economy.  There have been no further changes to the discount rate in the first six months of 2025.

 

The above table presents results in the up rate scenarios that exceed internal policy limits for the Economic Value of Equity (“EVE”) for both of the periods presented. This unprecedented outcome was created by the events occurring over the past five years, namely, the massive influx of liquidity in the form of deposits in 2020 and 2021 from government assistance while interest rates were at their lowest; the deployment of these funds at the prevailing low rates; and now the usage of the deposits as consumers utilize their deposits in an effort to maintain living standards in the current economy, which prevents the Company from investing in the higher rates that are now available. With the EVE model moving rates even higher than the current rates, it further exacerbates the differential between market rates and book rates, thereby creating the out of internal policy consequence. To mitigate these results, the Company has prioritized employing strategies to shrink the longer duration investment portfolio and replace the balances with assets having a shorter duration, including loans, in an effort to close the gap between the book and market rates. Any growth in lending will be done in a measured manner given the uncertain economic backdrop that exists today. The Company recognizes the risk that is inherent in growing loans but feels that its historical record of prudent underwriting, its low loan to deposit ratio and its strong credit metrics provide the ability to pursue solid opportunities in the marketplace. In addition, any loan growth will be broad based and will encompass consumer, indirect, 1-4 family, commercial and industrial and commercial real estate, so as not to increase the risk in any one portfolio or sector.

 

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The remaining results of the simulations in the table above indicate that interest rate change results fall within internal limits established by the Company at both June 30, 2025, and December 31, 2024. A report on interest rate risk is presented to the Board of Directors and the Asset/Liability Committee on a quarterly basis. The Company has no market risk sensitive instruments held for trading purposes.

 

With the largest amount of interest sensitive assets and liabilities maturing within twelve months, the Company monitors this area most closely. Early withdrawal of deposits, prepayments of loans and loan delinquencies are some of the factors that can impact actual results in comparison to our simulation analysis. In addition, changes in rates on interest sensitive assets and liabilities may not be equal, which could result in a change in net interest margin.

 

Interest rate sensitivity management provides some degree of protection against net interest income volatility. It is not possible or necessarily desirable to attempt to eliminate this risk completely by matching interest sensitive assets and liabilities. Other factors, such as market demand, interest rate outlook, regulatory restraint and strategic planning also have an effect on the desired balance sheet structure.

 

Item 4. Controls and Procedures

 

Based on their evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer have concluded the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) are effective. There were no changes in the Company’s internal controls over financial reporting (as defined in Rule 13a–15(f) under the Exchange Act) that occurred during the fiscal quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

The Company is a defendant in lawsuits and other adversary proceedings arising in the ordinary course of business. Legal costs incurred in connection with the resolution of claims and lawsuits are generally expensed as incurred, although the Company establishes accruals where losses are deemed probable and reasonably estimable. The Company’s assessment of the current exposure with respect to adverse claims in legal matters could change in the event of the discovery of additional facts in such matters or upon determinations by judges, juries, administrative agencies or other finders of fact that are inconsistent with the Company’s evaluation of claims. It is possible that the ultimate resolution of matters, if unfavorable, may be material to the results of operations in a particular future period as the time and amount of any resolution of such actions and its relationship to the future results of operations are not known.

 

Item 1A. Risk Factors

 

There are no material changes from the risk factors set forth under Part I, Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 except as set forth below:

 

Significant changes to the size, structure, powers and operations of the federal government, changes to U.S. economic policies, and uncertainties regarding these changes may cause economic disruptions which could adversely impact our business, results of operations and financial condition.

 

The current U.S. administration has implemented significant changes in federal priorities in the operations, structure, and policy focus of various federal agencies, as well as regulatory priorities, policy approaches and interpretations of existing laws by those federal agencies. Moreover, leadership transitions at key federal agencies have impacted and may continue to impact rulemaking, supervision, enforcement, and examination priorities across the financial regulatory landscape. These developments may have varying and unpredictable effects on the banking and financial services industry that, which makes it difficult to anticipate and mitigate attendant risks. Compliance with changing federal and regulatory priorities could, among other things, increase the costs of operating our business, reduce the demand for our products and services, impact our ability to achieve our business goals, and increase our legal, operational and reputational risks, any or all of which could materially adversely affect our results of operations.

 

The current U.S. administration also has implemented rapid shifts in macroeconomic policies, such as those relating to trade restrictions and tariffs, which have created significant uncertainties regarding U.S. economic growth, the potential for recession, and concerns over inflation. In order to mitigate the impact of unpredictable U.S. actions, global companies and governments may reduce the use of the U.S. dollar in world trade and financial transactions, which could result in further volatility in the financial markets and U.S. economy. Slow economic growth, economic contraction or recession, or shifts in broader consumer and business trends in the U.S. generally and regions we serve could significantly impact our ability to originate loans, the ability of borrowers to repay loans, and the value of the collateral securing loans.

 

Other political and economic events within the United States, including changes in or disagreements over U.S. monetary policy and actions of the Federal Reserve, disagreements over long-term federal budget and deficit reduction plans, the threat of a U.S. government shutdown, disagreements over, or threats not to increase, the U.S. government’s borrowing limit, and risk of further downgrade of the ratings of U.S. government debt obligations, also may negatively impact financial markets and the U.S. and regional economy.

 

Further, the perception of the potential for additional, significant changes in federal regulatory or economic policy also has increased uncertainty and may exacerbate declines in investor and consumer confidence, which in turn may adversely impact financial markets and the broader economy of the U.S. and the economy of regions we serve, perhaps suddenly and to a significant degree.

 

Regional business and economic conditions are a major driver of our results of operations. Difficult conditions in the regional business and economic environment, including those caused by the lack of stability and predictability of U.S. policymaking, may materially adversely affect our operating expenses, the quality of our assets, credit losses, and the demand for our products and services.

 

For further discussion of risk factors related to the Company, refer to Part 1, Item 1A, “Risk Factors,” contained in the Company’s 2024 Annual Report on Form10-K. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition.

 

Additional risk factors not currently known to us or that we currently deem immaterial may also adversely affect us.

 

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Purchases of equity securities by the issuer.

 

On March 1, 2023, the Company announced that its Board of Directors authorized the purchase of up to 1,000,000 shares of its common stock in the open market or in privately negotiated transactions, from time to time and subject to market and other conditions. This 2023 Repurchase Program supersedes the Company's 2019 share repurchase program. The 2023 Repurchase Program may be modified, suspended or terminated by the Company at any time.

 

                   

Total Number of

    

Maximum Number

  
                   

Shares Purchased

    

of Shares that May

  
   

Total Number of

    

Average Price

    

as Part of Publicly

    

Yet be Purchased

  

Period

  

Shares Purchased

    

Paid per Share

    

Announced Program

    

Under the Program

  

Beginning balance

                             497,047  

April 1 - 30

     7,895     $ 12.72       0       497,047  

May 1 - 31

     2,093       13.36       0       497,047  

June 1 - 30

     0       0       0       497,047  

Ending balance

     9,988       0       0       497,047  

 

There was no treasury stock activity under the program during the three month period ended June 30, 2025.

 

Item 3. Defaults Upon Senior Securities

 

Not applicable.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

Securities Trading Plans of Directors and Executive Officers

 

During the three months ended June 30, 2025, none of our directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any “non-Rule 10b5-1 trading arrangement” (as defined in Item 408(c) of Regulation S-K).

 

 

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Item 6. Exhibits

 

The following exhibits are filed or incorporated by reference as part of this report:

 

3.1

Articles of Incorporation of Farmers National Banc Corp., as amended (incorporated by reference from Exhibit 4.1 to the Company’s Registration Statement on Form S-3 filed with the Commission on October 3, 2001).
   

3.2

Amendment to Articles of Incorporation of Farmers National Banc Corp., as amended (incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on May 1, 2013).
   

3.3

Amendment to Articles of Incorporation of Farmers National Banc Corp., as amended (incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on April 20, 2018).
 

