[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the unaudited financial statements, management's discussion and analysis, market risk disclosures, and internal controls for the reporting period [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited financial statements for the quarter ended March 31, 2025, show an increase in total assets to **$5.16 billion** and net income of **$13.6 million**, up from **$11.2 million** in the prior year's quarter, reflecting changes in assets, liabilities, equity, income, and cash flows, with detailed notes providing further context [Consolidated Condensed Balance Sheets](index=4&type=section&id=Consolidated%20Condensed%20Balance%20Sheets) The balance sheet reflects an increase in total assets driven by a rise in total deposits - Total assets increased to **$5.157 billion** as of March 31, 2025, from **$5.119 billion** at December 31, 2024, driven by a rise in total deposits[7](index=7&type=chunk) Balance Sheet Summary (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$5,157,040** | **$5,118,924** | | Net Loans | $3,215,842 | $3,232,483 | | Total Deposits | $4,481,288 | $4,266,779 | | **Total Liabilities** | **$4,727,906** | **$4,712,896** | | **Total Stockholders' Equity** | **$429,134** | **$406,028** | [Consolidated Condensed Statements of Income](index=5&type=section&id=Consolidated%20Condensed%20Statements%20of%20Income) Net income for Q1 2025 increased by 20.8% due to higher net interest and noninterest income - Net income for Q1 2025 was **$13.58 million**, a **20.8% increase** from **$11.24 million** in Q1 2024, driven by higher net interest income and noninterest income[8](index=8&type=chunk) Income Statement Summary (in thousands, except per share data) | Account | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Interest Income | $34,195 | $31,687 | | Total Noninterest Income | $10,481 | $8,357 | | Total Noninterest Expenses | $28,526 | $27,039 | | **Net Income** | **$13,578** | **$11,240** | | **Diluted EPS** | **$0.36** | **$0.30** | [Consolidated Condensed Statements of Comprehensive Income (Loss)](index=6&type=section&id=Consolidated%20Condensed%20Statements%20of%20Comprehensive%20Income%20(Loss)) Total comprehensive income significantly improved in Q1 2025 due to unrealized gains on available-for-sale securities - Total comprehensive income was **$29.5 million** in Q1 2025, a significant improvement from a loss of **$1.2 million** in Q1 2024, primarily due to unrealized holding gains on available-for-sale securities in 2025 versus losses in 2024[9](index=9&type=chunk) [Consolidated Condensed Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Condensed%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity increased due to net income and other comprehensive income, partially offset by dividends - Total stockholders' equity increased from **$406.0 million** at year-end 2024 to **$429.1 million** at March 31, 2025, driven by net income of **$13.6 million** and other comprehensive income of **$16.0 million**, partially offset by dividends of **$6.4 million**[10](index=10&type=chunk) [Consolidated Condensed Statements of Cash Flows](index=8&type=section&id=Consolidated%20Condensed%20Statements%20of%20Cash%20Flows) The cash flow statement summarizes net cash from operating, investing, and financing activities Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $15,670 | $13,713 | | Net Cash from Investing Activities | $7,417 | $27,411 | | Net Cash from Financing Activities | $4,431 | $3,848 | | **Net Change in Cash** | **$27,518** | **$44,972** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, business segments, recent acquisitions, securities and loan portfolios, fair value measurements, regulatory capital, and new investments - The company operates through two main segments: the **Bank segment** and the **Trust segment**[16](index=16&type=chunk) - On December 16, 2024, Farmers Trust acquired Crest Retirement Advisors, LLC, for **$0.6 million**, with **$0.4 million** in contingent consideration, resulting in recording **$0.77 million** in intangible assets and **$0.004 million** in goodwill[23](index=23&type=chunk) - The available-for-sale securities portfolio totaled **$1.28 billion** at fair value as of March 31, 2025, with gross unrealized losses of **$225.9 million**, primarily due to changes in interest rates[25](index=25&type=chunk) - The allowance for credit losses (ACL) was **$35.5 million** at March 31, 2025, down from **$35.9 million** at year-end 2024, mainly due to lower loan balances and adjustments to qualitative factors[33](index=33&type=chunk)[64](index=64&type=chunk) - The company began investing in solar investment tax credits in Q1 2025, with a balance of **$10.0 million** and unfunded commitments of **$9.3 million** as of March 31, 2025[144](index=144&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=57&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reported a net income of **$13.6 million** for Q1 2025, an increase from **$11.2 million** in Q1 