Financial Data and Key Metrics Changes - Farmers National Bancorp reported solid operating and financial performance, marking the 171st consecutive quarter of profitability [10] - The company experienced loan growth of $34.4 million, representing an annualized growth rate of 4.2%, with commercial loans increasing by $30.1 million or 6% at an annualized rate [11] - The net interest margin expanded to 3%, the first time exceeding 3% in nearly 2.5 years [11] - The acquisition of Middlefield Bancorp is valued at $299 million, or $36.17 per share, representing approximately 163.5% of tangible book value and 14.1 times Middlefield's earnings for the last twelve months [12][13] Business Line Data and Key Metrics Changes - The merger with Middlefield will enhance Farmers' ability to grow organically, particularly in the Columbus market, which has shown strong loan growth [21] - The acquisition will push Farmers' total deposits over $6 billion and loans to approximately $5 billion, while maintaining strong capital levels [16] Market Data and Key Metrics Changes - Middlefield Bancorp has $2 billion in assets and a significant presence in attractive Ohio markets, which will complement Farmers' existing operations [4][5] - The merger will create a combined company with 83 branch locations across Northeast, Central, and Western Ohio, and Western Pennsylvania [8] Company Strategy and Development Direction - The merger is strategically important for Farmers, providing an opportunity to acquire scale in attractive Ohio communities and enhancing its position as a community bank of choice [5][6] - The company aims to leverage Middlefield's strong community presence to deepen relationships and expand its market share in Central Ohio [6][7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the merger's potential to enhance growth rates and profitability, with a focus on wealth management services to drive relationship growth [26][27] - The company anticipates a pro forma total risk-based capital ratio of approximately 13.7% post-merger, indicating a strong capital position [16] Other Important Information - The transaction is expected to close in 2026, with a core conversion planned for August 2026, which will enhance digital capabilities and result in significant cost savings [9][10] - The acquisition will be Farmers' largest transaction by banking assets, marking its ninth acquisition in the last ten years [9] Q&A Session Summary Question: Impact of the deal on Farmers' growth rate - Management believes the acquisition will enhance organic growth capabilities, particularly in the Columbus market, which has shown strong loan growth [21] Question: Anticipated changes to the balance sheet post-deal - Management indicated that the marketplace is creating opportunities for restructuring the investment portfolio, which could facilitate loan growth [23][24] Question: Impact on CRE concentration ratio - The acquisition will raise the CRE concentration ratio slightly, but it remains well below the regulatory limit, with opportunities in both CRE and C&I spaces [31][33] Question: Capacity for additional deals - Management stated that the current focus is solely on the Middlefield acquisition and its stakeholders, with no immediate plans for additional deals [36] Question: Timing of cost savings from the core conversion - Cost savings will be back-end loaded into 2026, with some immediate savings post-close, and the bulk expected after the core conversion in August [46][47] Question: Ability to lower Middlefield's higher cost funding - Management believes there are opportunities to manage deposit costs more efficiently, potentially leading to margin expansion over the next 18 to 24 months [54] Question: Comfortable loan-to-deposit ratio post-merger - Management indicated a comfortable loan-to-deposit ratio of approximately 90% post-merger, presenting opportunities for growth [56]

[Third Quarter 2025 Earnings Overview](index=1&type=section&id=Third%20Quarter%202025%20Earnings%20Overview) This section summarizes Farmers National Banc Corp.'s Q3 2025 financial performance and strategic initiatives [Financial Performance Highlights](index=1&type=section&id=Financial%20Performance%20Highlights) Farmers National Banc Corp. reported a significant increase in net income for Q3 2025 compared to Q3 2024, despite incurring pretax losses from asset sales and a charge for core platform transition consulting services. Excluding these items, adjusted net income and diluted EPS showed strong performance | Metric ($ in millions) | Q3 2025 | Q3 2024 | Change (YoY) | | :-------------------------- | :-------- | :-------- | :----------- | | Net Income | $12.5M | $8.5M | +$4.0M | | Diluted EPS | $0.33 | $0.23 | +$0.10 | | Pretax losses (asset sales) | $1.0M | - | | | Core platform charge | $3.1M | - | | | Adjusted Net Income (non-GAAP) | $15.7M | - | | | Adjusted Diluted EPS (non-GAAP) | $0.42 | - | | - The new core platform contract is expected to save the Company approximately **$2.0 million** per year, or **$0.04** in diluted earnings per share, once the conversion is complete in August 2026[2](index=2&type=chunk) [CEO Commentary & Strategic Initiatives](index=1&type=section&id=CEO%20Commentary%20%26%20Strategic%20Initiatives) CEO Kevin J. Helmick highlighted the Company's strong financial results and deliberate actions to strengthen its operating platform and financial model. He also announced the merger with Middlefield Banc Corp., expected to close in Q1 2026, which will significantly increase assets and market presence - Farmers continues to deliver strong financial results, demonstrating the value of diversified financial services[3](index=3&type=chunk) - The Company has taken deliberate actions in 2025 to strengthen its operating platform and enhance its financial model for sustainable growth and profitability[3](index=3&type=chunk) - Merger with Middlefield Banc Corp. announced, expected to close in Q1 2026, increasing assets to over **$7.4 billion** and expanding market reach in Ohio and Pennsylvania[3](index=3&type=chunk) [Financial Condition](index=1&type=section&id=Financial%20Condition) This section analyzes the Company's balance sheet, including assets, securities, deposits, and stockholders' equity, highlighting key trends and changes [Balance Sheet Overview](index=1&type=section&id=Balance%20Sheet%20Overview) Total assets and loans experienced consistent growth, with commercial loans being a primary driver. The Company's balance sheet reflects an improving trend in key metrics | Metric ($ in billions) | Sep 30, 2025 | Jun 30, 2025 | Dec 31, 2024 | | :----------- | :----------- | :----------- | :----------- | | Total Assets | $5.24B | $5.18B | $5.12B | | Loans | $3.34B | $3.30B | $3.27B | - Commercial loan balances increased by **$30.1 million**, representing a **6.0% annualized growth** from the prior quarter[4](index=4&type=chunk) [Securities Available for Sale](index=1&type=section&id=Securities%20Available%20for%20Sale) Securities available for sale increased, and the mark-to-market adjustment improved due to declining interest rates. The Company anticipates continued rate volatility | Metric ($ in billions) | Sep 30, 2025 | Jun 30, 2025 | Dec 31, 2024 | | :-------------------------- | :----------- | :----------- | :----------- | | Securities available for sale | $1.30B | $1.27B | $1.27B | - Mark-to-market adjustment improved by **$27.4 million** between June 30 and September 30, 2025, due to declining interest rates[5](index=5&type=chunk) [Deposits](index=1&type=section&id=Deposits) Total deposits showed slight growth quarter-over-quarter and a more substantial increase year-to-date. The Company successfully paid off brokered CDs and experienced strong organic deposit growth excluding public funds and brokered CDs - Total deposits increased slightly from June 30, 2025, and are up **$133.7 million** since December 31, 2024[6](index=6&type=chunk) - Paid off **$75.0 million** in brokered CDs during Q3 2025[6](index=6&type=chunk) - Excluding public funds and brokered CDs, deposit growth was **$108.3 million**, or **4.2% annualized**, since December 31, 2024[6](index=6&type=chunk) [Stockholders' Equity](index=1&type=section&id=Stockholders%27%20Equity) Total stockholders' equity increased significantly, primarily driven by an improvement in accumulated other comprehensive income and increased retained earnings | Metric ($ in millions) | Sep 30, 2025 | Jun 30, 2025 | Dec 31, 2024 | | :-------------------- | :----------- | :----------- | :----------- | | Total Stockholders' Equity | $465.9M | $437.7M | $406.0M | - The increase in equity was primarily due to an improvement in accumulated other comprehensive income and increased retained earnings[7](index=7&type=chunk) [Credit Quality](index=1&type=section&id=Credit%20Quality) This section evaluates the Company's credit quality through key metrics such as non-performing loans, provision for credit losses, and net charge-offs [Key Credit Quality Metrics](index=1&type=section&id=Key%20Credit%20Quality%20Metrics) While non-performing loans increased due to a single large loan relationship, the provision for credit losses decreased significantly year-over-year. Annualized net charge-offs remained stable quarter-over-quarter, and the allowance for credit losses to total loans showed a slight increase | Metric | Sep 30, 2025 | Jun 30, 2025 | Dec 31, 2024 | | :-------------------------------- | :----------- | :----------- | :----------- | | Non-performing loans ($ in millions) | $35.3M | $27.8M | $22.8M | | Non-performing loans to total loans | 1.06% | 0.84% | 0.70% | | Loans 30-89 days delinquent ($ in millions) | $16.1M | $17.7M | $13.0M | | Provision for credit losses (Q3, $ in millions) | $1.4M | - | $7.0M (Q3 2024) | | Annualized net charge-offs to avg loans | 0.07% | 0.07% | 0.58% (Q3 2024) | | Allowance for credit losses to total loans | 1.18% | 1.17% | 1.10% | - A single loan relationship totaling **$7.3 million** moved into nonaccrual this quarter, secured by an apartment building in Troy, Michigan[10](index=10&type=chunk) - The provision in Q3 2024 was impacted by a single commercial office loan resulting in a **$4.4 million** charge-off and a **$1.2 million** specific reserve[11](index=11&type=chunk) [Income Statement Analysis](index=2&type=section&id=Income%20Statement%20Analysis) This section provides a detailed analysis of the Company's net interest income, noninterest income, and noninterest expenses for the reporting period [Net Interest Income](index=2&type=section&id=Net%20Interest%20Income) Net interest income and net interest margin both increased significantly year-over-year and quarter-over-quarter. This improvement was driven by higher yields on earning assets and lower funding costs on interest-bearing liabilities, benefiting from Federal Reserve rate cuts | Metric | Q3 2025 | Q2 2025 | Q3 2024 | | :---------------------- | :-------- | :-------- | :-------- | | Net Interest Income ($ in millions) | $36.3M | $34.9M | $31.9M | | Net Interest Margin | 3.00% | 2.91% | 2.66% | | Yield on earning assets | 4.88% | - | 4.79% | | Cost of interest-bearing liabilities | 2.51% | - | 2.84% | - Average interest-earning assets increased to **$4.92 billion** in Q3 2025, primarily due to a **$69.9 million** increase in average loan balances[12](index=12&type=chunk) - The Company expects its net interest margin to continue expanding into 2026 due to its liability-sensitive position and falling interest rates[12](index=12&type=chunk) [Noninterest Income](index=2&type=section&id=Noninterest%20Income) Noninterest income declined year-over-year, primarily due to larger losses on the sale of securities and lower SBIC income. However, BOLI income, trust fees, retirement plan consulting fees, and investment commissions all increased, reflecting growth in fee-based businesses and recent acquisitions | Metric | Q3 2025 | Q3 2024 | Change (YoY) | | :-------------------------------- | :-------- | :-------- | :----------- | | Total Noninterest Income ($ in millions) | $11.4M | $12.3M | -$0.9M | | Service charge income on deposit accounts ($ in millions) | $1.9M | $2.0M | -$0.118M | | BOLI income ($ in thousands) | $852K | $688K | +$164K | | Trust fees ($ in millions) | $2.7M | $2.5M | +$0.2M | | Losses on sale of AFS securities ($ in thousands) | $927K | $403K | +$524K (loss) | | Retirement plan consulting fees ($ in millions) | $1.1M | $677K | +$0.423M | | Investment commissions ($ in thousands) | $658K | $476K | +$0.182M | | SBIC income ($ in thousands) | $258K | $1.1M | -$0.842M | - The Company restructured **$28.5 million** of securities in Q3 2025, reinvesting proceeds into securities yielding approximately **220 basis points** more[14](index=14&type=chunk) - Growth in retirement plan consulting fees is primarily due to the acquisition of Crest Retirement Advisors LLC in late December 2024[14](index=14&type=chunk) [Noninterest Expense](index=2&type=section&id=Noninterest%20Expense) Noninterest expense increased year-over-year, driven by higher salaries and employee benefits due to annual raises, acquisitions, and increased commission expense. Occupancy and equipment expenses also rose, and a significant charge was incurred for core platform transition consulting services | Metric ($ in millions) | Q3 2025 | Q3 2024 | Change (YoY) | | :-------------------------- | :-------- | :-------- | :----------- | | Total Noninterest Expense | $31.7M | $27.2M | +$4.5M | | Salaries and employee benefits | $16.0M | $14.9M | +$1.1M | | Occupancy and equipment expense | $4.4M | $4.0M | +$0.4M | | FDIC and state/local taxes | $1.2M | $1.5M | -$0.268M | | Core platform consulting charge | $3.1M | - | | | Core processing expense | $1.4M | $1.2M | +$0.2M | - Salaries and employee benefits increased due to annual raises, the acquisition of Crest Retirement in Q4 2024, and higher commission expense[15](index=15&type=chunk) [Liquidity](index=3&type=section&id=Liquidity) The Company maintains strong liquidity with substantial FHLB borrowing capacity and available-for-sale securities for pledging. Its loan-to-deposit ratio indicates a healthy funding position | Metric | Sep 30, 2025 | | :-------------------------------- | :----------- | | FHLB borrowing capacity ($ in millions) | $618.1M | | Available for sale securities (for pledging, $ in millions) | $353.2M | | Loan to deposit ratio | 75.9% | | Average deposit balance per account (excl. collateralized, $) | $26,235 | [Company Information](index=3&type=section&id=Company%20Information) Farmers National Banc Corp. is a diversified financial services company headquartered in Canfield, Ohio, with $5.2 billion in banking assets. It operates a full-service national bank and a trust company across Ohio and Pennsylvania, with total wealth management assets under care of $4.6 billion - Farmers National Banc Corp. is a diversified financial services company founded in 1887, headquartered in Canfield, Ohio[17](index=17&type=chunk) - The Company has **$5.2 billion** in banking assets and **62 banking locations** across Ohio and Pennsylvania[17](index=17&type=chunk) - Total wealth management assets under care were **$4.6 billion** at September 30, 2025[17](index=17&type=chunk) [Non-GAAP Financial Measures](index=3&type=section&id=Non-GAAP%20Financial%20Measures) This section clarifies the use of non-GAAP financial measures, such as tangible common equity ratio and adjusted net income, which are provided to offer a more complete understanding of the Company's operational results and trends, supplementing GAAP figures - Non-GAAP financial measures are used to provide a more complete understanding of underlying operational results and trends[18](index=18&type=chunk) - These measures are not considered in isolation or as a substitute for GAAP numbers[18](index=18&type=chunk) [Cautionary Statements Regarding Forward-Looking Statements](index=3&type=section&id=Cautionary%20Statements%20Regarding%20Forward-Looking%20Statements) This section provides a standard cautionary statement regarding forward-looking statements, emphasizing that actual results may differ materially from expectations due to various factors, including economic conditions and regulatory changes. The Company does not undertake to update these statements - Forward-looking statements represent management's current expectations and are subject to inherent uncertainties and factors outside of Farmers' control[19](index=19&type=chunk) - Actual results and financial condition may differ materially due to significant changes in economic conditions, monetary policy, and other factors detailed in SEC filings[19](index=19&type=chunk) [Consolidated Financial Tables](index=3&type=section&id=Consolidated%20Financial%20Tables) This section presents detailed consolidated financial statements and key ratios, including income statements, balance sheets, capital, liquidity, and asset quality metrics [Consolidated Statements of Income](index=3&type=section&id=Consolidated%20Statements%20of%20Income) The consolidated statements of income show a strong increase in net interest income and net income for both the three and nine months ended September 30, 2025, compared to the prior year. Noninterest income also grew for the nine-month period, while the provision for credit losses decreased significantly | Metric ($ in thousands) | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | YoY Q3 Change | YoY 9M Change | | :-------------------------- | :-------- | :-------- | :-------- | :-------- | :------------ | :------------ | | Total interest income | $59,366 | $57,923 | $174,374 | $169,823 | | 2.7% | | Total interest expense | $23,059 | $26,047 | $68,949 | $74,194 | | -7.1% | | Net interest income | $36,307 | $31,876 | $105,425 | $95,629 | | 10.2% | | Provision for credit losses | $1,419 | $7,008 | $4,763 | $7,671 | | -37.9% | | Noninterest income | $11,430 | $12,340 | $34,032 | $30,302 | | 12.3% | | Net income | $12,461 | $8,535 | $39,949 | $31,558 | | 26.6% | | Diluted earnings per share | $0.33 | $0.23 | $1.06 | $0.84 | | | [Performance Ratios](index=4&type=section&id=Performance%20Ratios) Key performance ratios demonstrate improved profitability and efficiency. Net interest margin, return on average assets, and return on average equity all increased year-over-year for both the quarter and nine-month periods. The efficiency ratio also improved | Metric | Q3 2025 | Q2 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :---------------------------------------------------------------- | :------ | :------ | :------ | :------ | :------ | | Net Interest Margin (Annualized) | 3.00% | 2.91% | 2.66% | 2.92% | 2.69% | | Efficiency Ratio (Tax equivalent basis) | 62.66% | 56.66% | 58.47% | 59.68% | 60.24% | | Efficiency Ratio (Tax equivalent basis) excluding core conversion, acquisition costs and other extraordinary items (b) | 56.43% | 55.66% | 59.05% | 57.20% | 60.26% | | Return on Average Assets (Annualized) | 0.96% | 1.08% | 0.66% | 1.04% | 0.83% | | Return on Average Equity (Annualized) | 11.26% | 13.08% | 8.18% | 12.46% | 10.51% | | Return on Average Tangible Assets (Non GAAP) | 1.00% | 1.13% | 0.69% | 1.07% | 0.86% | | Return on Average Tangible Equity (Non GAAP) | 19.46% | 23.37% | 14.94% | 22.18% | 19.95% | [Consolidated Statements of Financial Condition](index=4&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) The balance sheet shows growth in total assets, loans, and stockholders' equity. Total deposits also increased, with a notable reduction in brokered time deposits | Metric ($ in thousands) | Sep 30, 2025 | Jun 30, 2025 | Dec 31, 2024 | | :-------------------------- | :----------- | :----------- | :----------- | | Total Assets | $5,235,575 | $5,178,428 | $5,118,924 | | Debt securities available for sale | $1,301,766 | $1,274,899 | $1,266,553 | | Loans | $3,337,780 | $3,303,359 | $3,268,346 | | Net Loans | $3,298,252 | $3,264,796 | $3,232,483 | | Total deposits | $4,400,515 | $4,396,417 | $4,266,779 | | Brokered time deposits | $0 | $74,988 | $74,951 | | Total liabilities | $4,769,626 | $4,740,680 | $4,712,896 | | Stockholders' Equity | $465,949 | $437,748 | $406,028 | | Book value per share | $12.38 | $11.63 | $10.80 | | Tangible book value per share (Non GAAP) | $7.44 | $6.67 | $5.80 | [Capital and Liquidity Ratios](index=5&type=section&id=Capital%20and%20Liquidity%20Ratios) The Company's capital and liquidity ratios remained strong, with estimated increases across all key capital ratios (Common Equity Tier 1, Total Risk Based, Tier 1 Risk Based, and Tier 1 Leverage) at September 30, 2025, compared to prior periods | Metric | Sep 30, 2025 (Est.) | Jun 30, 2025 | Dec 31, 2024 | | :-------------------------- | :------------------ | :----------- | :----------- | | Common Equity Tier 1 Capital Ratio | 11.74% | 11.56% | 11.14% | | Total Risk Based Capital Ratio | 15.23% | 15.04% | 14.55% | | Tier 1 Risk Based Capital Ratio | 12.22% | 12.05% | 11.62% | | Tier 1 Leverage Ratio | 8.75% | 8.67% | 8.36% | | Equity to Asset Ratio | 8.90% | 8.45% | 7.93% | | Tangible Common Equity Ratio (b) | 5.54% | 5.03% | 4.42% | | Net Loans to Assets | 63.00% | 63.05% | 63.15% | | Loans to Deposits | 75.85% | 75.14% | 76.60% | [Asset Quality Ratios](index=5&type=section&id=Asset%20Quality%20Ratios) Asset quality metrics show an increase in non-performing loans and assets, but the allowance for credit losses to total loans remains stable. Net charge-offs for the quarter were consistent with the previous quarter but significantly lower than the prior year | Metric | Sep 30, 2025 | Jun 30, 2025 | Dec 31, 2024 | | :-------------------------------- | :----------- | :----------- | :----------- | | Non-performing loans ($ in thousands) | $35,344 | $27,819 | $22,818 | | Non-performing assets ($ in thousands) | $35,519 | $28,052 | $22,903 | | Loans 30 - 89 days delinquent ($ in thousands) | $16,083 | $17,727 | $13,032 | | Net Charge-offs (Qtr, $ in thousands) | $536 | $572 | $635 | | Annualized Net Charge-offs to Average Net Loans | 0.07% | 0.07% | 