 

3.4

Amended Code of Regulations of Farmers National Banc Corp. (incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on April 17, 2020).
   
10.1* Form of Executive Officer Change in Control Agreement (filed herewith). 
   
10.2* Form of Senior Officer Change in Control Agreement (filed herewith). 
   

31.1

Rule 13a-14(a)/15d-14(a) Certification of Kevin J. Helmick, President and Chief Executive Officer of the Company (principal executive officer) (filed herewith).
   

31.2

Rule 13a-14(a)/15d-14(a) Certification of A. Troy Adair, Executive Vice President, Chief Financial Officer and Secretary of the Company (principal financial officer) (filed herewith).
   

32.1

Certification pursuant to 18 U.S.C. Section 1350 of Kevin J. Helmick, President and Chief Executive Officer of the Company (principal executive officer) (filed herewith).
   

32.2

Certification pursuant to 18 U.S.C. Section 1350 of A. Troy Adair, Executive Vice President, Chief Financial Officer and Secretary of the Company (principal financial officer) (filed herewith).
   

101

The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2025, formatted in iXBRL (Inline Extensible Business Reporting Language), filed herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Income; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows; and (vi) Notes to Unaudited Consolidated Financial Statements.
   

104

The cover page from the Company’s Quarterly report on Form 10-Q for the quarter ended June 30, 2025, has been formatted in Inline XBRL.

 

* Constitutes a management contract or compensatory plan or arrangement.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

FARMERS NATIONAL BANC CORP.

 

 

Dated: August 7, 2025
 

/s/ Kevin J. Helmick

Kevin J. Helmick

President and Chief Executive Officer

 

 

Dated: August 7, 2025
 

/s/ A. Troy Adair

A. Troy Adair

Senior Executive Vice President, Chief Financial Officer and Secretary

 

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EX-10.1 2 ex_846804.htm EXHIBIT 10.1 HTML Editor

EXHIBIT 10.1

 

CHANGE IN CONTROL AGREEMENT

 

This Change in Control Agreement (this “Agreement”) is made by and between Farmers National Banc Corp. (the “Company”) and __________________ (the “Executive”) effective as of the [*] day of [*], 20[*] (the “Effective Date”).

 

WHEREAS, the Executive is currently employed by the Company or an Affiliate; and

 

WHEREAS, in order to induce the Executive to continue performing services for the Company or Affiliate, the Company desires to provide the Executive with certain severance benefits in the event the Executive’s employment with the Company is terminated in connection with a Change in Control under the circumstances described herein;

 

NOW, THEREFORE, in consideration of the mutual promises and agreement set forth below, the Company and the Executive agree as follows:

 

 

1.

Definitions.  When used in this Agreement, the following terms will have the meanings given to them in this Section unless another meaning is expressly provided.  When applying a definition, the form of any term or word will include any of its other forms.

 

 

a.

“Affiliate” means any entity with whom the Company would be considered a single employer under Sections 414(b) or 414(c) of the Code, but modified under any Code section relevant to the purpose for which the definition is applied.

 

 

b.

“Board” means the Board of Directors of the Company.

 

 

c.

“Business” includes, but is not limited to, the business of providing financial, banking, insurance, investment, personal and commercial lending, internet cash management and other similar services to individuals and companies.

 

 

d.

“Cause” means the occurrence of any one of the following events: (i) the Executive’s commission of any intentional, reckless, or grossly negligent act which may result in material injury to the goodwill, business or business reputation of the Company or any Affiliate; (ii) the Executive’s participation in any fraud, dishonesty, theft, conviction of or plea of guilty or nolo contendere to a crime, or unethical business conduct; (iii) the Executive’s violation of any of the covenants of this Agreement or any material written policy, rule or regulation of the Company or the Affiliate that employs the Executive; or (iv) the Executive’s failure to adequately perform the Executive’s job duties or to follow lawful and ethical directions provided to the Executive, which failure has not been cured in all material respects within 20 days after receiving notice of such failure from the Company or the Affiliate employing the Executive.

 

 

e.

“Change in Control” means the consummation of any of the following transactions: (i) any person (as defined in the securities laws) becomes a direct or indirect beneficial owner of securities of the Company or the Affiliate employing the Executive representing 20% or more of the combined voting power of the Company’s or Affiliate’s then outstanding securities; or (ii) the Company or the Affiliate employing the Executive is merged or consolidated with another entity, and as a result of such merger or consolidation, less than 75% of the outstanding voting securities of the surviving or resulting entity shall be owned in the aggregate by the former shareholders of the Company or such Affiliate; or (iii) during any two consecutive years during the term of this Agreement, individuals who at the beginning of such period constitute the Board, cease for any reason to constitute at least a majority thereof, unless the election of each director who is not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors at the beginning of the period.   A Change in Control will only be deemed to have occurred if one of the three above-listed scenarios occurs and, as a result thereof, the Executive is not offered a position that is substantially similar to the Executive’s position immediately prior to the transaction, in terms of duties, responsibilities, compensation and benefits. Notwithstanding the foregoing, for purposes of any payment that is subject to Section 409A of the Code (and for which no exception applies), a Change in Control will be deemed not to have occurred unless the events or circumstances constituting a Change in Control also constitute a “change in control event” within the meaning of Section 409A of the Code.

 

 

f.

“Code” means the Internal Revenue Code of 1986, as amended.

 

 

g.

“Confidential Information” means any proprietary information relating to the conduct of the business of the Company or an Affiliate, including the Company’s or an Affiliate’s unique business methods and compilations of information that has caused or continues to cause the Bank to enjoy a competitive advantage over companies engaged in the same or a similar business, including but not limited to the Company’s or an Affiliate’s methods of operations, customer relations, customer lists, contacts, confidential price policies and confidential price characteristics, lists of employees, vendors and suppliers, confidential information relating to marketing plans, quotations and contracts, order processing, procedures, purchasing and pricing methods and procedures, supplies, personnel information, financial data, future business plans, and the like.

 

 

h.

“Good Reason” means the occurrence of any one of the following events: (i) a material diminution of the duties, authority or responsibilities of the Executive’s position; (ii) a reduction in the Executive’s base salary of more than 20% of the annual rate; (iii) any change in the Executive’s principal place of work which would increase the Executive’s commute by 50 miles or more from the Executive’s current principal place of work; or (iv) a material breach by the Company of its obligations under this Agreement, which failure has not been cured in all material respects within 20 days after receiving written notice of such failures from the Executive.  Good Reason shall not have occurred unless the Executive shall have provided the Company with at least 14 days advance written notice of the condition constituting Good Reason after such condition first occurs and such condition has not been cured within 30 days following receipt of such notice.

 

 

a.

“Protection Period” means the six month period commencing prior to a Change in Control or the 24 month period thereafter.

 

 

b.

“Qualifying Termination” means the Executive’s termination of employment by the Company, other than for Cause, or by the Executive for Good Reason.   The Executive shall not be eligible for the payments and benefits described in Section 3 if the Executive’s employment is terminated by the Company or an Affiliate for Cause, if the Executive terminates other than for Good Reason, or if the Executive’s employment terminates due to the Executive’s death or disability, even if such termination occurs during the Protection Period.

 

 

c.

“Work Product” means any procedure, design feature, schematic, invention, improvement, development, discovery, know how, concept, idea or the like (whether or not patentable or registrable under copyright or trademark laws, or otherwise protectable under similar laws) that the Executive may conceive of, suggest, make, invent, develop or implement during the course of the Executive’s employment with the Company or an Affiliate (whether individually or jointly with any other person), relating in any way to the Business, and all physical embodiments and manifestations thereof, and all patent rights, copyrights, trademarks (or application therefore) and similar protections therein.

 

 

2.

Eligibility.  The Executive shall be eligible to receive the change in control benefits described in Section 3 if the Executive experiences a Qualifying Termination during the Protection Period.

 

 

3.

Change in Control Benefits.  If the Executive experiences a Qualifying Termination, the Executive shall receive the following change in control benefits:

 

 

a.