2024, driven by a **15 basis point** expansion in net interest margin to **2.85%** and strong growth in noninterest income, while maintaining a solid financial condition with total assets at **$5.16 billion** and strong capital ratios [Results of Operations](index=57&type=section&id=Results%20of%20Operations) Net income for Q1 2025 increased to **$13.6 million** ($0.36 per diluted share) from **$11.2 million** ($0.30 per diluted share) in Q1 2024, primarily due to a **$2.5 million** increase in net interest income and **$2.1 million** growth in noninterest income, partially offset by a **$1.5 million** rise in noninterest expense Key Performance Ratios | Ratio | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Return on average assets (annualized) | 1.06% | 0.90% | | Return on average equity (annualized) | 13.12% | 11.47% | | Net interest margin | 2.85% | 2.70% | - Net interest income increased to **$34.2 million** in Q1 2025 from **$31.7 million** in Q1 2024, attributed to a **15 basis point** increase in the net interest margin[155](index=155&type=chunk) - Noninterest income rose to **$10.5 million** in Q1 2025 from **$8.4 million** in Q1 2024, due to growth in service charges, trust fees, insurance commissions, and lower losses on security sales[158](index=158&type=chunk)[159](index=159&type=chunk) - Noninterest expense increased to **$28.5 million** in Q1 2025 from **$27.0 million** in Q1 2024, primarily driven by a **$1.1 million** increase in salaries and employee benefits[160](index=160&type=chunk) [Financial Condition](index=61&type=section&id=Financial%20Condition) As of March 31, 2025, total assets stood at **$5.16 billion**, with a slight decrease in net loans to **$3.25 billion** and an increase in total deposits to **$4.48 billion**, while stockholders' equity rose to **$429.1 million**, maintaining a well-capitalized position - Net loans decreased to **$3.25 billion** at March 31, 2025, from **$3.27 billion** at year-end 2024, mainly due to reductions in commercial and construction loans[164](index=164&type=chunk) - Total deposits increased to **$4.48 billion** from **$4.27 billion** at year-end 2024, driven by seasonality of public funds and the acquisition of **$85.0 million** in brokered time deposits[170](index=170&type=chunk) Asset Quality Ratios | Ratio | 3/31/2025 | 3/31/2024 | | :--- | :--- | :--- | | Nonperforming loans as a % of total loans | 0.64% | 0.38% | | Allowance for credit losses as a % of total loans | 1.09% | 1.04% | | Annualized net charge-offs to average net loans | 0.04% | 0.13% | - Total stockholders' equity increased to **$429.1 million** from **$406.0 million** at year-end 2024, primarily due to net income and a **$16.0 million** decrease in accumulated other comprehensive loss[172](index=172&type=chunk) [Critical Accounting Policies](index=65&type=section&id=Critical%20Accounting%20Policies) The company's critical accounting policies involve significant management judgment in determining the adequacy of the allowance for credit losses (ACL) and assessing goodwill impairment, with ACL estimation relying on macroeconomic forecasts and sensitivity analysis - The two critical accounting policies are determining the adequacy of the allowance for credit losses (ACL) and assessing impairment of goodwill or other intangibles[176](index=176&type=chunk) - The ACL estimation involves significant judgment, particularly regarding macroeconomic forecasts, using U.S. real GDP changes, U.S. PCE inflation, and the U.S. unemployment rate as key variables[179](index=179&type=chunk)[184](index=184&type=chunk) - A sensitivity analysis comparing the central economic scenario to a relative adverse scenario indicated a potential increase in modeled credit loss estimates of **$0.657 million** for residential real estate loans and **$1.15 million** for commercial real estate non-owner occupied loans[186](index=186&type=chunk) [Liquidity and Off-Balance Sheet Arrangements](index=67&type=section&id=Liquidity%20and%20Off-Balance%20Sheet%20Arrangements) The company maintains sufficient liquidity through liquid assets, cash flows, and wholesale funding, with **$102.0 million** in outstanding FHLB borrowings and **$749.3 million** in additional capacity, alongside **$734.2 million** in off-balance sheet loan commitments - The company maintains multiple sources of liquidity, including FHLB advances, a **$25.0 million** line of credit with a major domestic bank, and a **$5.0 million** revolving line of credit[193](index=193&type=chunk) - At March 31, 2025, the Bank had **$102.0 million** in outstanding short-term FHLB borrowings and an additional borrowing capacity of approximately **$749.3 million**[193](index=193&type=chunk) - Total unused commitments, including lines of credit and letters of credit, were **$734.2 million** at March 31, 2025[195](index=195&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=69&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, with simulation analysis showing that a **+100 basis point** rate shock