0.08% | | Allowance for Credit Losses to Total Loans | 1.18% | 1.17% | 1.10% | | Non-performing Loans to Total Loans | 1.06% | 0.84% | 0.70% | | Allowance to Non-performing Loans | 111.84% | 138.62% | 157.17% | [End of Period Loan Balances](index=5&type=section&id=End%20of%20Period%20Loan%20Balances) Commercial real estate loans showed strong growth, while residential real estate and HELOCs also increased. Commercial loans experienced a slight decrease, and consumer and agricultural loans remained relatively stable | Loan Type ($ in thousands) | Sep 30, 2025 | Jun 30, 2025 | Dec 31, 2024 | | :-------------------------- | :----------- | :----------- | :----------- | | Commercial real estate | $1,428,583 | $1,385,162 | $1,382,714 | | Commercial | $351,213 | $363,009 | $349,966 | | Residential real estate | $850,112 | $849,443 | $845,081 | | HELOC | $176,609 | $171,312 | $158,014 | | Consumer | $251,557 | $253,363 | $259,954 | | Agricultural loans | $269,025 | $270,599 | $262,392 | | Total, excluding net deferred loan costs | $3,327,099 | $3,292,888 | $3,258,121 | [End of Period Customer Deposit Balances](index=5&type=section&id=End%20of%20Period%20Customer%20Deposit%20Balances) Total customer deposits increased, with growth in interest-bearing demand, money market, and certificate of deposit accounts. Noninterest-bearing demand deposits remained stable | Deposit Type ($ in thousands) | Sep 30, 2025 | Jun 30, 2025 | Dec 31, 2024 | | :-------------------------- | :----------- | :----------- | :----------- | | Noninterest-bearing demand | $994,604 | $995,866 | $965,507 | | Interest-bearing demand | $1,443,422 | $1,388,596 | $1,366,255 | | Money market | $761,788 | $748,770 | $682,558 | | Savings | $410,165 | $416,795 | $414,796 | | Certificate of deposit | $790,536 | $771,403 | $762,712 | | Total customer deposits | $4,400,515 | $4,321,430 | $4,191,828 | [Noninterest Income Details](index=6&type=section&id=Noninterest%20Income%20Details) Detailed noninterest income shows varied performance. While security losses increased and service charges on deposits slightly declined, BOLI income, trust fees, retirement plan consulting fees, and investment commissions all saw growth, contributing to the overall increase in noninterest income for the nine-month period | Income Source ($ in thousands) | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :------------------------------------------------ | :-------- | :-------- | :-------- | :-------- | | Service charges on deposit accounts | $1,874 | $1,992 | $5,381 | $5,421 | | Bank owned life insurance income, including death benefits | $852 | $688 | $2,494 | $2,046 | | Trust fees | $2,745 | $2,544 | $7,982 | $7,398 | | Insurance agency commissions | $1,395 | $1,416 | $4,964 | $4,199 | | Security gains (losses), including fair value changes for equity securities | ($927) | ($403) | ($2,205) | ($2,647) | | Retirement plan consulting fees | $1,060 | $677 | $2,641 | $1,918 | | Investment commissions | $658 | $476 | $1,908 | $1,386 | | Debit card and EFT fees | $2,068 | $1,993 | $5,951 | $5,320 | | Other noninterest income | $954 | $2,619 | $3,336 | $3,892 | | Total Noninterest Income | $11,430 | $12,340 | $34,032 | $30,302 | [Noninterest Expense Details](index=6&type=section&id=Noninterest%20Expense%20Details) Detailed noninterest expenses show increases in salaries and employee benefits, occupancy and equipment, and core processing charges. A significant system conversion/merger related cost was incurred in Q3 2025, contributing to the overall rise in expenses | Expense Type ($ in thousands) | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :-------------------------------- | :-------- | :-------- | :-------- | :-------- | | Salaries and employee benefits | $15,992 | $14,874 | $46,880 | $44,501 | | Occupancy and equipment | $4,370 | $3,968 | $12,627 | $11,512 | | FDIC insurance and state and local taxes | $1,212 | $1,480 | $3,736 | $4,010 | | Professional fees | $990 | $1,084 | $3,213 | $3,532 | | System conversion / Merger related costs | $3,123 | $0 | $3,123 | $0 | | Advertising | $466 | $435 | $1,376 | $1,312 | | Intangible amortization | $718 | $629 | $2,188 | $1,947 | | Core processing charges | $1,412 | $1,186 | $4,210 | $3,420 | | Other noninterest expenses | $3,396 | $3,419 | $10,028 | $10,283 | | Total Noninterest Expense | $31,679 | $27,075 | $87,381 | $80,517 | [Average Balance Sheets and Related Yields and Rates](index=6&type=section&id=Average%20Balance%20Sheets%20and%20Related%20Yields%20and%20Rates) Average earning assets increased, primarily driven by loan growth. The yield on earning assets improved, while the cost of interest-bearing liabilities decreased, leading to an expansion in net interest margin and interest rate spread for both the three and nine months ended September 30, 2025 | Metric | Q3 2025 Average Balance ($ in thousands) | Q3 2025 Yield/Rate | Q3 2024 Average Balance ($ in thousands) | Q3 2024 Yield/Rate | | :-------------------------------- | :---------------------- | :----------------- | :---------------------- | :----------------- | | Loans | $3,311,535 | 5.88% | $3,241,603 | 5.81% | | Total earning assets | $4,922,275 | 4.88% | $4,890,344 | 4.79% | | Total interest-bearing deposits | $3,439,913 | 2.37% | $3,294,014 | 2.62% | | Total interest-bearing liabilities | $3,676,441 | 2.51% | $3,671,034 | 2.84% | | Net interest margin | - | 3.00% | - | 2.66% | | Metric | 9M 2025 Average Balance ($ in thousands) | 9M 2025 Yield/Rate | 9M 2024 Average Balance ($ in thousands) | 9M 2024 Yield/Rate | | :-------------------------------- | :---------------------- | :----------------- | :---------------------- | :----------------- | | Loans | $3,282,794 | 5.80% | $3,212,799 | 5.76% | | Total earning assets | $4,900,563 | 4.80% | $4,837,792 | 4.73% | | Total interest-bearing deposits | $3,414,640 | 2.36% | $3,233,379 | 2.48% | | Total interest-bearing liabilities | $3,669,478 | 2.51% | $3,626,290 | 2.73% | | Net interest margin | - | 2.92% | - | 2.69% | [Reconciliation of Tangible Assets](index=8&type=section&id=Reconciliation%20of%20Tangible%20Assets) This table provides a reconciliation of total assets to tangible assets by deducting goodwill and other intangibles, showing the tangible asset base for various periods | Metric ($ in thousands) | Sep 30, 2025 | Jun 30, 2025 | Dec 31, 2024 | | :-------------------------- | :----------- | :----------- | :----------- | | Total Assets | $5,235,575 | $5,178,428 | $5,118,924 | | Less Goodwill and other intangibles | $186,013 | $186,731 | $188,200 | | Tangible Assets | $5,049,562 | $4,991,697 | $4,930,724 | | Average Assets | $5,178,998 | $5,132,661 | $5,159,901 | | Less average Goodwill and other intangibles | $186,479 | $187,209 | $188,256 | | Average Tangible Assets | $4,992,519 | $4,945,452 | $4,971,645 | [Reconciliation of Common Stockholders' Equity to Tangible Common Equity](index=8&type=section&id=Reconciliation%20of%20Common%20Stockholders%27%20Equity%20to%20Tangible%20Common%20Equity) This reconciliation shows the calculation of tangible common equity by subtracting goodwill and other intangibles from common stockholders' equity, providing a clearer view of the Company's tangible capital | Metric ($ in thousands) | Sep 30, 2025 | Jun 30, 2025 | Dec 31, 2024 | | :-------------------------- | :----------- | :----------- | :----------- | | Stockholders' Equity | $465,949 | $437,748 | $406,028 | | Less Goodwill and other intangibles | $186,013 | $186,731 | $188,200 | | Tangible Common Equity | $279,936 | $251,017 | $217,828 | | Average Stockholders' Equity | $442,556 | $425,249 | $428,646 | | Less average Goodwill and other intangibles | $186,479 | $187,209 | $188,256 | | Average Tangible Common Equity | $256,077 | $238,040 | $240,390 | [Reconciliation of Net Income, Less Merger and Certain Items](index=8&type=section&id=Reconciliation%20of%20Net%20Income%2C%20Less%20Merger%20and%20Certain%20Items) This reconciliation adjusts net income and related performance ratios by excluding the after-tax impact of system conversion/acquisition costs and net losses/gains on asset/security sales, providing a non-GAAP view of core operational profitability | Metric | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :---------------------------------------------------------------- | :-------- | :-------- | :-------- | :-------- | | Net income ($ in thousands) | $12,461 | $8,535 | $39,949 | $31,558 | | System conversion / Acquisition related costs - after tax ($ in thousands) | $2,467 | $0 | $2,467 | $0 | | Net loss (gain) on asset/security sales - after tax ($ in thousands) | $760 | ($32) | $1,680 | $2,050 | | Net income - Adjusted ($ in thousands) | $15,688 | $8,503 | $44,097 | $33,608 | | Diluted EPS excluding merger and certain items | $0.42 | $0.23 | $1.17 | $0.90 | | Return on Average Assets excluding system conversion, merger and certain items (Annualized) | 1.21% | 0.66% | 1.14% | 0.88% | | Return on Average Equity excluding system conversion, merger and certain items (Annualized) | 14.18% | 8.15% | 13.76% | 11.19% | | Return on Average Tangible Equity excluding system conversion, merger costs and certain items (Annualized) | 24.51% | 14.88% | 24.48% | 21.24% | | Efficiency ratio excluding certain items | 56.43% | 59.05% | 57.20% | 60.26% | [Net Interest Margin Excluding Acquisition Marks and PPP Interest and Fees](index=9&type=section&id=Net%20Interest%20Margin%20Excluding%20Acquisition%20Marks%20and%20PPP%20Interest%20and%20Fees) This reconciliation provides the net interest margin adjusted to exclude the impact of acquisition marks and PPP interest and fees, offering a normalized view of the Company's core lending profitability | Metric | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :------------------------------------------------ | :-------- | :-------- | :-------- | :-------- | | Net interest income, tax equated ($ in thousands) | $36,940 | $32,483 | $107,332 | $97,485 | | Acquisition marks ($ in thousands) | $1,677 | $2,123 | $5,559 | $6,884 | | PPP interest and fees ($ in thousands) | $0 | $1 | $0 | $2 | | Adjusted and annualized net interest income ($ in thousands) | $141,052 | $121,436 | $135,697 | $120,799 | | Average earning assets ($ in thousands) | $4,922,275 | $4,890,344 | $4,900,563 | $4,837,792 | | Less PPP average balances ($ in thousands) | $89 | $112 | $98 | $167 | | Adjusted average earning assets ($ in thousands) | $4,922,186 | $4,890,226 | $4,900,465 | $4,837,625 | | Net interest margin excluding marks and PPP interest and fees | 2.87% | 2.48% | 2.77% | 2.50% |

Core Viewpoint - Farmers National Banc Corp. and Middlefield Banc Corp. have announced a definitive merger agreement, where Middlefield will merge into Farmers in an all-stock transaction [1]. Company Summary - Farmers National Banc Corp. is the holding company for The Farmers National Bank of Canfield [1]. - Middlefield Banc Corp. is the holding company for The Middlefield Banking Company [1]. Transaction Details - The merger will be executed as an all-stock transaction [1].