Base Salary.  A payment in an amount equal to 24 months of the Executive’s monthly base salary rate in effect immediately prior to the Executive’s termination or, if greater, the rate in effect immediately prior to the Change in Control, and prior to any reduction that gave rise to Good Reason, if applicable.

 

 

b.

Bonus.
 

i.

A lump sum amount equal to two (2) times the average of the annual incentive bonus paid to the Executive in the three years preceding termination; and

 

 

ii.

A pro rata incentive bonus for the year of termination (or, if the Executive’s termination occurred prior to the Change in Control, for the year in which the Change in Control occurred), in an amount determined by multiplying the annual incentive that the Executive would have earned under the Company’s annual incentive plan for the year in which the termination occurred, assuming that performance had been attained at the “target” level as based on a percentage of the Executive’s then-current base salary (or, if greater, the base salary immediately prior to any reduction constituting Good Reason), by a fraction, the numerator of which is the number of days elapsed during the calendar year prior to the Executive’s termination and the denominator of which is 365.

 

 

c.

Benefits.  The Executive shall receive a lump sum payment in an amount equal to 24 times the monthly COBRA premium payable by the Executive to continue to receive health benefits at a level similar to which the Executive and the executive’s spouse and dependents, if any, were participating immediately prior to the Qualifying Termination in order to continue to receive such benefits during the applicable COBRA coverage period.

 

 

d.

Outplacement. A lump sum amount of $20,000 for reasonable outplacement services.

 

Payment of the amounts described in this Section 3 shall be made within 60 days following the Executive’s termination (or, if the Executive’s termination occurred prior to the Change in Control, within 30 days following the Change in Control), provided that the Executive executes (and does not revoke) a general release and waiver reasonably acceptable to the Company, generally in the form attached as Exhibit A hereto, before payment is to begin (and, if such 60 day period would begin in one taxable year of the Executive and end in another taxable year of the Executive, payment shall not commence until the second taxable year, regardless of when the Executive executes the release).

 

 

4.

Excess Parachute Payments and Other Limitations on Payment.
 

a.

Excess Parachute Payments. Notwithstanding anything to the contrary in this Agreement, if any payments or benefits paid or payable to the Executive pursuant to this Agreement or any other plan, program or arrangement maintained by the Company or an Affiliate would constitute a “parachute payment” within the meaning of Section 280G of the Code, then the Executive shall receive the greater of: (i) one dollar ($1.00) less than the amount which would cause the payments and benefits to constitute a “parachute payment”, or (ii) the amount of such payments and benefits, after taking into account all federal, state and local taxes, including the excise tax imposed under Section 4999 of the Code payable by the Executive on such payments and benefits, if such amount would be greater than the amount specified in Section 4(a)(i), after taking into account all federal, state and local taxes payable by the Executive on such payments and benefits.  Any reduction to any payment made pursuant to this Section 4(a) shall be made consistent with the requirements of Section 409A of the Code.

 

 

b.

Regulatory Limitations.  If any payments otherwise payable to the Executive pursuant to this Agreement are prohibited or limited by any statute, regulation, order, consent decree or similar limitation in effect at the time the payments would otherwise be paid (a “Limiting Rule”): the Company (i) shall pay the maximum amount that may be paid after applying the Limiting Rule; and (ii) shall use commercially reasonable efforts to obtain the consent of the appropriate agency or body to pay any amounts that cannot be paid due to the application of the Limiting Rule.  The Executive agrees that the Company shall not have breached its obligations under this Agreement if it is not able to pay all or some portion of any payment due to the Executive as a result of the application of a Limiting Rule.

 

 

5.

Executive’s Obligations.  In order to receive the payments and benefits described in Section 3 of this Agreement after a Qualifying Termination, the Executive agrees to the following:

 

 

a.

Non-Solicitation of Customers. During the Executive’s employment with the Company or an Affiliate and for a period of 24 consecutive months thereafter, the Executive shall not, directly or indirectly solicit Business from any customers, clients or business patrons of the Company or an Affiliate who were customers, clients or business patrons of the Company or an Affiliate at the time of termination of the Executive’s employment.

 

 

b.

Non-Solicitation of Employees. During the Executive’s employment with the Company or an Affiliate and for a period of 24 consecutive months thereafter, the Executive shall not, directly or indirectly employ or attempt to employ or solicit for employment any other individual who is employed by the Company or an Affiliate at the time of termination of the Executive’s employment.

 

 

c.

Confidential Information. During the Executive’s employment with the Company or an Affiliate, or during any period thereafter, the Executive shall not directly or indirectly communicate or divulge any Confidential Information relating to the Company or an Affiliate to any other person or business entity.   All records, files, plans, documents and the like relating to the Business of the Company or an Affiliate, including but not limited to Confidential Information which the Executive has or will prepare, use or come into contact with shall remain the sole property of the Company or an Affiliate, shall not be copied without written permission, and shall be returned immediately to the Company or an Affiliate upon the Executive’s termination of employment with the Company or an Affiliate, or at the request of the Company or an Affiliate at any time. Further, the Executive shall not directly or indirectly use or disclose to any other person or business entity any secret or Confidential Information of the Company or an Affiliate without the prior written consent of an officer of the Company or an Affiliate.  The Executive further agrees to take all reasonable precautions to protect against the negligent or inadvertent disclosure of the secret or Confidential Information of the Company or an Affiliate to any other person or business entity. If the Executive improperly uses or discloses any secret or Confidential Information of the Company or an Affiliate, the Executive understands that the Executive’s employment will be subject to termination for Cause.  The Executive also recognizes that all writings, illustrations, drawings and other similar materials that embody or otherwise contain Confidential Information which the Executive may produce or which may be given to the Executive in connection with the Executive’s employment, are the property of the Company or an Affiliate and it shall be the Executive’s obligation to deliver the same to the Company or an Affiliate upon request, and upon termination of the Executive’s employment with the Company or an Affiliate for any reason.

 

 

d.

Intellectual Property Rights.  The Executive agrees and acknowledges that all Work Product shall be the sole, exclusive and absolute property of the Company or an Affiliate. All such Work Product shall be deemed to be works for hire and the Executive assigns to the Company all rights, title and interest in, to and under such Work Product, including but not limited to, the right to obtain such patents, copyright registrations, trademark registrations or similar protections as the Company or an Affiliate may desire to obtain.  The Executive shall immediately disclose all Work Product to the Company or an Affiliate and agrees, at any time upon the Company’s or an Affiliate’s request and without additional compensation, to execute any documents and to otherwise cooperate with the Company or an Affiliate respecting the perfection of its rights, title and interest in, to and under such Work Product, and in any litigation or other controversy in connection therewith, all reasonable expenses incident thereto to be borne by the Company or an Affiliate.

 

 

e.

Non-disparagement. The Executive agrees that he or she will not knowingly make any statement or take any action likely to disparage or have an adverse effect on the Company’s business reputation; provided, however, that such restriction will not prevent the Covered Executive from making any statement or taking any action that is required by law.

 

In the event of a breach by the Executive of any covenant set forth in this Section 5, the term of such covenant will be extended by the period of the duration of such breach and such covenant will survive any termination of this Agreement but only for the limited period of such extension.  The restrictions provided in this Section 5 are in addition to any restrictions on competition or solicitation contained in any other agreement between the Company or an Affiliate and the Executive.  The provisions of this Section 5 constitute an essential element of this Agreement, without which the Company would not have entered into this Agreement.  If the scope of any restriction contained in this Section 5 is too broad to permit enforcement of such restriction to its fullest extent, then such restriction will be enforced to the maximum extent permitted by law, and the Executive hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction.

