Acquisitions and Business Growth - Farmers Trust acquired substantially all assets of Crest Retirement Advisors, LLC in a cash transaction during 2024[20] - Farmers Insurance acquired substantially all assets of Randy L. Jones Agency, Inc. in a cash transaction during 2022[22] - Farmers Trust offers a full complement of personal and corporate trust services, enhancing its service offerings[20] Employment and Workforce - As of December 31, 2024, Farmers and its subsidiaries had 682 full-time equivalent employees[26] - The market for top talent is highly competitive, and Farmers is committed to attracting and retaining a dedicated workforce[26] Regulatory Environment - Farmers elected to become a financial holding company in 2016, allowing it to engage in activities that are financial in nature[42] - The Company is subject to extensive regulation by federal and state regulatory agencies, which may restrict its ability to diversify and pay dividends[28] - Farmers Bank is subject to regulation and examination primarily by the Office of the Comptroller of the Currency (OCC) and secondarily by the FDIC[32] - Farmers Bank is subject to federal regulations limiting transactions with affiliates, requiring covered transactions to be secured by specified collateral and capped at 10% of capital stock for individual transactions and 20% for aggregate transactions[47] - The Economic Growth, Regulatory Relief and Consumer Protection Act eased restrictions for bank holding companies with consolidated assets of less than 10 billion or less[64] Capital and Financial Ratios - Under Basel III, the minimum ratio of Common Equity Tier 1 (CET1) to risk-weighted assets is set at 4.5%, plus a 2.5% capital conservation buffer, resulting in an effective minimum ratio of 7.0%[56] - The minimum Tier 1 capital ratio is 6.0%, plus the capital conservation buffer, leading to an effective minimum of 8.5%[56] - The total capital ratio must be at least 8.0%, plus the capital conservation buffer, resulting in a minimum total capital ratio of 10.5%[56] Community and Compliance - Farmers received a "satisfactory" rating in its most recent Community Reinvestment Act examination, which is crucial for any new activities or acquisitions[73] - The Dodd-Frank Act mandates shareholders to have a non-binding vote on executive compensation practices, with a new clawback policy approved on September 26, 2023[80] - Farmers Bank is subject to the Sarbanes-Oxley Act, requiring the CEO and CFO to certify the accuracy of Quarterly and Annual Reports, ensuring no material misstatements[77] Cybersecurity and Risk Management - The bank has implemented multiple layers of cybersecurity controls to protect against attacks, with a focus on maintaining business continuity and rapid recovery processes[81] - Federal regulations require banking organizations to notify regulators of computer-security incidents within 36 hours, promoting early awareness of threats[82] - Farmers Bank continues to monitor state-level cybersecurity regulatory activities as they evolve[85] - The bank's incentive compensation policies are under review by the Federal Reserve to ensure they do not encourage excessive risk-taking[79] - The bank has not experienced significant data loss or financial losses from cybersecurity attacks to date, but risks remain high[86] Interest Rate Sensitivity and Financial Projections - The company anticipates a net interest income change of -9.0% for a +400 basis point increase in interest rates for 2024, compared to -6.2% for 2023[286] - A sudden and sustained 400 basis point decrease in market interest rates is projected to increase net interest income by 6.1% in 2024, up from 2.7% in 2023[286] - The net present value of equity is expected to decrease by 37.2% with a +400 basis point increase in interest rates for 2024, compared to a decrease of 36.4% for 2023[286] - The Federal Open Market Committee raised the discount rate from 0.25% to 5.50% between March 2022 and July 2023, with a forecasted cut of 100 basis points in late 2024[286] - The company is focusing on shortening the duration of its investment portfolio to mitigate the gap between book and market rates[288] - Loan growth will be broad-based across various sectors, including consumer, commercial, and real estate, to manage risk effectively[288] - Interest rate sensitivity management is crucial for protecting against net interest income volatility, with a quarterly report presented to the Board of Directors[289] - A significant portion of interest-sensitive assets and liabilities matures within twelve months, necessitating close monitoring[290] - The company has no market risk sensitive instruments held for trading purposes, indicating a conservative approach to market risk[289] - The company recognizes the inherent risks in growing loans but believes its strong credit metrics support pursuing solid opportunities[288]
Farmers National Banc(FMNB) - 2024 Q4 - Annual Report