CANFIELD, Ohio--(BUSINESS WIRE)--Farmers National Banc Corp. ("Farmers†or the "Company†) (NASDAQ: FMNB) today announced net income of $12.5 million, or $0.33 per diluted share, for the third quarter of 2025 compared to $8.5 million, or $0.23 per diluted share, for the third quarter of 2024. Net income for the third quarter of 2025 included pretax losses for the sale of investment securities and other assets totaling $1.0 million and a charge of $3.1 million for consulting services associated w. ...

Core Points - KBRA affirms the senior unsecured debt rating of BBB for Farmers National Banc Corp. [1] - The subordinated debt rating is affirmed at BBB- and the short-term debt rating is K3 for Farmers National Banc Corp. [1] - For its subsidiary, The Farmers National Bank of Canfield, KBRA affirms the deposit and senior unsecured debt ratings of BBB+ [1] - The subordinated debt rating for the subsidiary is affirmed at BBB and the short-term deposit and debt ratings are K2 [1] - The Outlook for all ratings is stable [1]

Core Viewpoint - Farmers National Banc (FMNB) has been upgraded to a Zacks Rank 1 (Strong Buy), indicating a positive outlook on its earnings estimates, which is a significant factor influencing stock prices [1][2]. Earnings Estimates and Stock Price Movement - The Zacks rating system highlights the strong correlation between changes in earnings estimates and near-term stock price movements, making it a valuable tool for investors [2][3]. - Institutional investors play a role in this relationship, as they adjust their valuations based on earnings estimates, leading to stock price fluctuations [3]. Business Improvement Indicators - The upgrade in earnings estimates for Farmers National suggests an improvement in the company's underlying business, which could lead to an increase in stock price as investors respond positively [4]. Importance of Earnings Estimate Revisions - Research indicates a strong correlation between earnings estimate revisions and stock movements, emphasizing the importance of tracking these revisions for investment decisions [5]. - The Zacks Rank system effectively utilizes earnings estimate revisions to classify stocks, providing a structured approach to investment [6]. Specific Earnings Estimates for Farmers National - Farmers National is projected to earn $1.59 per share for the fiscal year ending December 2025, with no year-over-year change expected [7]. - Over the past three months, the Zacks Consensus Estimate for Farmers National has increased by 6%, reflecting analysts' positive sentiment [7]. Zacks Rating System Overview - The Zacks rating system maintains a balanced distribution of ratings, with only the top 5% of stocks receiving a "Strong Buy" rating, indicating superior earnings estimate revisions [8][9]. - The upgrade of Farmers National to a Zacks Rank 1 places it among the top 5% of stocks covered by Zacks, suggesting potential for market-beating returns in the near term [9].

Core Viewpoint - Farmers National Banc (FMNB) is experiencing solid improvement in earnings estimates, which is likely to continue driving its stock price momentum [1][2] Earnings Estimate Revisions - Analysts have shown growing optimism regarding FMNB's earnings prospects, leading to a rising trend in estimate revisions that should positively impact the stock price [2] - For the current quarter, FMNB is expected to earn $0.41 per share, reflecting a year-over-year increase of +78.3% and a 12.5% increase in consensus estimates over the last 30 days [6] - For the full year, the expected earnings per share is $1.59, indicating a year-over-year change of +24.2%, with a 6.71% increase in consensus estimates due to positive revisions [7][8] Zacks Rank and Performance - FMNB has achieved a Zacks Rank 2 (Buy), indicating strong agreement among analysts in raising earnings estimates, which historically correlates with stock outperformance [9] - Stocks with Zacks Rank 1 (Strong Buy) and 2 (Buy) have shown significant outperformance compared to the S&P 500 [9] Stock Performance - The stock has gained 10.3% over the past four weeks, driven by solid estimate revisions and positive earnings growth prospects [10]

PART I - FINANCIAL INFORMATION This section presents the comprehensive financial information, including statements, notes, and management's discussion and analysis [Item 1 Financial Statements (Unaudited)](index=4&type=section&id=Item%201%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements of Farmers National Banc Corp. and its subsidiaries, including balance sheets, income statements, comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining accounting policies, financial instrument details, and segment information for the periods ended June 30, 2025, and December 31, 2024 [Consolidated Condensed Balance Sheets (Unaudited)](index=4&type=section&id=Consolidated%20Condensed%20Balance%20Sheets%20(Unaudited)) Presents the company's financial position with key asset, liability, and equity figures at specific dates **Consolidated Condensed Balance Sheets (Unaudited) - Key Figures (in Thousands of Dollars):** | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | **ASSETS** | | | | TOTAL CASH AND CASH EQUIVALENTS | $90,740 | $85,738 | | Securities available for sale | $1,274,899 | $1,266,553 | | NET LOANS | $3,264,796 | $3,232,483 | | TOTAL ASSETS | $5,178,428 | $5,118,924 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | TOTAL DEPOSITS | $4,396,417 | $4,266,779 | | Short-term borrowings | $203,000 | $305,000 | | TOTAL LIABILITIES | $4,740,680 | $4,712,896 | | TOTAL STOCKHOLDERS' EQUITY | $437,748 | $406,028 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $5,178,428 | $5,118,924 | [Consolidated Condensed Statements of Income (Unaudited)](index=5&type=section&id=Consolidated%20Condensed%20Statements%20of%20Income%20(Unaudited)) Details the company's financial performance over periods, including interest income, expenses, and net income **Consolidated Condensed Statements of Income (Unaudited) - Key Figures (in Thousands except Per Share Data):** | Metric | For the Three Months Ended June 30, 2025 | For the Three Months Ended June 30, 2024 | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | | TOTAL INTEREST AND DIVIDEND INCOME | $57,702 | $56,846 | | TOTAL INTEREST EXPENSE | $22,781 | $24,780 | | NET INTEREST INCOME | $34,921 | $32,066 | | Provision for credit losses | $3,586 | $1,395 | | TOTAL NONINTEREST INCOME | $12,122 | $9,606 | | TOTAL NONINTEREST EXPENSES | $27,175 | $26,403 | | NET INCOME | $13,910 | $11,783 | | EARNINGS PER SHARE - diluted | $0.37 | $0.31 | | Metric | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------------- | :------------------------------------- | | TOTAL INTEREST AND DIVIDEND INCOME | $115,008 | $111,900 | | TOTAL INTEREST EXPENSE | $45,891 | $48,147 | | NET INTEREST INCOME | $69,117 | $63,753 | | Provision for credit losses | $3,608 | $1,125 | | TOTAL NONINTEREST INCOME | $22,603 | $17,963 | | TOTAL NONINTEREST EXPENSES | $55,701 | $53,442 | | NET INCOME | $27,488 | $23,023 | | EARNINGS PER SHARE - diluted | $0.73 | $0.61 | [Consolidated Condensed Statements of Comprehensive Income (Unaudited)](index=6&type=section&id=Consolidated%20Condensed%20Statements%20of%20Comprehensive%20Income%20(Unaudited)) Reports net income and other comprehensive income components, such as unrealized gains/losses on securities **Consolidated Condensed Statements of Comprehensive Income (Unaudited) - Key Figures (in Thousands of Dollars):** | Metric | For the Three Months Ended June 30, 2025 | For the Three Months Ended June 30, 2024 | | :------------------------------------------------ | :--------------------------------------- | :--------------------------------------- | | NET INCOME | $13,910 | $11,783 | | Unrealized holding gains (losses), net of reclassification and tax | $563 | $(6,279) | | TOTAL COMPREHENSIVE INCOME | $14,473 | $5,504 | | Metric | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------------- | :------------------------------------- | | NET INCOME | $27,488 | $23,023 | | Unrealized holding gains (losses), net of reclassification and tax | $16,527 | $(18,679) | | TOTAL COMPREHENSIVE INCOME | $44,015 | $4,344 | [Consolidated Condensed Statements of Stockholders' Equity (Unaudited)](index=7&type=section&id=Consolidated%20Condensed%20Statements%20of%20Stockholders'%20Equity%20(Unaudited)) Outlines changes in stockholders' equity, including net income, other comprehensive income, and dividends paid **Consolidated Condensed Statements of Stockholders' Equity (Unaudited) - Key Figures (in Thousands of Dollars):** | Metric | December 31, 2024 | June 30, 2025 | | :-------------------------------- | :---------------- | :------------ | | Balance | $406,028 | $437,748 | | Net income (6 months) | $27,488 | $27,488 | | Other comprehensive income (6 months) | $16,527 | $16,527 | | Dividends paid (6 months) | $(12,792) | $(12,792) | [Consolidated Condensed Statements of Cash Flows (Unaudited)](index=8&type=section&id=Consolidated%20Condensed%20Statements%20of%20Cash%20Flows%20(Unaudited)) Summarizes cash inflows and outflows from operating, investing, and financing activities **Consolidated Condensed Statements of Cash Flows (Unaudited) - Key Figures (in Thousands of Dollars):** | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | NET CASH FROM OPERATING ACTIVITIES | $29,688 | $30,306 | | NET CASH FROM INVESTING ACTIVITIES | $(38,742) | $(19,074) | | NET CASH FROM FINANCING ACTIVITIES | $14,056 | $66,097 | | NET CHANGE IN CASH AND CASH EQUIVALENTS | $5,002 | $77,329 | | Ending cash and cash equivalents | $90,740 | $180,987 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements [Principles of Consolidation and Basis of Presentation](index=9&type=section&id=Principles%20of%20Consolidation%20and%20Basis%20of%20Presentation) Farmers National Banc Corp. operates as a Financial Holding Company, providing banking, trust, and insurance services through its subsidiaries. The unaudited consolidated financial statements are prepared in accordance with Form 10-Q and U.S. GAAP, including normal recurring adjustments, and should be read with the 2024 Form 10-K - Farmers National Banc Corp. is a Financial Holding Company providing full banking, trust, and insurance services through its subsidiaries (The Farmers National Bank of Canfield, Farmers National Insurance, LLC, Farmers of Canfield Investment Co., and Farmers Trust Company)[12](index=12&type=chunk) - The unaudited consolidated financial statements conform to Form 10-Q and Article 10 of Regulation S-X, including normal recurring adjustments, and should be read in conjunction with the 2024 Form 10-K[13](index=13&type=chunk) [Estimates and Segments](index=9&type=section&id=Estimates%20and%20Segments) Financial statement preparation involves management estimates and assumptions, which may differ from actual results. The Company manages and reports operations primarily through two segments: the Bank segment and the Trust segment, serving northeastern Ohio and western Pennsylvania - Preparation of financial statements requires management to make estimates and assumptions that affect reported amounts, and actual results could differ from these estimates[14](index=14&type=chunk) - The Company's operations are managed and financial performance is primarily aggregated and reported in two lines of business: the Bank segment and the Trust