would decrease Net Interest Income by **2.2%**, and the Economic Value of Equity (EVE) sensitivity exceeds internal policy limits in rising rate scenarios, prompting strategies to shorten investment portfolio duration and pursue prudent loan growth Interest Rate Sensitivity Analysis (March 31, 2025) | Rate Change (bps) | Net Interest Income Change | Net Present Value of Equity Change | | :--- | :--- | :--- | | +400 | -7.6% | -33.3% | | +200 | -4.1% | -16.1% | | +100 | -2.2% | -8.0% | | -100 | 1.8% | 4.4% | | -200 | 3.1% | 5.1% | - The Economic Value of Equity (EVE) sensitivity exceeds internal policy limits in rising rate scenarios, attributed to the large influx of low-rate deposits in 2020-2021 invested at low rates, and the subsequent rise in market rates[201](index=201&type=chunk) - Mitigation strategies include shrinking the longer-duration investment portfolio and replacing balances with shorter-duration assets, including pursuing measured and diversified loan growth[202](index=202&type=chunk) [Item 4. Controls and Procedures](index=71&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls over financial reporting during the quarter - The CEO and CFO have concluded that the Company's disclosure controls and procedures are effective as of the end of the reporting period[206](index=206&type=chunk) - No changes in internal controls over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[206](index=206&type=chunk) [PART II - OTHER INFORMATION](index=71&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, unregistered sales of equity securities, other information, and a list of exhibits [Item 1. Legal Proceedings](index=71&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various lawsuits in the ordinary course of business, with accruals for probable losses, though ultimate resolution remains uncertain and could be material - The Company is a defendant in lawsuits arising in the ordinary course of business, and while it accrues for probable losses, the ultimate outcome could be material to future results[207](index=207&type=chunk) [Item 1A. Risk Factors](index=71&type=section&id=Item%201A.%20Risk%20Factors) There are no material changes from the 2024 Form 10-K risk factors, except for a newly highlighted risk concerning significant changes in federal government operations, economic policies, and regulatory priorities that could cause economic disruptions and adversely impact the business - A new risk factor highlights that significant changes to U.S. government operations, economic policies (such as trade and tariffs), and regulatory priorities may cause economic disruptions that could adversely impact the business[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=73&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No shares were repurchased under the company's 2023 Repurchase Program during the first quarter of 2025, with **497,047** shares remaining available for repurchase - No shares were repurchased under the company's 2023 Repurchase Program during the first quarter of 2025[218](index=218&type=chunk) - As of March 31, 2025, **497,047** shares remain available for repurchase under the authorized program[218](index=218&type=chunk) [Item 5. Other Information](index=73&type=section&id=Item%205.%20Other%20Information) No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans or other non-Rule 10b5-1 trading arrangements during the first quarter of 2025 - No directors or executive officers adopted or terminated a Rule 10b5-1 trading plan or any other trading arrangement during the three months ended March 31, 2025[221](index=221&type=chunk) [Item 6. Exhibits](index=74&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, compensatory plan forms, officer certifications, and iXBRL data files

Core Viewpoint - Farmers National Banc (FMNB) has been upgraded to a Zacks Rank 2 (Buy), indicating a positive outlook based on rising earnings estimates, which significantly influence stock prices [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system emphasizes the importance of earnings estimate revisions, which are strongly correlated with near-term stock price movements [4][6]. - Institutional investors often adjust their valuations based on changes in earnings estimates, leading to significant stock price movements [4]. Business Improvement Indicators - The upgrade reflects an improvement in Farmers National's underlying business, suggesting that investors may respond positively by driving the stock price higher [5][10]. - The consensus estimate for Farmers National's earnings is projected at $1.50 per share for the fiscal year ending December 2025, representing a year-over-year increase of 17.2% [8]. Zacks Rank System Overview - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a strong historical performance, particularly for Zacks Rank 1 stocks, which have averaged a +25% annual return since 1988 [7]. - The upgrade to Zacks Rank 2 places Farmers National in the top 20% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [10].