 

Notwithstanding any other remedy available, the restrictions described in this Section 5 may be enforced by the Company, an Affiliate and/or any successor thereto, by an action to recover payments made under this Agreement, an action for injunction, and/or an action for damages.  In the event the Company or an Affiliate obtains a permanent injunction against the Executive after notice and the opportunity to appear, the Executive shall be liable to pay all costs, including reasonable attorneys’ fees, which the Company or an Affiliate may incur in enforcing, to any extent, the provisions of this Agreement, whether or not litigation is actually commenced and including litigation of any appeal taken or defended by the Company or an Affiliate in any action to enforce this Agreement and which affirms and/or results in a permanent injunction. Any proceedings brought to enforce Section 5 of this Agreement shall be brought in the courts of Mahoning County, Ohio and the Executive expressly waives any objection or defense relating to jurisdiction or forum non-conveniens or similar doctrine or theory. The Executive acknowledges and agrees that the remedy at law for any breach of this Section 5 shall be inadequate, and that the Company or an Affiliate shall be entitled to injunctive relief without bond. Such injunctive relief shall not be exclusive, but shall be in addition to any other rights or remedies which the Company or an Affiliate may have for any such breach. In addition to the injunctive remedies described herein, the Executive acknowledges and agrees that in the event of a final judicial determination against the Executive with respect to an actual or threatened breach by the Executive of this Section 5, the Company shall be entitled to withhold any remaining amounts payments payable under Section 3 of this Agreement.

 

 

6.

Miscellaneous.  

 

 

a.

No Mitigation.  The Executive is not required to mitigate the amount of any payment or benefit described in this Agreement by seeking other employment or otherwise, nor will the amount of any payment or benefit hereunder be reduced by any compensation that the Executive earns in any capacity after termination or by reason of the Executive’s receipt of or right to receive any retirement or other benefits after termination.  Except as expressly provided in this Agreement, the Executive’s right to receive the payments and benefits described in this Agreement will not decrease the amount of, or otherwise adversely affect, any other benefits payable to the Executive under any other plan, agreement or arrangement between the Executive and the Company or any Affiliate.

 

 

b.

Withholding.  Payments under this Agreement shall be subject to withholding of such amounts as the Company or the Affiliate employing the Executive reasonably determines are required to be withheld with respect to any income, wage or employment taxes imposed on such payment.

 

 

c.

Assignment. The rights of the Executive under this Agreement may not be assigned, transferred, pledged or encumbered except by will or by the applicable laws of descent and distribution.  The rights and obligations of the Company under this Agreement will inure to the benefit of, and will be binding upon, the successors and assigns of the Company.  If the Company is at any time merged or consolidated into, or with any other company, or if substantially all of the assets of the Company are transferred to another company, the provisions of this Agreement will be binding upon and inure to the benefit of the company resulting from such merger or consolidation or to which such assets have been transferred, and this provision will apply in the event of any subsequent merger, consolidation or transfer.

 

 

d.

Governing Law.  This Agreement will be construed in accordance with, and pursuant to, the laws of the State of Ohio (other than laws governing conflicts of laws).

 

 

e.

Entire Agreement; Amendment.  This instrument contains the entire written agreement of the parties relating to the subject matter hereof, and the parties have made no other agreement, representations or warranties relating to the subject matter of this Agreement that are not set forth herein.  This Agreement may be amended only by mutual written agreement of the parties.

 

 

f.

Captions; Severance; Counterparts.  The captions of this Agreement will not be part of the provisions hereof and will have no force or effect.  The invalidity or unenforceability of any provision of this Agreement will not affect the validity or unenforceability of any other provision of this Agreement. This Agreement may be executed in several counterparts, each of which will be deemed to be an original and all of which together will constitute one and the same instrument.

 

 

g.

No Waiver.  The failure of either party to insist in any instance on the strict performance of any provision of this Agreement or to exercise any right hereunder will not constitute a waiver of such provision or right in any other instance.

 

 

h.

Notice.  All written communications provided for in this Agreement shall be deemed to have been duly served when delivered by U.S. registered mail, return receipt requested, postage prepaid, to the following addresses (or such other address as either party may provide the other in writing):

 

If to the Company:

 

Farmers National Banc Corp.

 

20 South Broad Street

 

Canfield, Ohio 44406

 

Attn: Chief Human Resources Officer

 

If to the Executive:

 

At the last address on file with the Company or the Affiliate employing the Executive.

 

 

i.

Compliance with Section 409A of the Code.  The parties intend that this Agreement be subject to or exempt from the requirements of Section 409A of the Code, as applicable, and this Agreement shall be interpreted, administered and operated accordingly.  For purposes of Section 409A of the Code, any reference to the Executive’s termination of employment shall mean the Executive’s “separation from service” (as such term is defined in Section 409A of the Code) and each payment of compensation under the Agreement shall be treated as a separate payment of compensation.  Any amounts payable solely on account of an involuntary termination shall be excludible from the requirements of Section 409A of the Code, either as separation pay or as short-term deferrals to the maximum possible extent.  Nothing herein shall be construed as the guarantee of any particular tax treatment to the Executive, and none of the Company or any Affiliate, nor their respective boards of directors, officers or employees, shall have any liability to the Executive arising from any failure to comply with the requirements of Section 409A of the Code.  Notwithstanding anything in this Agreement to the contrary, if the Executive is a “specified employee” (within the meaning of Treasury Regulations Section 1.409A-1(i) and as determined under the Company’s policy for determining specified employees) on the Executive’s date of termination and the Executive is entitled to a benefit under this Agreement that is required to be delayed pursuant to Section 409A(1)(2)(B)(i) of the Code, then such payment or benefit will not be paid or provided to the Executive until the first business day of the seventh month following the Executive’s termination or, if earlier, the date of the Executive’s death.

 

 

j.

Arbitration. Except as set forth in Section 5, any controversy or dispute which arises in connection with the validity, construction, application, enforcement or breach of this Agreement shall be submitted to final and binding arbitration pursuant to the commercial arbitration rules of the American Arbitration Association (the “AAA”). The fees and costs of arbitration (other than attorney fees and costs) shall be borne equally by the parties. A neutral arbitrator shall be jointly chosen by the parties from a list of arbitrators provided by the AAA, and any arbitration under this Section 6(j) shall take place in the Cleveland, Ohio office of the AAA. Judgment upon an award rendered by an arbitrator under this Section 6(j) may be entered in any court of competent jurisdiction.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date first written above.

 

COMPANY

 

By:                                                                  Date               

 

Title:                                                               

 

EXECUTIVE

 

Signed:                                                            Date               

 

Print Name:                                                                            



 

 

EXHIBIT A

Form of Release

GENERAL RELEASE

 

This General Release (the “Agreement”) is made and entered into as of ______, 20___, by and between Farmers National Banc Corp. (the “Company”), and _________________ (the “Executive”) (collectively, the “Parties”).

 

ARTICLE I   RELEASES, WAIVERS AND REVOCATION RIGHTS

 

 

1.

Release.  In consideration of receipt of the payments and benefits set forth in Section 3 of the Parties’ Change in Control Agreement by and between the Company and the Executive, effective as of ______, 20___ (“CIC Agreement”), the Executive does hereby fully and forever surrender, release, acquit and discharge the Company, and its principals, stockholders, directors, officers, agents, administrators, insurers, subsidiaries, affiliates, employees, successors, assigns, related entities, and legal representatives, personally and in their representative capacities, and each of them (collectively, “Released Parties”), of and from any and all claims for costs of attorneys’ fees, expenses, compensation, and all losses, demands and damage of whatsoever nature or kind in law or in equity, whether known or unknown, including without limitation those claims arising out of, under, or by reason of the Executive’s employment with the Company or any Affiliate (as defined in the CIC Agreement), the Executive’s relationship with the Company or any Affiliate and/or the termination of the Executive’s employment relationship and any and all claims which were or could have been asserted in any charge, complaint, or related lawsuit. Without limiting the generality of the foregoing, the Executive specifically releases and discharges, but not by way of limitation, any obligation, claim, demand or cause of action based on, or arising out of, any alleged wrongful termination, breach of employment contract, breach of implied covenants of good faith and fair dealing, defamation, fraud, promissory estoppel, intentional or negligent infliction of emotional distress, discrimination based on age, pain and suffering, personal injury, punitive damages, and any and all claims arising from any alleged violation by the Released Parties of any federal, state, or local statutes, ordinances or common laws, including but not limited to the Ohio Civil Rights Act, including all provisions of the Ohio Revised Code concerning discrimination on the basis of age, the Age Discrimination in Employment Act of 1967 (“ADEA”), Title VII of the Civil Rights Act of 1964, the Americans With Disabilities Act (“ADA” and “ADAA”) or the Employee Retirement Income Security Act of 1974. This release of rights is knowing and voluntary. The Company acknowledges that the Executive does not release herein any rights or claims which may arise after the Effective Date of this Agreement (as defined in Section 1.03 of this Agreement) nor any rights the Executive has under the CIC Agreement, any rights the Executive may have regarding the enforcement of the CIC Agreement, the Executive’s rights under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or the Executive’s rights to indemnification.