segment, serving northeastern Ohio and western Pennsylvania[15](index=15&type=chunk) [Equity and Comprehensive Income](index=9&type=section&id=Equity%20and%20Comprehensive%20Income) The Company has 50 million authorized shares, with 37.64 million outstanding as of June 30, 2025. Comprehensive income includes net income and other comprehensive income (loss), primarily unrealized gains/losses on available-for-sale securities and post-retirement plan changes, net of tax - As of June 30, 2025, there are **50,000,000 shares authorized** and **37,641,666 shares outstanding**[16](index=16&type=chunk) - Comprehensive income consists of net income and other comprehensive income (loss), which includes unrealized gains and losses on available-for-sale securities and changes in the funded status of the post-retirement plan, net of tax effect[17](index=17&type=chunk) [Updates to Significant Accounting Policies](index=9&type=section&id=Updates%20to%20Significant%20Accounting%20Policies) The Company adopted ASU 2023-07 (Segment Reporting) effective for fiscal years beginning after December 15, 2023, updating footnote 16. Other new ASUs (2024-02 and 2023-09) are not expected to materially impact operating results or financial condition upon their effective dates in fiscal years beginning after December 15, 2024 - ASU 2024-02 (Codification Improvements) is effective for public business entities for fiscal years beginning after December 15, 2024, and is not expected to have a material effect on the Company's operating results or financial condition[18](index=18&type=chunk) - ASU 2023-09 (Income Taxes Disclosures) is effective for fiscal years beginning after December 15, 2024, and is not expected to have a material effect on the Company's operating results or financial condition[19](index=19&type=chunk) - ASU 2023-07 (Segment Reporting) was adopted by the Company for fiscal years beginning after December 15, 2023, resulting in updates to footnote 16 - Segment information with enhanced disclosures about significant segment expenses[20](index=20&type=chunk) [Business Combinations](index=11&type=section&id=Business%20Combinations) On December 16, 2024, Farmers Trust acquired substantially all assets of Crest Retirement Advisors, LLC for $600,000, with an additional $400,000 in contingent consideration, recording $770,000 in intangible assets and $4,000 in goodwill - On December 16, 2024, Farmers Trust acquired substantially all assets of Crest Retirement Advisors, LLC for **$600,000**, with an additional **$400,000** in contingent consideration payable over two years[22](index=22&type=chunk) - The acquisition resulted in the recording of **$770,000 in intangible assets** and **$4,000 in goodwill**[22](index=22&type=chunk) [Securities](index=11&type=section&id=Securities) The available-for-sale securities portfolio had an amortized cost of $1.498 billion and a fair value of $1.275 billion at June 30, 2025, with total unrealized losses of $225.3 million. The Company does not consider these unrealized losses to be credit-related, attributing them to interest rate changes, and intends to hold securities for recovery. Equity securities, including SBIC investments, are held at modified cost **Available-for-Sale Securities Portfolio (in Thousands of Dollars):** | Metric | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Amortized Cost | $1,497,929 | $1,510,681 | | Fair Value | $1,274,899 | $1,266,553 | | Gross Unrealized Gains | $2,278 | $1,585 | | Gross Unrealized Losses | $(225,308) | $(245,713) | - The Company does not consider any of its available-for-sale securities with unrealized losses to be attributable to credit-related factors, but rather to changes in noncredit related factors such as interest rates, market spreads, and market conditions[28](index=28&type=chunk)[29](index=29&type=chunk) - Management has both the ability and intent to hold the securities for a period sufficient to allow for the recovery in fair value[28](index=28&type=chunk)[29](index=29&type=chunk) - Equity securities include **$16.0 million** in Small Business Investment Company ("SBIC") partnership investments at June 30, 2025, held at modified cost[30](index=30&type=chunk) [Loans and Allowance for Credit Losses](index=14&type=section&id=Loans%20and%20Allowance%20for%20Credit%20Losses) Total loans increased to $3.29 billion at June 30, 2025, from $3.26 billion at December 31, 2024, primarily in commercial real estate and commercial loans. The allowance for credit losses increased to $38.56 million from $35.86 million, mainly due to specific reserves on three commercial real estate non-owner occupied relationships and increased loan balances. Nonaccrual loans and past due loans over 89 days also increased **Loan Balances (in Thousands of Dollars):** | Loan Type | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Commercial real estate | $1,601,067 | $1,599,799 | | Commercial | $416,703 | $405,572 | | Residential real estate | $1,020,755 | $1,003,095 | | Consumer | $253,363 | $259,954 | | Total loans | $3,292,888 | $3,258,121 | | Allowance for credit losses | $(38,563) | $(35,863) | | NET LOANS | $3,264,796 | $3,232,483 | **Allowance for Credit Losses Activity (in Thousands of Dollars) - Six Months Ended June 30, 2025:** | Metric | Commercial Real Estate | Commercial | Residential Real Estate | Consumer | Total | | :-------------------------------- | :--------------------- | :--------- | :---------------------- | :------- | :---- | | 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 | - The increase in the allowance for credit losses from June 30, 2024, to June 30, 2025, is largely attributed to specific reserves for three commercial real estate non-owner occupied relationships, increased loss ratio trends in that segment, and increased loan balances[35](index=35&type=chunk) **Nonaccrual and Past Due Loans (in Thousands of Dollars):** | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total Nonaccrual Loans | $27,819 | $17,814 | | Loans past due over 89 days still accruing | $0 | $615 | [Loan Restructurings](index=19&type=section&id=Loan%20Restructurings) The Company modified $11.36 million in loans for borrowers experiencing financial difficulty during the three months ended June 30, 2025, primarily through term extensions for non-owner occupied commercial real estate. Most restructured loans remained current, with a small portion becoming nonaccrual. No additional commitments to lend on restructured loans existed as of June 30, 2025 **Loan Modifications to Borrowers Experiencing Financial Difficulty (in Thousands of Dollars) - Three Months Ended June 30, 2025:** | Loan Class | Payment Deferral | Term Extension | Interest Rate Reduction | Combination Term Extension and Interest Rate Reduction | Total | | :-------------------------- | :--------------- | :------------- | :---------------------- | :--------------------------------------------------- | :------ | | Commercial real estate - Non-owner occupied | $0 | $11,128 | $0 | $0 | $11,128 | | Commercial - Commercial and industrial | $0 | $0 | $0 | $58 | $58 | | Residential real estate - 1-4 family residential | $0 | $0 | $0 | $0 | $103 | | Residential real estate - Home equity lines of credit | $0 | $0 | $0 | $75 | $75 | | Total modifications | $103 | $11,128 | $0 | $133 | $11,364 | **Payment Status of Restructured Loans (in Thousands of Dollars) - Three Months Ended June 30, 2025:** | Loan Class | Current | 30-89 Days Past Due | 90+ Days Past Due | | :-------------------------- | :------ | :------------------ | :---------------- | | Total Accruing Restructured Loans | $11,306 | $0 | $0 | | Total Nonaccrual Restructured Loans | $58 | $0 | $0 | | Total Restructured Loans | $11,364 | $0 | $0 | - As of June 30, 2025, the Company had no commitments to lend any additional funds on restructured loans[50](index=50&type=chunk) [Credit Quality Indicators](index=26&type=section&id=Credit%20Quality%20Indicators) The Company categorizes commercial loans by risk ratings (Special Mention, Substandard, Doubtful) and residential/consumer loans by aging status. As of June 30, 2025, nonperforming loans increased to $27.8 million (0.84% of total loans) from $22.8 million (0.70%) at December 31, 2024. The allowance for credit losses increased to $38.6 million, covering 138.62% of nonperforming loans. The Company uses cohort and PD/LGD methodologies for ACL calculation, adjusting for economic conditions - The Company categorizes commercial loans into risk categories (Special Mention, Substandard, Doubtful) and evaluates residential, consumer indirect, and direct loan classes based on aging status and payment activity[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) **Asset Quality Ratios (in Thousands of Dollars):** | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Nonperforming loans | $27,819 | $22,818 | | Nonperforming loans as a % of total loans | 0.84% | 0.70% | | Allowance for credit losses | $38,563 | $35,863 | | Allowance for credit losses as a % of total loans | 1.17% | 1.10% | | Allowance for credit losses as a % of nonperforming loans | 138.62% | 157.17% | **Loan Pool Methodologies for Allowance for Credit Losses Calculation:** | Portfolio Segments | Methodology | | :---------------------- | :---------- | | Residential real estate | Cohort | | Home Equity Lines of Credit | Cohort | | Consumer Finance | Cohort | | Commercial | PD/LGD | | Commercial real estate | PD/LGD | - The **$2.7 million increase in ACL** was due to individual evaluation of three commercial real estate non-owner occupied relationships, increased loss ratio trends of commercial real estate non-owner occupied, and increased loan balances, partially offset by adjustments to maximum loss rates and portfolio composition factors[71](index=71&type=chunk) [Purchased Loans](index=34&type=section&id=Purchased%20Loans) The Company did not acquire any additional Purchase Credit Deteriorated (PCD) loans in 2025. The outstanding balance of PCD loans was $28.03 million with an ACL of $1.55 million at June 30, 2025, showing a decrease in loan balance and an increase in ACL compared to December 31, 2024 - The Company has not acquired any additional Purchase Credit Deteriorated (PCD) loans during 2025[72](index=72&type=chunk) **PCD Loan Balances and ACL (in Thousands of Dollars):** | Metric | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | Loan Balance | $28,027 | $30,171 | | ACL Balance | $1,550 | $561 | [Revenue from Contracts with Customers](index=36&type=section&id=Revenue%20from%20Contracts%20with%20Customers) Noninterest income, recognized under ASC 606, increased for both the three and six months ended June 30, 2025, across various fee-based services like trust fees, insurance agency commissions, retirement plan consulting fees, and investment commissions, reflecting business growth and acquisitions **Total Noninterest Income (in Thousands of Dollars):** | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | $12,122 | $9,606 | | Six Months Ended June 30 | $22,603 | $17,963 | **Key Noninterest Income Streams (in Thousands of Dollars) - Three Months Ended June 30:** | Revenue Stream | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Trust fees | $2,596 | $2,345 | | Insurance agency commissions | $1,828 | $1,255 | | Retirement plan consulting fees | $783 | $623 | | Investment commissions | $721 | $478 | - The increase in noninterest income 