Core Viewpoint - Farmers National Banc (FMNB) reported a revenue increase of 11.6% year-over-year for Q1 2025, with earnings per share (EPS) exceeding expectations, indicating a positive financial performance despite a slight revenue miss against consensus estimates [1]. Financial Performance - Revenue for the quarter was $44.68 million, up from the previous year's $40.00 million [1]. - EPS was reported at $0.39, an increase from $0.34 in the same quarter last year, representing a 14.71% surprise over the consensus estimate of $0.34 [1]. - The revenue surprise was -0.39% compared to the Zacks Consensus Estimate of $44.85 million [1]. Key Metrics - Efficiency Ratio was reported at 59.6%, better than the estimated 60.3% [4]. - Net Interest Margin stood at 2.9%, exceeding the average estimate of 2.8% [4]. - Average Earning Assets were $4.89 billion, slightly above the estimated $4.88 billion [4]. - Non-Performing Loans (NCOs) to Average Loans ratio was 0%, compared to the estimated 0.2% [4]. - Total Noninterest Income was $10.48 million, below the estimated $11.38 million [4]. - Trust fees were $2.64 million, lower than the estimated $2.97 million [4]. - Retirement plan consulting fees were $0.80 million, compared to the estimated $0.99 million [4]. - Service charges on deposit accounts were $1.76 million, slightly below the estimated $1.81 million [4]. - Net Interest Income (tax-equivalent) was $34.84 million, above the estimated $33.40 million [4]. - Net Interest Income was reported at $34.20 million, exceeding the estimated $33.28 million [4]. Stock Performance - Farmers National shares have returned -7.8% over the past month, compared to the Zacks S&P 500 composite's -4.2% change [3]. - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3].

Group 1: Earnings Performance - Farmers National Banc (FMNB) reported quarterly earnings of $0.39 per share, exceeding the Zacks Consensus Estimate of $0.34 per share, and showing an increase from $0.34 per share a year ago, representing an earnings surprise of 14.71% [1] - The company posted revenues of $44.68 million for the quarter ended March 2025, which was 0.39% below the Zacks Consensus Estimate, compared to $40.04 million in revenues from the same quarter last year [2] Group 2: Stock Performance and Outlook - Farmers National shares have declined approximately 14.8% since the beginning of the year, while the S&P 500 has decreased by 8.3% [3] - The current consensus EPS estimate for the upcoming quarter is $0.35 on revenues of $45.2 million, and for the current fiscal year, it is $1.43 on revenues of $182.5 million [7] Group 3: Industry Context - The Banks - Midwest industry, to which Farmers National belongs, is currently ranked in the top 12% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8]

Financial Performance - Net income for Q1 2025 was $13.6 million, or $0.36 per diluted share, up from $11.2 million, or $0.30 per diluted share in Q1 2024, representing a 21.4% increase in net income year-over-year [2]. - Net income for Q1 2025 was $13,578,000, a decrease of 5.65% compared to $14,391,000 in Q4 2024 [18]. - Adjusted net income increased to $14,634 for the three months ended March 31, 2025, compared to $14,543 in the previous quarter, showing a slight growth of 0.62% [25]. - Return on Average Assets (Annualized) was 1.06%, down from 1.12% in Q4 2024 [18]. - Return on average tangible equity (annualized) was 25.89% for the three months ended March 31, 2025, compared to 24.20% in the previous quarter, reflecting an increase of 1.69 percentage points [25]. Asset and Deposit Growth - Total assets increased by $38.1 million to $5.16 billion in Q1 2025, while total deposits rose by $214.5 million to $4.48 billion [4][6]. - Total assets increased to $5,157,040,000, up from $5,118,924,000 in Q4 2024 [18]. - Total deposits rose to $4,481,288,000, an increase of 5.02% from $4,266,779,000 in Q4 2024 [18]. - Total customer deposits rose to $4,321,323 million, up from $4,198,125 million year-over-year, reflecting a growth of 2.9% [19]. Income and Revenue Streams - Net interest income increased to $34.2 million in Q1 2025 from $31.7 million in Q1 2024, with net interest margin improving to 2.85% from 2.70% year-over-year [11]. - Noninterest income rose to $10.5 million in Q1 2025, up from $8.4 million in Q1 2024, driven by improved profitability across fee-based services [12]. - Total interest income for Q1 2025 was $57,305,000, a decrease of 1.04% from Q4 2024 [18]. - Noninterest income decreased to $10,481,000, down 8.15% from $11,413,000 in Q4 2024 [18]. - Net interest