 

1.02     Waiver of Right to Sue.  Except for the Company’s promises and obligations contained in the CIC Agreement, the Executive further agrees, promises and covenants that neither the Executive, nor any person, organization, or any other entity acting on the Executive’s behalf will file, charge, claim, sue or cause or permit to be filed, charged or claimed, any action for damages or other relief (including injunctive, declaratory, monetary relief or other) against the Company, involving any matter occurring in the past up to the Effective Date of this Agreement or involving any continuing effects of actions or practices which arose prior to the Effective Date of this Agreement or the termination of the Executive’s employment.

 

1.03     Older Workers’ Benefit Protection Act Waiver.  The Executive has certain individual federal rights, which must be explicitly waived. Specifically, the Executive is protected by the ADEA from discrimination in employment because of the Executive’s age. By executing this Agreement, the Executive waives these rights as to any past or current claims. Notwithstanding anything else in this Agreement, excluded from this Agreement are ADEA age claims that may arise after execution of this Agreement. In connection with the releases in Section 1.01 and waivers in Section 1.02 of any and all claims or disputes that the Executive has or may have on the date hereof, the Executive makes the following acknowledgements:

 

[1]        By signing this Agreement, the Executive waives all claims against the Released Parties for discrimination based on age, including without limitation, any claim which arises under or by reason of a violation of the ADEA.

 

[2]        In consideration of the releases, waivers and covenants made by the Executive under this Agreement, the Executive will be receiving the payments and other benefits in the amounts and manner described in Section 3 of the Parties’ CIC Agreement.

 

[3]        The Executive represents and acknowledges that the Executive has consulted with an attorney prior to executing this Agreement and the Executive has been given a period of at least twenty-one (21) days within which to consider whether or not to enter into this Agreement.

 

[4]        The Executive understands that this Agreement shall be effective as of the date on which the Executive signs the Agreement (“Effective Date”), provided that the Agreement is not revoked by the Executive within seven days after the Executive signs the Agreement. For a period of seven days after the Executive signs the Agreement, the Executive has the right to revoke and/or cancel this Agreement by the delivery of notice in writing of revocation and/or cancellation to the Company. In the event that the Executive does not revoke and/or cancel this Agreement during this period, this Agreement shall become effective on the Effective Date. In the event that the Executive revokes this Agreement, the Executive shall not be entitled to any of the consideration set out in Section 3 of the Parties’ CIC Agreement.

 

ARTICLE 2   MISCELLANEOUS

 

2.01     Counterparts.  This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original, but all of which together will constitute one and the same Agreement. Facsimile signatures will have the same legal effect as original signatures.

 

2.02     Applicable Law.  To the extent not preempted by federal law, the provisions of this Agreement will be construed and enforced in accordance with the laws of the state of Ohio.

 

2.03     Headings.  The descriptive headings in this Agreement are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement.

 

IN WITNESS WHEREOF, the Parties have executed this Agreement, as of _________, 20____.

 

FARMERS NATIONAL BANC CORP.

 

By:                                                                  

Date signed:                                                    

Title:________________________________

  

 

THE EXECUTIVE

 

 

Signature

Date signed:                                                    

 

____________________________________

 

Printed Name

 
EX-10.2 3 ex_846808.htm EXHIBIT 10.2 HTML Editor

EXHIBIT 10.2

 

CHANGE IN CONTROL AGREEMENT

 

This Change in Control Agreement (this “Agreement”) is made by and between Farmers National Banc Corp. (the “Company”) and ____________________ (the “Executive”) effective as of the ____ day of __________, 20__ (the “Effective Date”).

 

WHEREAS, the Executive is currently employed by the Company or an Affiliate; and

 

WHEREAS, in order to induce the Executive to continue performing services for the Company or Affiliate, the Company desires to provide the Executive with certain severance benefits in the event the Executive’s employment with the Company is terminated in connection with a Change in Control under the circumstances described herein;

 

NOW, THEREFORE, in consideration of the mutual promises and agreement set forth below, the Company and the Executive agree as follows:

 

 

1.

Definitions.  When used in this Agreement, the following terms will have the meanings given to them in this Section unless another meaning is expressly provided.  When applying a definition, the form of any term or word will include any of its other forms.

 

 

a.

“Affiliate” means any entity with whom the Company would be considered a single employer under Sections 414(b) or 414(c) of the Code, but modified under any Code section relevant to the purpose for which the definition is applied.

 

 

b.

“Board” means the Board of Directors of the Company.

 

 

c.

“Business” includes, but is not limited to, the business of providing financial, banking, insurance, investment, personal and commercial lending, internet cash management and other similar services to individuals and companies.

 

 

d.

“Cause” means the occurrence of any one of the following events: (i) the Executive’s commission of any intentional, reckless, or grossly negligent act which may result in material injury to the goodwill, business or business reputation of the Company or any Affiliate; (ii) the Executive’s participation in any fraud, dishonesty, theft, conviction of or plea of guilty or nolo contendere to a crime, or unethical business conduct; (iii) the Executive’s violation of any of the covenants of this Agreement or any material written policy, rule or regulation of the Company or the Affiliate that employs the Executive; or (iv) the Executive’s failure to adequately perform the Executive’s job duties or to follow lawful and ethical directions provided to the Executive, which failure has not been cured in all material respects within 20 days after receiving notice of such failure from the Company or the Affiliate employing the Executive.

 

 

e.

“Change in Control” means the consummation of any of the following transactions: (i) any person (as defined in the securities laws) becomes a direct or indirect beneficial owner of securities of the Company or the Affiliate employing the Executive representing 20% or more of the combined voting power of the Company’s or Affiliate’s then outstanding securities; or (ii) the Company or the Affiliate employing the Executive is merged or consolidated with another entity, and as a result of such merger or consolidation, less than 75% of the outstanding voting securities of the surviving or resulting entity shall be owned in the aggregate by the former shareholders of the Company or such Affiliate; or (iii) during any two consecutive years during the term of this Agreement, individuals who at the beginning of such period constitute the Board, cease for any reason to constitute at least a majority thereof, unless the election of each director who is not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors at the beginning of the period.   A Change in Control will only be deemed to have occurred if one of the three above-listed scenarios occurs and, as a result thereof, the Executive is not offered a position that is substantially similar to the Executive’s position immediately prior to the transaction, in terms of duties, responsibilities, compensation and benefits. Notwithstanding the foregoing, for purposes of any payment that is subject to Section 409A of the Code (and for which no exception applies), a Change in Control will be deemed not to have occurred unless the events or circumstances constituting a Change in Control also constitute a “change in control event” within the meaning of Section 409A of the Code.

 

 

f.

“Code” means the Internal Revenue Code of 1986, as amended.

 

 

g.

“Confidential Information” means any proprietary information relating to the conduct of the business of the Company or an Affiliate, including the Company’s or an Affiliate’s unique business methods and compilations of information that has caused or continues to cause the Bank to enjoy a competitive advantage over companies engaged in the same or a similar business, including but not limited to the Company’s or an Affiliate’s methods of operations, customer relations, customer lists, contacts, confidential price policies and confidential price characteristics, lists of employees, vendors and suppliers, confidential information relating to marketing plans, quotations and contracts, order processing, procedures, purchasing and pricing methods and procedures, supplies, personnel information, financial data, future business plans, and the like.