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[181](index=181&type=chunk) [Fair Value Measurements](index=38&type=section&id=Fair%20Value%20Measurements) The Company measures financial instruments at fair value using a three-level hierarchy. Investment securities available-for-sale are primarily Level 2, while individually evaluated loans and other real estate owned are typically Level 3 due to significant unobservable inputs. The fair value of investment securities available-for-sale increased slightly to $1.275 billion at June 30, 2025, from $1.267 billion at December 31, 2024 - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (significant other observable inputs), and Level 3 (significant unobservable inputs)[86](index=86&type=chunk)[87](index=87&type=chunk) **Fair Value of Investment Securities Available-for-Sale (in Thousands of Dollars):** | Date | Fair Value | | :---------------- | :----------- | | June 30, 2025 | $1,274,899 | | December 31, 2024 | $1,266,553 | - Individually evaluated loans and other real estate owned are typically classified as Level 3 due to significant unobservable inputs, such as adjustments for differences between comparable sales or income data in appraisals[95](index=95&type=chunk)[96](index=96&type=chunk)[100](index=100&type=chunk)[102](index=102&type=chunk) [Goodwill and Intangible Assets](index=46&type=section&id=Goodwill%20and%20Intangible%20Assets) Goodwill remained at $167.4 million at June 30, 2025, with no impairment indicated. Amortized intangible assets totaled $41.68 million gross carrying amount, with accumulated amortization of $22.40 million, resulting in a net of $19.28 million. Amortization expense for the three and six months ended June 30, 2025, was $735,000 and $1.5 million, respectively - Goodwill totaled **$167.4 million** at June 30, 2025, and December 31, 2024, with no events or changes indicating impairment[105](index=105&type=chunk) **Acquired Intangible Assets (in Thousands of Dollars) - June 30, 2025:** | Metric | Gross Carrying Amount | Accumulated Amortization | | :-------------------------- | :-------------------- | :----------------------- | | Customer relationship intangibles | $7,975 | $(7,170) | | Non-compete contracts | $457 | $(433) | | Trade name | $1,131 | $(481) | | Core deposit intangible | $32,115 | $(14,313) | | Total | $41,678 | $(22,397) | **Aggregate Amortization Expense (in Thousands of Dollars):** | Period | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Three Months Ended June 30 | $735 | $630 | | Six Months Ended June 30 | $1,500 | $1,300 | [Leases](index=46&type=section&id=Leases) The Company holds operating leases for various assets, with right-of-use assets and lease liabilities at $7.8 million and $8.0 million, respectively, as of June 30, 2025. Lease expense for the three and six months ended June 30, 2025, was $351,000 and $644,000, respectively. The weighted-average remaining lease term is 8.93 years **Lease Balances (in Thousands of Dollars):** | Metric | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Right of use assets | $7,800 | $9,700 | | Lease liabilities | $8,000 | $9,900 | **Lease Expense (in Thousands of Dollars):** | Period | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Three Months Ended June 30 | $351 | $327 | | Six Months Ended June 30 | $644 | $658 | - The weighted-average remaining lease term for all leases was **8.93 years** as of June 30, 2025[110](index=110&type=chunk) [Derivative Financial Instruments](index=48&type=section&id=Derivative%20Financial%20Instruments) The Company uses interest rate swaps for commercial loan customers and a fair value hedge for its municipal bond portfolio. Commercial loan swaps had a notional value of $66.8 million at June 30, 2025, with offsetting fair values. A $100 million notional fair value hedge swap had a fair value of $(571,000) at June 30, 2025. Mortgage banking derivatives, including interest rate lock commitments, are also used for risk management - Interest rate swaps associated with commercial loans had 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[113](index=113&type=chunk) **Interest Rate Swap Designated as a Fair Value Hedge (in Thousands of Dollars):** | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Notional amount | $100,000 | $100,000 | | Fair value | $(571) | $(168) | | Remaining maturity (in years) | 1.1 | 1.6 | **Mortgage Banking Derivatives (in Thousands of Dollars) - June 30, 2025:** | Metric | Notional Amount | Fair Value | | :-------------------------- | :-------------- | :--------- | | Interest rate lock commitments | $10,664 | $87 | | Forward sales contracts (included in other liabilities) | $11,000 | $68 | [Earnings Per Share](index=50&type=section&id=Earnings%20Per%20Share) Basic EPS for the three and six months ended June 30, 2025, was $0.37 and $0.73, respectively. Diluted EPS was $0.37 and $0.73 for the same periods. The weighted average shares outstanding for diluted EPS increased to 37.62 million for the six months ended June 30, 2025, from 37.48 million in the prior year **Earnings Per Share (EPS) Data:** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | | Basic earnings per share | $0.37 | $0.32 | | Diluted earnings per share | $0.37 | $0.31 | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Basic earnings per share | $0.73 | $0.62 | | Diluted earnings per share | $0.73 | $0.61 | **Weighted Average Shares Outstanding for Diluted EPS:** | Period | 2025 | 2024 | | :----------------------------- | :----------- | :----------- | | Six Months Ended June 30 | 37,622,159 | 37,479,586 | [Stock Based Compensation](index=50&type=section&id=Stock%20Based%20Compensation) The Company's 2022 Equity Incentive Plan allows for up to one million share awards. For the six months ended June 30, 2025, 66,080 service-based and 102,336 performance-based share awards were granted. Total unrecognized compensation expense was $3.5 million, expected to be recognized over 2.7 years - The 2022 Equity Incentive Plan permits the award of up to **one million shares** to directors and employees[120](index=120&type=chunk) **Stock Based Compensation Activity (Six Months Ended June 30, 2025):** | Metric | Service Units | Performance Units | | :-------------------------- | :------------ | :---------------- | | Granted | 66,080 | 102,336 | | Vested | (101,333) | (47,514) | | Forfeited | (1,762) | (8,085) | | Ending balance - non-vested shares | 194,415 | 269,657 | - As of June 30, 2025, there was **$3.5 million of total unrecognized compensation expense** related to nonvested shares, expected to be recognized over **2.7 years**[121](index=121&type=chunk) [Other Comprehensive Income (Loss)](index=52&type=section&id=Other%20Comprehensive%20Income%20(Loss)) Accumulated other comprehensive loss improved from $(193.27) million at December 31, 2024, to $(176.74) million at June 30, 2025, primarily due to net unrealized holding gains on available-for-sale securities **Accumulated Other Comprehensive Income (Loss) (in Thousands of Dollars):** | Metric | December 31, 2024 | June 30, 2025 | | :-------------------------------- | :---------------- | :------------ | | Balance | $(193,265) | $(176,738) | | Net current period other comprehensive income (6 months) | $15,964 | $15,964 | [Regulatory Capital Matters](index=52&type=section&id=Regulatory%20Capital%20Matters) The Company and its Bank subsidiary meet all Basel III capital adequacy requirements, including common equity tier 1, tier 1 risk-based, total risk-based, and tier 1 leverage ratios, exceeding minimum thresholds. The Bank is categorized as "well capitalized" under prompt corrective action regulations - Management believes that as of June 30, 2025, the Company and the Bank meet all capital adequacy requirements to which they are subject under Basel III[128](index=128&type=chunk)[132](index=132&type=chunk) **Consolidated Capital Ratios (June 30, 2025):** | Ratio | Actual | Requirement For Capital Adequacy Purposes | | :-------------------------- | :----- | :---------------------------------------- | | Common equity tier 1 capital ratio | 11.56% | 4.5% | | Total risk based capital ratio | 15.04% | 8.0% | | Tier 1 risk based capital ratio | 12.05% | 6.0% | | Tier 1 leverage ratio | 8.67% | 4.0% | - The Bank was categorized as well capitalized under the regulatory framework for prompt corrective action at June 30, 2025, and December 31, 2024[133](index=133&type=chunk) [Segment Information](index=54&type=section&id=Segment%20Information) The Company operates in two reportable segments: Bank and Trust. Both segments showed increased revenues and profits for the three and six months ended June 30, 2025, compared to the prior year, with the Bank segment generating the majority of interest income and the Trust segment contributing significantly through fees - The Company's reportable segments are the Bank segment and the Trust segment, distinguished by products/services and information provided to the chief operating decision maker[135](index=135&type=chunk) **Total Consolidated Segment Revenues (in Thousands of Dollars):** | Period | 2025 | 2024 | | :-------------------------- | :------- | :------- | | Three Months Ended June 30 | $60,158 | $58,703 | | Six Months Ended June 30 | $119,819 | $115,850 | **Segment Profit (in Thousands of Dollars):** | Period | 2025 | 2024 | | :-------------------------- | :------- | :------- | | Three Months Ended June 30 | $19,130 | $18,269 | | Six Months Ended June 30 | $39,730 | $37,442 | [Short-term Borrowings](index=58&type=section&id=Short-term%20Borrowings) Short-term borrowings decreased to $203.0 million at June 30, 2025, from $305.0 million at December 31, 2024, primarily due to using increased deposits to pay down Federal Home Loan Bank (FHLB) advances. The Bank also has access to unused lines of credit **Short-term Advances from FHLB (in Thousands of Dollars):** | Date | Amount | | :---------------- | :------- | | June 30, 2025 | $203,000 | | December 31, 2024 | $305,000 | - The decrease in short-term borrowings was due to the Company using proceeds from deposits to pay down FHLB advances[198](index=198&type=chunk) - The Bank has access to a **$25.0 million line of credit** at a major domestic bank and Farmers has an unsecured revolving line of credit for **$5.0 million**, with no outstanding balances on either at June 30, 2025[143](index=143&type=chunk)[144](index=144&type=chunk) [Long-term Borrowings](index=58&type=section&id=Long-term%20Borrowings) Total long-term borrowings were $86.43 million at June 30, 2025, primarily consisting of subordinated notes and junior subordinated debt securities from past acquisitions. These borrowings qualify as Tier 1 capital for regulatory purposes **Total Long-term Borrowings (in Thousands of Dollars):** | Date | Amount | | :---------------- | :------- | | June 30, 2025 | $86,428 | | December 31, 2024 | $86,150 | - Long-term borrowings include **$75.0 million aggregate principal amount of fixed-to-floating rate subordinated notes** due December 15, 2031, with **$3 million bought back and retired** in August 2024[146](index=146&type=chunk)[147](index=147&type=chunk) - The Company also assumed Floating Rate Junior Subordinated Debt Securities from acquisitions (Cortland, Maple Leaf, National Bancshares), which qualify as Tier 1 capital for regulatory purposes[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) [Tax Credit Investments](index=60&type=section&id=Tax%20Credit%20Investments) The