income for the quarter was $34,837 million, up from $32,341 million year-over-year, resulting in a net interest margin of 2.85% [22]. Credit Quality and Risk Management - Non-performing loans decreased to $20.7 million, or 0.64% of total loans, down from $22.8 million, or 0.70% at the end of 2024, indicating improved credit quality [8]. - The allowance for credit losses to total loans was 1.09% at March 31, 2025, slightly down from 1.10% at the end of 2024, indicating stable credit risk management [10]. - Non-performing loans decreased to $20,724 million from $22,818 million quarter-over-quarter, indicating improved asset quality [19]. - Non-performing assets to total assets ratio improved to 0.41% from 0.45% quarter-over-quarter, showing enhanced asset management [19]. Operational Efficiency - The efficiency ratio improved to 59.6% in Q1 2025 compared to the same period in 2024, reflecting better operational efficiency [9]. - The efficiency ratio excluding certain items improved to 59.57% for the three months ended March 31, 2025, down from 61.54% in the previous quarter, indicating enhanced operational efficiency [25]. Strategic Initiatives - The company opened a commercial loan production office in Columbus at the end of Q1 2025, marking a strategic expansion into a growth market [9]. - The company anticipates continued volatility in the bond market throughout 2025, impacting investment strategies [5]. - The company had access to an additional $749.3 million in FHLB borrowing capacity as of March 31, 2025, enhancing liquidity [14]. Capital Adequacy - Common Equity Tier 1 Capital Ratio increased to 11.48% from 10.88% year-over-year [19]. - The Tier 1 Leverage Ratio increased to 8.54% from 8.19% year-over-year, indicating stronger capital adequacy [19]. - Tangible common equity rose to $241,668 for the three months ended March 31, 2025, up from $217,828 in the previous quarter, representing an increase of 10.93% [24].

Group 1 - Below-average loan growth is expected to be the main earnings driver for Farmers National Banc Corp. in the current year [1] - The company's bottom line will receive support from subdued margin expansion [1] - Earnings are projected to be $1.43 per share, reflecting a 17% increase [1]

Acquisitions and Business Growth - Farmers Trust acquired substantially all assets of Crest Retirement Advisors, LLC in a cash transaction during 2024[20] - Farmers Insurance acquired substantially all assets of Randy L. Jones Agency, Inc. in a cash transaction during 2022[22] - Farmers Trust offers a full complement of personal and corporate trust services, enhancing its service offerings[20] Employment and Workforce - As of December 31, 2024, Farmers and its subsidiaries had 682 full-time equivalent employees[26] - The market for top talent is highly competitive, and Farmers is committed to attracting and retaining a dedicated workforce[26] Regulatory Environment - Farmers elected to become a financial holding company in 2016, allowing it to engage in activities that are financial in nature[42] - The Company is subject to extensive regulation by federal and state regulatory agencies, which may restrict its ability to diversify and pay dividends[28] - Farmers Bank is subject to regulation and examination primarily by the Office of the Comptroller of the Currency (OCC) and secondarily by the FDIC[32] - Farmers Bank is subject to federal regulations limiting transactions with affiliates, requiring covered transactions to be secured by specified collateral and capped at 10% of capital stock for individual transactions and 20% for aggregate transactions[47] - The Economic Growth, Regulatory Relief and Consumer Protection Act eased restrictions for bank holding companies with consolidated assets of less than $100 billion, including Farmers[61] - The Volcker Rule limits trading activities of insured depository institutions, but Farmers is exempt as a community bank with total consolidated assets of $10 billion or less[64] Capital and Financial Ratios - Under Basel III, the minimum ratio of Common Equity Tier 1 (CET1) to risk-weighted assets is set at 4.5%, plus a 2.5% capital conservation buffer, resulting in an effective minimum ratio of 7.0%[56] - The minimum Tier 1 capital ratio is 6.0%, plus the capital conservation buffer, leading to an effective minimum of 8.5%[56] - The total capital ratio must be at least 8.0%, plus the capital conservation buffer, resulting in a minimum total capital ratio of 10.5%[56] Community and Compliance - Farmers received a "satisfactory" rating in its most recent Community