 

 

h.

“Good Reason” means the occurrence of any one of the following events: (i) a material diminution of the duties, authority or responsibilities of the Executive’s position; (ii) a reduction in the Executive’s base salary of more than 20% of the annual rate; (iii) any change in the Executive’s principal place of work which would increase the Executive’s commute by 50 miles or more from the Executive’s current principal place of work; or (iv) a material breach by the Company of its obligations under this Agreement, which failure has not been cured in all material respects within 20 days after receiving written notice of such failures from the Executive.  Good Reason shall not have occurred unless the Executive shall have provided the Company with at least 14 days advance written notice of the condition constituting Good Reason after such condition first occurs and such condition has not been cured within 30 days following receipt of such notice.

 

 

a.

“Protection Period” means the six month period commencing prior to a Change in Control or the 24 month period thereafter.

 

 

b.

“Qualifying Termination” means the Executive’s termination of employment by the Company, other than for Cause, or by the Executive for Good Reason.   The Executive shall not be eligible for the payments and benefits described in Section 3 if the Executive’s employment is terminated by the Company or an Affiliate for Cause, if the Executive terminates other than for Good Reason, or if the Executive’s employment terminates due to the Executive’s death or disability, even if such termination occurs during the Protection Period.

 

 

c.

“Work Product” means any procedure, design feature, schematic, invention, improvement, development, discovery, know how, concept, idea or the like (whether or not patentable or registrable under copyright or trademark laws, or otherwise protectable under similar laws) that the Executive may conceive of, suggest, make, invent, develop or implement during the course of the Executive’s employment with the Company or an Affiliate (whether individually or jointly with any other person), relating in any way to the Business, and all physical embodiments and manifestations thereof, and all patent rights, copyrights, trademarks (or application therefore) and similar protections therein.

 

 

2.

Eligibility.  The Executive shall be eligible to receive the change in control benefits described in Section 3 if the Executive experiences a Qualifying Termination during the Protection Period.

 

 

3.

Change in Control Benefits.  If the Executive experiences a Qualifying Termination, the Executive shall receive the following change in control benefits:

 

 

a.

Base Salary.  A payment in an amount equal to the Executive’s annual base salary rate in effect immediately prior to the Executive’s termination or, if greater, the rate in effect immediately prior to the Change in Control, and prior to any reduction that gave rise to Good Reason, if applicable.

 

 

b.

Bonus.
 

i.

A lump sum amount equal to the average of the annual incentive bonus paid to the Executive in the three years preceding termination; and

 

 

ii.

A pro rata incentive bonus for the year of termination (or, if the Executive’s termination occurred prior to the Change in Control, for the year in which the Change in Control occurred), in an amount determined by multiplying the annual incentive that the Executive would have earned under the Company’s annual incentive plan for the year in which the termination occurred, assuming that performance had been attained at the

 

“target” level as based on a percentage of the Executive’s then-current base salary (or, if greater, the base salary immediately prior to any reduction constituting Good Reason), by a fraction, the numerator of which is the number of days elapsed during the calendar year prior to the Executive’s termination and the denominator of which is 365.

 

 

c.

Benefits.  The Executive shall receive a lump sum payment in an amount equal to 12 times the monthly COBRA premium payable by the Executive to continue to receive health benefits at a level similar to which the Executive and the executive’s spouse and dependents, if any, were participating immediately prior to the Qualifying Termination in order to continue to receive such benefits during the applicable COBRA coverage period.

 

Payment of the amounts described in this Section 3 shall be made within 60 days following the Executive’s termination (or, if the Executive’s termination occurred prior to the Change in Control, within 30 days following the Change in Control), provided that the Executive executes (and does not revoke) a general release and waiver reasonably acceptable to the Company, generally in the form attached as Exhibit A hereto, before payment is to begin (and, if such 60 day period would begin in one taxable year of the Executive and end in another taxable year of the Executive, payment shall not commence until the second taxable year, regardless of when the Executive executes the release).

 

 

4.

Excess Parachute Payments and Other Limitations on Payment.
 

a.

Excess Parachute Payments. Notwithstanding anything to the contrary in this Agreement, if any payments or benefits paid or payable to the Executive pursuant to this Agreement or any other plan, program or arrangement maintained by the Company or an Affiliate would constitute a “parachute payment” within the meaning of Section 280G of the Code, then the Executive shall receive the greater of: (i) one dollar ($1.00) less than the amount which would cause the payments and benefits to constitute a “parachute payment”, or (ii) the amount of such payments and benefits, after taking into account all federal, state and local taxes, including the excise tax imposed under Section 4999 of the Code payable by the Executive on such payments and benefits, if such amount would be greater than the amount specified in Section 4(a)(i), after taking into account all federal, state and local taxes payable by the Executive on such payments and benefits.  Any reduction to any payment made pursuant to this Section 4(a) shall be made consistent with the requirements of Section 409A of the Code.

 

 

b.

Regulatory Limitations.  If any payments otherwise payable to the Executive pursuant to this Agreement are prohibited or limited by any statute, regulation, order, consent decree or similar limitation in effect at the time the payments would otherwise be paid (a “Limiting Rule”): the Company (i) shall pay the maximum amount that may be paid after applying the Limiting Rule; and (ii) shall use commercially reasonable efforts to obtain the consent of the appropriate agency or body to pay any amounts that cannot be paid due to the application of the Limiting Rule.  The Executive agrees that the Company shall not have breached its obligations under this Agreement if it is not able to pay all or some portion of any payment due to the Executive as a result of the application of a Limiting Rule.

 

 

5.

Executive’s Obligations.  In order to receive the payments and benefits described in Section 3 of this Agreement after a Qualifying Termination, the Executive agrees to the following:

 

 

a.

Non-Solicitation of Customers. During the Executive’s employment with the Company or an Affiliate and for a period of 12 consecutive months thereafter, the Executive shall not, directly or indirectly solicit Business from any customers, clients or business patrons of the Company or an Affiliate who were customers, clients or business patrons of the Company or an Affiliate at the time of termination of the Executive’s employment.

 

 

b.

Non-Solicitation of Employees. During the Executive’s employment with the Company or an Affiliate and for a period of 12 consecutive months thereafter, the Executive shall not, directly or indirectly employ or attempt to employ or solicit for employment any other individual who is employed by the Company or an Affiliate at the time of termination of the Executive’s employment.

 

 

c.

Confidential Information. During the Executive’s employment with the Company or an Affiliate, or during any period thereafter, the Executive shall not directly or indirectly communicate or divulge any Confidential Information relating to the Company or an Affiliate to any other person or business entity.   All records, files, plans, documents and the like relating to the Business of the Company or an Affiliate, including but not limited to Confidential Information which the Executive has or will prepare, use or come into contact with shall remain the sole property of the Company or an Affiliate, shall not be copied without written permission, and shall be returned immediately to the Company or an Affiliate upon the Executive’s termination of employment with the Company or an Affiliate, or at the request of the Company or an Affiliate at any time. Further, the Executive shall not directly or indirectly use or disclose to any other person or business entity any secret or Confidential Information of the Company or an Affiliate without the prior written consent of an officer of the Company or an Affiliate.  The Executive further agrees to take all reasonable precautions to protect against the negligent or inadvertent disclosure of the secret or Confidential Information of the Company or an Affiliate to any other person or business entity. If the Executive improperly uses or discloses any secret or Confidential Information of the Company or an Affiliate, the Executive understands that the Executive’s employment will be subject to termination for Cause.  The Executive also recognizes that all writings, illustrations, drawings and other similar materials that embody or otherwise contain Confidential Information which the Executive may produce or which may be given to the Executive in connection with the Executive’s employment, are the property of the Company or an Affiliate and it shall be the Executive’s obligation to deliver the same to the Company or an Affiliate upon request, and upon termination of the Executive’s employment with the Company or an Affiliate for any reason.