Company invests in qualified affordable housing projects and solar investment tax credits. Affordable housing investments totaled $27.0 million at June 30, 2025, with $17.7 million in unfunded commitments. Solar investment tax credits, initiated in Q1 2025, totaled $7.3 million with $6.3 million in unfunded commitments. Amortization expense and tax credits from these investments are recognized in income tax expense and cash flows **Tax Credit Investments (in Thousands of Dollars):** | Investment Type | June 30, 2025 Balance | December 31, 2024 Balance | Unfunded Commitments (June 30, 2025) | | :-------------------------- | :-------------------- | :------------------------ | :----------------------------------- | | Qualified affordable housing projects | $27,000 | $22,000 | $17,700 | | Solar investment tax credits | $7,300 | $0 | $6,300 | - Solar investment tax credits were initiated in the first quarter of 2025[157](index=157&type=chunk) - Amortization expense from solar investment tax credits for the six months ended June 30, 2025, was **$2.4 million**, included in income tax expense[158](index=158&type=chunk) [Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations](index=61&type=section&id=Item%202%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial performance and condition, highlighting key trends, significant changes, and future outlook. It covers results of operations, financial condition, critical accounting policies, liquidity, and off-balance sheet arrangements, emphasizing the impact of market and regulatory developments [Cautionary Note Regarding Forward Looking Statements](index=61&type=section&id=Cautionary%20Note%20Regarding%20Forward%20Looking%20Statements) The report contains forward-looking statements subject to inherent uncertainties and risks, including general economic conditions, regulatory actions, interest rate fluctuations, and competition. Readers are cautioned not to place undue reliance on these statements, and the Company disclaims any obligation to update them - This report contains forward-looking statements based on current expectations, beliefs, and assumptions, which are not statements of historical fact[160](index=160&type=chunk) - Forward-looking statements are subject to inherent uncertainties, risks, and changes in circumstances, including general economic conditions, regulatory environment, interest rate fluctuations, and competitive factors[160](index=160&type=chunk)[161](index=161&type=chunk)[165](index=165&type=chunk) - The Company does not undertake, and expressly disclaims, any obligation to update or alter any forward-looking statements, except as required by applicable law[162](index=162&type=chunk) [Recent Market and Regulatory Developments](index=61&type=section&id=Recent%20Market%20and%20Regulatory%20Developments) Recent legislation, such as the "One Big Beautiful Bill Act" (OBBBA) signed July 4, 2025, is being evaluated for its impact on the Company, though no material effects are currently expected for Q2 2025. The financial industry remains subject to continuous review and potential changes in statutes, regulations, and policies, which could materially affect the business - The "One Big Beautiful Bill Act" (OBBBA) was signed into law on July 4, 2025, effective after the close of the calendar quarter, and its impacts are still being evaluated but are not expected to be material to the Company or its financial results for Q2 2025[164](index=164&type=chunk)[166](index=166&type=chunk) - Statutes, regulations, and policies affecting the financial industry are continually under review and subject to change, which could have a material effect on the Company's business[167](index=167&type=chunk) [Results of Operations](index=62&type=section&id=Results%20of%20Operations) Net income increased for both the three and six months ended June 30, 2025, driven by higher net interest income and noninterest income, despite an increase in the provision for credit losses. The net interest margin improved due to stable asset yields and decreased funding costs. Noninterest income growth was broad-based across fee-based businesses, while noninterest expenses saw increases in salaries, occupancy, and core processing **Selected Financial Ratios and Results (in Thousands, except Per Share Data):** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net income | $13,910 | $11,783 | | Diluted earnings per share | $0.37 | $0.31 | | Return on average assets (annualized) | 1.08% | 0.93% | | Return on average equity (annualized) | 13.08% | 12.15% | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net income | $27,488 | $23,023 | | Diluted earnings per share | $0.73 | $0.61 | | Return on average assets (annualized) | 1.07% | 0.91% | | Return on average equity (annualized) | 13.10% | 11.76% | - Net interest income for the three months ended June 30, 2025, was **$34.9 million**, up from **$32.1 million** in the prior year, driven by a **20 basis point increase in net interest margin** and a higher earning asset base[176](index=176&type=chunk) - The net interest margin for the three-month period ended June 30, 2025, was **2.91%**, up from **2.71%** in the prior year, due to stable interest-earning asset yields and a **24 basis point decrease** in the cost of interest-bearing liabilities[177](index=177&type=chunk) - The provision for credit losses and unfunded loans increased to **$3.5 million** for the three months ended June 30, 2025, from **$1.1 million** in the prior year, primarily due to **$2.6 million in specific reserves** on two nonperforming loans[179](index=179&type=chunk) - Noninterest income for the second quarter of 2025 increased to **$12.1 million** from **$9.6 million** in the prior year, driven by improved profitability across all fee-based lines of business and lower losses on the sale of available-for-sale securities[181](index=181&type=chunk) - Noninterest expense totaled **$27.2 million** for the quarter ended June 30, 2025, up from **$26.4 million** in the prior year, primarily due to higher salaries, occupancy and equipment costs, and core processing charges[186](index=186&type=chunk) [Financial Condition](index=67&type=section&id=Financial%20Condition) Cash and cash equivalents increased to $90.7 million, reflecting a strategic increase in liquidity. Securities available for sale remained stable at $1.27 billion, with net unrealized losses decreasing. Net loans grew to $3.30 billion, primarily in commercial and commercial real estate. The allowance for credit losses increased due to specific reserves. Total deposits rose to $4.40 billion, used to reduce short-term borrowings. Stockholders' equity increased to $437.7 million, bolstered by net income and reduced comprehensive loss - Cash and cash equivalents increased by **$5.0 million** to **$90.7 million** at June 30, 2025, from **$85.7 million** at December 31, 2024, due to the Company intentionally holding more liquidity[190](index=190&type=chunk) - Securities available for sale totaled **$1.27 billion** at June 30, 2025, with net unrealized losses decreasing to **$223.0 million** from **$244.1 million** at December 31, 2024[191](index=191&type=chunk) - Net loans increased to **$3.30 billion** at June 30, 2025, from **$3.27 billion** at December 31, 2024, primarily driven by increases in commercial and commercial real estate loans[192](index=192&type=chunk) - The allowance for credit losses increased to **$38.6 million** at June 30, 2025, from **$35.9 million** at December 31, 2024, mainly due to **$2.6 million in specific reserves** on two nonperforming loans[195](index=195&type=chunk) - Total deposits increased to **$4.40 billion** at June 30, 2025, from **$4.27 billion** at December 31, 2024, with customer deposits growing **$129.6 million**, which were used to pay down borrowings[197](index=197&type=chunk)[198](index=198&type=chunk) - Total stockholders' equity increased to **$437.7 million** at June 30, 2025, from **$406.0 million** at December 31, 2024, primarily due to a **$16.5 million decrease in accumulated other comprehensive loss** and **$14.7 million growth in retained earnings**[199](index=199&type=chunk) [Critical Accounting Policies](index=70&type=section&id=Critical%20Accounting%20Policies) The Company's critical accounting policies involve significant judgment in estimating the allowance for credit losses (ACL) and assessing goodwill impairment. ACL estimation uses macroeconomic forecasts (GDP, PCE inflation, unemployment) and two methodologies (cohort and PD/LGD). Goodwill impairment is annually assessed by reviewing past and projected operating results - The Company's critical accounting policies include determining the adequacy of the allowance for credit losses (ACL) and assessing the impairment of goodwill and other intangibles[203](index=203&type=chunk) - ACL estimation involves significant judgment, incorporating macroeconomic forecasts (U.S. real GDP, PCE inflation, U.S. civilian unemployment rate) and using cohort and PD/LGD methodologies for different loan portfolios[205](index=205&type=chunk)[206](index=206&type=chunk)[211](index=211&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk) - Goodwill impairment testing is performed annually by reviewing past and projected operating results for subsidiaries and comparable industry information[218](index=218&type=chunk) [Liquidity](index=72&type=section&id=Liquidity) The Company maintains sufficient liquidity through liquid assets, deposit growth, and access to wholesale funds and credit lines. As of June 30, 2025, it had $203.0 million in FHLB advances with an additional borrowing capacity of $596.9 million, and unused lines of credit totaling $30.0 million - The Company maintains sufficient liquidity to satisfy depositors' requirements and meet customer credit needs, relying on liquid assets, market share of deposits, and potential new funds[219](index=219&type=chunk) - Additional liquidity sources include access to wholesale funds, ability to obtain deposits through interest rate adjustments, and approved lines of credit at major domestic banks[220](index=220&type=chunk) - As of June 30, 2025, the Bank had **$203.0 million in outstanding FHLB advances** with an additional borrowing capacity of approximately **$596.9 million**, and unused lines of credit totaling **$30.0 million** (**$25.0 million** Bank, **$5.0 million** Company)[220](index=220&type=chunk) [Off-Balance Sheet Arrangements](index=72&type=section&id=Off-Balance%20Sheet%20Arrangements) The Company engages in off-balance sheet arrangements, primarily commitments to originate loans and financial standby letters of credit, which involve credit and interest rate risk. Total unused commitments were $736.6 million at June 30, 2025, and the Company also has $20.2 million in subscriptions to SBIC investment funds, with $15.2 million invested - The Company is a party to financial instruments with off-balance sheet risk, including commitments to originate mortgage, commercial, and consumer loans, and financial standby letters of credit[221](index=221&type=chunk) **Total Unused Commitments (in Millions of Dollars):** | Date | Amount | | :---------------- | :------- | | June 30, 2025 | $736.6 | | December 31, 2024 | $692.4 | - The Company has committed up to **$20.2 million** in subscriptions in SBIC investment funds, with **$15.2 million invested** at June 30, 2025[222](index=222&type=chunk) [Item 3 