Reinvestment Act examination, which is crucial for any new activities or acquisitions[73] - The Dodd-Frank Act mandates shareholders to have a non-binding vote on executive compensation practices, with a new clawback policy approved on September 26, 2023[80] - Farmers Bank is subject to the Sarbanes-Oxley Act, requiring the CEO and CFO to certify the accuracy of Quarterly and Annual Reports, ensuring no material misstatements[77] Cybersecurity and Risk Management - The bank has implemented multiple layers of cybersecurity controls to protect against attacks, with a focus on maintaining business continuity and rapid recovery processes[81] - Federal regulations require banking organizations to notify regulators of computer-security incidents within 36 hours, promoting early awareness of threats[82] - Farmers Bank continues to monitor state-level cybersecurity regulatory activities as they evolve[85] - The bank's incentive compensation policies are under review by the Federal Reserve to ensure they do not encourage excessive risk-taking[79] - The bank has not experienced significant data loss or financial losses from cybersecurity attacks to date, but risks remain high[86] Interest Rate Sensitivity and Financial Projections - The company anticipates a net interest income change of -9.0% for a +400 basis point increase in interest rates for 2024, compared to -6.2% for 2023[286] - A sudden and sustained 400 basis point decrease in market interest rates is projected to increase net interest income by 6.1% in 2024, up from 2.7% in 2023[286] - The net present value of equity is expected to decrease by 37.2% with a +400 basis point increase in interest rates for 2024, compared to a decrease of 36.4% for 2023[286] - The Federal Open Market Committee raised the discount rate from 0.25% to 5.50% between March 2022 and July 2023, with a forecasted cut of 100 basis points in late 2024[286] - The company is focusing on shortening the duration of its investment portfolio to mitigate the gap between book and market rates[288] - Loan growth will be broad-based across various sectors, including consumer, commercial, and real estate, to manage risk effectively[288] - Interest rate sensitivity management is crucial for protecting against net interest income volatility, with a quarterly report presented to the Board of Directors[289] - A significant portion of interest-sensitive assets and liabilities matures within twelve months, necessitating close monitoring[290] - The company has no market risk sensitive instruments held for trading purposes, indicating a conservative approach to market risk[289] - The company recognizes the inherent risks in growing loans but believes its strong credit metrics support pursuing solid opportunities[288]

Core Insights - Farmers National Banc (FMNB) reported a revenue of $44.15 million for the quarter ended December 2024, reflecting a year-over-year decline of 1.9% and an EPS of $0.39 compared to $0.41 a year ago, with a revenue surprise of +0.12% over the Zacks Consensus Estimate [1] - The EPS surprise was +14.71% compared to the consensus estimate of $0.34 [1] Financial Performance Metrics - Efficiency Ratio was reported at 56.4%, better than the estimated 60.8% by three analysts [4] - Net Interest Margin stood at 2.7%, matching the average estimate of three analysts [4] - Average Earning Assets were $4.91 billion, slightly below the estimated $5 billion by three analysts [4] - Non-Performing Loans (NCOs) to Average Loans ratio was 0.1%, consistent with the average estimate [4] - Total Noninterest Income was $11.41 million, exceeding the average estimate of $10.82 million [4] - Trust fees were reported at $2.70 million, below the average estimate of $2.90 million [4] - Service charges on deposit accounts were $1.89 million, slightly above the average estimate of $1.86 million [4] - Net Interest Income (tax-equivalent) was $33.36 million, below the average estimate of $33.90 million [4] - Net Interest Income was reported at $32.74 million, lower than the estimated $33.64 million [4] Stock Performance - Shares of Farmers National have returned -3.6% over the past month, contrasting with the Zacks S&P 500 composite's +1.7% change [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Group 1: Earnings Performance - Farmers National Banc (FMNB) reported quarterly earnings of $0.39 per share, exceeding the Zacks Consensus Estimate of $0.34 per share, but down from $0.41 per share a year ago, representing an earnings surprise of 14.71% [1] - The company posted revenues of $44.15 