 

 

d.

Intellectual Property Rights.  The Executive agrees and acknowledges that all Work Product shall be the sole, exclusive and absolute property of the Company or an Affiliate. All such Work Product shall be deemed to be works for hire and the Executive assigns to the Company all rights, title and interest in, to and under such Work Product, including but not limited to, the right to obtain such patents, copyright registrations, trademark registrations or similar protections as the Company or an Affiliate may desire to obtain.  The Executive shall immediately disclose all Work Product to the Company or an Affiliate and agrees, at any time upon the Company’s or an Affiliate’s request and without additional compensation, to execute any documents and to otherwise cooperate with the Company or an Affiliate respecting the perfection of its rights, title and interest in, to and under such Work Product, and in any litigation or other controversy in connection therewith, all reasonable expenses incident thereto to be borne by the Company or an Affiliate.

 

 

e.

Non-disparagement. The Executive agrees that he or she will not knowingly make any statement or take any action likely to disparage or have an adverse effect on the Company’s business reputation; provided, however, that such restriction will not prevent the Covered Executive from making any statement or taking any action that is required by law.

 

In the event of a breach by the Executive of any covenant set forth in this Section 5, the term of such covenant will be extended by the period of the duration of such breach and such covenant will survive any termination of this Agreement but only for the limited period of such extension.  The restrictions provided in this Section 5 are in addition to any restrictions on competition or solicitation contained in any other agreement between the Company or an Affiliate and the Executive.  The provisions of this Section 5 constitute an essential element of this Agreement, without which the Company would not have entered into this Agreement.  If the scope of any restriction contained in this Section 5 is too broad to permit enforcement of such restriction to its fullest extent, then such restriction will be enforced to the maximum extent permitted by law, and the Executive hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction.

 

Notwithstanding any other remedy available, the restrictions described in this Section 5 may be enforced by the Company, an Affiliate and/or any successor thereto, by an action to recover payments made under this Agreement, an action for injunction, and/or an action for damages.  In the event the Company or an Affiliate obtains a permanent injunction against the Executive after notice and the opportunity to appear, the Executive shall be liable to pay all costs, including reasonable attorneys’ fees, which the Company or an Affiliate may incur in enforcing, to any extent, the provisions of this Agreement, whether or not litigation is actually commenced and including litigation of any appeal taken or defended by the Company or an Affiliate in any action to enforce this Agreement and which affirms and/or results in a permanent injunction. Any proceedings brought to enforce Section 5 of this Agreement shall be brought in the courts of Mahoning County, Ohio and the Executive expressly waives any objection or defense relating to jurisdiction or forum non-conveniens or similar doctrine or theory. The Executive acknowledges and agrees that the remedy at law for any breach of this Section 5 shall be inadequate, and that the Company or an Affiliate shall be entitled to injunctive relief without bond. Such injunctive relief shall not be exclusive, but shall be in addition to any other rights or remedies which the Company or an Affiliate may have for any such breach. In addition to the injunctive remedies described herein, the Executive acknowledges and agrees that in the event of a final judicial determination against the Executive with respect to an actual or threatened breach by the Executive of this Section 5, the Company shall be entitled to withhold any remaining amounts payments payable under Section 3 of this Agreement.

 

 

6.

Miscellaneous.  

 

 

a.

No Mitigation.  The Executive is not required to mitigate the amount of any payment or benefit described in this Agreement by seeking other employment or otherwise, nor will the amount of any payment or benefit hereunder be reduced by any compensation that the Executive earns in any capacity after termination or by reason of the Executive’s receipt of or right to receive any retirement or other benefits after termination.  Except as expressly provided in this Agreement, the Executive’s right to receive the payments and benefits described in this Agreement will not decrease the amount of, or otherwise adversely affect, any other benefits payable to the Executive under any other plan, agreement or arrangement between the Executive and the Company or any Affiliate.

 

 

b.

Withholding.  Payments under this Agreement shall be subject to withholding of such amounts as the Company or the Affiliate employing the Executive reasonably determines are required to be withheld with respect to any income, wage or employment taxes imposed on such payment.

 

 

c.

Assignment. The rights of the Executive under this Agreement may not be assigned, transferred, pledged or encumbered except by will or by the applicable laws of descent and distribution.  The rights and obligations of the Company under this Agreement will inure to the benefit of, and will be binding upon, the successors and assigns of the Company.  If the Company is at any time merged or consolidated into, or with any other company, or if substantially all of the assets of the Company are transferred to another company, the provisions of this Agreement will be binding upon and inure to the benefit of the company resulting from such merger or consolidation or to which such assets have been transferred, and this provision will apply in the event of any subsequent merger, consolidation or transfer.

 

 

d.

Governing Law.  This Agreement will be construed in accordance with, and pursuant to, the laws of the State of Ohio (other than laws governing conflicts of laws).

 

 

e.

Entire Agreement; Amendment.  This instrument contains the entire written agreement of the parties relating to the subject matter hereof, and the parties have made no other agreement, representations or warranties relating to the subject matter of this Agreement that are not set forth herein.  This Agreement may be amended only by mutual written agreement of the parties.

 

 

f.

Captions; Severance; Counterparts.  The captions of this Agreement will not be part of the provisions hereof and will have no force or effect.  The invalidity or unenforceability of any provision of this Agreement will not affect the validity or unenforceability of any other provision of this Agreement. This Agreement may be executed in several counterparts, each of which will be deemed to be an original and all of which together will constitute one and the same instrument.

 

 

g.

No Waiver.  The failure of either party to insist in any instance on the strict performance of any provision of this Agreement or to exercise any right hereunder will not constitute a waiver of such provision or right in any other instance.

 

 

h.

Notice.  All written communications provided for in this Agreement shall be deemed to have been duly served when delivered by U.S. registered mail, return receipt requested, postage prepaid, to the following addresses (or such other address as either party may provide the other in writing):

 

If to the Company:

 

Farmers National Banc Corp.

 

20 South Broad Street

 

Canfield, Ohio 44406

 

Attn: Chief Human Resources Officer

 

If to the Executive:

 

At the last address on file with the Company or the Affiliate employing the Executive.

 

 

i.

Compliance with Section 409A of the Code.  The parties intend that this Agreement be subject to or exempt from the requirements of Section 409A of the Code, as applicable, and this Agreement shall be interpreted, administered and operated accordingly.  For purposes of Section 409A of the Code, any reference to the Executive’s termination of employment shall mean the Executive’s “separation from service” (as such term is defined in Section 409A of the Code) and each payment of compensation under the Agreement shall be treated as a separate payment of compensation.  Any amounts payable solely on account of an involuntary termination shall be excludible from the requirements of Section 409A of the Code, either as separation pay or as short-term deferrals to the maximum possible extent.  Nothing herein shall be construed as the guarantee of any particular tax treatment to the Executive, and none of the Company or any Affiliate, nor their respective boards of directors, officers or employees, shall have any liability to the Executive arising from any failure to comply with the requirements of Section 409A of the Code.  Notwithstanding anything in this Agreement to the contrary, if the Executive is a “specified employee” (within the meaning of Treasury Regulations Section 1.409A-1(i) and as determined under the Company’s policy for determining specified employees) on the Executive’s date of termination and the Executive is entitled to a benefit under this Agreement that is required to be delayed pursuant to Section 409A(1)(2)(B)(i) of the Code, then such payment or benefit will not be paid or provided to the Executive until the first business day of the seventh month following the Executive’s termination or, if earlier, the date of the Executive’s death.

 

 

j.

Arbitration. Except as set forth in Section 5, any controversy or dispute which arises in connection with the validity, construction, application, enforcement or breach of this Agreement shall be submitted to final and binding arbitration pursuant to the commercial arbitration rules of the American Arbitration Association (the “AAA”). The fees and costs of arbitration (other than attorney fees and costs) shall be borne equally by the parties. A neutral arbitrator shall be jointly chosen by the parties from a list of arbitrators provided by the AAA, and any arbitration under this Section 6(j) shall take place in the Cleveland, Ohio office of the AAA. Judgment upon an award rendered by an arbitrator under this Section 6(j) may be entered in any court of competent jurisdiction.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date first written above.