Quantitative and Qualitative Disclosures About Market Risk](index=74&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company's primary market exposure is interest rate risk, monitored through simulation analysis. While net interest income changes generally fall within internal limits, the net present value of equity in up-rate scenarios exceeds policy limits due to historical market conditions. Strategies are being implemented to mitigate this by shortening the duration of the investment portfolio and pursuing measured loan growth - The Company's primary market exposure is interest rate risk, monitored using simulation analysis to determine the effect of changes on net interest income and net present value of equity[225](index=225&type=chunk)[226](index=226&type=chunk) **Impact of Interest Rate Changes on Net Interest Income and Net Present Value of Equity (June 30, 2025):** | Changes In Interest Rate (basis points) | Net Interest Income Change | Net Present Value Of Equity Change | | :------------------------------------ | :------------------------- | :--------------------------------- | | +400 | -7.4% | -31.0% | | +300 | -5.8% | -23.2% | | +200 | -3.9% | -14.8% | | +100 | -2.1% | -7.4% | | -100 | 1.6% | 4.1% | | -200 | 2.9% | 4.6% | | -300 | 4.0% | 1.0% | | -400 | 4.3% | -3.9% | - The results for the Net Present Value of Equity in up-rate scenarios exceed internal policy limits, an outcome attributed to the massive influx of low-rate deposits in 2020-2021 and subsequent market rate increases[228](index=228&type=chunk) - To mitigate these results, the Company is prioritizing strategies to shrink the longer-duration investment portfolio, replace balances with shorter-duration assets (including loans), and pursue measured loan growth[229](index=229&type=chunk) [Item 4 Controls and Procedures](index=76&type=section&id=Item%204%20Controls%20and%20Procedures) The Company's CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025. No material changes to internal controls over financial reporting occurred during the quarter - The Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[233](index=233&type=chunk) - There were no changes in the Company's internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting during the fiscal quarter ended June 30, 2025[233](index=233&type=chunk) PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other relevant disclosures [Item 1 Legal Proceedings](index=76&type=section&id=Item%201%20Legal%20Proceedings) The Company is involved in various lawsuits and adversary proceedings in the ordinary course of business. While legal costs are generally expensed, accruals are made for probable and estimable losses. The ultimate resolution of these matters, if unfavorable, could be material to future operating results - The Company is a defendant in lawsuits and other adversary proceedings arising in the ordinary course of business[234](index=234&type=chunk) - Legal costs are generally expensed as incurred, but accruals are established where losses are deemed probable and reasonably estimable[234](index=234&type=chunk) - The ultimate resolution of matters, if unfavorable, may be material to the results of operations in a particular future period[234](index=234&type=chunk) [Item 1A Risk Factors](index=76&type=section&id=Item%201A%20Risk%20Factors) No material changes to risk factors from the 2024 Form 10-K, except for new discussions on significant changes in federal government size, structure, powers, and U.S. economic policies. These changes, including shifts in macroeconomic policies and regulatory priorities, could cause economic disruptions, adversely impacting the Company's business, results, and financial condition - There are no material changes from the risk factors set forth in the Company's 2024 Annual Report on Form 10-K, except for new discussions on significant changes to the size, structure, powers, and operations of the federal government and U.S. economic policies[235](index=235&type=chunk) - Changes in federal priorities, regulatory policies, and macroeconomic policies (e.g., trade restrictions, tariffs) could cause economic disruptions, increasing operating costs, reducing demand, and impacting business goals[236](index=236&type=chunk)[237](index=237&type=chunk) - Difficult regional business and economic conditions, including those caused by U.S. policymaking instability, may materially adversely affect operating expenses, asset quality, credit losses, and demand for products and services[240](index=240&type=chunk) [Item 2 Unregistered Sales of Equity Securities and Use of Proceeds](index=78&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company's 2023 Repurchase Program authorizes the purchase of up to 1,000,000 shares. During the three months ended June 30, 2025, the Company purchased 9,988 shares at an average price of $12.85 per share, leaving 497,047 shares yet to be purchased under the program - The 2023 Repurchase Program authorizes the purchase of up to **1,000,000 shares** of common stock[244](index=244&type=chunk) **Share Repurchase Activity (Three Months Ended June 30, 2025):** | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :------------- | :----------------------------- | :--------------------------- | | April 1 - 30 | 7,895 | $12.72 | | May 1 - 31 | 2,093 | $13.36 | | June 1 - 30 | 0 | $0.00 | | Total | 9,988 | $12.85 | *Note: Average price calculated from provided data.* - As of June 30, 2025, **497,047 shares** may yet be purchased under the 2023 Repurchase Program[245](index=245&type=chunk) [Item 3 Defaults Upon Senior Securities](index=78&type=section&id=Item%203%20Defaults%20Upon%20Senior%20Securities) Not applicable - Not applicable[246](index=246&type=chunk) [Item 4 Mine Safety Disclosures](index=78&type=section&id=Item%204%20Mine%20Safety%20Disclosures) Not applicable - Not applicable[247](index=247&type=chunk) [Item 5 Other Information](index=78&type=section&id=Item%205%20Other%20Information) No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - During the three months ended June 30, 2025, none of the Company's directors or executive officers adopted or terminated any Rule 10b5-1 trading plans or "non-Rule 10b5-1 trading arrangement"[248](index=248&type=chunk) [Item 6 Exhibits](index=79&type=section&id=Item%206%20Exhibits) This section lists all exhibits filed or incorporated by reference as part of the report, including Articles of Incorporation, Executive Officer Change in Control Agreements, and various certifications (Rule 13a-14(a)/15d-14(a) and 18 U.S.C. Section 1350). It also specifies the filing of iXBRL formatted financial statements - The section lists exhibits filed or incorporated by reference, including Articles of Incorporation, Executive Officer Change in Control Agreements, and various certifications (Rule 13a-14(a)/15d-14(a) and 18 U.S.C. Section 1350)[249](index=249&type=chunk) - The Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Stockholders' Equity, Consolidated Statements of Cash Flows, and Notes to Unaudited Consolidated Financial Statements are filed in iXBRL format[249](index=249&type=chunk) SIGNATURES Confirms the official signing and dating of the report by authorized executives [Signatures](index=80&type=section&id=Signatures) The report is duly signed on behalf of Farmers National Banc Corp. by Kevin J. Helmick, President and Chief Executive Officer, and A. Troy Adair, Senior Executive Vice President, Chief Financial Officer and Secretary, on August 7, 2025 - The report is signed by Kevin J. Helmick, President and Chief Executive Officer, and A. Troy Adair, Senior Executive Vice President, Chief Financial Officer and Secretary[253](index=253&type=chunk) - The report is dated August 7, 2025[253](index=253&type=chunk)

Core Viewpoint - Farmers National Banc (FMNB) has been upgraded to a Zacks Rank 2 (Buy) due to an upward trend in earnings estimates, which is a significant factor influencing stock prices [1][2]. Earnings Estimates and Stock Price Movement - The correlation between changes in a company's future earnings potential and its stock price movements is strong, largely influenced by institutional investors who adjust their valuations based on earnings estimates [3]. - Rising earnings estimates and the subsequent rating upgrade for Farmers National indicate an improvement in the company's underlying business, suggesting that investors may respond positively by driving the stock price higher [4]. Importance of Earnings Estimate Revisions - Empirical research supports the strong correlation between earnings estimate revisions and near-term stock movements, making tracking these revisions a valuable strategy for investment decisions [5]. - The Zacks Rank stock-rating system effectively utilizes earnings estimate revisions to classify stocks, with a proven track record of Zacks Rank 1 stocks generating an average annual return of +25% since 1988 [6]. Specifics on Farmers National's Earnings Estimates - Farmers National is projected to earn $1.52 per share for the fiscal year ending December 2025, reflecting no year-over-year change, while the Zacks Consensus Estimate has increased by 1% over the past three months [7]. Zacks Rating System Overview - The Zacks rating system maintains a balanced distribution of "buy" and "sell" ratings across its universe of over 4,000 stocks, with only the top 20% receiving a "Strong Buy" or "Buy" rating [8][9]. - The upgrade of Farmers National to a Zacks Rank 2 places it in the top 20% of Zacks-covered stocks based on estimate revisions, indicating potential for near-term stock price appreciation [9].

Core Viewpoint - Farmers National Banc reported strong second-quarter 2025 results, exceeding earnings and revenue expectations, while facing increased credit risk from commercial real estate exposures [1][5]. Financial Performance - Non-GAAP earnings per share (EPS) reached $0.37, surpassing the analyst consensus of $0.36, and showing a year-over-year increase of 19.4% from $0.31 in Q2 2024 [2][5]. - Revenue (GAAP) was $47.0 million, exceeding the estimate of $46.0 million and reflecting a slight year-over-year increase of 1.1% from $46.5 million in Q2 2024 [2][5]. - Net interest margin improved to 2.91%, up from 2.71% in Q2 2024, indicating better loan yields and reduced funding costs [2][7]. - The efficiency ratio improved to 56.7%, down from 60.8% in the previous year, demonstrating enhanced operational efficiency [2][7]. Loan and Revenue Growth - Total loans increased by $52.0 million, with commercial loans rising by $43.6 million, resulting in annualized growth rates of 6.4% and 8.8%, respectively [6]. - Noninterest income grew significantly, with a 25.8% increase compared to Q2 2024, driven by higher insurance agency commissions and trust fees [6]. Asset Quality and Credit Risk - Non-performing loans rose to $27.8 million, or 0.84% of total loans, up from $20.7 million (0.64%) in Q1 2025, primarily due to two commercial real estate loans classified as nonaccrual [8]. - A specific credit reserve of $2.6 million was established, with a provision for credit losses of $3.5 million, a notable increase from $1.1 million in Q2 2024 [9]. Management Outlook - Management is optimistic about further net interest margin expansion, influenced by potential changes in Federal Reserve policy rates [10]. - The quarterly dividend remained unchanged at $0.17 per share, continuing a consistent payout history [10].