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 0.12%, but down from $44.99 million year-over-year [2] - Over the last four quarters, the company has surpassed consensus EPS estimates two times and topped consensus revenue estimates two times [2] Group 2: Stock Performance and Outlook - Farmers National shares have declined approximately 3.6% since the beginning of the year, while the S&P 500 has gained 3.2% [3] - The current consensus EPS estimate for the upcoming quarter is $0.34 on revenues of $44.65 million, and for the current fiscal year, it is $1.44 on revenues of $181.5 million [7] - The estimate revisions trend for Farmers National is currently unfavorable, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Group 3: Industry Context - The Zacks Industry Rank for Banks - Midwest is currently in the top 9% of over 250 Zacks industries, suggesting that the industry outlook can significantly impact stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Performance - Net income for Q4 2024 was $14.4 million, or $0.38 per diluted share, slightly down from $14.6 million, or $0.39 per diluted share in Q4 2023[3] - Net income for Q4 2024 was $14,391,000, down 8.0% from $14,577,000 in Q4 2023[21] - Total interest income for Q4 2024 was $57,909,000, an increase of 6.7% compared to $55,069,000 in Q4 2023[21] - Net interest income decreased by 6.8% to $32,739,000 in Q4 2024 from $32,830,000 in Q4 2023[21] - Noninterest income decreased to $11.4 million in Q4 2024 from $12.2 million in Q4 2023, primarily due to a decline in net gain on sale of loans[13] - Noninterest income for the twelve months ended December 31, 2024, was $41,716,000, a slight decrease of 0.3% from $41,861,000 in 2023[21] - The company reported a decrease in total net interest income for the twelve months ended December 31, 2024, to $140,588 million from $130,848 million in the previous year[33] Assets and Liabilities - Total assets decreased to $5.12 billion at December 31, 2024, from $5.24 billion at September 30, 2024, but increased from $5.08 billion at December 31, 2023[5] - Total assets as of December 31, 2024, were $5,118,924,000, compared to $5,078,350,000 as of December 31, 2023[22] - Total deposits decreased to $4.27 billion at December 31, 2024, from $4.36 billion at September 30, 2024, but increased by $89.4 million from $4.18 billion at December 31, 2023[7] - Total deposits decreased to $4,266,779,000 in Q4 2024 from $4,177,386,000 in Q4 2023[22] - Total stockholders' equity declined to $406.0 million at December 31, 2024, from $439.7 million at September 30, 2024[8] - Stockholders' equity as of December 31, 2024, was $406,028 thousand, an increase from $404,415 thousand in 2023[31] Loan and Asset Quality - Loans slightly declined to $3.27 billion at December 31, 2024, from $3.28 billion at September 30, 2024, but increased by $70.2 million from December 31, 2023[5] - Non-performing loans increased to $22.8 million at December 31, 2024, compared to $19.1 million at September 30, 2024, and $15.1 million at December 31, 2023[10] - Non-performing loans rose to $22,818 million from $15,063 million year-over-year, indicating a deterioration in asset quality[23] - Annualized Net Charge-offs to Average Net Loans decreased to 0.08% from 0.10% year-over-year[23] - The company reported a net charge-off of $635 million for the quarter, down from $800 million year-over-year[23] Interest Margin and Efficiency - Net interest margin improved to 2.72% in Q4 2024 from 2.66% in Q3 2024, but declined from 2.78% in Q4 2023[9] - The Company expects net interest margin to continue expanding in 2025 as funding costs reprice lower[12] - Net interest margin excluding acquisition marks and PPP interest and fees was 2.56% for the three months ended December 31, 2024, up from 2.48% in the previous quarter[33] - The efficiency ratio excluding certain items for the twelve months ended December 31, 2024, was 59.19%, compared to 55.42% in 2023[32] Capital Ratios - Common Equity Tier 1 Capital Ratio increased to 11.26% from 10.61% year-over-year[23] - Total Risk Based Capital Ratio increased to 14.67% from 14.06% year-over-year[23] - Average tangible common equity for the twelve months ended December 31, 2024, was $218,331 thousand, compared to $165,156 thousand in 2023[31] Acquisitions and Future Outlook - The Company completed the acquisition of Crest Retirement Advisors LLC, expected to enhance fee-based business in 2025[9] - The average balance of loans increased to $3,227,384 thousand in 2024, with an average yield of 5.76%, compared to $3,155,858 thousand and 5.46% in 2023[28]