 

COMPANY

 

By:                                                                 

 

Title:                                                               

 

EXECUTIVE

 

Signed:                                                           

 

Print Name:                                                    



 

 

EXHIBIT A

Form of Release

GENERAL RELEASE

 

This General Release (the “Agreement”) is made and entered into as of ______, 20___, by and between Farmers National Banc Corp. (the “Company”), and _________________ (the “Executive”) (collectively, the “Parties”).

 

ARTICLE I   RELEASES, WAIVERS AND REVOCATION RIGHTS

 

 

1.

Release.  In consideration of receipt of the payments and benefits set forth in Section 3 of the Parties’ Change in Control Agreement by and between the Company and the Executive, effective as of ______, 20___ (“CIC Agreement”), the Executive does hereby fully and forever surrender, release, acquit and discharge the Company, and its principals, stockholders, directors, officers, agents, administrators, insurers, subsidiaries, affiliates, employees, successors, assigns, related entities, and legal representatives, personally and in their representative capacities, and each of them (collectively, “Released Parties”), of and from any and all claims for costs of attorneys’ fees, expenses, compensation, and all losses, demands and damage of whatsoever nature or kind in law or in equity, whether known or unknown, including without limitation those claims arising out of, under, or by reason of the Executive’s employment with the Company or any Affiliate (as defined in the CIC Agreement), the Executive’s relationship with the Company or any Affiliate and/or the termination of the Executive’s employment relationship and any and all claims which were or could have been asserted in any charge, complaint, or related lawsuit. Without limiting the generality of the foregoing, the Executive specifically releases and discharges, but not by way of limitation, any obligation, claim, demand or cause of action based on, or arising out of, any alleged wrongful termination, breach of employment contract, breach of implied covenants of good faith and fair dealing, defamation, fraud, promissory estoppel, intentional or negligent infliction of emotional distress, discrimination based on age, pain and suffering, personal injury, punitive damages, and any and all claims arising from any alleged violation by the Released Parties of any federal, state, or local statutes, ordinances or common laws, including but not limited to the Ohio Civil Rights Act, including all provisions of the Ohio Revised Code concerning discrimination on the basis of age, the Age Discrimination in Employment Act of 1967 (“ADEA”), Title VII of the Civil Rights Act of 1964, the Americans With Disabilities Act (“ADA” and “ADAA”) or the Employee Retirement Income Security Act of 1974. This release of rights is knowing and voluntary. The Company acknowledges that the Executive does not release herein any rights or claims which may arise after the Effective Date of this Agreement (as defined in Section 1.03 of this Agreement) nor any rights the Executive has under the CIC Agreement, any rights the Executive may have regarding the enforcement of the CIC Agreement, the Executive’s rights under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or the Executive’s rights to indemnification.

 

1.02     Waiver of Right to Sue.  Except for the Company’s promises and obligations contained in the CIC Agreement, the Executive further agrees, promises and covenants that neither the Executive, nor any person, organization, or any other entity acting on the Executive’s behalf will file, charge, claim, sue or cause or permit to be filed, charged or claimed, any action for damages or other relief (including injunctive, declaratory, monetary relief or other) against the Company, involving any matter occurring in the past up to the Effective Date of this Agreement or involving any continuing effects of actions or practices which arose prior to the Effective Date of this Agreement or the termination of the Executive’s employment.

 

1.03     Older Workers’ Benefit Protection Act Waiver.  The Executive has certain individual federal rights, which must be explicitly waived. Specifically, the Executive is protected by the ADEA from discrimination in employment because of the Executive’s age. By executing this Agreement, the Executive waives these rights as to any past or current claims. Notwithstanding anything else in this Agreement, excluded from this Agreement are ADEA age claims that may arise after execution of this Agreement. In connection with the releases in Section 1.01 and waivers in Section 1.02 of any and all claims or disputes that the Executive has or may have on the date hereof, the Executive makes the following acknowledgements:

 

[1]        By signing this Agreement, the Executive waives all claims against the Released Parties for discrimination based on age, including without limitation, any claim which arises under or by reason of a violation of the ADEA.

 

[2]        In consideration of the releases, waivers and covenants made by the Executive under this Agreement, the Executive will be receiving the payments and other benefits in the amounts and manner described in Section 3 of the Parties’ CIC Agreement.

 

[3]        The Executive represents and acknowledges that the Executive has consulted with an attorney prior to executing this Agreement and the Executive has been given a period of at least twenty-one (21) days within which to consider whether or not to enter into this Agreement.

 

[4]        The Executive understands that this Agreement shall be effective as of the date on which the Executive signs the Agreement (“Effective Date”), provided that the Agreement is not revoked by the Executive within seven days after the Executive signs the Agreement. For a period of seven days after the Executive signs the Agreement, the Executive has the right to revoke and/or cancel this Agreement by the delivery of notice in writing of revocation and/or cancellation to the Company. In the event that the Executive does not revoke and/or cancel this Agreement during this period, this Agreement shall become effective on the Effective Date. In the event that the Executive revokes this Agreement, the Executive shall not be entitled to any of the consideration set out in Section 3 of the Parties’ CIC Agreement.

 

ARTICLE 2   MISCELLANEOUS

 

2.01     Counterparts.  This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original, but all of which together will constitute one and the same Agreement. Facsimile signatures will have the same legal effect as original signatures.

 

2.02     Applicable Law.  To the extent not preempted by federal law, the provisions of this Agreement will be construed and enforced in accordance with the laws of the state of Ohio.

 

2.03     Headings.  The descriptive headings in this Agreement are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement.

 

IN WITNESS WHEREOF, the Parties have executed this Agreement, as of _________, 20____.

 

FARMERS NATIONAL BANC CORP.

 

By:                                                                  

Date signed:                                                    

Title:________________________________

  

 

THE EXECUTIVE

 

 

Signature

Date signed:                                                    

 

____________________________________

 

Printed Name

 
EX-31.1 4 ex_826618.htm EXHIBIT 31.1 ex_826618.htm

Exhibit 31.1

 

CERTIFICATIONS

 

Certification of Chief Executive Officer

CERTIFICATION FOR QUARTERLY REPORT ON FORM 10-Q

 

I, Kevin J. Helmick certify that:

 

1) I have reviewed this quarterly report on Form 10-Q of Farmers National Banc Corp.;

 

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

/s/ Kevin J. Helmick

 

Kevin J. Helmick

Chief Executive Officer

 

August 7, 2025

 

 
EX-31.2 5 ex_826619.htm EXHIBIT 31.2 ex_826619.htm

Exhibit 31.2

 

CERTIFICATIONS

 

Certification of Chief Financial Officer

CERTIFICATION FOR QUARTERLY REPORT ON FORM 10-Q

 

I, A. Troy Adair certify that:

 

1) I have reviewed this quarterly report on Form 10-Q of Farmers National Banc Corp.;

 

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

/s/ A. Troy Adair

 

A. Troy Adair

Chief Financial Officer

 

August 7, 2025

 

 
EX-32.1 6 ex_826620.htm EXHIBIT 32.1 ex_826620.htm

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Farmers National Banc Corp. (the “Corporation”) on Form 10-Q for the period ended June 30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I Kevin J. Helmick, Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

 

/s/ Kevin J. Helmick

 

Kevin J. Helmick

Chief Executive Officer

 

August 7, 2025

 

 

 

 

 
EX-32.2 7 ex_826621.htm EXHIBIT 32.2 ex_826621.htm

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Farmers National Banc Corp. (the “Corporation”) on Form 10-Q for the period ended June 30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I A. Troy Adair, Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

 

/s/ A. Troy Adair

 

A. Troy Adair

Chief Financial Officer

 

August 7, 2025